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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: DECEMBER 31, 1995
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OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ___________________
Commission file number 0 - 10200
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SEI CORPORATION
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(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1707341
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
680 EAST SWEDESFORD ROAD, WAYNE,
PENNSYLVANIA 19087-1658
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code 610-254-1000
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Securities registered pursuant to Section
12(b) of the Act:
Name of Each Exchange on Which
Title of Each Class Registered
------------------- --------------------------------------
None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
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(Title of class)
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 ___
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(Cover page 1 of 2 pages)
Exhibit Index on Page 52
Page 1 of 65 Pages
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State the aggregate market value of the voting stock held by non-affiliates of
the registrant based on the closing price of such stock as reported by NASDAQ as
of February 29, 1996: $284,703,101. For purposes of making this calculation
only, registrant has defined affiliates as including all directors and
beneficial owners of more than ten percent of the common stock of the
registrant.
APPLICABLE ONLY TO REGISTRANTS 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 Section 12, 13, or 14(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 REGISTRANTS:
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of February 29, 1996: 18,553,438.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the following documents are incorporated by reference herein:
1. Notice of and Proxy Statement for the 1996 Annual Meeting of
Shareholders to be filed within 120 days after the end of the fiscal
year covered by this annual report, incorporated by reference in Part
III hereof.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Paragraph 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [_]
(Cover page 2 of 2 pages)
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PART I
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Item 1. Business.
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General Development of Business
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SEI Corporation ("SEI" or the "Company") was incorporated in Pennsylvania in
1968. SEI Financial Services Company ("SFS"), SEI Financial Management
Corporation ("SFM"), and SEI Trust Company ("SEI Trust") are the principal
wholly owned subsidiaries of the Company. SFS and SFM are investment advisors
registered with the Securities and Exchange Commission ("SEC") under the
Investment Advisers Act of 1940. SFS is a broker-dealer registered with the SEC
under the Securities Exchange Act of 1934 and a member of the National
Association of Securities Dealers, Inc. SEI Trust is a limited-purpose trust
entity chartered in the Commonwealth of Pennsylvania.
At the time of the Company's initial public offering in March 1981, the
Company's principal business activity was providing an on-line, real-time
accounting and management information system to bank trust departments.
Beginning in 1982, the Company, through SFS and SFM, sponsored a number of
institutional investment products, primarily in the form of registered
investment companies sold to SEI clients and other institutional investors and
financial intermediaries. In 1990, SFS and SFM began providing a full range of
administrative and distribution services to proprietary mutual funds established
for banks and other financial institutions and intermediaries. The banks
generally act as investment advisor for their proprietary funds, and the funds
are sold primarily to clients of the banks.
In October 1983, the Company, through SFS, acquired the Funds Evaluation
Division of A.G. Becker Paribas, Incorporated, and began providing a comparative
investment performance evaluation service to tax-exempt fund sponsors and
institutional money managers. The Company's evaluation services were augmented
in December 1985 when SFS acquired the software and Capital Resources database
previously used by Merrill Lynch, Pierce, Fenner & Smith Inc., to provide
investment performance analysis products and services, and again in October
1986, when SFS acquired certain assets of the Pensions Finance Associates
Division of Public Affairs Resource Group Limited, which provided evaluation
services in Canada. In 1991, the Company began to provide asset management
services for institutional investors in the United States. In 1995, the Company
began to offer asset management services outside the United States. In May
1995, the Company announced its intention to dispose of the Capital Resources
Division. Currently, the Company is exploring the sale of this unit or making
it an independent enterprise (See Note 2 of the Notes to Consolidated Financial
Statements).
In May 1989, the Company acquired National FSI, Inc., which it renamed SEI
Benefit Services Corporation ("SBS"). SBS, a provider of administrative and
processing services and software systems for use by employee benefit plans, was
merged into SFM in June 1992 and was renamed SEI Defined Contribution Retirement
Services ("DC"). In the first quarter of 1996, the Company completed the
transfer of the processing services provided by DC to a third party (See Note 2
of the Notes to Consolidated Financial Statements).
Industry Segments
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Prior to 1995, the Company was organized around the markets to which it
delivered products and services: Trust and Banking and Fund Sponsor/Investment
Advisory. The Trust and Banking segment, included all products and services sold
to banks. The Fund Sponsor/Investment Advisory market unit included all products
and services sold to benefit plan sponsors, money managers, and institutional
owners of funds.
In 1995, the Company reorganized around its two major product lines: Investment
Technology and Services and Asset Management. The Investment Technology and
Services segment, which accounted for 70 percent of the Company's consolidated
revenues in 1995, contains the following products related to technology and back
office trust services: 3000 product line, proprietary funds, and back office
trust processing. The Asset Management segment, which accounted for 30 percent
of the Company's consolidated revenues in 1995, contains the following products
related to managing assets: SEI Family of Funds, liquidity funds and services,
Customized Asset Management Service, and consulting services.
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Financial information about the Company's business segments is contained in Note
11 of the Notes to Consolidated Financial Statements in Item 8. Additional
financial information and discussion about the Company's business segments,
including a breakdown of the Company's revenues by market, is contained in
Management's Discussion and Analysis of Financial Condition and Results of
Operations in Item 7.
INVESTMENT TECHNOLOGY AND SERVICES
Trust Systems and Services
The Company, through SFM, provides trust accounting and management information
services with its 3000 product line. SEI's 3000 product line which consists of
TRUST 3000(R), INVEST 3000(R), TRADE 3000(R), SOURCE 3000(R), PERFORMANCE
3000(SM), and GLOBAL TRUST 3000(R) supports investment accounting; client
administration; portfolio analysis; trade-order processing; a centralized
securities and financial information database; performance measurement; and
international and domestic securities processing.
TRUST 3000 is a complete trust accounting and investment system that features a
fully automated securities movement and control program, linked directly to the
Depository Trust Company. TRUST 3000 is fully integrated with several trust
management subsystems. INVEST 3000 combines portfolio information with third-
party research databases and analytical tools for effective investment
management. TRADE 3000 is a trade-order processing system that tracks
securities trades from the development of trade orders through the resulting
execution and trade settlement. SOURCE 3000 is a centralized securities and
financial information database utilizing third-party-provided pricing and other
asset-related information. PERFORMANCE 3000 provides periodic reports that
measure investment performance, including rates of return and comparison with
industry standards, or customer-specific indices. GLOBAL TRUST 3000 is an
integrated international and domestic securities processing product with multi-
currency trust accounting capabilities.
The 3000 product line allows clients to choose the processing alternatives that
best suit their business needs: on-site (at a client's designated location on a
client-owned or leased computer); facilities management (via data communications
links to a dedicated processing environment at the Company's data center); or
remote service (via data communications links to shared computers at the
Company's data center), which is the most common delivery option. All three
processing alternatives offer on-line data entry with real-time retrieval
capabilities.
The Company offers flexible, easily upgradable on-site solutions, based on a
full range of mainframe computers. With the facilities management and remote
service options, a client can opt to control report printing on-site on high-
speed printers and/or access other bank applications, through the use of shared
lines with the Systems Network/Architecture Network Interconnection capability.
Installation of SEI's 3000 product line for on-site customers involves the
determination of hardware requirements, the building of a system configuration,
and the establishment of a communications environment. For facilities
management and remote service customers, the Company's installation
representatives integrate specific client needs and procedures with SEI's
software programs and equipment.
The Company supplies its 3000 product line to facilities management and remote
service customers through a nationwide data communications network managed by
the Company. Each facilities management and remote service customer utilizes
one or more terminals, which are connected through this network to mainframe
computers at the Company's data center. On-site customers access this product
line through the data communications network.
Customers generally contract for terms of three to five years. On-site client
revenues are based on monthly software service fees. Revenues from facilities
management and remote service customers are based on monthly software service
fees, as well as usage-based processing fees.
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SEI's market for its trust accounting and management information services
consists primarily of United States bank trust departments managing assets
between $10 million and $100 billion. The Company believes that there are
approximately 1,500 trust departments of this size. At December 31, 1995, the
Company was providing processing or software services to 166 trust departments
located in 38 states, the District of Columbia, and Canada. The Company
segregates the trust accounting and information services market by trust assets
under management: $20 billion or more in managed assets; $300 million to $20
billion in managed assets; and under $300 million in managed assets. Each of
these three trust accounting and management information services markets are
characterized by different pricing, service, and product parameters. SEI
endeavors to offer a range of products and services suitable for each.
Principal competitors of the Company's trust accounting and processing services
are National Computer Systems, Inc. and Asset Management Services Group, a
division of Broadway & Seymour. In addition, numerous financial institutions
operate their own proprietary trust processing systems. The Company believes
that in terms of both revenues and number of clients served, its TRUST 3000
product is the leading trust accounting and management system sold by
third-party vendors to bank trust departments. The Company believes that, with
regard to its 3000 product line, the most important factors in a potential
customer's evaluation and choice of vendor are product and service reliability,
ease of use, functional capability, future flexibility, data security, and cost
effectiveness. A vendor's experience in, and commitment to, the financial
industry is also considered. Revenues from trust systems services accounted for
approximately 49 percent of the Company's consolidated revenues in 1995.
The Company, through SEI Trust, provides complete trust back-office accounting
and processing services, along with the the Company's investment products and
services. The market for these services include small bank trust departments and
other small banks in the process of starting trust departments. At December 31,
1995, SEI Trust was performing back-office processing services to 11 clients.
Proprietary Fund Services
In 1990, the Company began providing administrative and distribution services to
proprietary mutual funds for which a bank serves as the investment advisor, and
which are sold primarily to clients of the bank. SEI provides a full range of
administration and distribution services to the proprietary funds created for
banks, other financial institutions, and money managers. Administration services
are offered through SFM, while distribution services are provided through SFS.
Administration services offered include the back-office administrative,
financial, legal/compliance, and shareholder accounting services. Distribution
services offered include marketing strategy and sales support. SEI also assists
the client in establishing both product and program strategy. SEI offers a
multifaceted marketing program which assists in promoting the funds at the trust
and retail levels. At December 31, 1995, SEI provided administration and
distribution services for banks, money managers, and credit union proprietary
fund complexes with assets under management of approximately $41.7 billion.
These complexes include various open-end management investment companies.
To establish new proprietary mutual fund complexes, the Company must first
establish the mutual fund complex, including the necessary federal securities
registration, and then assist the bank in the transfer of existing investment
funds into the mutual funds. Until such registration is complete and asset
transfers occur, which usually takes four to six months, SEI receives no
revenues from the proprietary funds it helps establish. In addition, SEI must
expend significant time and resources during the start-up of a mutual fund
complex and bears the risk that these costs will not be recovered if the mutual
fund complex is not funded. Many of the Company's new clients have been existing
mutual funds for which the Company assumes the administration and distribution
responsibilities. These relationships do not bear the risk of non-funding as
with a new fund complex.
The Company's market for its proprietary funds services and products consists
primarily of bank trust departments and investment advisors. At the end of 1995,
there were approximately 110 proprietary fund complexes that existed in the
United States. SEI administered proprietary funds for 23 clients at December 31,
1995. Two proprietary fund clients were acquired by other banks and the related
assets were transferred to proprietary funds advised by such banks in the first
quarter of 1996.
5
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The Company's contracts with proprietary mutual funds have initial terms ranging
from two to five years. Principal competitors of the Company's proprietary
mutual fund services include Federated Investors, Inc., BISYS Group, First Data
Corporation, PFPC, and State Street Bank. The Company believes that a potential
customer of its proprietary mutual fund services considers the price of such
services, the performance of its administrative and other support services such
as legal and marketing, and the integration of such services with proprietary
software provided by the Company. In addition, while banks are currently
prohibited by banking laws from serving as the principal underwriter to mutual
funds, legislation has been proposed from time to time to remove this
restriction. Currently, several versions of such legislation are pending before
Congress. If such legislation is passed, some banks may consider performing the
services provided by SEI themselves. Some banks already perform certain
administrative services themselves, such as fund accounting, and other banks may
perform similar services in the future. In addition, consolidation in the
banking industry may reduce the number of bank proprietary fund complexes in
existence. Revenues from proprietary fund products and services accounted for
approximately 21 percent of the Company's consolidated revenues in 1995.
ASSET MANAGEMENT
Liquidity and Mutual Fund Services
SEI, through SFS and SFM, has created a number of investment products for
institutional investors and financial intermediaries. The initial investment
product, first distributed in 1982, and successive products were developed to
meet the liquidity requirements of the Company's 3000 product line customers,
which are primarily bank trust departments. In 1985, the Company began to offer
a growing family of funds, including equity, fixed income, and tax-exempt
products, to satisfy the diverse product requirements of its expanded
institutional investor market. In 1993, the Company began to offer its Family
of Funds on a retail basis through financial institutions and intermediaries.
The products include several open-end management investment companies: SEI
Liquid Asset Trust (a money market fund); SEI Tax Exempt Trust (tax-exempt money
market and fixed income funds); SEI Daily Income Trust (money market and
government bond portfolios); SEI Index Funds (indexed equity and fixed income
funds); SEI Institutional Managed Trust (equity, bond, and balanced portfolios);
and SEI International Trust (international equity and fixed income portfolios).
Each investment company offers multiple portfolios and classes within a
portfolio designed to meet a variety of investment objectives through various
distribution channels.
SFM is the administrator, transfer agent, fund accountant, and dividend
distribution agent for these investment companies under the terms of separate
administration contracts, which generally are subject to renewal annually by the
board of trustees of each investment company. These contracts provide for the
payment to SFM of administration fees based on a percentage of the average net
assets of each investment company. SFS is the distributor of each investment
company's shares for which it receives reimbursement for a portion of its
distribution expenses.
In 1994 and 1995, SFM became the investment advisor for the majority of the
portfolios within these investment companies. This change is consistent with
the Company's move toward becoming an asset management company with in-house
asset allocation and investment expertise. Sub-advisors will be selected and
hired by SFM for portfolio management.
The SEI Repurchase Agreement Program ("REPO") is an additional investment
service offered by the Company. REPO permits institutions to invest short-term
funds in overnight and term tri-party repurchase agreements. Through the
Company's REPO program, the institutional investor purchases securities offered
by selected dealers that simultaneously agree to repurchase the securities on a
specified day. Pending repurchase, the securities are held by an independent
custodian bank in segregated accounts for each investor.
Clients that also use the 3000 product line can effect purchases and redemptions
in SEI's investment products through an automated subsystem included in the
Company's TRUST 3000 system that performs daily sweeps of trust accounts and
invests the available cash in one or more of the Company's investment products.
Other clients may purchase or redeem investment products through microsystems
utilizing SFM's FundPac+Plus(R) product located at client locations, or by
telephone orders to SFM. Accounting and administrative functions for the funds
are performed at the Company's headquarters. The Company also provides cash
sweep technology that enables a financial institution to sweep excess balances
from demand deposit accounts into money market mutual funds.
6
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The Company's market for its Liquidity and Family of Funds products consists
primarily of bank trust departments, investment advisors, and corporations
located in the United States. The number of clients investing in the Company's
investment products totaled approximately 800 at December 31, 1995.
Principal competitors of the Company's Liquidity and Family of Funds include
Federated Investors, Inc., Fidelity Management Corporation, Investors Fiduciary
Trust Company, and Goldman, Sachs & Co., and other mutual fund complexes that
market to institutional investors as well as individual bank proprietary and
common funds. The Company believes that a potential customer of its Liquidity
and Family of Funds business considers the price and performance of the
Company's investment products and its diverse product offerings, as well as the
ease of investment through SEI's automated sweep system, FundPac+Plus, and its
cash sweep technology. Revenues from liquidity and mutual fund services
accounted for approximately 18 percent of the Company's consolidated revenues in
1995.
Asset Management Services
Drawing on its research expertise, the Company began providing investment
solutions to its fund sponsor and money manager clients in 1991. Customized
Asset Management Service ("CAMS") is a program started in 1991 for defined
benefit plans, hospitals, endowment funds, and other institutional investors.
CAMS permits such clients access to the products, services, and managers
typically available to larger plans and investors through investments in the SEI
Family of Funds or through separate accounts with specialist money managers. The
Company now provides a full array of investment management services which
include implementation of asset allocation strategies based upon a client's
investment goals and risk tolerance. These allocation strategies include
investment products created by the Company, and utilize the services of top
quality investment sub-advisors. The sub-advisors are screened through the
Company's due diligence process and a performance measurement system. By the end
of 1995, CAMS had 54 clients and $1.9 billion in asset balances. In 1995, the
Company began offering its asset management services outside the United States.
The Company has offered comprehensive asset management programs since 1992 that
provide a fee-based business solution for financial intermediaries such as
banks, registered investment advisors, financial planners, and broker-dealers.
These programs are designed to provide such intermediaries a long-term
investment strategy to their high-net-worth individual and small qualified plan
customers. The Company's asset management programs offer financial
intermediaries various asset allocation models which afford their customers
access to SEI's Family of Funds, diversification among investment classes, and
periodic rebalancing to achieve the investor's objectives.
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The principal competition for the Company's asset management products is from
other investment advisors and mutual fund companies. Revenues from asset
management services accounted for approximately 6 percent of the Company's
consolidated revenues in 1995.
Brokerage and Consulting Services
In May 1995, the Company announced its intention to dispose of the Capital
Resources Division, accounting for it as a discontinued operation (See Note 2 of
the Notes to Consolidated Financial Statements). The Company intends to retain
the Canadian pension and investment advisor consulting business.
The Company, through its wholly owned subsidiary, SEI Financial Services Limited
("SFS Ltd."), provides performance evaluation and other consulting services to
Canadian pension plans. SFS Ltd. also supports money managers in managing their
clients' investments through investment performance evaluation services, as well
as trading cost analysis and marketing strategy review.
The Company's fund sponsor, money manager, and Trust 3000 clients remit payment
for services rendered by SEI in cash or, subject to applicable regulatory
guidelines, by directing brokerage commissions to SFS or SFS Ltd. through SEI-
approved clearing agents or clearing brokers. These clients may also apply a
portion of such directed brokerage commissions to defray certain other third-
party costs. As a result of the directed brokerage business, the Company's
revenues may be affected by changes in market trading volume or changes in
government regulations affecting directed brokerage payments.
The market for the Company's consulting services consists mostly of defined
benefit plan sponsors and investment managers located in Canada. At December
31, 1995, the Company was providing consulting services to approximately 485
defined benefit plan sponsors and 45 investment managers. The Company claims
more than 75 percent of the market and has no significant competitors in the
Canadian market. Revenues from brokerage and consulting services accounted for
approximately 6 percent of the Company's consolidated revenues in 1995.
Marketing and Sales
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SEI employs 32 sales representatives in its Investment Technology and Services
segment and 52 sales representatives in its Asset Management segment. These
sales personnel operate from 13 offices located in Wayne, Pennsylvania; San
Francisco, California; Chicago, Illinois; Boston, Massachusetts; New York, New
York; Dallas and Houston, Texas; Atlanta, Georgia; Toronto, Ontario; Montreal,
Quebec; Vancouver, British Columbia; Halifax, Nova Scotia; and Zurich,
Switzerland.
Customers
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The Company currently serves approximately 2,200 clients. For the year ended
December 31, 1995, no single customer accounted for more than 10 percent of the
Company's revenues in any industry segment.
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Development of New Products and Services
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Software products
The Company believes that its service to existing and potential customers is
enhanced by its substantial investment in improving existing software products
and developing new products and services for the financial industry. To sustain
and enhance its competitive position in the industry, the Company is committed
to a continuous and high level of expenditures for research and development.
The Company currently releases new products as they are completed, rather than
holding them for bundling in three major annual releases as it has in the past.
The benefit to the client is frequent, more manageable releases. Maintenance
releases occur four times each year during the months of February, May, August,
and November.
The Company's product development efforts are currently focused on its open
architecture based products. This open architecture project will allow the
Company's clients to operate in a multi-platform environment using client/server
installations. This new open architecture will also facilitate the development
of new applications for the Company, as well as significantly expand the upward
functionality of its existing products to enhance its attractiveness to the
largest clients. As clients begin utilizing new client/server applications, the
Company expects its ability to sell into this market to be greatly enhanced
over the next three years. During 1995, 1994, and 1993, the Company expended
(including amounts capitalized) approximately $16,744,000 (7.4 percent of
revenues), $15,001,000 (7.3 percent of revenues), and $15,092,000 (8.2 percent
of revenues), respectively, to design, develop, and modify existing or new
products and services.
Investment products
The Company has taken several steps to increase the asset management services it
provides. In 1994, the Company formed a partnership with three leading academics
in the field of finance and established an asset management company in Canada.
The partnership, LSV Asset Management ("LSV"), is a value-oriented, contrarian
money manager that offers a deep-value investment alternative. In addition to
managing approximately $80 million of the Company's Large Cap Value Fund, LSV
managed approximately $25 million of institutional money as of December 31,
1995. The Canadian asset management company, Primus Capital Advisors Inc., is an
investment counselor/portfolio manager offering investment advisory services to
both large and small Canadian defined benefit pension plans.
SEI is entering the international export finance business through its Swiss
subsidiary, SEI Capital AG. While this subsidiary has been in existence for a
year, its operations have not been significant. SEI Capital AG will manage and
trade a portfolio of trade finance obligations arising from international export
transactions . Revenue will be generated from several sources: interest,
commitment fees, and trading spreads. At December 31, 1995, SEI contributed $8
million to this subsidiary and held $5.2 million of loans receivable available
for sale (See Note 4 of the Notes to Consolidated Financial Statements).
Regulatory Considerations
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SFS and SFM are subject to various federal and state laws and regulations that
grant supervisory agencies, including the SEC, broad administrative powers. In
the event of a failure to comply with such laws and regulations, the possible
sanctions that may be imposed include the suspension of individual employees,
limitations on SFS's or SFM's engaging in business for specified periods of
time, the revocation of SFS's or SFM's registration as a broker-dealer or
investment advisor, censures, and fines. SEI Trust is subject to laws and
regulations imposed by state banking authorities. In the event of a failure to
comply with these laws and regulations, limitations may be placed on the
business of SEI Trust, or its license as a trust company may be revoked.
Investment products offered by SEI and its subsidiaries are also subject to
regulation by the SEC and state securities authorities. Existing or future
regulations that affect these investment vehicles or their investment strategies
could impair their investment performance and lead to a reduction in sales of
such investment products. Directed brokerage payment arrangements offered by
the Company are also subject to SEC and other federal regulatory authorities.
Changes in the regulation of directed brokerage or soft dollar payment
arrangements could affect the Company's sales of some services, primarily its
brokerage and consulting services.
Bank clients of both business segments are subject to supervision by federal and
state banking authorities concerning the manner such clients purchase and
receive the Company's products and services. Plan sponsor clients are subject
to supervision by the Department of Labor and compliance with employee benefit
regulations. Investment advisor clients are regulated by the SEC and state
securities authorities. Existing or future regulations applicable to the
Company's clients may affect such clients' purchase of the products and services
offered by the Company.
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Personnel
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At December 31, 1995, the Company had 1,101 full-time and 86 part-time
employees. None of the Company's employees are represented by a labor union.
The Company considers its employee relations to be good.
ITEM 2. PROPERTIES.
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The Company's corporate offices are located in leased facilities containing
224,000 square feet of space in Wayne, Pennsylvania. The Company also leases an
additional 86,000 square feet of space in Wayne for use as its data center. The
Company has sales support offices in Chicago, Illinois (67,000 square feet) and
Dallas, Texas (46,000 square feet). All other offices leased by the Company
aggregate 40,000 square feet. The Company owns a New York City condominium
(3,400 square feet) used for business purposes. In 1994, the Company purchased
90 acres of land near its present corporate offices for approximately $4
million. The Company began construction of a corporate campus on this site in
August 1995. The project is expected to be completed in the fall of 1996. The
expirations of the Company's leases in Wayne coincide with the corporate move in
1996.
ITEM 3. LEGAL PROCEEDINGS.
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There are no legal proceedings to which the Company is a party or to which any
of its properties is subject which are expected to have a material adverse
effect on the business of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
---------------------------------------------------
There were no matters submitted to a vote of security holders during the fourth
quarter of 1995.
Information with regard to the executive officers of the Company is contained in
Item 10 hereof and is incorporated by reference to this Part I.
10
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PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S SECURITIES AND RELATED STOCKHOLDER MATTERS.
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Price Range of Common Stock:
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The Company's common stock is traded in the NASDAQ National Market System under
the symbol SEIC. The following table shows the range of closing sales prices on
the NASDAQ National Market System for the periods indicated.
<TABLE>
<CAPTION>
1995 High Low
- ---- ---- ---
<S> <C> <C>
First Quarter 20 1/4 16 3/4
Second Quarter 23 7/8 17 1/4
Third Quarter 24 1/2 20 1/8
Fourth Quarter 23 3/4 19 3/4
<CAPTION>
1994 High Low
- ---- ---- ---
<S> <C> <C>
First Quarter 28 1/2 23 1/4
Second Quarter 24 3/4 17
Third Quarter 22 1/4 17 1/4
Fourth Quarter 22 1/4 16 3/4
</TABLE>
As of December 31, 1995, there were approximately 1,100 shareholders of record.
The Board of Directors declared a $.10 dividend in May and December of 1995, and
a $.08 dividend in May and December of 1994. The Board of Directors has
indicated its intention to pay future dividends on a semiannual basis.
11
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ITEM 6. SELECTED FINANCIAL DATA.
-----------------------
(In thousands, except per share data)
The following table summarizes certain selected financial data for the five
years in the period ended December 31, 1995. The historical selected financial
data for the Company for each of the five years in the period ended December 31
are derived from, and are qualified by reference to, the financial statements of
the Company which are included with Item 8 in this report. Such financial
statements have been audited by Arthur Anderson LLP, independent public
accountants, to the extent indicated in their report. This data should be read
in conjunction with the Company's financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in this report.
<TABLE>
<CAPTION>
FOR THE YEAR 1995 1994( A) 1993(A) 1992(A)(B) 1991(A)(B)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues .................................................. $225,964 $205,051 $185,064 $158,025 $133,317
Expenses:
Operating and development................................ 115,366 110,504 108,743 96,378 77,125
Sales and marketing...................................... 58,892 48,561 39,521 37,874 24,605
General and administrative............................... 16,963 16,919 16,865 17,285 16,419
------------- ------------- ------------- ------------- -----------
Income from continuing operations before interest and 34,743 29,067 19,935 6,488 15,168
income taxes..............................................
Interest income, net....................................... (764) (374) (315) (472) (840)
------------- ------------- ------------- ------------- -----------
Income from continuing operations before income taxes...... 35,507 29,441 20,250 6,960 16,008
Income taxes............................................... 14,381 11,188 7,493 2,506 5,923
------------- ------------- ------------- ------------- -----------
Income from continuing operations.......................... 21,126 18,253 12,757 4,454 10,085
Income (loss) from discontinued operations................. (1,942) 997 3,382 6,877 2,065
Gain on sale of discontinued operation..................... -- -- -- 1,597 --
------------- ------------- ------------- ------------- -----------
Net income................................................. $ 19,184 $ 19,250 $ 16,139 $ 12,928 $ 12,150
- ----------------------------------------------------------------------------------------------------------------------------------
Earnings per share from continuing operations (C).......... $ 1.09 $ .91 $ .62 $ .20 $ .44
Earnings (loss) per share from discontinued operations (C). (.10) .05 .16 .39 .09
------------- ------------- ------------- ------------- -----------
Earnings per share (primary and fully diluted) (C)......... $ .99 $ .96 $ .78 $ .59 $ .53
Shares used to calculate earnings per share (C)............ 19,445 20,027 20,733 21,940 23,016
Cash dividends declared per common share (C)............... $ .20 $ .16 $ .12 $ .075 $ .063
- ----------------------------------------------------------------------------------------------------------------------------------
Year-end Financial Position
Property and equipment, net................................ $ 24,299 $ 25,338 $ 22,279 $ 19,033 $ 23,344
Total assets............................................... $101,347 $ 91,148 $ 88,229 $ 79,402 $ 74,229
Shareholders' equity....................................... $ 56,002 $ 51,309 $ 51,541 $ 49,376 $ 47,934
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Information for 1994, 1993, 1992, and 1991 has been restated to reflect the
SEI Capital Resources Division and the SEI Defined Contribution Retirement
Service Division as discontinued operations. See Note 2 of the Notes to
Consolidated Financial Statements.
(B) Information for 1992 and 1991 has been reported to reflect Reality
Technologies, Ltd. as a discontinued operation.
(C) All share and per share information for 1992 and 1991 has been reported to
reflect the two-for-one stock split in 1993. See Note 7 of the Notes to
Consolidated Financial Statements.
12
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS.
-------------
(In thousands, except per share data)
The Company is organized around its two major product lines: Investment
Technology and Services and Asset Management. Financial information on each of
these segments is reflected in Note 11 of the Notes to Consolidated Financial
Statements.
RESULTS OF OPERATIONS
- ---------------------
1995 COMPARED WITH 1994
The Company's results of operations for the year ended December 31, 1995
included revenues from continuing operations of $225,964, compared to $205,051
reported in the same period of 1994, an increase of over 10 percent from the
prior period. Income from continuing operations for 1995 was $21,126 or $1.09
per share, compared to $18,253 or $0.91 per share reported in 1994. Earnings
per share for 1995 increased 20 percent over the prior year. Assets under
management at December 31, 1995 were $61.2 billion compared to $46.3 billion at
December 31, 1994, an increase of 32 percent. Included in these assets are
proprietary fund balances of $41.7 billion at December 31, 1995 and $25.8
billion at December 31, 1994, an increase of 62 percent. The Company continued
to focus on reducing non-strategic and non-essential expenses, while revenues
continued to grow.
INVESTMENT TECHNOLOGY AND SERVICES
- ----------------------------------
Revenues from the Investment Technology and Services segment for the year ended
December 31, 1995 and 1994 were $157,960 and $136,498, respectively.
<TABLE>
<CAPTION>
INVESTMENT TECHNOLOGY AND SERVICES REVENUES
--------------------------------------------
DOLLAR PERCENT
1995 1994 CHANGE CHANGE
---- ---- ------ ------
<S> <C> <C> <C> <C>
Trust systems and services $110,886 $104,180 $ 6,706 6%
Proprietary fund services 47,074 32,318 14,756 46%
------- ------- ------
Total $157,960 $136,498 $21,462 16%
======= ======= ======
</TABLE>
The 16 percent increase in this segment's revenues was due primarily to growth
in the proprietary mutual fund business. Proprietary fund services revenue
increased 46 percent from the prior-year period due to an increase in average
proprietary fund balances over the past year. Average proprietary fund balances
increased $12.8 billion or 60 percent from $21.5 billion during 1994 to $34.3
billion during 1995. This increase in proprietary fund balances was the result
of growth in existing fund complexes and the commencement of new fund complexes
during the past year. Trust systems revenue increased 6 percent from the prior
year primarily due to an increase in one-time implementation fees. The increase
in implementation fees was a result of mergers among various bank clients.
Revenues should continue to expand in 1996 due to continued growth in fund
balances from bank proprietary funds. However, future revenue increases will be
partially offset by the loss of bank proprietary funds as a result of continued
mergers among banks.
13
<PAGE>
INVESTMENT TECHNOLOGY AND SERVICES EXPENSES
-------------------------------------------
<TABLE>
<CAPTION>
DOLLAR PERCENT
1995 1994 CHANGE CHANGE
---- ---- ------ ------
<S> <C> <C> <C> <C>
Operating and development $82,529 $76,236 $6,293 8%
Sales and marketing $30,255 $23,737 $6,518 27%
</TABLE>
Operating profit from Investment Technology and Services for the year ended
December 31, 1995 was $45,176, an increase of 24 percent from the $36,525 for
the corresponding period of 1994. Operating margins for this segment increased
to 29 percent in 1995 compared to 27 percent in 1994. The 8 percent increase in
operating and development expense was primarily attributable to increases in
consulting, outsourcing, and direct expense associated with the growth in
proprietary fund balances. The increase in consulting and outsourcing expense
reflects the Company's investment in trust technology and its internal
infrastructure. The 27 percent increase in sales and marketing expense was
primarily attributable to an increase in personnel and consulting expense. The
increase in consulting expense relates primarily to the increase in one-time
trust services revenue. This segment should continue to expand revenues and
operating profits in 1996, despite significant investments in technology.
ASSET MANAGEMENT
- ----------------
Revenues from the Asset Management segment for the year ended December 31, 1995
and 1994 were $68,004 and $68,553, respectively.
ASSET MANAGEMENT REVENUES
-------------------------
<TABLE>
<CAPTION>
DOLLAR PERCENT
1995 1994 CHANGE CHANGE
---- ---- ------ ------
<S> <C> <C> <C> <C>
Liquidity services $21,944 $21,380 $564 3%
Mutual fund services 18,677 20,011 (1,334) (7%)
Asset management services 14,476 16,336 (1,860) (11%)
Brokerage and consulting services 12,907 10,826 2,081 19%
------ ------ -----
Total $68,004 $68,553 $(549) (1%)
====== ====== =====
</TABLE>
Revenues from this segment decreased slightly due to declines in this segment's
mutual fund and asset management businesses. The 7 percent decline in mutual
fund services was due primarily to a decrease in fund balances from the
Company's Family of Funds and a shift from higher-fee to lower-fee products
within these funds. The decline in fund balances was a result of two banks
transferring their mutual fund balances to proprietary funds. The 11 percent
decline in asset management services is primarily due to a decrease in fees from
the International Equity Fund.
14
<PAGE>
ASSET MANAGEMENT EXPENSES
-------------------------
<TABLE>
<CAPTION>
DOLLAR PERCENT
1995 1994 CHANGE CHANGE
---- ---- ------ ------
<S> <C> <C> <C> <C>
Operating and development $32,837 $34,268 $(1,431) (4%)
Sales and marketing $28,637 $24,824 $ 3,813 15%
</TABLE>
The 4 percent decrease in operating and development expense was due primarily to
a decrease in personnel expense. The 15 percent increase in sales and marketing
expense was due primarily to increases in promotion, travel, and personnel
expenses. The Asset Management segment recorded an operating profit of $6,530
in 1995, compared to $9,461 in 1994. The lower operating profit in this segment
was primarily attributable to investments the Company has made in its asset
management business, along with declining fund balances and lower revenues from
the International Equity Fund and the Company's Family of Funds. The Asset
Management segment is expected to show improved operating results in 1996 as a
result of growth in its core asset management business and continued growth in
its liquidity services business.
OTHER INCOME AND EXPENSES
- -------------------------
General and administrative expenses for the year ended December 31, 1995 and
1994 were $16,963 and $16,919, respectively. General and administrative
expenses remained relatively flat from 1994.
Interest income for the year ended December 31, 1995 and 1994 was $764 and $374,
respectively. The increase in interest income is due primarily to an increase
in the average cash balance invested in 1995 compared to 1994, in addition to
dividend income generated from the Company's investments available for sale.
The Company's effective tax rate from continuing operations was 40.5 percent for
1995 and 38 percent for 1994. The increase in the effective tax rate was due to
losses incurred from the Company's foreign subsidiaries in 1995 for which no tax
benefit was received. The Company accounts for income taxes in accordance with
Financial Accounting Standards Board Statement No. 109, "Accounting for Income
Taxes" (See Note 1 of the Notes to Consolidated Financial Statements). The
Company expects its effective tax rate from continuing operations to be
approximately 41 percent in 1996.
15
<PAGE>
1994 COMPARED WITH 1993
The Company's results of operations for the year ended December 31, 1994
included revenues from continuing operations of $205,051, compared to $185,064
reported in the same period of 1993, an increase of 11 percent. Income from
continuing operations for 1994 was $18,253 or $0.91 per share, compared to
$12,757 or $0.62 per share reported in 1993. Earnings per share from continuing
operations increased 47 percent over the prior year. Assets under management at
December 31, 1994 were $46.3 billion compared to $39.5 billion at December 31,
1993, an increase of 17 percent. Included in these assets are proprietary fund
balances of $25.8 billion at December 31, 1994 and $19.6 billion at December 31,
1993, an increase of 32 percent.
INVESTMENT TECHNOLOGY AND SERVICES
- ----------------------------------
Revenues from the Investment Technology and Services segment for the year ended
December 31, 1994 and 1993 were $136,498 and $124,329, respectively.
INVESTMENT TECHNOLOGY AND SERVICES REVENUES
-------------------------------------------
<TABLE>
<CAPTION>
DOLLAR PERCENT
1994 1993 CHANGE CHANGE
---- ---- ------ ------
<S> <C> <C> <C> <C>
Trust systems and services $104,180 $93,462 $10,718 11%
Proprietary fund services 32,318 30,867 1,451 5%
------- ------- ------
Total $136,498 $124,329 $12,169 10%
======= ======= ======
</TABLE>
The 11 percent increase in trust systems revenue was due primarily to an
increase in trust processing fees from existing clients along with an increase
in one-time implementation fees and support services. Proprietary fund revenues
increased 5 percent in 1994 despite the loss of a major proprietary fund complex
which generated revenues of $4.5 million in 1993. The loss of revenue from this
mutual fund complex did not have a significant impact on earnings because the
profit margin from this mutual fund complex was immaterial.
INVESTMENT TECHNOLOGY AND SERVICES REVENUES
-------------------------------------------
<TABLE>
<CAPTION>
DOLLAR PERCENT
1994 1993 CHANGE CHANGE
---- ---- ------ ------
<S> <C> <C> <C> <C>
Operating and development $76,236 $85,187 $(8,951) (11%)
Sales and marketing $23,737 $16,703 $ 7,034 42%
</TABLE>
Operating profit from Investment Technology and Services for the year ended
December 31, 1994 was $36,525, an increase of 63 percent from the $22,439 for
the corresponding period of 1993. Operating margins for this segment were 27
percent and 18 percent for 1994 and 1993, respectively. The 11 percent decrease
in operating and development expense was primarily attributable to a decline in
direct proprietary fund expense and from an internal reorganization of the sales
and service teams for each banking unit from operating and development to sales
and marketing expense. The 42 percent increase in sales and marketing expense
was primarily attributable to investments the Company made in its sales force,
along with the internal sales and service team reorganization.
16
<PAGE>
ASSET MANAGEMENT
- ----------------
Revenues from the Asset Management segment for the year ended December 31, 1994
and 1993 were $68,553 and $60,735, respectively.
ASSET MANAGEMENT EXPENSES
-------------------------
<TABLE>
<CAPTION>
DOLLAR PERCENT
1994 1993 CHANGE CHANGE
---- ---- ------ ------
<S> <C> <C> <C> <C>
Liquidity services $21,380 $26,250 $(4,870) (19%)
Mutual fund services 20,011 14,020 5,991 43%
Asset management services 16,336 10,566 5,770 55%
Brokerage and consulting services 10,826 9,899 927 9%
------ ------ -----
Total $68,553 $60,735 $7,818 13%
====== ====== =====
</TABLE>
The 13 percent increase for 1994, as compared to 1993, was primarily
attributable to increased asset management fees from the International Equity
Fund and CAMS, along with an increase in the Company's mutual fund business.
Year-end balances of the International Equity Fund and CAMS increased from $1.7
billion at the end of 1993 to approximately $2.5 billion at the end of 1994, an
increase of 47 percent. The increase in mutual fund services is primarily
attributable to an increase in average fund balances from SEI's Family of Funds
in 1994, as compared to 1993, along with an increase in basis points earned on
these fund balances.
ASSET MANAGEMENT EXPENSES
-------------------------
<TABLE>
<CAPTION>
DOLLAR PERCENT
1994 1993 CHANGE CHANGE
---- ---- ------ ------
<S> <C> <C> <C> <C>
Operating and development $34,268 $23,556 $10,712 45%
Sales and marketing $24,824 $22,818 $2,006 9%
</TABLE>
The 45 percent increase in operating and development expense was due primarily
to direct costs associated with the outside management and internal support of
the International Equity Fund and CAMS. The 9 percent increase in sales and
marketing expense was due primarily to investments the Company made in its sales
force. The Asset Management segment recorded an operating profit of $9,461 in
1994 compared to $14,361 recorded in 1993. The decline in operating profit in
1994 was primarily attributable to investments the Company made in its sales
force, an increase in one-time personnel expense, and substantial increases in
asset management operations expense.
OTHER INCOME AND EXPENSES
- -------------------------
General and administrative expenses for the year ended December 31, 1994 and
1993 were $16,919 and $16,865, respectively. General and administrative
expenses remained relatively flat from 1993.
Interest income for the year ended December 31, 1994 and 1993 was $374 and $315,
respectively. The increase in interest income is due primarily to an increase
in short-term interest rates during 1994 and an average cash balance that
remained relatively constant in 1994, compared to 1993.
The Company's effective tax rate from continuing operations was 38 percent in
1994 and 37 percent in 1993. The Company accounts for income taxes in
accordance with Financial Accounting Standards Board Statement No. 109,
"Accounting for Income Taxes" (See Note 1 of the Notes to Consolidated Financial
Statements).
17
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's ability to generate adequate cash 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 $20,000 (See Note 6 of the Notes to Consolidated Financial
Statements). At December 31, 1995, the Company's unused sources of liquidity
consisted primarily of cash and cash equivalents of $10,256 and the entire line
of credit of $20,000. The availability of this loan is subject to the Company's
compliance with certain covenants set forth in the loan agreement. Cash flow
generated from operations was $24,352, $36,681, $31,586, in 1995, 1994, and
1993, respectively. Cash flow from operations declined in 1995 due to increases
in receivables and prepaid expenses, along with an increase in loans receivable
available for sale. Loans receivable available for sale represent loans
purchased through the Company's Swiss-based subsidiary, SEI Capital AG (See Note
4 of the Notes to Consolidated Financial Statements). During 1995, the Company
invested $8 million in this business with an additional $7 million invested in
January 1996. The Company borrowed $11 million from its line of credit in
January 1996 primarily to fund this additional investment in the operations of
this business.
In addition, during 1995, the Company acquired approximately 880,000 shares of
common stock at a cost of $18.4 million pursuant to an open market stock
purchase authorization of $175.7 million made by the Board of Directors. As of
February 2, 1996, the Company has repurchased approximately 12.7 million shares
of its common stock at a cost of $155.7 million since the inception of the stock
buyback program in 1987. Capital expenditures were $8,611 in 1995, $13,732 in
1994, and $13,150 in 1993. In 1994, the Company purchased 90 acres of land for
$4,065. The Company is currently constructing a corporate campus on this site.
Construction in progress related to this project was $4,490 at December 31,
1995. This corporate campus is expected to be completed in 1996 at a total
estimated cost of $31.8 million. The Company believes that excess cash provided
by operations and anticipated long-term borrowing arrangements will provide
adequate funds for all future costs relating to this campus.
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 completion
of its new corporate campus.
18
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-------------------------------------------
Index to Financial Statements:
Report of Independent Public Accountants
Consolidated Balance Sheets -- December 31, 1995 and 1994
Consolidated Statements of Operations -- For the years ended
December 31, 1995, 1994, and 1993
Consolidated Statements of Shareholders' Equity -- For the years ended
December 31, 1995, 1994, and 1993
Consolidated Statements of Cash Flows -- For the years ended
December 31, 1995, 1994, and 1993
Notes to Consolidated Financial Statements
Schedule II -- Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the Consolidated
Financial Statements or notes thereto.
19
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To SEI Corporation:
We have audited the accompanying consolidated balance sheets of SEI Corporation
(a Pennsylvania corporation) and subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of operations, shareholders' equity and
cash flows for each of the three years in the period ended December 31, 1995.
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedule are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SEI Corporation and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the Index to
Financial Statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
Philadelphia, Pa. ARTHUR ANDERSEN LLP
February 2, 1996
20
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS SEI Corporation and Subsidiaries
(In thousands)
DECEMBER 31, 1995 1994
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS CURRENT ASSETS:
Cash and cash equivalents............................ $10,256 $20,232
Receivables, net of allowance for doubtful
accounts of $1,206................................ 22,436 17,268
Receivables from regulated investment companies...... 8,757 6,286
Deferred income taxes................................ 2,584 2,157
Loans receivable available for sale.................. 5,152 --
Prepaid expenses..................................... 4,890 2,351
------------- -------------
TOTAL CURRENT ASSETS.............................. 54,075 48,294
------------- -------------
NET ASSETS OF DISCONTINUED OPERATIONS................ 6,046 9,101
------------- -------------
INVESTMENTS AVAILABLE FOR SALE....................... 6,205 --
------------- -------------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization of $61,513
and $56,188...................................... 24,299 25,338
------------- -------------
CAPITALIZED SOFTWARE, net of accumulated
amortization of $3,746 and $2,224................ 4,356 2,879
------------- -------------
OTHER ASSETS, net.................................... 6,366 5,536
------------- -------------
$101,347 $91,148
-----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
21
<PAGE>
CONSOLIDATED BALANCE SHEETS SEI Corporation and Subsidiaries
(In thousands, except par value)
<TABLE>
<CAPTION>
DECEMBER 31, 1995 1994
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
LIABILITIES AND CURRENT LIABILITIES:
SHAREHOLDERS' Accounts payable ................................. $6,252 $4,431
EQUITY Accrued compensation.............................. 13,724 14,121
Other accrued liabilities......................... 19,115 16,206
Deferred revenue.................................. 5,795 4,267
--------- ---------
TOTAL CURRENT LIABILITIES....................... 44,886 39,025
--------- ---------
DEFERRED INCOME TAXES............................. 459 814
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Series Preferred stock, $.05 par value,
60 shares authorized; no shares issued
and outstanding.................................. -- --
Common stock, $.01 par value,
100,000 shares authorized; 18,425 and
18,781 shares issued and outstanding............. 184 188
Capital in excess of par value.................... 48,207 47,406
Retained earnings................................. 7,167 3,823
Cumulative translation adjustments................ (58) (108)
Unrealized holding gain on investments............ 502 --
--------- ---------
TOTAL SHAREHOLDERS' EQUITY...................... 56,002 51,309
--------- ---------
$101,347 $91,148
---------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
22
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS SEI Corporation and Subsidiaries
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES ............................................................ $225,964 $205,051 $185,064
EXPENSES:
Operating and development........................................ 115,366 110,504 108,743
Sales and marketing.............................................. 58,892 48,561 39,521
General and administrative....................................... 16,963 16,919 16,865
------------ ------------ --------------
INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST AND INCOME TAXES... 34,743 29,067 19,935
INTEREST INCOME, NET................................................. (764) (374) (315)
------------ ------------ --------------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES................ 35,507 29,441 20,250
INCOME TAXES......................................................... 14,381 11,188 7,493
------------ ------------ --------------
INCOME FROM CONTINUING OPERATIONS.................................... 21,126 18,253 12,757
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAX
EXPENSE (BENEFIT) OF $(1,295), $1,119, AND $2,398................. (1,942) 997 3,382
------------ ------------ --------------
NET INCOME........................................................... $19,184 $19,250 $16,139
- ---------------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE:
Earnings per share from continuing operations.................... $1.09 $.91 $.62
Earnings (loss) per share from discontinued operations........... (.10) .05 .16
------------ ------------ --------------
EARNINGS PER SHARE (PRIMARY AND FULLY DILUTED)....................... $.99 $.96 $.78
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
23
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' SEI Corporation and Subsidiaries
EQUITY (In thousands)
<TABLE>
<CAPTION>
CAPITAL
COMMON STOCK IN EXCESS CUMULATIVE UNREALIZED TOTAL
------------------- OF RETAINED TRANSLATION HOLDING GAIN SHAREHOLDERS'
SHARES AMOUNT PAR VALUE EARNINGS ADJUSTMENTS ON INVESTMENTS EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992...................... 9,814 $98 $42,256 $7,123 ($101) $-- $49,376
Net income...................................... -- -- -- 16,139 -- -- 16,139
Purchase and retirement of common stock......... (814) (8) (2,536) (16,715) -- -- (19,259)
Issuance of common stock under the employee
stock purchase plan......................... 45 1 887 -- -- -- 888
Issuance of common stock upon
exercise of stock options................... 486 5 4,590 -- -- -- 4,595
Tax benefit on stock options exercised.......... -- -- 2,155 -- -- -- 2,155
Cash dividends.................................. -- -- -- (2,307) -- (2,307)
Issuance of common stock for two-for-one
stock split................................. 9,640 96 (96) -- -- -- --
Currency translation adjustments................ -- -- -- -- (46) (46)
- -----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1993...................... 19,171 192 47,256 4,240 (147) -- 51,541
Net income...................................... -- -- -- 19,250 -- -- 19,250
Purchase and retirement of common stock......... (1,280) (13) (11,503) (16,665) -- -- (28,181)
Issuance of common stock under the employee
stock purchase plan......................... 60 1 1,084 -- -- -- 1,085
Issuance of common stock upon
exercise of stock options................... 830 8 6,075 -- -- -- 6,083
Tax benefit on stock options exercised.......... -- -- 4,494 -- -- -- 4,494
Cash dividends.................................. -- -- -- (3,002) -- -- (3,002)
Currency translation adjustments................ -- -- -- -- 39 -- 39
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994...................... 18,781 $188 $47,406 $3,823 $(108) $-- $51,309
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
24
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' SEI Corporation and Subsidiaries
EQUITY (in thousands)
<TABLE>
<CAPTION>
CAPITAL
COMMON STOCK IN EXCESS CUMULATIVE UNREALIZED TOTAL
-------------------- OF RETAINED TRANSLATION HOLDING GAIN SHAREHOLDERS'
SHARES AMOUNT PAR VALUE EARNINGS ADJUSTMENTS ON INVESTMENTS EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 ................. 18,781 $188 $47,406 $3,823 $(108) $ -- $51,309
Net income.................................. -- -- -- 19,184 -- -- 19,184
Purchase and retirement of common stock..... (880) (9) (6,264) (12,105) -- -- (18,378)
Issuance of common stock under the employee
stock purchase plan...................... 60 -- 1,008 -- -- -- 1,008
Issuance of common stock upon
exercise of stock options................ 464 5 4,364 -- -- -- 4,369
Tax benefit on stock options exercised...... -- -- 1,693 -- -- -- 1,693
Cash dividends.............................. -- -- -- (3,735) -- -- (3,735)
Currency translation adjustments............ -- -- -- -- 50 -- 50
Unrealized holding gain on investments...... -- -- -- -- -- 502 502
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995.................. 18,425 $ 184 $48,207 $7,167 $ (58) $502 $56,002
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
25
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS SEI Corporation and Subsidiaries
(In thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................ $19,184 $19,250 $16,139
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................................... 11,574 12,126 10,988
Provision for losses on receivables.............................. -- 235 --
Deferred income tax expense (benefit)............................ (672) (2,799) 56
Discontinued operations.......................................... 3,055 147 5,362
Tax benefit on stock options exercised........................... 1,693 4,494 2,155
Other............................................................ (673) 411 (511)
Change in current assets and liabilities:
Decrease (increase) in
Receivables.................................................. (5,168) (1,710) (4,096)
Receivables from regulated investment companies.............. (2,471) (351) (4,502)
Loans receivable available for sale.......................... (5,152) -- --
Prepaid expenses............................................. (2,539) (74) 795
Increase (decrease) in
Accounts payable............................................. 1,821 (418) (108)
Accrued compensation......................................... (397) 407 5,528
Other accrued liabilities.................................... 2,569 3,783 (1,250)
Deferred revenue............................................. 1,528 1,180 1,030
------------ ------------ ------------
Total adjustments................................................ 5,168 17,431 15,447
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES........................... $24,352 $36,681 $31,586
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
26
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS SEI Corporation and Subsidiaries
(In thousands)
YEAR ENDED DECEMBER 31, 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments available for sale....................... $(5,361) $ -- $ --
Additions to property and equipment.............................. (8,611) (13,732) (13,150)
Additions to capitalized software................................ (2,999) (1,052) (1,819)
Proceeds from sale of asset...................................... -- 4,200 --
Other............................................................ (961) (100) (593)
-------------- --------------- ---------------
NET CASH USED IN INVESTING ACTIVITIES.......................... (17,932) (10,684) (15,562)
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase and retirement of common stock.......................... (18,378) (28,181) (19,259)
Proceeds from issuance of common stock........................... 5,377 7,168 5,483
Payment of dividends............................................. (3,395) (2,650) (1,895)
-------------- --------------- ---------------
NET CASH USED IN FINANCING ACTIVITIES.......................... (16,396) (23,663) (15,671)
-------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............... (9,976) 2,334 353
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR....................... 20,232 17,898 17,545
-------------- --------------- ---------------
CASH AND CASH EQUIVALENTS, END OF YEAR............................. $10,256 $20,232 $17,898
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements.
27
<PAGE>
Notes to Consolidated Financial SEI Corporation and Subsidiaries
Statements
NOTE 1 - SUMMARY OF SIGNIFICANT NATURE OF OPERATIONS - SEI Corporation
ACCOUNTING POLICIES: (the "Company") is organized around its two
major 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. Principal markets for these
products and services include trust departments
of large banks located in the United States.
The Asset Management segment provides
investment solutions through various investment
products including the Company's Family of
Funds, liquidity funds and services, Customized
Asset Management Service ("CAMS"), and
consulting services. Principal markets for
these products and services include trust
departments of large banks, investment
advisors, corporations, and money managers
located in the United States and Canada. Based
on 1995 revenues, the Investment Technology and
Services segment accounted for 70 percent of
the Company's consolidated revenues and the
Asset Management segment accounted for 30
percent of the Company's consolidated revenues.
PRINCIPLES OF CONSOLIDATION - The Consolidated
Financial Statements include the accounts of
the Company and its wholly owned subsidiaries.
The Company's principal subsidiaries are SEI
Financial Services Company ("SFS"), SEI
Financial Management Corporation ("SFM"), and
SEI Trust Company. All intercompany accounts
and transactions have been eliminated.
CASH AND CASH EQUIVALENTS - At December 31,
1995 and 1994, Cash and cash equivalents
included $10,196,000 and $18,533,000,
respectively, primarily invested in SEI Tax
Exempt Trust, one of several mutual funds
managed by SFM. Interest and dividend income
for 1995, 1994, and 1993 was $1,019,000,
$405,000, and $340,000, respectively (See Note
12).
PROPERTY AND EQUIPMENT - Property and Equipment
on the accompanying Consolidated Balance Sheets
consist of the following:
<TABLE>
<CAPTION>
Estimated
Useful Lives
1995 1994 (In Years)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equipment.............................. $43,469,000 $43,164,000 3
Buildings, furniture and fixtures...... 16,754,000 16,704,000 3 to 39
Leasehold improvements................. 9,814,000 9,275,000 Lease Term
Purchased software..................... 7,220,000 6,810,000 3
Information database................... -- 360,000 10
Land................................... 4,065,000 4,065,000 N/A
Construction in progress............... 4,490,000 1,148,000 N/A
----------- -----------
85,812,000 81,526,000
Less: Accumulated depreciation
and amortization.................... (61,513,000) (56,188,000)
---------- ----------
Property and Equipment, net............ $24,299,000 $25,338,000
--------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
Property and Equipment are stated at cost. 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.
In December 1994, the Company purchased 90 acres of land for
$4,065,000 near its present site. The Company is currently
in the process of constructing a corporate campus on this
site. Construction in progress for 1995 and 1994 related to
this project was $4,490,000 and $1,148,000, respectively.
This corporate campus is expected to be completed in late
1996.
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
year is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Interest paid............................. $ 211,000 $ -- $ --
Interest and dividends received........... $ 1,024,000 $ 374,000 $ 331,000
Income taxes paid (Federal and state)..... $12,846,000 $9,620,000 $7,415,000
</TABLE>
REVENUE RECOGNITION - Principal sources of revenues are
information processing and software services, distribution
and administration of money market and mutual funds,
brokerage and consulting services, and investment solutions.
Revenues from these services are recognized in the periods
in which the services are performed. Cash received by the
Company in advance of the performance of services is
deferred and recognized as revenue when earned.
INCOME TAXES - The Company accounts for income taxes in
accordance with Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under
SFAS 109, the liability method is used for income taxes.
Under this method, deferred tax assets and liabilities are
determined based on differences between the financial
reporting and tax basis of assets and liabilities and are
measured using enacted tax rates and laws that are expected
to be in effect when the differences reverse (See Note 10).
FOREIGN CURRENCY TRANSLATION - The assets and liabilities of
foreign operations are translated into U.S. dollars using
the rates of exchange at year end. The results of operations
are translated into U.S. dollars at the average daily
exchange rates for the period. All foreign currency
transaction gains and losses are included in income in the
periods in which they occur, and are immaterial for each of
the three years ended December 31, 1995.
29
<PAGE>
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 development is
completed. 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 years.
Capitalized software development costs consist primarily of
salary expense and computer costs incurred to develop new
products and enhancements to existing products. During 1995,
1994, and 1993, $2,999,000, $1,052,000, and $1,819,000 of
software development costs were capitalized, respectively.
In 1994, $1,954,000 (net of accumulated amortization of
$1,423,000) of capitalized software development costs were
written off. This write-off was recorded in Income from
discontinued operations on the accompanying Consolidated
Statements of Operations for 1994 because it related to a
certain activity of one of the discontinued operations. The
net book value of capitalized software development costs
written off in 1995 and 1993, was zero. Amortization expense
was $1,522,000, $1,322,000, and $1,000,000 in 1995, 1994,
and 1993, respectively, and is included in Operating and
development expense on the accompanying Consolidated
Statements of Operations.
Total research and development costs, including capitalized
software, were $16,744,000, $15,001,000, and $15,092,000 in
1995, 1994, and 1993, respectively.
EARNINGS PER SHARE - The Company utilizes the modified
treasury stock method to compute earnings per share since
common share equivalents at the end of the year 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. In 1995, 1994, and 1993, the weighted average
shares outstanding for primary earnings per share were
19,445,000, 20,027,000, and 20,733,000, respectively; fully
diluted earnings per share was not materially different from
the primary earnings per share indicated.
30
<PAGE>
STOCK-BASED COMPENSATION PLANS - In October 1995, the
Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation"("SFAS 123"). The disclosure
requirements of SFAS 123 are effective for the Company's
December 31, 1996 financial statements. However, these
disclosures will include the effects of all awards granted
during the year ended December 31, 1995. SFAS 123
establishes a fair value based method of accounting for
stock-based compensation plans. SFAS 123 requires that an
employer's financial statements include certain disclosures
about stock-based employee compensation arrangements
regardless of the method used to account for the plan. The
required information, if the Company chooses to continue to
apply certain allowable accounting principles, will not
effect any adjustments to reported net income or earnings
per share.
MANAGEMENT'S 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 years
have been reclassified to conform with current-year
presentation.
NOTE 2 - In May 1995, the Company's Board of Directors approved a
DISCONTINUED formal plan of disposal for the SEI Capital Resources
OPERATIONS: Division ("CR") and the SEI Defined Contribution Retirement
Services Division ("DC"). CR provides investment performance
evaluation services, consulting services, and brokerage
services to employee benefit plan sponsors and investment
advisors in the United States. DC provides administrative
and processing services, recordkeeping and payment software,
and employee retirement planning materials for use by
defined contribution plans. For CR, the expected manner of
disposal is the sale of substantially all of its assets. For
DC, its full-service recordkeeping operations were
transferred to KPMG Peat Marwick ("KPMG") in the first
quarter of 1996. The Company anticipates CR's sale to be
completed in 1996.
CR and DC are being accounted for as discontinued operations
with a measurement date of May 31, 1995. The accompanying
Consolidated Financial Statements reflect the operating
results and balance sheet items of the discontinued
operations separately from continuing operations. The
Company expects that the sale of CR will result in a gain on
the disposal of CR's assets which will be sufficient to
offset the losses of DC from the measurement date to the
disposal date and the loss upon the completion of the
transfer of DC to KPMG. As a result, no estimated losses for
DC have been accrued and the net gain will be recognized
when realized. The gain expected from the sale of CR is
based upon management's best estimate of the amount to be
realized. The amount the Company will ultimately realize
could differ from this estimate. The net income or net loss
from discontinued operations from the measurement date to
the disposal date will be recorded as an adjustment to the
net assets or net liabilities of the discontinued operations
on the accompanying Consolidated Balance Sheets. Prior
periods have been restated.
31
<PAGE>
Income (loss) from discontinued operations on the accompanying Consolidated
Statements of Operations were:
<TABLE>
<CAPTION>
Five Months Ended Year Ended Year Ended
--------------------- --------------------- -------------------
May 31, 1995 December 31, 1994 December 31, 1993
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues.......................... $17,674,000 $58,714,000 $62,106,000
Income (loss) before
income taxes.................... $(3,237,000) $ 2,116,000 $ 5,780,000
Income tax expense (benefit)...... (1,295,000) 1,119,000 2,398,000
---------- ---------- ----------
Income (loss)..................... $(1,942,000) $ 997,000 $ 3,382,000
- -------------------------------------------------------------------------------------------------------
</TABLE>
The assets and liabilities of CR and DC have been reclassified on the
accompanying Consolidated Balance Sheets to separately identify them as net
assets or net liabilities of discontinued operations. A summary of these net
assets is as follows:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets.................................. $7,709,000 $10,843,000
Property and equipment, net..................... 1,257,000 2,265,000
Other assets.................................... 5,581,000 7,172,000
Current liabilities............................. (11,835,000) (10,633,000)
Deferred income taxes........................... (421,000) (546,000)
Loss from discontinued operations for the
period June 1, 1995 to December 31, 1995,
net of income tax benefit of $462,000 3,755,000 --
---------- ---------
Net Assets of Discontinued Operations........... $6,046,000 $ 9,101,000
- -----------------------------------------------------------------------------------------------
</TABLE>
32
<PAGE>
NOTE 3 - Receivables on the accompanying Consolidated Balance Sheets
RECEIVABLES: consist of the following:
<TABLE>
<CAPTION>
1995 1994
------------------------------------------------------------------------------------------
<S> <C> <C>
Trade receivables................................. $14,474,000 $11,282,000
Fees earned, not received......................... 2,866,000 1,425,000
Fees earned, not billed........................... 6,302,000 5,767,000
----------- -----------
23,642,000 18,474,000
Less: Allowance for doubtful accounts............ (1,206,000) (1,206,000)
------------ ------------
$22,436,000 $17,268,000
------------------------------------------------------------------------------------------
</TABLE>
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, SFS
and SFM, for distribution, investment advisory, and
administration services provided by these subsidiaries to
various regulated investment companies.
NOTE 4 - LOANS Loans receivable available for sale represent loans
RECEIVABLE which were purchased through the Company's Swiss subsidiary,
AVAILABLE FOR SEI Capital AG, which is based in Zurich. The Company
SALE: intends to sell these loans within six months from the
balance sheet date. 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 a 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 5 - Investments available for sale consist of mutual
INVESTMENTS funds sponsored by the Company which are primarily invested
AVAILABLE in equity securities. The Company accounts for these
FOR SALE: 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. Prior to January 1, 1995,
the Company had no material investments which would have
been accounted for pursuant to SFAS 115. Unrealized holding
gains and losses on these investments are reported as a
separate component of Shareholders' equity.
33
<PAGE>
At December 31, 1995, Investments available for sale had a
cost of $5,361,000 and a market value of $6,205,000. At that
date, $844,000 of net unrealized gains on securities were
included in Investments available for sale. There were no
unrealized losses as of December 31, 1995. The net change in
unrealized gains on Investments available for sale was
$502,000 (net of income taxes) for the year ended December
31, 1995, and is included as a separate component of
Shareholders' equity on the accompanying Consolidated
Balance Sheets.
NOTE 6 - DEBT: The Company has a line of credit agreement (the "Agreement")
with its principal lending institution which provides for
borrowing of up to $20,000,000. The Agreement ends on May
31, 1996, at which time the outstanding principal balance,
if any, becomes payable unless the Agreement is extended.
The line of credit, when utilized, accrues interest at the
Prime rate or five-eighths percent above the London
Interbank Offered Rate. The Company is obligated to pay a
commitment fee equal to one-eighth percent per annum on the
average daily unused portion of the commitment. The line of
credit is secured by the common stock of the Company's
wholly owned subsidiaries. Certain other covenants under the
Agreement require the Company to maintain specified levels
of net worth, prohibit unsecured borrowings, and place
certain restrictions on investments.
The maximum month-end amount of debt outstanding was
$11,000,000 for the year ended December 31, 1995. The
weighted average balance of debt outstanding was $3,206,000
during 1995. Interest expense was $211,000 based on a
weighted average interest rate of 6.6 percent for the year
ended December 31, 1995. The Company had no outstanding debt
during 1994 and 1993.
NOTE 7 - SHARE- STOCK SPLIT - On May 12, 1993, the Board of Directors
HOLDERS' EQUITY: approved a two-for-one stock split of the Company's $.01 par
value common stock, effected in the form of a stock dividend
which was paid on July 6, 1993 to shareholders of record as
of June 21, 1993. A total of 9,640,000 shares of common
stock were issued in connection with the stock split. The
par value of the common stock remained unchanged.
Accordingly, a total of $96,000 was reclassified from
Capital in excess of par value to Common stock. Except for
the Consolidated Statements of Shareholders' Equity, all
references in the accompanying financial statements to the
number of shares of common stock, related prices, and per
share amounts have been reported to reflect the effect of
the stock split.
STOCK OPTION PLANS - The Company has stock option plans
under which non-qualified and incentive stock options for
common stock are available for grant to officers, directors,
and key employees. The options granted and the option prices
are established by the Board of Directors in accordance with
the terms of the plans. Options currently outstanding were
granted at fair market value on the date of grant, become
exercisable in annual installments of not more than 25
percent per year commencing one year after the date of
grant, and remain exercisable no longer than 10 years after
the date of grant.
34
<PAGE>
Certain information for 1995 and 1994 relative to stock
options is summarized as follows:
<TABLE>
<CAPTION>
EMPLOYEE PLAN DIRECTORS' PLAN
NUMBER OF SHARES 1995 1994 1995 1994
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year............... 4,422,000 4,980,000 108,000 96,000
Granted........................................ 197,000 568,000 12,000 12,000
Exercised (A).................................. (464,000) (830,000) -- --
Expired or cancelled........................... (148,000) (296,000) -- --
---------- ---------- --------- --------
Outstanding at end of year (B)................. 4,007,000 4,422,000 120,000 108,000
Exercisable at end of year..................... 3,067,000 2,882,000 90,000 78,000
Participants at end of year.................... 218 236 3 3
Available for future grant at end of year...... 336,000 385,000 262,000 274,000
---------------------------------------------------------------------------------------------------------
</TABLE>
(A) Options were exercised at prices ranging from $4.56 to
$19.75 per share during 1995 and from $3.44 to $15.13
per share during 1994.
(B) For outstanding shares under option for the Employee
Plan at December 31,1995, option prices ranged from
$3.94 to $25.25 (and averaged $13.43) per share. For
outstanding shares under option for the Directors' Plan
at December 31, 1995, option prices ranged from $7.00
to $26.25 (and averaged $13.68) per share. For
outstanding shares under option for the Employee Plan
at December 31, 1994, option prices ranged from $3.94
to $25.25 (and averaged $12.78) per share. For
outstanding shares under option for the Directors' Plan
at December 31, 1994, option prices ranged from $7.00
to $26.25 (and averaged $12.78) per share. The
expiration dates for options under the Employee Plan
range from July 21, 1996 to December 19, 2005. The
expiration dates for options under the Directors' Plan
range from December 14, 1997 to December 29, 2005.
EMPLOYEE STOCK PURCHASE PLAN - The Company has an employee
stock purchase plan that provides for offerings of common
stock to eligible employees at a price equal to 85 percent
of the fair market value of the stock at the end of the
stock purchase period, as defined. The Company has reserved
800,000 shares for issuance under this plan. At December 31,
1995, 634,000 cumulative shares have been issued.
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 of up to an aggregate
of $175,729,000. The Company purchased 880,000 shares at a
cost of $18,378,000 during 1995. Through December 31, 1995,
a total of 12,700,000 shares at an aggregate cost of
$155,732,000 have been repurchased and retired.
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.
35
<PAGE>
SHAREHOLDERS' RIGHTS PLAN - On December 19, 1988, the
Company's Board of Directors declared a distribution of one
right for each outstanding common share of the Company to
shareholders of record at the close of business on January
4, 1989. In addition, any new common shares issued after
January 4, 1989 will receive one right for each common
share. Each right entitles shareholders to buy one-
fourhundredth of a share of Series A Junior Participating
Preferred Stock at an exercise price of $65 per share. The
rights will not be exercisable until a person or group owns
more than 40 percent of the Company's common stock, acquires
20 percent or more of the Company's common stock after
December 19, 1988 (the "Stock Acquisition Date"), or a
person or group begins a tender offer for 30 percent or more
of the Company's common stock. The rights, which do not have
voting rights, expire on December 19, 1998, and may be
redeemed by the Company at a price of $.01 per right at any
time until 10 days following the Stock Acquisition Date. In
the event that the Company is acquired in a merger or other
business combination transaction, each holder of a right
will have the right to receive, upon exercise, common shares
of the acquiring company having a value equal to two times
the exercise price of the right.
DIVIDENDS - On May 16, 1995, the Board of Directors declared
a cash dividend of $.10 per share on the Company's common
stock, which was paid on June 29, 1995, to shareholders of
record on June 8, 1995. On December 22, 1995, the Board of
Directors declared a cash dividend of $.10 per share on the
Company's common stock, payable on January 22, 1996, to
shareholders of record on December 28, 1995.
The dividends declared in 1995 and 1994 were $3,735,000 and
$3,002,000, respectively. The Board of Directors has
indicated its intention to pay future dividends on a
semiannual basis.
NOTE 8 - EMPLOYEE The Company has a tax-qualified defined contribution plan
BENEFIT PLAN: (the "Plan"). The Plan provides retirement benefits,
including provisions for early retirement and disability
benefits, as well as tax-deferred savings features. After
satisfying certain requirements, participants are vested in
employer contributions at the time the contributions are
made. All Company contributions are discretionary and are
made from available profits. The Company contributed
$1,065,000, $1,084,000, and $1,160,000 to the Plan in 1995,
1994, and 1993, respectively.
36
<PAGE>
NOTE 9 - COMMIT- The Company operates in leased facilities and also
MENTS AND leases data processing equipment. Some of these leases
CONTINGENCIES: contain escalation clauses for increased taxes and operating
expenses. The Company's leases are accounted for as
operating leases. Rent expense was $16,570,000, $17,406,000,
and $17,467,000 in 1995, 1994, and 1993, respectively.
Aggregate noncancellable minimum lease commitments at
December 31, 1995 are:
<TABLE>
---------------------------------------------------
<S> <C>
1996................................... $16,645,000
1997................................... 12,573,000
1998................................... 6,747,000
1999................................... 2,417,000
2000................................... 2,466,000
2001 and after......................... 3,656,000
-----------
$44,504,000
---------------------------------------------------
</TABLE>
At December 31, 1995, the Company has future obligations
relating to an office facility which is expected to become
vacant. The management of the Company believes it will be
able to locate a suitable tenant to sublease this facility.
Although the terms of any sublease arrangement are not
presently determinable, management believes that an adequate
loss reserve has been provided and that the resolution of
this matter will not have a material adverse effect on the
Company's financial position. In 1994, the Company accrued
approximately $1,600,000 relating to this lease commitment.
The $1,600,000 was recorded in Income from discontinued
operations on the accompanying Consolidated Statements of
Operations for 1994 because it related to the activity of
one of the discontinued operations. Actual results could
differ from this estimate.
In the normal course of business, the Company is party to
various claims and legal proceedings. Although the ultimate
outcome of these matters is presently not determinable,
management, after consultation with legal counsel, does not
believe that the resolution of these matters will have a
material adverse effect upon the Company's financial
position or results of operations.
37
<PAGE>
NOTE 10 - INCOME TAXES Income taxes from continuing operations consist of the
following:
<TABLE>
<CAPTION>
Year Ended December 31, 1995 1994 1993
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal.................................... $13,476,000 $12,506,000 $6,954,000
State...................................... 1,577,000 1,481,000 483,000
---------- ---------- ---------
15,053,000 13,987,000 7,437,000
---------- ---------- ---------
Deferred, including current deferred
Federal.................................... (682,000) (2,133,000) (23,000)
State...................................... 10,000 (666,000) 79,000
---------- ---------- ---------
(672,000) (2,799,000) 56,000
---------- ---------- ---------
Total income taxes from continuing
operations................................. $14,381,000 $11,188,000 $7,493,000
---------------------------------------------------------------------------------------------------------
The effective income tax rate from continuing operations differs from the Federal income tax
statutory rate due to the following:
Year Ended December 31, 1995 1994 1993
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate................................... 35.0% 35.0% 35.0%
State taxes, net of Federal tax benefit.......... 2.5 1.8 1.8
Other, net....................................... 3.0 1.2 0.2
---- ---- ----
40.5% 38.0% 37.0%
----------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
Deferred income taxes for 1995, 1994, and 1993 reflect the impact of "temporary
differences" between the amount of assets and liabilities for financial
reporting purposes and such amounts as measured by tax laws and regulations.
Principal items comprising the deferred income tax provision from continuing
operations are as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Difference in financial reporting and income
tax depreciation methods.......................... $ (555,000) $ (652,000) $ (691,000)
Reserves not currently deductible................... 213,000 (300,000) (303,000)
Capitalized software currently deductible for
tax purposes, net of amortization and
write-offs........................................ 512,000 (974,000) 489,000
State deferred income taxes......................... 6,000 (433,000) 51,000
Revenue and expense recognized in
different periods for financial reporting
and income tax purposes........................... (657,000) (354,000) 234,000
Other, net.......................................... (191,000) (86,000) 276,000
--------- ----------- -------
$ (672,000) $(2,799,000) $ 56,000
- ------------------------------------------------------------------------------------------------------------------
The net deferred income tax asset is comprised of the following:
Year Ended December 31, 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Current deferred income taxes:
Gross assets...................................... $3,331,000 $2,769,000
Gross liabilities................................. (747,000) (612,000)
--------- ---------
2,584,000 2,157,000
--------- ---------
Long-term deferred income taxes:
Gross assets...................................... 1,741,000 1,142,000
Gross liabilities................................. (2,200,000) (1,956,000)
---------- ----------
(459,000) (814,000)
---------- ----------
Net deferred income tax asset....................... $2,125,000 $1,343,000
- ------------------------------------------------------------------------------------------------
</TABLE>
The Company did not record any valuation allowance against deferred tax assets
at December 31, 1995 and 1994.
39
<PAGE>
The tax effect of significant temporary differences representing deferred tax
assets is as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Difference in financial reporting and income
tax depreciation methods......................... $1,161,000 $ 937,000
Reserves not currently deductible.................. 1,396,000 2,215,000
Capitalized software currently deductible for
tax purposes, net of amortization and
write-offs....................................... (1,855,000) (1,298,000)
State deferred income taxes........................ (158,000) (119,000)
Revenue and expense recognized in
different periods for financial reporting
and income tax purposes.......................... 1,935,000 423,000
Unrealized holding gain on investments............. (342,000) --
Other, net......................................... (12,000) (815,000)
--------- ----------
$2,125,000 $1,343,000
- ---------------------------------------------------------------------------------------------
</TABLE>
40
<PAGE>
NOTE 11 - SEGMENT INFORMATION: The Company has redefined its business segments
to reflect the Company's focus around two core
product lines: Investment Technology and
Services and Asset Management. Previously, the
business segments were defined by markets, not
products. The Investment Technology and Services
segment consists of the Company's trust
technology and proprietary mutual fund
businesses. The Asset Management segment
consists of the Company's liquidity management,
asset management, and mutual fund businesses.
The following tables highlight certain financial
information from continuing operations about
each of the Company's segments for the years
ended December 31, 1995, 1994, and 1993. Prior-
year business segment information has been
restated to conform with current-year
presentation and for the effect of the
discontinued operations discussed in Note 2.
<TABLE>
<CAPTION>
Investment
Technology Asset General and
1995 and Service Management Administrative Consolidated
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues............................................... $157,960,000 $68,004,000 $225,964,000
----------- ---------- -----------
Operating profit....................................... $ 45,176,000 $ 6,530,000 $ 51,706,000
----------- ----------
General and administrative expenses.................... $16,963,000 $ 16,963,000
----------
Interest income, net................................... $ (764,000)
-----------
Income from continuing operations before income taxes.. $ 35,507,000
-----------
Depreciation and amortization.......................... $ 8,997,000 $ 2,253,000 $ 324,000 $ 11,574,000
----------- ---------- ---------- -----------
Capital expenditures................................... $ 3,931,000 $ 1,114,000 $ 3,566,000 $ 8,611,000
----------- ---------- ---------- -----------
Total identifiable assets at December 31, 1995......... $ 39,543,000 $41,288,000 $14,470,000 $ 95,301,000
----------- ---------- ---------- -----------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
Investment
Technology Asset General and
1994 and Services Management Administrative Consolidated
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues............................................... $136,498,000 $68,553,000 $205,051,000
----------- ---------- -----------
Operating profit....................................... $ 36,525,000 $ 9,461,000 $ 45,986,000
----------- ----------
General and administrative expenses.................... $16,919,000 $ 16,919,000
----------
Interest income, net................................... $ (374,000)
-----------
Income from continuing operations before income taxes.. $ 29,441,000
-----------
Depreciation and amortization.......................... $ 9,458,000 $ 2,304,000 $ 364,000 $ 12,126,000
----------- ---------- ---------- -----------
Capital expenditures................................... $ 6,889,000 $ 1,110,000 $ 5,733,000 $ 13,732,000
----------- ---------- ---------- -----------
Total identifiable assets at December 31, 1994......... $ 33,898,000 $24,775,000 $23,374,000 $ 82,047,000
----------- ---------- ---------- -----------
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Investment
Technology Asset General and
1993 and Services Management Administrative Consolidated
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues............................................... $124,329,000 $60,735,000 $ 185,064,000
----------- ---------- ------------
Operating profit....................................... $ 22,439,000 $14,361,000 $ 36,800,000
----------- ----------
General and administrative expenses.................... $16,865,000 $ 16,865,000
----------
Interest income, net................................... $ (315,000)
------------
Income from continuing operations before income taxes.. $ 20,250,000
------------
Depreciation and amortization.......................... $ 8,571,000 $ 2,088,000 $ 329,000 $ 10,988,000
----------- ---------- ---------- ------------
Capital expenditures................................... $ 10,586,000 $ 2,231,000 $ 333,000 $ 13,150,000
----------- ---------- ---------- ------------
Total identifiable assets at December 31, 1993......... $ 36,178,000 $20,884,000 $17,719,000 $ 74,781,000
----------- ---------- ---------- ------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
42
<PAGE>
NOTE 12 - RELATED PARTY SFM is a party to Investment Advisory and
TRANSACTIONS: Administration Agreements with several regulated
investment companies ("RICS"), which are administered
by the Company. Shares of the RICs are offered to
clients of the Company and its subsidiaries. Under the
Investment Advisory and Administration Agreements, SFM
receives a fee for providing investment advisory,
administrative, and accounting services to the RICs.
The investment advisory and adiministration fee is a
fixed percentage of the average daily net asset value
of each RIC, subject to certain limitations. Investment
advisory and administration fees received by the
Company totaled $73,807,000, $59,249,000, and
$57,003,000 in 1995, 1994, and 1993, respectively. SFS
is a party to Distribution Agreements with several
RICs, which are managed by SFM. SFS receives a fee from
the RICs for providing distribution services pursuant
to the provisions of various Rule 12b-1 Plans adopted
by the RICs. These distribution fees totaled
$5,897,000, $7,014,000, and $8,868,000 in 1995, 1994,
and 1993, respectively.
<TABLE>
<CAPTION>
NOTE 13 - QUARTERLY FINANCIAL
DATA (UNAUDITED):
For the Three Months Ended For the Three Months Ended
-----------------------------------------------------------------------------
1995 MARCH 31 (A) JUNE 30 SEPT. 30 DEC. 31
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues........................................... $53,499,000 $55,737,000 $56,478,000 $60,250,000
Income from continuing operations before
income taxes..................................... $ 9,868,000 $ 7,540,000 $ 8,674,000 $ 9,425,000
Income from continuing operations.................. $ 5,921,000 $ 4,524,000 $ 4,943,000 $ 5,738,000
Net income......................................... $ 4,883,000 $ 3,620,000 $ 4,943,000 $ 5,738,000
Primary and fully diluted earnings per share
from continuing operations....................... $.30 $.23 $.26 $.30
Primary and fully diluted earnings per share....... $.25 $.18 $.26 $.30
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
For the Three Months Ended For the Three Months Ended
----------------------------------------------------------------------------
1994 MARCH 31 (A) JUNE 30 (A) SEPT. 30 (A) DEC. 31 (A)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues........................................... $48,474,000 $51,012,000 $52,110,000 $53,455,000
Income from continuing operations before
income taxes..................................... $ 5,736,000 $ 7,572,000 $ 9,052,000 $ 7,081,000
Income from continuing operations.................. $ 3,556,000 $ 4,621,000 $ 5,686,000 $ 4,390,000
Net income......................................... $ 4,371,000 $ 4,623,000 $ 4,919,000 $ 5,337,000
Primary and fully diluted earnings per share
from continuing operations....................... $.17 $.23 $.29 $.22
Primary and fully diluted earnings per share....... $.21 $.23 $.25 $.27
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Amounts have been restated to reflect the
discontinued operations discussed in Note 2.
43
<PAGE>
SEI CORPORATION AND SUBSIDIARIES
--------------------------------
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
-----------------------------------------------
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
-----------------------------------------------------------------
<TABLE>
<CAPTION>
Additions
--------------------------------
Balance at Charged to Charged Balance
Beginning Costs and to Other at End
Description of Year Expenses Accounts (Deductions) of Year
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
For the Year Ended December 31, 1993:
Allowance for doubtful accounts $ 971,000 $ -- $ -- $ -- $ 971,000
========= ========= ========== ========== =========
For the Year Ended December 31, 1994:
Allowance for doubtful accounts $ 971,000 $ 235,000 $ -- $ -- $1,206,000
========= ========= ========== ========== =========
For the Year Ended December 31, 1995:
Allowance for doubtful accounts $1,206,000 $ -- $ -- $ -- $1,206,000
========= ========= ========== ========== =========
</TABLE>
44
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE.
- --------------------
None.
45
<PAGE>
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
--------------------------------------------------
Certain information called for in this item is hereby incorporated by reference
from the Company's definitive proxy statement for its 1996 Annual Meeting of
Shareholders to be filed with the Securities and Exchange Commission within 120
days after December 31, 1995 pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "1996 Proxy Statement").
The executive officers of the Company are as follows:
ALFRED P. WEST, JR., 53, has been the Chairman of the Board of Directors and
Chief Executive Officer of the Company since its inception in 1968. Mr. West was
President from June 1979 to August 1990.
HENRY H. GREER, 58, has been President and Chief Operating Officer since August
1990, and was an Executive Vice President from July 1990 to August 1990. Mr.
Greer has been a Director since November 1979.
CARMEN V. ROMEO, 52, has been an Executive Vice President since December 1985.
Mr. Romeo has been Treasurer, Chief Financial Officer, and a Director since June
1979.
GILBERT L. BEEBOWER, 62, has been an Executive Vice President since July 1987.
RICHARD B. LIEB, 48, has been an Executive Vice President since October 1990,
and a Director since May 1995.
CARL A. GUARINO, 38, has been a Senior Vice President since April 1988, and was
General Counsel from April 1988 to January 1994.
EDWARD D. LOUGHLIN, 45, has been a Senior Vice President since January 1988.
DENNIS J. MCGONIGLE, 35, has been a Vice President since January 1991, and a
Senior Vice President since January 1994.
46
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
----------------------
The information called for in this item is hereby incorporated by reference from
the 1996 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
--------------------------------------------------------------
The information called for in this item is hereby incorporated by reference from
the 1996 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
----------------------------------------------
The information called for in this item is hereby incorporated by reference from
the 1996 Proxy Statement.
47
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
----------------------------------------------------------------
Financial Statements. The following is a list of the Consolidated Financial
- --------------------
Statements of the Company and its subsidiaries and supplementary data filed as
part of Item 8 hereof:
Report of Independent Public Accountants
Consolidated Balance Sheets -- December 31, 1995 and 1994
Consolidated Statements of Operations -- For the years ended
December 31, 1995, 1994, and 1993
Consolidated Statements of Shareholders' Equity -- For the years ended
December 31, 1995, 1994, and 1993
Consolidated Statements of Cash Flows -- For the years ended
December 31, 1995, 1994, and 1993
Notes to Consolidated Financial Statements
Schedule II -- Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the Consolidated
Financial Statements or notes thereto.
Exhibits, Including Those Incorporated by Reference. The following is a list of
- ---------------------------------------------------
exhibits filed as part of this annual report on Form 10-K. Where so indicated by
footnote, exhibits which were previously filed are incorporated by reference.
For exhibits incorporated by reference, the location of the exhibit in the
previous filing is indicated in parentheses.
3.1 Articles of Incorporation of the Registrant as amended on
January 21, 1983. (1) (Exhibit 3.1)
3.1.1 Designation of Series A Junior Participating Preferred Shares,
dated December 19, 1988. (7) (Exhibit 3.1.1)
3.1.2 Amendment to Articles of Incorporation of the Registrant, dated
May 21, 1992. (12) (Exhibit 3.1.2)
3.1.3 Amendment to Articles of Incorporation of the Registrant, dated
May 26, 1994. (14) (Exhibit 3.1.3)
3.2 By-Laws. (2) (Exhibit 3.2)
3.2.1 Amendment to By-Laws, dated December 19, 1988. (7) (Exhibit
3.2.1)
3.2.2 Amendment to By-Laws, dated July 12, 1990. (9) (Exhibit 3.2.2)
4.1 Form of Certificate for Shares of Common Stock. (7) (Exhibit
4.1)
4.1.1 Form of Rights Certificate. (5) (Exhibit B to Exhibit 1)
4.2 See Exhibits 3.1 and 3.2 hereto.
*10.1 1981 Stock Option Plan, Amended, Restated and Renewed as of May
8, 1991. (6) (Exhibit 4)
*10.2 Employee Stock Ownership Plan. (4) (Exhibit 10.3 (b))
*10.3 Employee Stock Purchase Plan, Amended and Restated as of May 8,
1991. (11) (Exhibit 10.3)
*10.4 SEI Capital Accumulation Plan. (8) (Exhibit 10.5)
*10.5 Stock Option Plan for Non-Employee Directors. (7) (Exhibit
10.12)
*10.6 Employment Agreement, dated May 25, 1979, between Alfred P.
West, Jr. and the Registrant. (10) (Exhibit 10.7)
*10.7 Employment Agreement, dated January 21, 1987, between Gilbert L.
Beebower and the Registrant. (10) (Exhibit 10.8)
*10.8.1 Employment Agreement, dated July 1, 1987, between Richard B.
Lieb and the Registrant. (10) (Exhibit 10.9)
*10.8.2 Stock Option Agreement, dated February 23, 1989, between Richard
B. Lieb and a subsidiary of the Registrant, as amended. (12)
(Exhibit 10.8.2)
*10.9 Summary of Company Bonus Plan for Senior Management. (13)
(Exhibit 10.9)
*10.10 Employment Agreement, dated February 28, 1992, between Charles
A. Marsh and the Registrant. (13) (Exhibit 10.10)
10.11 Directors and Officers Liability Insurance Policy. (3) (Exhibit
10.9)
10.12 Lease Agreement, dated as of January 1, 1990, between The Canada
Life Assurance Company and the Registrant. (10) (Exhibit 10.11)
48
<PAGE>
10.13 Lease Agreement, dated as of May 1, 1991, between Two North
Riverside Plaza Joint Venture and the Registrant. (11) (Exhibit
10.11)
10.14 Credit Agreement, dated May 31, 1992, between Provident National
Bank and the Registrant, as amended. (12) (Exhibit 10.12)
10.14.1 Second Modification Agreement to the Credit Agreement, dated
April 19, 1993, between PNC Bank, National Association,
successor by merger to Provident National Bank, and the
Registrant. (13) (Exhibit 10.14.1)
10.14.2 Third Modification Agreement to the Credit Agreement, dated May
31, 1993, between PNC Bank, National Association, successor by
merger to Provident National Bank, and the Registrant. (13)
(Exhibit 10.14.2)
10.14.3 Fourth Modification Agreement to the Credit Agreement, dated
March 14, 1994, between PNC Bank, National Association,
successor by merger to Provident National Bank, and the
Registrant. (14) (Exhibit 10.14.3)
10.14.4 Fifth Modification Agreement to the Credit Agreement, dated May
31, 1994, between PNC Bank, National Association, successor by
merger to Provident National Bank, and the Registrant. (14)
(Exhibit 10.14.4)
10.14.5 Sixth Modification Agreement to the Credit Agreement, dated May
5, 1995, between PNC Bank, National Association, successor by
merger to Provident National Bank, and the Registrant. (Exhibit
10.14.5)
10.14.6 Seventh Modification Agreement to the Credit Agreement, dated
June 15, 1995, between PNC Bank, National Association, successor
by merger to Provident National Bank, and the Registrant.
(Exhibit 10.14.6)
10.14.7 Eighth Modification Agreement to the Credit Agreement, dated
October 19, 1995, between PNC Bank, National Association,
successor by merger to Provident National Bank, and the
Registrant. (Exhibit 10.14.7)
10.15 Pledge Agreement, dated May 31, 1992, between Provident National
Bank and the Registrant. (12) (Exhibit 10.13)
10.16 Master Lease Agreement, dated December 29, 1989, between
Varilease Corporation and the Registrant, as amended. (12)
(Exhibit 10.14)
11. Earnings per share calculations. (Exhibit 11)
21. Subsidiaries of the Registrant. (Exhibit 21)
23. Consent of Independent Public Accountants. (Exhibit 23)
27. Financial Data Schedule. (Exhibit 27)
99. Miscellaneous exhibits. (Exhibit 99)
* Denotes a management contract or compensatory plan or arrangement required to
be filed as an exhibit to this Form 10-K.
(1) Filed March 30, 1983, as an exhibit to the Company's Form 10-K for the
fiscal year ended December 31, 1982, and incorporated herein by
reference.
(2) Filed March 30, 1984, as an exhibit to the Company's Form 10-K for the
fiscal year ended December 31, 1983, and incorporated herein by
reference.
(3) Filed June 25, 1982, as an exhibit to the Company's Registration Statement
on Form S-8 (No. 2-78133), and incorporated herein by reference.
(4) Filed March 26, 1986, as an exhibit to the Company's Form 10-K for the
fiscal year ended December 31, 1985, and incorporated herein by
reference.
(5) Filed January 12, 1989, as an exhibit to the Company's Form 8-K dated
January 5, 1989, and incorporated herein by reference.
(6) Filed July 8, 1991, as an exhibit to the Company's Registration Statement
on Form S-8 (No. 33-41602), and incorporated herein by reference.
(7) Filed March 23, 1989, as an exhibit to the Company's Form 10-K for the
fiscal year ended December 31, 1988, and incorporated herein by
reference.
(8) Filed March 29, 1990, as an exhibit to the Company's Form 10-K for the
fiscal year ended December 31, 1989, and incorporated herein by
reference.
49
<PAGE>
(9) Filed August 14, 1990, as an exhibit to the Company's Form 10-Q for the
quarter ended June 30, 1990, and incorporated herein by reference.
(10) Filed March 28, 1991, as an exhibit to the Company's Form 10-K for the
fiscal year ended December 31, 1990, and incorporated herein by
reference.
(11) Filed March 27, 1992, as an exhibit to the Company's Form 10-K for the
fiscal year ended December 31, 1991, and incorporated herein by
reference.
(12) Filed March 24, 1993, as an exhibit to the Company's Form 10-K for the
fiscal year ended December 31, 1992, and incorporated herein by
reference.
(13) Filed March 28, 1994, as an exhibit to the Company's Form 10-K for the
fiscal year ended December 31, 1993, and incorporated herein by
reference.
(14) Filed March 30, 1995, as an exhibit to the Company's Form 10-K for the
fiscal year ended December 31, 1994, and incorporated herein by
reference.
50
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 CORPORATION
Date March 29, 1996 By /s/ CARMEN V. ROMEO
-------------------- -----------------------------------
Carmen V. Romeo
Executive Vice President,
Chief Financial Officer, Treasurer,
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on the behalf of the Registrant
and in the capacities and on dates indicated.
Date March 29, 1996 By /s/ ALFRED P. WEST, JR.
-------------------- -----------------------------------
Alfred P. West, Jr.
Chairman of the Board,
Chief Executive Officer,
and Director
Date March 29, 1996 By /s/ HENRY H. GREER
-------------------- -----------------------------------
Henry H. Greer
President, Chief Operating
Officer, and Director
Date March 29, 1996 By /s/ RICHARD B. LIEB
-------------------- -----------------------------------
Richard B. Lieb
Executive Vice President and
Director
Date March 29, 1996 By /s/ DONALD C. CARROLL
-------------------- -----------------------------------
Donald C. Carroll
Director
Date March 29, 1996 By /s/ WILLIAM M. DORAN
-------------------- -----------------------------------
William M. Doran
Director
Date March 29, 1996 By /s/ HENRY H. PORTER, JR.
-------------------- -----------------------------------
Henry H. Porter, Jr.
Director
51
<PAGE>
EXHIBIT INDEX
3.1 Articles of Incorporation of the Registrant as amended on
January 21, 1983. (1) (Exhibit 3.1)
3.1.1 Designation of Series A Junior Participating Preferred Shares,
dated December 19, 1988. (7) (Exhibit 3.1.1)
3.1.2 Amendment to Articles of Incorporation of the Registrant, dated
May 21, 1992. (12) (Exhibit 3.1.2)
3.1.3 Amendment to Articles of Incorporation of the Registrant, dated
May 26, 1994 (14) (Exhibit 3.1.3)
3.2 By-Laws. (Exhibit 3.2)
3.2.1 Amendment to By-Laws, dated December 19, 1988. (7) (Exhibit
3.2.1)
3.2.2 Amendment to By-Laws, dated July 12, 1990. (9) (Exhibit 3.2.2)
4.1 Form of Certificate for Shares of Common Stock. (7) (Exhibit
4.1)
4.1.1 Form of Rights Certificate. (5) (Exhibit B to Exhibit 1)
4.2 See Exhibits 3.1 and 3.2 hereto.
*10.1 1981 Stock Option Plan, Amended, Restated and Renewed as of May
8, 1991. (6) (Exhibit 4)
*10.2 Employee Stock Ownership Plan. (4) (Exhibit 10.3 (b))
*10.3 Employee Stock Purchase Plan, Amended and Restated as of May 8,
1991. (11) (Exhibit 10.3)
*10.4 SEI Capital Accumulation Plan. (8) (Exhibit 10.5)
*10.5 Stock Option Plan for Non-Employee Directors. (7) (Exhibit
10.12)
*10.6 Employment Agreement, dated May 25, 1979, between Alfred P.
West, Jr. and the Registrant. (10) (Exhibit 10.7)
*10.7 Employment Agreement, dated January 21, 1987, between Gilbert L.
Beebower and the Registrant. (10) (Exhibit 10.8)
*10.8.1 Employment Agreement, dated July 1, 1987, between Richard B.
Lieb and the Registrant. (10) (Exhibit 10.9)
*10.8.2 Stock Option Agreement, dated February 23, 1989, between Richard
B. Lieb and a subsidiary of the Registrant, as amended. (12)
(Exhibit 10.8.2)
*10.9 Summary of Company Bonus Plan for Senior Management. (13)
(Exhibit 10.9)
*10.10 Employment Agreement, dated February 28, 1992, between Charles
A. Marsh and the Registrant. (13) (Exhibit 10.10)
10.11 Directors and Officers Liability Insurance Policy. (3) (Exhibit
10.9)
10.12 Lease Agreement, dated as of January 1, 1990, between The Canada
Life Assurance Company and the Registrant. (10) (Exhibit 10.11)
10.13 Lease Agreement, dated as of May 1, 1991, between Two North
Riverside Plaza Joint Venture and the Registrant. (11) (Exhibit
10.11)
10.14 Credit Agreement, dated May 31, 1992, between Provident National
Bank and the Registrant, as amended. (12) (Exhibit 10.12)
10.14.1 Second Modification Agreement to the Credit Agreement, dated
April 19, 1993, between PNC Bank, National Association,
successor by merger to Provident National Bank, and the
Registrant. (13) (Exhibit 10.14.1)
10.14.2 Third Modification Agreement to the Credit Agreement, dated May
31, 1993, between PNC Bank, National Association, successor by
merger to Provident National Bank, and the Registrant. (13)
(Exhibit 10.14.2)
10.14.3 Fourth Modification Agreement to the Credit Agreement, dated
March 14, 1994, between PNC Bank, National Association,
successor by merger to Provident National Bank, and the
Registrant. (14) (Exhibit 10.14.3)
10.14.4 Fifth Modification Agreement to the Credit Agreement, dated May
31, 1994, between PNC Bank, National Association, successor by
merger to Provident National Bank, and the Registrant. (14)
(Exhibit 10.14.4)
10.14.5 Sixth Modification Agreement to the Credit Agreement, dated May
5, 1995, between PNC Bank, National Association, successor by
merger to Provident National Bank, and the Registrant. (Exhibit
10.14.5) (Page 54)
10.14.6 Seventh Modification Agreement to the Credit Agreement, dated
June 15, 1995, between PNC Bank, National Association, successor
by merger to Provident National Bank, and the Registrant.
(Exhibit 10.14.6) (Page 56)
52
<PAGE>
<TABLE>
<S> <C>
10.14.7 Eighth Modification Agreement to the Credit Agreement, dated
October 19, 1995, between PNC Bank, National Association,
successor by merger to Provident National Bank, and the
Registrant. (Exhibit 10.14.7) (Page 58)
10.15 Pledge Agreement, dated May 31, 1992, between Provident National
Bank and the Registrant. (12) (Exhibit 10.13)
10.16 Master Lease Agreement, dated December 29, 1989, between
Varilease Corporation and the Registrant, as amended. (12)
(Exhibit 10.14)
11. Earnings per share calculations. (Exhibit 11) (Page 60)
21. Subsidiaries of the Registrant. (Exhibit 21) (Page 62)
23. Consent of Independent Public Accountants. (Exhibit 23) (Page
63)
27. Financial Data Schedule. (Exhibit 27) (Page 64)
99. Miscellaneous exhibits. (Exhibit 99) (Page 65)
</TABLE>
* Denotes a management contract or compensatory plan or arrangement required to
be filed as an exhibit to this Form 10-K.
(1) Filed March 30, 1983, as an exhibit to the Company's Form 10-K for the
fiscal year ended December 31, 1982, and incorporated herein by
reference.
(2) Filed March 30, 1984, as an exhibit to the Company's Form 10-K for the
fiscal year ended December 31, 1983, and incorporated herein by
reference.
(3) Filed June 25, 1982, as an exhibit to the Company's Registration Statement
on Form S-8 (No. 2-78133), and incorporated herein by reference.
(4) Filed March 26, 1986, as an exhibit to the Company's Form 10-K for the
fiscal year ended December 31, 1985, and incorporated herein by
reference.
(5) Filed January 12, 1989, as an exhibit to the Company's Form 8-K dated
January 5, 1989, and incorporated herein by reference.
(6) Filed July 8, 1991, as an exhibit to the Company's Registration Statement
on Form S-8 (No. 33-41602), and incorporated herein by reference.
(7) Filed March 23, 1989, as an exhibit to the Company's Form 10-K for the
fiscal year ended December 31, 1988, and incorporated herein by
reference.
(8) Filed March 29, 1990, as an exhibit to the Company's Form 10-K for the
fiscal year ended December 31, 1989, and incorporated herein by
reference.
(9) Filed August 14, 1990, as an exhibit to the Company's Form 10-Q for the
quarter ended June 30, 1990, and incorporated herein by reference.
(10) Filed March 28, 1991, as an exhibit to the Company's Form 10-K for the
fiscal year ended December 31, 1990, and incorporated herein by
reference.
(11) Filed March 27, 1992, as an exhibit to the Company's Form 10-K for the
fiscal year ended December 31, 1991, and incorporated herein by
reference.
(12) Filed March 24, 1993, as an exhibit to the Company's Form 10-K for the
fiscal year ended December 31, 1992, and incorporated herein by
reference.
(13) Filed March 28, 1994, as an exhibit to the Company's Form 10-K for the
fiscal year ended December 31, 1993, and incorporated herein by
reference.
(14) Filed March 30, 1995, as an exhibit to the Company's Form 10-K for the
fiscal year ended December 30, 1994, and incorporated herein by
reference.
53
<PAGE>
EXHIBIT 10.14.5
---------------
SIXTH MODIFICATION AGREEMENT
----------------------------
THIS AGREEMENT is made as of the 5th day of May, 1995 between and among SEI
CORPORATION, a Pennsylvania corporation ("Company") and PNC BANK, NATIONAL
ASSOCIATION, successor by merger to Provident National Bank ("Bank").
BACKGROUND
----------
Bank and Company have entered into a Credit Agreement effective as of May
31, 1992 as amended by a Waiver and First Modification Agreement between Bank
and Company dated as of September 30, 1992, a Second Modification Agreement
between Bank and Company dated as of April 19, 1993, a third Modification
Agreement between Bank and Company dated as of May 31, 1993, a fourth
Modification Agreement between Bank and Company dated as of March 14, 1994 and a
Fifth Modification Agreement dated as of May 31, 1994 (as so amended, the
"Credit Agreement") pursuant to which Bank agreed to make up to $20,000,000 in
loans (the "Loans") to Company. Capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to them in the Credit Agreement. The
Loans are evidenced by Company's note originally dated May 31, 1992 and amended
and restated September 30, 1992 (the "Note") in the principal amount of
$20,000,000.
The obligations of Company under the Credit Agreement are secured by a
Pledge Agreement, dated as of May 31, 1992 as amended by the First Modification
Agreement (as so amended, the "Pledge Agreement") under which Company pledged to
Bank the shares of capital stock of certain of the Subsidiaries.
Company and Bank desire to amend further certain provisions of the Credit
Agreement.
Agreement
---------
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
1. Section 7.10 of the Credit Agreement is hereby amended by adding a new
Section 7.10(j) thereto which reads in full as follows:
"(j) Investments made by the Company related to SEI AG (a private
placement operation in Zurich, Switzerland) in an aggregate amount not to
exceed $10,000,000."
2. All references in the Note and the Pledge Agreement to the Credit
Agreement are hereby deemed to be to the Credit Agreement as amended hereby.
3. Company represents and warrants that:
(a) Company is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania and has all
requisite power and authority to make and perform this Agreement.
(b) The execution, delivery and performance of this Agreement have
been duly authorized by all requisite corporate action of Company and will not
violate any applicable provision of law or judgment, order or regulation of any
court or of any public or governmental agency or authority nor conflict with or
constitute a breach of or a default under any instrument to which Company is a
party or by which Company or any of Company's properties is bound;
(c) This Agreement constitutes the legal, valid and binding
obligation of Company, enforceable in accordance with its terms, except as the
same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditor's rights generally and
general principles of equity;
(d) No approval, consent or authorization of, or registration,
declaration or filing with, any governmental or public body or authority is
required in connection with the valid execution, delivery and performance by
Company of this Agreement, except such as has been obtained; and
54
<PAGE>
(e) All representations and warranties of Company set forth in
Section 5 of the Credit Agreement are true and correct as of the date hereof.
All of the above representations and warranties shall survive the making of
this Agreement.
4. Except as hereinabove modified and amended and except as necessary to
conform to the intention of the parties hereinabove set forth, the Credit
Agreement, the Note and the Pledge Agreement shall remain unchanged and in full
force and effect and are hereby ratified and confirmed in all respects, as so
amended.
5. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania.
6. This Agreement shall inure to the benefit of, and be binding upon, the
parties hereto and their respective successors and assigns.
7. This Agreement may be executed in counterparts, each of which shall be
deemed an original, and all of which, when taken together, shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
SEI CORPORATION
By: Cris Brookmyer
Title: Controller
PNC BANK, NATIONAL ASSOCIATION
By: H. Todd Dissinger
Title: Vice President
55
<PAGE>
EXHIBIT 10.14.6
---------------
SEVENTH MODIFICATION AGREEMENT
------------------------------
THIS AGREEMENT is made this 15th day of June, and effective as of the 31st
day of May, 1995 between and among SEI CORPORATION, a Pennsylvania corporation
("Company") and PNC BANK, NATIONAL ASSOCIATION, successor by merger to Provident
National Bank ("Bank").
BACKGROUND
----------
Bank and Company have entered into a Credit Agreement effective as of May
31, 1992 as amended by a Waiver and First Modification Agreement between Bank
and Company dated as of September 30, 1992, a Second Modification Agreement
between Bank and Company dated as of April 19, 1993, a Third Modification
Agreement between Bank and Company dated as of May 31, 1993, a Fourth
Modification Agreement between Bank and Company dated as of March 14, 1994, a
Fifth Modification Agreement dated as of May 31, 1994 and a Sixth Modification
Agreement dated as of May 5, 1995 (as so amended, the "Credit Agreement")
pursuant to which Bank agreed to make up to $20,000,000 in loans (the "Loans")
to Company. Capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to them in the Credit Agreement. The Loans are evidenced
by Company's note originally dated May 31, 1992 and amended and restated
September 30, 1992 (the "Note") in the principal amount of $20,000,000.
The obligations of Company under the Credit Agreement are secured by a
Pledge Agreement, dated as of May 31, 1992 as amended by the First Modification
Agreement (as so amended, the "Pledge Agreement") under which Company pledged to
Bank the shares of capital stock of certain of the Subsidiaries.
Company and Bank desire to amend further certain provisions of the Credit
Agreement.
Agreement
---------
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
1. Capitalized terms not defined herein shall have the meanings set forth
in the Credit Agreement.
2. The Credit Agreement is hereby amended as follows:
(a) As contemplated by Section 9.15 of the Credit Agreement, the
Termination Date and the date on which the Credit Agreement shall expire and the
Credit Period shall end is hereby changed from May 31, 1995 to May 31, 1996.
(b) Section 7.6 of the Credit Agreement is hereby amended such that
the Consolidated Tangible Effective Net Worth shall be greater than or equal to
$35,000,000 at and after May 31, 1995, such figure to continue to adjust
thereafter as set forth in the Credit Agreement, provided that the Consolidated
Tangible Effective Net Worth shall not at any time fall below $0.
(c) The reference in Section 7.10(g) of the Credit Agreement to
"$150,729,000" is hereby deleted and "$200,729,000" is substituted therefor.
(d) Section 7.11 of the Credit Agreement is hereby amended to provide
that the Company may sell its Defined Contribution Recordkeeping Services and
Capital Resources Pension Consulting business units.
3. All references in the Note and the Pledge Agreement to the Credit
Agreement are hereby deemed to be to the Credit Agreement as amended hereby.
4. Company represents and warrants that:
(a) Company is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania and has all
requisite power and authority to make and perform this Agreement.
56
<PAGE>
(b) The execution, delivery and performance of this Agreement have
been duly authorized by all requisite corporate action of Company and will not
violate any applicable provision of law or judgment, order or regulation of any
court or of any public or governmental agency or authority nor conflict with or
constitute a breach of or a default under any instrument to which Company is a
party or by which Company or any of Company's properties is bound;
(c) This Agreement constitutes the legal, valid and binding
obligation of Company, enforceable in accordance with its terms, except as the
same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditor's rights generally and
general principles of equity;
(d) No approval, consent or authorization of, or registration,
declaration or filing with, any governmental or public body or authority is
required in connection with the valid execution, delivery and performance by
Company of this Agreement, except such as has been obtained; and
(e) All representations and warranties of Company set forth in
Section 5 of the Credit Agreement are true and correct as of the date hereof.
All of the above representations and warranties shall survive the making of
this Agreement.
5. Except as hereinabove modified and amended and except as necessary to
conform to the intention of the parties hereinabove set forth, the Credit
Agreement, the Note and the Pledge Agreement shall remain unchanged and in full
force and effect and are hereby ratified and confirmed in all respects, as so
amended.
6. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania.
7. This Agreement shall inure to the benefit of, and be binding upon, the
parties hereto and their respective successors and assigns.
8. This Agreement may be executed in counterparts, each of which shall be
deemed an original, and all of which, when taken together, shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
SEI CORPORATION
By: Cris Brookmyer
Title: Controller
PNC BANK, NATIONAL ASSOCIATION
By: H. Todd Dissinger
Title: Vice President
57
<PAGE>
EXHIBIT 10.14.7
---------------
EIGHTH MODIFICATION AGREEMENT
-----------------------------
THIS AGREEMENT is made as of and effective this 19th day of October, 1995
between and among SEI CORPORATION, a Pennsylvania corporation ("Company") and
PNC BANK, NATIONAL ASSOCIATION, successor by merger to Provident National Bank
("Bank").
BACKGROUND
----------
Bank and Company have entered into a Credit Agreement effective as of May
31, 1992 as amended by a Waiver and First Modification Agreement between Bank
and Company dated as of September 30, 1992, a Second Modification Agreement
between Bank and Company dated as of April 19, 1993, a Third Modification
Agreement between Bank and Company dated as of May 31, 1993, a Fourth
Modification Agreement between Bank and Company dated as of March 14, 1994, a
Fifth Modification Agreement dated as of May 31, 1994, a Sixth Modification
Agreement dated as of May 5, 1995 and a Seventh Modification Agreement effective
as of May 31, 1995 (as so amended, the "Credit Agreement") pursuant to which
Bank agreed to make up to $20,000,000 in loans (the "Loans") to Company.
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Credit Agreement. The Loans are evidenced by Company's
note originally dated May 31, 1992 and amended and restated September 30, 1992
(the "Note") in the principal amount of $20,000,000.
The obligations of Company under the Credit Agreement are secured by a
Pledge Agreement, dated as of May 31, 1992 as amended by the First Modification
Agreement (as so amended, the "Pledge Agreement") under which Company pledged to
Bank the shares of capital stock of certain of the Subsidiaries.
Company and Bank desire to amend further certain provisions of the Credit
Agreement.
Agreement
---------
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
1. Capitalized terms not defined herein shall have the meanings set forth
in the Credit Agreement.
2. Section 7.8 of the Credit Agreement is hereby amended by adding a new
subparagraph (k) thereto which shall read in full as follows:
"(k) Indebtedness of the Company's Subsidiary, SEI AG, in the maximum
amount of $30,000,000; provided that such Indebtedness shall be solely an
obligation of SEI AG and there shall be no recourse or other liability to the
Company in respect of such Indebtedness."
3. All references in the Note and the Pledge Agreement to the Credit
Agreement are hereby deemed to be to the Credit Agreement as amended hereby.
4. Company represents and warrants that:
(a) Company is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania and has all
requisite power and authority to make and perform this Agreement.
(b) The execution, delivery and performance of this Agreement have
been duly authorized by all requisite corporate action of Company and will not
violate any applicable provision of law or judgment, order or regulation of any
court or of any public or governmental agency or authority nor conflict with or
constitute a breach of or a default under any instrument to which Company is a
party or by which Company or any of Company's properties is bound;
(c) This Agreement constitutes the legal, valid and binding
obligation of Company, enforceable in accordance with its terms, except as the
same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditor's rights generally and
general principles of equity;
58
<PAGE>
(d) No approval, consent or authorization of, or registration,
declaration or filing with, any governmental or public body or authority is
required in connection with the valid execution, delivery and performance by
Company of this Agreement, except such as has been obtained; and
(e) All representations and warranties of Company set forth in
Section 5 of the Credit Agreement are true and correct as of the date hereof.
All of the above representations and warranties shall survive the making of
this Agreement.
5. Except as hereinabove modified and amended and except as necessary to
conform to the intention of the parties hereinabove set forth, the Credit
Agreement, the Note and the Pledge Agreement shall remain unchanged and in full
force and effect and are hereby ratified and confirmed in all respects, as so
amended.
6. This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania.
7. This Agreement shall inure to the benefit of, and be binding upon, the
parties hereto and their respective successors and assigns.
8. This Agreement may be executed in counterparts, each of which shall be
deemed an original, and all of which, when taken together, shall constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
SEI CORPORATION
By: Cris Brookmyer
Title: Controller
PNC BANK, NATIONAL ASSOCIATION
By: H. Todd Dissinger
Title: Vice President
59
<PAGE>
EXHIBIT 11
----------
SEI CORPORATION AND SUBSIDIARIES
--------------------------------
EARNINGS PER SHARE CALCULATION
------------------------------
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
-----------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Earnings per common and common equivalent share
(Primary EPS):
Income from continuing operations $21,126,000 $18,253,000 $12,757,000
========== ========== ==========
Net income $19,184,000 $19,250,000 $16,139,000
========== ========== ==========
Weighted average number of shares issued and
outstanding 18,607,000 18,845,000 19,275,000
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 838,000 1,182,000 1,458,000
---------- ---------- ----------
Adjusted weighted average number of shares outstanding 19,445,000 20,027,000 20,733,000
========== ========== ==========
Earnings per common and common equivalent share
from continuing operations $1.09 $.91 $.62
==== === ===
Earnings per common and common equivalent share $.99 $.96 $.78
==== === ===
</TABLE>
60
<PAGE>
SEI CORPORATION AND SUBSIDIARIES
--------------------------------
EARNINGS PER SHARE CALCULATION
------------------------------
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
-----------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Earnings per common and common equivalent share,
assuming full dilution (Fully diluted EPS):
Income from continuing operations $21,126,000 $18,253,000 $12,757,000
========== ========== ==========
Net income $19,184,000 $19,250,000 $16,139,000
========== ========== ==========
Weighted average number of shares issued and
outstanding 18,607,000 18,845,000 19,275,000
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 year-end market price) of outstanding options 968,000 1,182,000 2,085,000
---------- ---------- ----------
Adjusted weighted average number of shares outstanding,
assuming full dilution 19,575,000 20,027,000 21,360,000
========== ========== ==========
Earnings per common and common equivalent share
from continuing operations, assuming full dilution $1.08 $.91 $.60
==== === ===
Earnings per common and common equivalent share,
assuming full dilution $.98 $.96 $.76
==== === ===
</TABLE>
61
<PAGE>
EXHIBIT 21
----------
SUBSIDIARIES OF THE REGISTRANT
------------------------------
JURISDICTION OF ORGANIZATION
NAME OR INCORPORATION
---- ----------------
SEI Financial Services Company Pennsylvania
SEI Financial Management Corporation Delaware
SEI Financial Services Limited Canada (Federal)
SEI Capital Limited Canada (Federal)
Rembrandt Financial Services Company Pennsylvania
SEI Developments, Inc. Delaware
SEI Software Corporation Delaware
SEI Trust Company Pennsylvania
SEI Funds, Inc. Delaware
SEI Investments, Inc. Delaware
SEI Global Investments Corporation Delaware
SEI Capital AG Switzerland
Primus Capital Advisors Inc. Canada (Federal)
SEI Advanced Capital Management, Inc. Delaware
SEI Global Capital Investments, Inc. Delaware
SEI Global Management (Cayman) Inc. Cayman Islands, B.W.I.
SEI Global Asset Management Limited Ireland
Fund Resources International Limited Ireland
62
<PAGE>
EXHIBIT 23
----------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To SEI Corporation:
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed
Registration Statements File No. 2-73997, File No. 2-75629, File No. 2-78133,
File No. 2-80841, File No. 2-89659, File No. 33-19952, File No. 33-24595, and
File No. 33-41602.
Philadelphia, Pa. ARTHUR ANDERSEN LLP
March 29, 1996
63
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 10,256
<SECURITIES> 6,205
<RECEIVABLES> 23,642
<ALLOWANCES> (1,206)
<INVENTORY> 0
<CURRENT-ASSETS> 54,075
<PP&E> 85,812
<DEPRECIATION> (61,513)
<TOTAL-ASSETS> 101,347
<CURRENT-LIABILITIES> 44,886
<BONDS> 0
0
0
<COMMON> 184
<OTHER-SE> 55,818
<TOTAL-LIABILITY-AND-EQUITY> 101,347
<SALES> 0
<TOTAL-REVENUES> 225,964
<CGS> 0
<TOTAL-COSTS> 174,258
<OTHER-EXPENSES> 16,963
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (764)
<INCOME-PRETAX> 35,507
<INCOME-TAX> 14,381
<INCOME-CONTINUING> 21,126
<DISCONTINUED> (1,942)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,184
<EPS-PRIMARY> .99
<EPS-DILUTED> .99
</TABLE>
<PAGE>
EXHIBIT 99
----------
The undertaking set forth below is filed for purposes of incorporation by
reference into Part II of the registration statements on Form S-8, File No. 2-
73997, File No. 2-75629, File No. 2-78133, File No. 2-80841, File No. 2-89659,
File No. 33-19952, File No. 33-24595, and File No. 33-41602.
Item 9. Undertakings.
- ----------------------
(a) The undersigned registrant hereby undertakes:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to
directors, officers or persons controlling the registrant pursuant to
the provisions described in this registration statement, or otherwise,
SEI Corporation (the "Company") has been advised that in the opinion
of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by a
director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication of
such issue.
65
