SEI Investments Co (SEIC) 2002 Q2 法說會逐字稿

Thank you for standing by, and welcome to the SEI Investments' Q2 2002 earnings conference. At this time all phone participants are in a listen-only mode. Later you'll be given instructions on how you may ask questions. In the meantime, if you should require assistance, press zero star. As a reminder, this call is being recorded. I'd like to turn the conference over to Chairman and CEO, Al West. Please go ahead sir.

Thank you and welcome everybody. With me today are all of our segment leaders, they're all on the call as well as Kathy Heilig, SEI's Controller.

Now I'll start by recapping the second quarter of 2002 for the company as a whole and then I'll turn it over to each one of the business segment leaders to comment on the results of their segment. And, as usual, we'll field questions at the end of each segment's report. And then finally, Kathy Heilig will give us some important company-wide statistics and then we'll ask - answer questions on anything.

OK. To start with, second quarter earnings grew 15 percent from a year ago on a revenue shortfall of six percent. Our diluted earnings per share of 31 cents, represents a 15 percent growth from the second quarter a year ago and a slight increase over the 30 cents we reported in first quarter of 2002.

SEI's situation has not changed substantially over the last quarter. Times remain challenging. Our portfolio invested 60/40 in equities and fixed income respectively, which is our typical portfolio we manage for our clients - has dropped 4.08 percent from the first of the year through the second quarter. Now this directly reduces the revenues we generate from our businesses receiving asset-based fees.

In addition, the market and the general gloomy sentiment of investors and business people continues to adversely effect the buying decisions of our clients and their customers. And as I mentioned last quarter, our revenues were lower during - coming into the year by late 2001 losses of business in fund processing and institutional asset management. And, finally, results of the second quarter 2001 included sizable one-time revenues, which does distort the comparison with second quarter this year.

Now despite these times and its consequences we continue to grow earnings. All of our businesses generated new client relationships during the quarter, but the market this growth. And throughout the company we have aggressively controlled costs and improved productivity. And because of these efforts, our operating margins improved to 37 percent this quarter from 31 percent a year ago.

Now our control of costs also extends to our investment in our future. While we'll never forego our investments, as you all know, we are sharpening our priorities and continue to sharpen our priorities to better focus them and make the money we put there work harder. Our primary investments all are aimed at building outsourcing business solutions for our target markets. They're also aimed at improving our client business results and in turning our revenues and profits and, in turn, growing SEI's revenue and profits.

Now all of our investments are by design leverageable across multiple target markets. And these investments are as follows, there's five I want to cover. First, a straight-through-processing platform designed to streamline investment processing for our clients as well as our own trust department - or trust company. Second investment is a front-end interface for intermediaries to enhance their and their customers' experience and the streamline transaction processing.

The third investment is a new outsourcing business solutions to expand our business with our intermediary clients. And our fourth one is expanding are asset management business solutions worldwide, as well as our technology business solutions worldwide. And then the fifth is creating business solutions for money managers and alternative investment managers. Now, of these four, I'd like to footnote the first investment, and that's the investment we're making in a straight-through processing platform.

There's a lot of talk in the securities industry about straight-through processing and settlements on trade date plus one. Now they're talking about streamlining the process from the trader through to the street. Now our straight-through processing is defined as the process from the client way out in the front end, through the administrator or adviser, then through the trader to the street. Now the efficiencies and quality improvements available by streamlining this end-to-end process far dwarfs that available from what the industry is considering. We can also implement our straight-through processing regardless of what the industry advocates or eventually undertakes.

Now all of our investments, the five investments that are talking about, are aimed at providing new revenue sources in our existing markets, new revenue sources by entering new markets and substantially lowering our costs and the costs of our clients. As we look to the very near future, we see growth and sales but are expecting the market to continue to work against us. Consequently, profit improvement will have to continue to come from cost containment and productivity improvements. As we look a little further out, nearly all are sales pipelines are strong, and we know it is just a matter of time before clients unfreeze their decisions.

Now in the longer run, we remain very optimistic. Tough market climates such as these reinforce our investment management story, and they also make our outsourcing business solutions even more appropriate and valuable. In addition, the investments we are making, as well as the significant progress we have made to date in streamlining our operations, we ensure we exit these doldrums stronger than ever. We also remain bullish because of the fundamentals of our business. The recurring nature of our revenues, a strong cash flow, the strong and growing market acceptance of outsource business solutions, the inherent leverage in our operations and the portfolio businesses we are creating will serve us very well in any future business climate. And as a footnote to this, I want to mention our cash flow. Our cash flow from operations during the first half of the year totaled $72 million, $3 million more than earnings, and allowed up to comfortably buy back 1.4 million shares of our stock.

Finally, it's not something that we usually talk about, but I think these unique times make it very important. We have a clean balance sheet, and we employ conservative accounting. With that, I'd like to now move to our segments, and we'll report our five segments in the following order: We'll first report private banking and trust, then investment advisers, enterprises, money mangers and then investments and new businesses.

I'm going to turn it first over to Bob Crudup to discuss results of the private banking and trust segment. Bob.

Thanks Al. Good afternoon everyone. I will be reporting on the private bank and trust segment. First let's review the financials for the quarter, Then provide some additional information in financial detail. Revenues for the quarter were 82.9 million. This is a decrease of about ten million, or 11 percent, compared with the same quarter in 2001. Revenues are flat versus Q1. Profits for this quarter are 33.7 million, down five percent from last year, and substantially flat compared to last quarter.

Now let's look inside those numbers just a bit. First, investment processing. This revenue is made up of both recurring revenue and one-time revenue. Our one-time implementation fees have been negatively affected by the slowdown in new deal flow, and the lack of bank acquisitions. These one-time revenues are at their lowest point in several quarters. On a positive note, we've continued to grow the investment processing recurring revenue, which increased by 13 percent over the same quarter in 2001. This increase in recurring revenue is a definite bright spot for our business.

Moving on to the fund processing business, as previously discussed the significant losses sustained last year within this business line are negatively affecting revenue. In the release, these losses are reflected in the $8 million decrease versus Q2 of 2001. It is important to note that this quarter reflects the full effect of those revenue losses. Finally let's review the investment management financials.

About this time last year, we started focusing and repositioning our investment management business in the bank market. That repositioning is complete, and we are now in a transition period. In this transition period, which will last for two or three more quarters, we are losing the old balances in mutual fund products and capturing new assets into our mutual fund wrap, and separate account solutions. These losses and gains are offsetting, and keeping revenues relatively flat. Obviously the capital markets are not helping our revenues or sales efforts.

Now moving on to new business activity. We re-contracted four national banks. They are Mellon, State Street, HSBC, and Wachovia's Institutional Business. These are long-term contracts that solidify an important part of our recurring revenue stream. This is a strong indication of the acceptance of our offering in the large end of the market. We also re-contracted three community banks. Relative to new business, we closed a small fund processing deal with Smith Barney, and had investment processing cross-sales totaling 1.6 million in recurring revenue.

Our investment-processing pipeline remains good, and activity seems to have picked up a bit in the last few weeks. In spite of the revenue difficulties we have with fund processing losses and lack of one-time implementation fees, there are some positive indicators. First our sales pipeline for investment processing remains strong. Second, since January we've signed 11 selling agreements in the regional community bank market for our separate account solution.

Finally, we continue to forge ahead with our investments and delivery of important new solutions. These new solutions include our STP and electronic trading solutions, and we remain on track to deliver these new solutions next year. Preliminary conversations with clients have been very positive regarding these new solutions.

In conclusion, we are investing in new solutions for the Private Banking and Trust segment because we believe it will be a growth market for our firm.

I'll be happy to answer any questions.

And if you wish to ask a question you may press the one on your touch-tone phone at this time. You'll hear a tone then indicating that you've been placed in queue and you can remove yourself from queue at any time by pressing the pound key. Please remember to pick up your handset before pressing the number if you're using a speakerphone.

Our first question comes from with Select Equity Group.

Please go ahead.

Hi, Bob. Can you give us some more specifics about the backlog and what kind of impact sequentially that might have on the investment processing business?

OK. Let me make sure I understand your question. The feedback that we've gotten from current clients about the new solutions we'll be rolling out next year, the straight-through-processing solution and electronic trading solution?

Sure.

That's your question.

Yeah.

We've actually been out in the market for a couple of months now talking about the straight-through-processing solutions and the electronic trading solutions with clients in both the national market and regional community bank market. The conversations had gone very positively in that we're presenting these as we present everything as a business solution and solutions that will help them lower costs, improve income opportunities, and reduce risks around the operations that they're running.

Though we're not going to be prepared to deliver these solutions until sometime next year, the interest has been very keen and very positive feedback to this point.

Do you have a sense if that's the beginning of the year, or mid year or at this point when those solutions would be delivered?

Well, there's a handful of solutions that will roll out during 2003 and I would expect the first ones to start coming out in the first quarter. So we would expect to see some revenue impact through the year as we roll them out.

OK. And since the one-time revenues were down in this quarter, do you expect with the new account activity that you had in the quarter that revenues would be sequentially growing for the duration of the year for the third and fourth quarters that is?

What our ability to grow one-time revenues in Q3 and Q4 will depend upon is our ability to close new-name business in the third and fourth quarter because we get immediate effect with implementation revenues. And in the investment processing business the pipeline for Q3 and Q4 is very solid and, you know, we expect to have some positive effect there.

OK, thanks a lot.

And our next question is from with A.G. Edward.

Good afternoon, Bob. Sort of a follow-up question on the one that was just asked, but you had mentioned in the first quarter call I believe that U.S. Bancorp was supposed to add that conversion to your trust processing, completed this quarter. Is that correct?

Yes. We brought that business on actually at the very end of last quarter. So the recurring revenues for U.S. Bank are reflected in this quarter's numbers.

For the full quarter.

OK.

For the full quarter.

So there's nothing to be gained going into 3Q from that. The second question that I had was, and this is just sort of a housekeeping question, was do you have a breakout? I know in your Q's you break out the three different revenue categories within the private bank. You don't in the quarterly release, but do you have those? Could we get those on the call? The asset management versus the fund administration versus the trust technology?

Yeah, we can give you that. For the quarter?

Yeah, just for the three months, end of June.

OK. For 2002, if you look at the investment processing, revenues for the quarter, it's 57.9 million. The fund processing is 14.7 and the investment management numbers are 10.2.

Two other quick things. Wachovia, between that merger between them and First Union, have you been able to make or broaden that relationship any further? Because I don't believe you were doing business with, was it First Union? Even more so with Wachovia at the time?

Yeah, we had all the investment trust processing business with Wachovia, and we've had the institutional trust business with First Union for some time. And as a result of the merger, we want the institutional business for the new Wachovia and the personal trust business went someplace else.

OK. Could you talk a bit more also about the recent press release you put out with first merit, with I believe selling the separate accounts program. Are they the largest of the 11 you said you've signed, and are there others of similar size that you would consider strong prospects for an agreement like that?

Since the first of the year, we've signed 11 regional community banks to sell the separate account program. First merit would be among the largest. I would expect between now and the end of the year to continue to bring on a few more separate account programs onto the program. But as you know, as you roll one of these programs out, when you get a client that's prepared to sell the program, then you get very focused on building assets inside that program. But the result, to this point in time to have already sold 11 selling agreements, is an early indicator about the asset management business and the bank market. I'll go ahead and give you the same caution I have for the last couple of quarters. I think we're three or four quarters away from the full results being in about success in the asset management business and the bank market. But the early results are very positive.

Thank you.

And our next question is from Glen Greene with Sync Equity Partners. Please go ahead.

Thank you. We just wanted to drill down on some of the asset numbers, specifically the assets under administration declining sequentially. Just sort of wanted to get a sense how much of that is due to the market and how much due to the previous client losses?

Well if you look at, if you look at those balances, you know, over the last three or four quarters , a great deal of it, the losses are very substantially related to the loss claims. If you look inside the bank market, their asset mix tends to be a little bit more oriented toward fixed income. You might not, you might see more, like a 50/50 split versus a 60/40. The banks have the same issues that all asset management firms have today and, you know, that's keeping the balances they have, plus the market effect.

So you've got those three things going on inside the balances. You've got the market effect, you've got asset write-off and then you've got the lost business. But a very high percent of what you're seeing here is the, is the lost business.

Then the converse is that the assets under management was flat sequentially, even despite the sort of market decline we're seen. Should we read into that that fund flows were very positive, or how would you explain that?

Could you say that to me again? I didn't quite tune into your question.

The assets under management component, within the assets, was actually flat sequentially. Which is sort of counter-intuitive to the market decline.

Oh, OK. In our product.

Correct.

OK. Yes, I think that again, that's an early positive indicator of our asset management business in the bank market. Because what we have going on there is, as I've talked with you about before, we've got mutual fund products that were sold the old way, and those balances are going away slowly over time. And we're bringing in new clients into the new programs, the mutual fund wrap program and the separate account program.

Then you've got, on top of that, the market effect. And if you put all those in the hopper, our balances and revenues have remained fairly flat over the last several quarters, and I think that's pretty good. I think that's ...

That's what I'm suggesting, is that you must have had very positive fund flows in the quarter. Offset the market decline.

Yes. I don't, I don't think I want to get into that every quarter.

OK.

But if you look at inside the numbers, that you can't see in the release there. Over the last couple of months we've been bringing about $30 million a month in to the new programs.

OK. Thanks Bob.

Our next question is from with . Please go ahead.

Hi. Hi Bob. Couple of things. First off, you mentioned last quarter that the pipeline was building in this segment, and again, you are sensing that that's still the case. Just wondering if you could try to explain to me why the pipeline continues to build, and yet you have a buyer psychology which continues to prevent buyers from actually making decisions in this environment? Can you explain to me, what would be the catalyst to get these folks to do something other than just sit in the pipeline?

OK. That's an interesting question. It's something that we've looked at here. You really have to look at, in order to answer your question, you really have to look at the national bank market, and then take a separate look at the regional community bank market.

In the national bank market what is driving the pipeline there is and straight-through-processing. In the regional community bank market what's driving the pipeline in outsourcing. So the regional community bank market pipeline there's a lot of activity and motivation there to make things happen. And I think that the importance of outsourcing and gaining the efficiencies and productivity that you get by doing that is what's going to continue to drive the regional community bank market. And I have a good bit of confidence that we'll have success in that market between now and the end of the year.

In the national bank market, as you know, what's going on around , the momentum there has slowed down a bit. And we actually have been in an environment where has been a strong motivator for action for the national bank market. With that motivation going away a little bit, the driving motivator there is now going to be straight-through-processing, which as I - as I said back in - at the June meeting, I think it's a very big deal. But their sense of urgency there is not as keen in the national bank market because activity's slowed down a little bit.

As we roll our straight-through-processing solutions out and they see the opportunities around efficiencies, productivity, cost reduction, and risk reduction, I think that that's what will drive the motivation in the national bank market. And I think the timeline for activities there is a little bit longer than between now and the end of the year. I think it's more 2003 initiatives.

So it sounds like the - to the extent that you're characterizing or qualifying the pipeline it sounds like it's more full with a greater number of smaller clients. And I'm curious to know what would be the relative profitability between a national bank and a regional bank client?

The profitability margins are relatively similar for those two markets. I'd say that if you characterized the sense of urgency in the regional bank market and the community bank market about changing vendors that there is a stronger sense of urgency in that market. But we still have good activity in the national bank market.

OK. On another tack with regard to the mutual fund services pipeline and activity levels, what are you seeing today industry-wide in terms of the number of RFP's out there and how close do you feel like you are to executing on your share of opportunities at this point?

Well, I'm encouraged by the fact that we closed that transaction with Smith Barney this past quarter. The activity for that product solution in today's climate is pretty low. And the pipeline is not robust and we're not seeing a lot of RFP's. And I would certainly not characterize the investment processing pipeline that way.

OK. And then finally, just curious with regard to expenses to the extent that you've been able to hold the line on operating expenses. Where would you say that most of those efficiencies have come from, the sales and marketing effort, and can you be specific as to just how much more opportunity there is to hold the line on expenses?

Well I think that over the short term we can maintain our margins. A lot of the activity around cost reductions here over the past 12 months have been around changes to our infrastructure, looking for places where we can create efficiencies in our scalable businesses. And we continue to look for those, we will continue to find those and the good news about those process changes is when we get in a more positive business climate, we'll be able to continue to reap the benefit of those processes. The other very important point is as we move to the straight through processing environment for our clients, we'll also be moving to it for our operations. And all those benefits that we've talked so much for our clients will accrue to us. So I think we'll continue to see big opportunities there over the next, really six quarters, around straight-through processing, and even past that.

OK. Great. Thanks so much.

Our next question is from with . Please go ahead.

Hi Bob. Just a couple of questions, follow-ups. Could you talk a little bit about customer attrition in your fund business. Any potential risk there? And also give us maybe a few examples in the trust business in terms of the full back-office outsourcing that you've talked about in the past. Thanks.

OK. In the fund processing business in the bank market, I would characterize our current client base as pretty stable. So our expectations are fairly positive about keeping the clients that we've got. What was your second question?

It related to the full back-office outsourcing proposition that you've talked about with bigger banks. Is that beginning to happen for you guys, and if you could give us a few example of deals you may have signed in the June period.

As I've said before, the way that that solution, full back-office investment processing, will go up market, is it will move up market slowly. You know, we'll go from a 10,000 account bank to a 15,000 account bank and from a 15,000 account bank to a 20,000 account bank. So I think it will move up market slowly, and I don't think anything has changed about that since the meeting we've had out here June.

Right. Can you maybe give a few examples of clients you've signed in the quarter. I missed part of the call, so if you've already talked about it I apologize. But just a couple of examples would be helpful in terms of clients you may have signed across your three businesses.

Yeah. The only new name that we signed across the businesses that we talked about a little bit earlier, was we signed a small-fund processing deal with Smith Barney. We did not sign a full back-office outsourcing client this quarter.

OK. And what about in the pure investment processing area?

Nor an investment processing client.

OK.

We're re-plowing ground we've already plowed. We did re-contract four large national banks this quarter.

OK. Great. Thanks a lot.

You bet.

There are no further questions at this time. Please continue.

Thank you. Our next, second, in second segment is investment advisors. And I'm going to turn it over to Carmen Romeo to discuss this segment. Carmen?

Thanks Al, and thanks for joining us today. I will cover three areas today. First cover the state of the business. Secondly the financial results, and then thirdly the areas of focus as we head into the second half of the year. The market environment has continued to tax the patience of high net worth investors. And until stabilization of the equity market occurs, we will be plagued by less than attractive cash flows.

The bear market provides no incentive for investors to seek new alternatives for investment strategies. Consequently, our net cash flows for the quarter amounted to only $200 million, which is down from the $600 million that we chalked up in the first quarter of this year. However gross cash flows were 1.7 billion, which is slightly down from the first quarter, while the redemption rate was 7.2 percent. Now that's up from 5.9 percent in the first quarter of this year.

Despite the order flow, assets now stand at 25.8 billion at June 30th. The impact of a down market manifested itself mostly in the month of June, so that the impact on revenues was not as severe as it might have been. As a result, revenues were $39 million and profits were 20.4 million, or at a 52 percent profit margin, compared with 39 million and 14.4 million in the comparable quarter last year.

The increase in profitability and margin improvement was caused primarily by cost control. Now despite the market environment, we are still, we are still conducting activities that will reap rewards when the market returns from its doldrums. These activities include recruiting new advisors, and in the quarter we added 95 advisory firms, bringing our total to 212 for the year. We continue to move our clients along who have signed conversion agreements. And at 630, we have 1.4 billion awaiting conversion.

Managed accounts now is at $1.5 billion, and still is getting acceptability by clients. Now in order to qualm investor nerves, we still continue to conduct open forums with end investors, supplemented with Internet technology, as well as assisting advisors in servicing investor accounts that show signs of distress. All in all, we feel reasonably satisfied with the new business activity for the quarter, and believe that if the market bottoms out, that our client base, the RIAs, and this business unit will reap the rewards by providing advice that investors require as they meet, as we meet their long-term goals.

That concludes my remarks, and I would be happy to respond to any questions that you might have.

And once again, if there's a question you may press the one on your phone at this time. And we have a question in queue from with Sanford Bernstein. Please go ahead.

Hi. Could you tell me to what extent you're achieving these cost reductions by simply accruing less for bonuses and incentive compensation?

Well clearly as cash flow from our business activities declines, we will pay less to our sales folks, and other folks across the board....

I should remind you that all of our compensation plans are based upon new business activity. We don't pay trails to any of our sales folks. So the money has to come in before we pay money to our sales folks. So there's some degree of cost containment associated with that, so there's a correlation there.

And then we've also taken a look at some of the marketing and promotional costs as well as some new technology initiatives that we sort of put on hold at least for the time being. That have - and those have all manifested themselves and will continue to manifest themselves in the quarters going forward.

Are you concerned that cutting back on marketing may reduce growth in the future?

I am not concerned about that at all. We have 18 sales people in the field, which is adequate coverage even in the best of time. We've had that - little less than that now. But so we don't - I don't believe that's going to be an issue at all.

And, of course, we don't do a lot of advertising at all. So that's not the kind of cost that we have to cut. But there are other ancillary marketing activities that we're sort of putting the hold on. So I don't see that effecting new business. I think the new business activities will finally come our way as the market begins to stabilize. You know, we still continue to add 95 new advisors so ...

Yeah.

... so their poised to deliver as the market allows us to, I suspect.

Did you say you have less than 18 sales reps in the field now?

No, we have 18. We had - we had 21 when we started the year ...

OK.

... and we consolidated three territories.

OK, great. Thanks.

You're welcome.

Our next question is from Brad Moore with Putnam Lavelle.

Please go ahead.

Hi, , couple of things. First, could you remind me what the - what the conversion process is? How long does it take for a typical RIA to move on to your system? And are there any up-front implementation fees? And then on the other side of the - of the equation, what - how difficult is it for somebody to move off the system and are there any termination fees at the back end?

OK. Let's - when you speak about conversion the primary reason why an advisor would want to convert their entire book to the SEI platform where we're housing the assets in our trust company is because it gives them a significant amount of efficiencies, it allows them to really concentrate on servicing accounts and gathering assets. So when they convert they're moving assets from other investment companies into the trust company and implementing an investment strategy that we provide to each of the individual accounts that are being converted.

There's no up-front fee on the part of advisor. Generally speaking the conversion might last from six to 12 months. We try to move them along as quickly as possible for obvious reasons. But in the final analysis it really depends upon the speed and attention that the advisor is giving to this process.

Now, of course, they're incented because it will provide some efficiencies to the advisor and their business, and also maybe perhaps provide some increase in fee income to them. So there's a lot of incentives.

Now with respect to can they de-convert, the clients don't really do that. I can't remember the last advisor we lost where they took their entire book of business with them. Now the individual investment account might decide to renew him out of the SEI program. So that's really the risk that we have. I hope that answers you question.

Yeah, that helps. And then can you tell me for the 95 firms that were, I think you said they were signed in the second quarter, how many RIA's does that represent? And when during the quarter did you sign these folks on roughly speaking.

They represent about 102 individuals. And it's probably done rateably over the quarter. There's really not a period of time when these folks come in. They don't come in at the beginning of the month or the end of the month. It's kind of ratably over the quarter.

Great, OK. Thanks.

And we have a question from with AT Edwards.

Good afternoon Carmen. Could you just tell me if you get any sense that the advisors you already have are giving you more business. Are the funds and the allocation and the discipline that you all preach in your model portfolios, are you winning more fans within that advisor base already as they sort see in the performance of what they do have with you versus what they elected to try to do on their own or place with somebody else?

Let me try to answer that question. First of all, I wish they'd give us more money.

So do I.

All of us in this conversation. Again, when we sold in visor, we're selling this business solution to an advisor. And the business solution has three components. There's a recurring revenue component, or benefit that they get, they're going to be much more efficient in their back-office operation and thirdly they're going to be able to free up time, so they can spend time servicing and selling new business. So I - that still holds true no matter if we're in a bear market or a bull market. I just think right now it's very, very difficult for advisors to get new business. And you're dealing with negative returns on an absolute basis, and you need a little bit of a positive pop here in the market for investors to consider alternatives. They're hunkering down.

But you're not, I guess what I was trying to maybe better understand is, you're advisors you sign up don't have to give you 100 percent of their assets right?

No, they do not. And it's really - the typical advisor that comes on board with us, outside of a conversion advisor, typically will give us one or two accounts, get used to the operations of our trust company, and then as they feel more comfortable with selling the story, then they'll give us more business. And we help them through this process of getting comfortable with selling the program and servicing accounts.

But you're not really seeing any move where they'd only been giving you 10 percent of their business, and as they review the shrinkage and the pain over the last year, year-and-a-half and said, you know what, I need to be giving more of business to SEI and gradually moving more accounts over to you?

No, I don't see any evidence of that right now.

OK. That's what I wanted to know. Thanks.

Thank you. Sure.

Our next question is from with . Please go ahead.

Hey Carmen.

How you doing?

Good. In the margins that you generated this quarter, I mean, the margin expansion sequentially over the last six, really in the last four years has been phenomenal, but certainly sequentially it's been phenomenal. And I'm just wondering, can you give a little bit more a feel for, or where some of these cuts are occurring? How much is related to a shortfall in perhaps the inflows, and how much is more cuts made in the marketing area?

If, you know, there was any, the expansion given the market was so great, it almost makes me want to ask the question if there was a one-time cost reversal or anything one-time in nature in the numbers. But, you know, I think, I'm trying to get a feel here, is this, is this a number that we can see as sustainable, given that we don't see continued further erosion of equity market values?

Well as I, as I said to the previous caller, you know, the cost cuts primarily occur in promotion, technology and in compensation. So can we do this forever? I don't think we can. And if we have a shortfall in revenue, then that's going to have an impact upon the margins. Now, you know, there is a ceiling here. We can't control how the market takes away the asset base and consequently revenues. We can have some control over expenses up to a point. But it can't, you know, we're not going to come out of here saying we make 75 percent profit margins. So, but we're managing the business in concert with the environment that we are in.

OK.

And we will be, we will be prudent in managing those expenses going forward.

Real quickly, will you remind me if you have any account minimums for the advisors or tiered expense ratios based upon the assets that they have?

No, the minimum account size is about $150,000.

OK.

You know, our average account size across all accounts is probably close to $500,000. There is no tiered expense breaks in our managed, or in our mutual fund program, asset allocation program. When you get into the managed accounts area, the account sizes are generally higher and there is an opportunity, depending upon the size of the account, to get a lower fee that the end investor would pay.

For higher, for much higher levels of assets?

That's correct.

OK. Thank you.

Sure.

Our next question is from with Bing Equity Partners.

Thanks. really asked my operating margin question. But I just want to clarify that the typical portfolio is still a 60/40 equity fixed income split?

About that. It may be slightly skewed towards the equity side. But not materially different than the 60/40.

OK. Thanks.

Sure.

And our last question in queue is from of Barrington Research.

The performance in the last quarter we trailed a little bit the benchmarks by about 40 to 50 basis points in the last quarter. But, you know, that's not - you know, individual clients aren't going to leave because we trail the benchmark by 50 basis points. They're going to leave because they just lost $65,000 on their account based upon the return of their portfolio. So it's not so much a question of how the basis points - or how we missed the benchmark.

Well, in your family of funds, I mean, how many of them are fixed income, equity? You know, you're going through a program where you're trying to educate the RIA's to move more money into fixed and muni's versus stocks ...

Well, we have always provided them with a series of about almost 32 portfolios that range from 100 percent fixed income to 100 percent equity. And there are a lot of supplemental tools that allow the advisor to take investor needs and translate that into a asset strategy. And we commend, you know, that if the psychological impact of market volatility for the end investor to absorb, at least in this market, that they should go to more of a fixed-income type strategy. And we began preaching that back at the September 11th of last year when that event occurred. So they have those options.

A lot of them also employ dollar-cost averaging. The record keeping system that we use allows them to take an investor account and, you know, move that into the market over a specified period of time.

So there are a lot of tools, techniques, tricks, that they might use to bring an investor into the - into the market.

Thanks, .

Sure.

And there are no further questions at this time, please continue.

Thank you.

Our next and third segment is the Enterprise segment and I'm going to turn it over to to discuss this segment.

.

Thanks, Al.

Good afternoon. I'm going to start by reviewing the overall results for the Enterprise segment compared to the second quarter of 2001.

Revenues for the second quarter compared to a year ago decreased 17 percent to $14.3 million. The reason for the decline is divided pretty much equally between three different areas. The first was that revenue from two large year-end clients, that we discussed last year that were lost, was included in the second quarter 2001 results. The second reason was that, as you recall, for this quarter last year there was a one-time positive revenue event that was included in the second quarter 2001 comparative results. And lastly, there was a decline in the capital markets during this one-year period.

But looking at the June 2002 quarter compared to the first quarter, market depreciation caused revenues to decline by three percent. The second quarter market decline though was partially offset by very strong client funding of $600 million of new assets during the quarter.

Operating profits for the annual period decreased nine percent to 5.7 million compared to a year ago. This profit decline is also a direct result of the revenue shortfall that I just touched on. Operating profits for the second quarter, 2002 increased seven percent compared to the first quarter 2002. For 2002, we continued to tightly manage discretionary spending, while at the same time strategically investing in product initiative that we believe will fuel future growth. Now operating margins also improved during the period. Margins for this segment were 41 percent, compared to 37 percent for the second quarter of 2001. A large part of this increase was due to the completion of the treasury trading technology during 2001. There was very little expense for that particular product in 2002, because that project is complete.

And finally, asset balances at the second quarter end were $15.3 billion, essentially flat with the first quarter of 2002. The market's appreciation of the second quarter was pretty much made up by new client funding. Now let's look behind the numbers and start with what was sold. On the sales side, before capital markets and declining interest rates of the past several years are really now starting to provide an environment where prospective clients are becoming more committed to making retirement program changes, and SEI's business is starting to benefit. New asset retirement sales for the quarter totaled $830 million and year-to-date it's $1.2 billion in new assets. This is double the asset sales from the first quarter of 2002 and five times the asset sale of the fourth quarter of 2001. As I reported last quarter, we're starting to see institutions make change decisions, and our business is benefiting. Some notable new client wins during the quarter were Hercules Corporation, Moore Corporation, Intelstat and a local IBEW union up in Albany, New York.

On the treasury side, we won three new client relationships totaling about $200 million in assets. On the funding side, $610 million of retirement assets were funded during the quarter, and the $200 million of treasury assets. The retirement assets of $610 million is compared against 308 million that was funded during the first quarter of 2002. As of 6/30, our un-funded backlog was $400 million, and this is pretty much double in size for the first quarter backlog.

So in conclusion, we're now starting to see institutions focus on making changes to their retirement programs, and for the third consecutive quarter, we've seen both sales and funding results continue to improve. We're hopeful that the pace of institutional decision making will continue to increase and as the institutional decision making mindset returns, SEI will benefit by a return to growth and top line revenues. Those are my remarks, and I'd be glad to answer any questions.

And we have a question in queue from Tim Willy with AG Edwards.

Ed, I'm sorry. I didn't hear what you said the number way in terms of the assets you funded this quarter. That was $610 million, is that correct?

Yes it was Tim.

On the retirement side, then 200 on the treasury?

Correct.

OK. I was wondering, could you - you talked about the environment being better for people to reconsider how their retirement programs are being run, et cetera. Could you give us a feel, I guess, as you've talked to people and go through the RFP process, what some of the sort of general return assumptions are that people are still using, but having to reconsider for their pension plans? I mean, are you seeing like people that are talking that they used to be at an 11 percent assumption, but they're now realizing it has to be seven or six, or something like that?

Yes. It pretty much varies, and a lot of it varies dependent upon the marketplace that we're talking about. Sometimes that the public funds might have a little bit higher than some of the corporate plans. But just generally, we see them a lot higher than what we believe, and what I think that the clients believe, the capital markets are going to be able to return in the future. And what it also, what also is playing out is they're getting some advice from their actuary that they should probably adjust these on a downward basis.

So it is prompting them to have to make contributions. Because the smoothing impact over the last couple years has really kind of gone away, because the market declines, the disappointment in the capital markets has extended for, you know, this is going on the third year.

Yes. Well what kind of, just for an FYI purpose I guess, what kind of general number do you tell people they need to think about, or do you use in your proposals in terms of return rates?

You know, it's going to be, depending upon the overall asset allocation that we, you know, pretty much that's done on a customized basis, so it's going to depend on the mix of assets that we put together for them.

OK.

On how diversified they are.

OK. Thank you.

And we have a question from with . Please go ahead.

Thank you. Ed I just wanted to check some numbers that you gave, and just reconfirm. 830 million is total funding so far this year, is that correct?

No. The 830 million were the sales for this quarter.

OK. And of that, 610 million was funded?

No. I guess the numbers in so far as, let me go through them again for you.

Thanks.

The sales for this quarter, OK, were $830 million.

OK.

Year to date total new sales were 1.2 billion.

OK.

And funding for this quarter was 610 million, and funding for the first quarter was 308. So that would be a total of 918 million.

OK. And these numbers all are retirement assets, not the treasury business?

They were all retirement assets, correct. For the second quarter the funding for treasury was $200 million.

OK.

And if you give me a minute I'll find the number for the first quarter.

OK.

It was about, looks like about 330 million of treasury assets for the first quarter.

OK. Great, thanks a lot.

No further questions at this time. You may continue.

Thank you. Our fourth segment is money managers, and I'm going to turn it over to , who is sitting in for Wayne Withrow, who is on vacation, to discuss this segment. ?

Thank you Al. Good afternoon everyone. During the second quarter as the money manager segment recorded revenues of 10.8 million, an increase of 24 percent over the 8.7 million recorded in the same quarter last year. Operating profits were 2.2 million, compared to 700,000 from a year ago.

Client assets under administration at the end of June were 75.4 billion, a decrease of 2.8 billion for the quarter. This decrease reflects 5.8 billion in market depreciation, and three billion in closed funds, offset by six billion in client fundings. The three billion in closed funds represent balances from United Asset Management portfolios that were sold to Old Mutual Holdings early in the year.

In addition to our financial results highlights for this segment included the following. First, new business sold was three million in annualized revenue during the second quarter. This included nine new clients with six of them being alternative investment managers and the balance being U.S.-based money managers. We will begin to recognize this revenue over the next two quarters.

Second, we continue to move forward with the expansion of our product offering. As we discussed previously, we completed the build out of our registered hedge fund offering during the first quarter. I'm please to report that we signed our first two registered hedge fund clients during the second quarter.

Third, during the second quarter we also sold our first back-office outsourcing deal in the money manager segment. This transaction represents revenue close to the seven-figure dollar range and is another example of SEI leveraging its solutions across multiple markets.

In conclusion for this segment, we are winning new business, continuing to grow our pipeline, and expanding our cross-sell initiatives. We also continue to make investments in this business to further develop our product offering and feel this segment will continue to exhibit strong momentum.

I'll now be happy to answer any questions.

Once again, if you have a question you may press the one at this time.

And again we have a question from .

Please go ahead.

Sorry. Thanks. I have to check the numbers once again. If you can just repeat, you mentioned nine new clients, six in the hedge fund area and three domestic. Is that correct?

Yes, it is. And total revenues, annualized revenues $3 million.

In new sales?

Yes.

OK. And then the first part of your comment you mentioned the closed funds. If you could maybe give a little more insight into what triggered that that would be helpful. Thanks.

Sure. United Asset Management with were a client of ours. Early in the year they were purchased by Old Mutual who decided to close down that trust. So in essence those funds and their affiliated managers went away.

The good side of that was those managers wanted to keep the fund products so we were able to go and design a new solution for them and really convert them over into from one client the UAM Trust to 11 new clients for us. Or if you would look at it, 11 new fund complexes for us in our .

OK. And what will be the impact of this - of these closed clients?

Well, it was really - if you look at the funds going away and then us bringing on the new business, it was really a net wash to revenue.

OK.

So it was zero impact.

OK. Thanks.

You're welcome.

And we have a question from with A.G. Edwards.

Hi. For the hedge fund that you said you're doing the operation outsourcing for that you, I think, you said you signed this quarter, I was wondering if you could maybe just give some general characteristics as to the size and whether this is a newly traded hedge fund that's just trying to outsource everything from the get go? Or is this a more established player that had dealt with the pain and finally just threw up his hands and decided to outsource?

Yes, well, there were six new clients in the second quarter and actually they - it really goes the spectrum of size. We had actually one start-up in there and the rest went to - really through the life cycle of hedge funds all the way up to what we would consider a high-asset-range hedge fund of a billion dollars.

And really what we're starting to see with this market, many more of these hedge-fund managers, there's many new start ups coming out. There's quite a proliferation of new funds and new mangers, but we're also seeing some of the more existing fund managers realizing they need to increase their technology, increase the business solutions they have available, especially as they mature and look to go upstream to institutional investors. So we're really seeing, as opposed to a couple years ago where we really just saw start ups, we're really starting to see more of all the spectrum of assets for these hedge fund managers.

And now for the - specifically, for the, I think you said you signed your first back-office operations customer. Is that correct?

We signed our first investment processing back-office deal for the money manager segment, yes.

OK. So that's not necessarily a hedge fund?

No, that is not a hedge fund. That is actually an investment management firm. And what they did was, the case there, we were able to leverage, which is something that we have been planning to do, and we look to continue. Another solution that we provided FCI in our investment processing, back-office outsourcing to this investment manger's private client basis.

OK. Great. Thank you.

Thank you. Our next question comes from Pete Hackman with . Please go ahead.

Good afternoon. As regards some of these smaller money managers and hedge funds, are the revenues calculated - I guess are revenues paid on a monthly basis or a quarterly basis, and are there some minimums involved for these, we've seen some real active growth managers have significantly declines in assets. Are there some monthly minimums in place if they fall below certain asset levels?

Yes, I'll answer it backwards. The fees are generally asset based, so basis points on assets in our administration are subject to a minimum. That minimum varies, depending on size, frequency evaluation, type of strategy. So really the minimum would apply to the very small and not so much of the bigger mangers. Also, I think as Wayne has told you before, with the hedge fund industry the assets and the size of the funds tend to be smaller, but the fees are generally larger than on the traditional side.

OK. And currently in that portfolio, 75 billion in asset administration, what would you say is the waiting between equities and other asset classes?

Are you looking for the breakdown between hedge and kind of our traditional?

Really just trying to figure out what percentages in equities, so I can get a feel for how much that can be impacted this and being down seven percent quarter-to-date.

It's about 60/40. About 61 percent equities.

Great.

And we have a question from Brad Moore with .

Hi, couple things. I was curious to know, you mentioned that you won nine new clients during the quarter, and I was curious to know how many, what was the total number of bids that you made during the quarter? And who did you run into? Who were the competitors that you ran into during the quarter?

Total number of bids I believe, and I don't have an exact number, but I believe was in the area of 11. As far as competition, it somewhat differs between the hedge and the traditional side. On the hedge side, obviously, as we've said before there's a pool of petite providers, as well as some of the more established traditional administrators in the business as well. And on the traditional side, you know, the typical competitors who we see, State Street, PFDC, et cetera.

OK. And how is the pipeline stacking up right now in terms of the number, the total number of available opportunities that you can bid on in the third quarter?

Our pipeline for both the traditional side and alternatives remains very strong. We have seen, as with other businesses some slowing in the decision making process, but the pipeline continues to grow.

So that would put it at more than 11 potential bid opportunities?

We don't want to predict how many but, you know, I would say our pipeline continues to be strong.

OK. Thank you.

No further questions at this time. Please continue.

Thank you. Our fifth and final segment is investment in new business. I'm going to turn it over to Carl Guarino to discuss this segment. Carl?

Thanks Al. Results in the new business segment for the second quarter were very much in line with first quarter results, that is to say, reflecting improvement in assets, revenue and operating losses on a year-to-year basis, but not on a quarter-to-quarter basis. Revenues for the quarter were 11.6 million, and assets under management at quarter end were 8.2 billion. Now in each case that's up approximately ten percent from the year ago period but slightly down from the first quarter.

Although we did have positive net asset flow of over 250 million in assets in the second quarter, this was more than offset by adverse market movement during the quarter. The operating loss for the quarter of 3.3 million reflects substantial improvement over the prior year, but also continued investment in technology, our Dublin based operations, and European sales and marketing. As we previously indicated, the size of losses in this segment may fluctuate quarterly based on the timing of certain investments, and this quarter's results should not necessarily be seen as indicative of future ones.

Among the highlights for the quarter is the good growth we continue to see in our Canadian asset management business. During the quarter, net sales in Canada were over 200 million in U.S. dollar terms, bringing total asset management, assets under management in Canada to over 2.3 billion. In the second quarter alone, we had five new institutional wins in Canada, totaling approximately $250 million, of which 150 million funded in the quarter.

New asset growth from the European region was modest in the quarter, as we saw a sharp slowdown in distribution on the European continent. In the U.K. however, our activity level and prospect pipeline continue to look promising for both the institutional and IFA segments. On the U.K. institutional side, we had two small new wins during the quarter. On the U.K. high net worth side, we now have signed 25 IFAs in total, and have approximately $100 million in funded assets with additional client assets in process of being converted.

We remain optimistic about the long-term prospects of our global business initiatives, and I'd be happy to take any questions that you have.

Once again, please press the one on your phone at this time if you wish to ask a question. And . Please go ahead.

Hi Carl.

Hello.

This is a segment that clearly holds a lot of potential, both for revenue growth in the future, but also potential earnings growth and I know you've been reluctant in the past to comment on perhaps what the operating losses might look like on annual basis. I assume you're still reluctant to do so, if not, please comment. But I'm wondering if there's some - if there's areas that given the current environment and given the pressure on some of these more established operations if there are areas within the investments and new business where you're perhaps reducing investment or would consider reducing investment where - areas that the return possibilities are more than let's say one, or two, or three years out. I believe you drastically reduced your presence in Argentina, if not closed it entirely. I'm wondering if you might be looking at closing operations or reducing them in other countries?

I'll say this, Pete, I mean, I'm not any less reluctant to predict I guess the future. I will say we do - we are - we are managing our investments in this area as we do in others. And as Al mentioned, in this kind of a time I think we're trying to be as very - as focused in our investments as we can. So you certainly see that focusing in this area.

As you alluded to, we did close our office in Argentina. We have a distribution relationship with a firm in Latin America regionally but we closed our operation there. We're really focusing our investments in the three areas I identified: technology; our operations in Dublin, which really helps us on the whole of the continent; and our European sales and marketing. So they're the three areas that we're really concentrated on. I'm not anticipating, you know, any other sort of closings or major changes in that regard.

In terms of what to expect on the P&L side in the near term, I would say I would certainly not expect further improvement from the numbers that we've been reporting in the - in the first and second quarter. Those, I think, reflect I'll say, you know, the continuing level of investments that we're making. As I said, you could see fluctuation quarter-to-quarter, but the fluctuation if it's - in the short term if there is any it's probably more the other way rather than seeing an improvement from that 3.3.

Thank you.

And there are no further question at this time. Please continue.

Thank you.

Now that concludes the quarterly reports from our segments. And I'd like now to turn it over to Kathy Heilig to give you a few company-wide statistics.

Thanks, Al.

I have some additional corporate information about this quarter. Second quarter cash flow from operations was 44.6 million or 39 cents a share. The second quarter free cash flow was 34-and-a-half million or 31 cents a share. Year-to-date cash flow from operations, 72.3 million or 63 cents per share.

During the second quarter capital expenditures were 8.4 million, and that includes 5.4 million for our new facilities as well as 1.2 million of capitalized software for our investment processing platform. Year-to-date capital expenditures are $18 million, which include 11.8 million towards our new facility.

Second quarter depreciation, 4.1 million. Second quarter amortization, 400,000, bringing year-to-date depreciation to 8.1 million and year-to-date amortization to 860,000.

Expected capital expenditures for the remainder of 2002 are approximately 13.6 million. The accounts payable balance at June 30th was 2-and-a-half million.

Also we would like to remind you that many of our responses are based upon assumptions that involve risk. Our future revenues and income could differ from our expected results and we have no obligation to publicly update any forward-looking statements. Is there any questions that anybody has?

We have a question in queue from Tim Willy with AG Edwards.

Regarding the capitalized software, you had it - done it for awhile and I think this might be the first quarter in quite awhile where there's been anything of a $1 million or more. Is this truly about something related to the work you had done? Or is there some flexibility to capitalize this in a little bit tougher environment? I'm not trying to get to anything that seems sinister, but I just want to understand the shift here.

This is Al. The shift is - it's not really a shift as much as part of - and just a part of the straight-through processing full effort is in the guts of the system. And every time we have gone into the guts of the system, either to enhance or replace, we have capitalized that. We did it under Y2K, and we also did it under open architecture. And it was very consistent with what we have done in the past, and like I said it is a small amount of what the total thing that we are spending.

OK. Will this be something that would just continue for a little bit, or would this likely be the only time we're going to see it? Or maybe for the next year?

Yes. It is going to continue. And we'll be able to give you a lot more look ahead on it. This is the first part of it that is scoping everything we're doing. So we'll have more information in the months to come.

OK. And then how much is left on share buyback authorizations? I can't remember.

Around 51 million.

That's right. And you just re-upped, didn't you, for 50?

Yes.

OK. Great. Thank you.

And we have a question from Pete Hackman with Steeple Nicklaus and Company. Please go ahead.

Yes. Tim asked the questions I was looking for, but just what were the ending shares outstanding in the period?

That we used to compute EPS?

Not the way it averaged but actually the ending.

One hundred and nine million.

Thank you.

And another question from Brad Moore with Putnum Lovell.

Hi, this was actually a follow up to Bob's presentation on the private banking. Bob, can you address the client attrition issue with regard to mutual fund services? But could you comment with regard to the investment processing part? Any major contracts coming up for renewal? Or do you expect any major client attrition.

If you look at the two markets that we do business in, the regional community bank market and the national bank market, in the national bank market our - in the upper end of that, our competition comes substationally from in house. And you can see we re-contracted four of those this quarter. And I'm confident in that segment about the stability of our business. If you look at the regional community bank market, our primary offering there is the full back-office outsource, and there we have little direct competition when we're selling full back office outsource, so I'm very confident about the stability of our business there.

Where we see voracious competition is sort of in the middle. And that is sort of defined at the lower end of the regional community bank market. And, you know, with a couple of hundred clients, we're re-contracting several dozen every year. And every year we pick some clients up, especially right there in that middle, and every year we'll lose a client or two. I'm confident that we're, we will win more than we will lose, and sort of in the middle of that market. But that's where we see real competition.

OK.

Did that answer your question?

Yes, with regard though to the national bank clientele then, are there any significant contract expirations coming up in the next two quarters?

No.

OK. Thank you.

And we have a follow-up from with AG Edwards.

This is a question for Al. I know that you really don't like to do acquisitions and haven't for a long time, but I guess, if this market continues the way it is, and I think you had made some comment in your opening remarks about expecting pretty sort of, I won't say dire, but challenge and not a lot of hope I guess in the near-term maybe. There are a lot of shops building technologies for trading straight through processing, what have you, that I would suspect won't make it on their own if this goes on, and I'm curious about your thoughts on if you see a neat piece of technology, or, you know, five guys that have written a pretty good program, but can't quite seem to get it going in this environment, if that's something you'd be interested in buying?

Thank you. You are right, I don't like acquisitions. Four and five person firms, or even smaller than that, I would not necessarily term an acquisition. Because it doesn't necessarily require cultural change. And we're, what we are doing a bit of is finding some of those firms, and not buying them, but certainly making an investment in them. And we've done that a couple times and we're looking at it every time we do run across a firm like that.

And whether or not we end up then picking them up, that's based on what's best for SEI. So I think we're keeping all of our options open on that sort of thing. And because we are using a lot of firms to build out all the technology that we need to, that we need to continue to grow this business and to execute the plans that we're talking to you about.

OK. Could you just give a quick update on the Advent relationship, and the progress with where it stands now, and your thoughts on if there's anything that could be developed more fully? They've got a pretty good hedge fund product out there, you talk a lot about that market with your own operations, or they've also got some neat stuff for endowments and foundations, where you're also targeting.

Yes, our focus there will continue to be on their investment portfolio platform, and their trade order management platform. That's where the focus of our partnership with them is today, and I see that for the foreseeable future.

And as our different parts of business, because we do have some people that are aimed directly at foundations and endowments, they are scouring the entire front of people providing different parts of solutions and Advent's one of those, and so. But we don't have right now, there are, have no current plans to expand our relationship.

Great. Thank you.

And there are no further questions at this time. Please continue.

OK. So that concludes today. I'd like to make a few more comments as usual. Today we have earnings growth in times that have certainly been trying and we're going to try to keep that going through productivity improvements while we await more favorable business conditions.

But I can't stress enough that in the long run we are optimistic and confident. We like the markets we're in. Our recurring revenues, our strong cash flow, the market acceptance of our business solutions, and the operational leverage added to the continuous investment in the future in our portfolio of businesses, all serve to support our goal of creating long-term, sustainable growth in revenues and profits.

Now, once again, if there's anything that I'd like to leave you with it's a reminder we are in the business solutions business. Our clients do business with us because we are solving essential business problems for them in making their businesses better. This is a high-value-added proposition. It differentiates us from our competition. And we believe it will serve us well during times like these and the times that follow these.

Now if there are any other questions we'll entertain them now. And if not, we will bid you good day.

And it looks as if no one is queuing up to ask a question.

Thank you very much for your time and have a great day.

And this conference will be available for replay starting today at 9 o'clock p.m. and lasting until August 29th at midnight. You can access the AT&T Executive Playback Service from within the U.S. by dialing 800-475-6701 and entering the access code 644574. Again, that number is 800-475-6701 with the access code 644574. If you're dialing outside the U.S. you may dial 320-365-3844 with the access code 644574.

That does conclude our conference for today. Thanks again for your participation and also for using AT&T's Executive Teleconference Service. You may now disconnect.