SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
___ EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
----------------------------------
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 1-5240
-----------
THE DREYFUS CORPORATION
________________________________________________________________________________
(Exact name of registrant as specified in its charter)
New York 13-5673135
________________________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
200 Park Avenue, New York, N.Y. 10166
________________________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 922-6000
-----------------------------
Not Applicable
________________________________________________________________________________
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
----------- -----------
Indicate the number of shares outstanding of each of the Issuer's classes
of common stock, as of the latest practicable date.
Common Stock (par value $.10) 36,557,203 shares
- - ----------------------------- -----------------
(Class) (Outstanding at April 15, 1994)
FORM 10-Q
PAGE 2
THE DREYFUS CORPORATION AND SUBSIDIARY COMPANIES
INDEX
Page
____
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets--March 31, 1994
(Unaudited) and December 31, 1993. . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Income
(Unaudited)--Three Months Ended March 31, 1994 and March 31, 1993. . . 5
Condensed Consolidated Statement of Changes in Stockholders' Equity
(Unaudited)--Three Months Ended March 31, 1994 . . . . . . . . . . . . 6
Condensed Consolidated Statements of Cash Flows
(Unaudited)--Three Months Ended March 31, 1994 and March 31, 1993. . . 7
Notes to Condensed Consolidated Financial Statements
(Unaudited). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . . .15
Exhibit I--Computation of Earnings Per Share (Unaudited). . . . . . . . . .20
PART II--OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . .22
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
FORM 10-Q
PAGE 3
PART I--ITEM 1. FINANCIAL INFORMATION
THE DREYFUS CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(000'S OMITTED)
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993 (A)
-------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents - primarily shares
of sponsored money market investment
companies $115,684 $301,277
Receivables, including management, investment
advisory and administrative fees
of $21,556 in 1994 and $23,114 in 1993 65,173 50,114
Investments in marketable securities - Note 2 536,646 331,731
Other investments - at cost (fair value - $104,707 in
1994 and $175,862 in 1993) 104,638 133,923
Fixed assets - at cost, less accumulated depreciation
and amortization of $40,115 in 1994 and $37,585 in 1993 70,249 62,643
Other assets, including prepaid expenses and deferred charges of
$28,159 in 1994 and $20,026 in 1993 - Note 3 37,477 34,900
-------- --------
Total Assets $929,867 $914,588
======== ========
FORM 10-Q
PAGE 4
THE DREYFUS CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS - (Continued)
(000'S OMITTED)
March 31, December 31,
1994 1993
-------- --------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Short positions in marketable equity securities - Note 2 $4,184 $7,915
Due to brokers and dealers 570 386
Banking customer deposits (fair value - $25,477 in
1994 and $26,525 in 1993) 25,479 26,519
Taxes, including Federal income taxes of $7,075
in 1994 12,983 4,318
Accrued compensation and benefits 16,908 17,756
Sundry liabilities and accrued expenses 28,026 33,105
-------- --------
Total Liabilities 88,150 89,999
-------- --------
Stockholders' Equity--Notes 2, 4 and 5:
Common Stock - par value $.10 per share (50,000 shares
authorized), shares issued - 44,973 in 1994 and 1993 4,497 4,497
Additional paid-in capital 279,633 279,576
Retained earnings 749,665 731,188
-------- --------
1,033,795 1,015,261
Less:
Treasury stock - at cost, 8,416 shares in 1994 and
8,417 in 1993 190,522 190,524
Net unrealized loss on available for sale securities 1,408 -
Notes receivable for Common Stock issued 148 148
-------- --------
Total Stockholders' Equity 841,717 824,589
-------- --------
Contingencies and other matters - Notes 5, 6 and 7
Total Liabilities and Stockholders' Equity $929,867 $914,588
======== ========
See notes to condensed consolidated financial statements.
(A) The Condensed Consolidated Balance Sheet at December 31, 1993 has been summarized from
the audited financial statements at that date.
</TABLE>
<TABLE>
<CAPTION>
FORM 10-Q
PAGE 5
THE DREYFUS CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(000'S OMITTED EXCEPT PER SHARE DATA)
Three Months Ended
March 31,
---------------------------
1994 1993
-------- --------
<S> <C> <C>
Revenues:
Management, investment advisory
and administrative fees (net) $71,648 $74,109
Interest and dividends 5,582 6,149
Underwriting and other fees (net) 6,952 5,234
Net gains on investment transactions--Note 2 12,642 3,546
Other (net) 3,922 3,881
-------- --------
Total Revenues 100,746 92,919
-------- --------
Expenses:
Operating expenses 59,091 52,195
Interest expense 432 384
-------- --------
Total Expenses 59,523 52,579
-------- --------
Income before income taxes 41,223 40,340
Provision for income taxes 15,800 15,100
-------- --------
Net Income $25,423 $25,240
======== ========
Net Income per share of Common Stock $0.70 $0.68
======== ========
Cash dividends per share of Common
Stock $0.19 $0.17
======== ========
Weighted average number of common
shares outstanding during each
period 36,557 37,381
======== ========
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
FORM 10-Q
PAGE 6
THE DREYFUS CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
(000'S OMITTED)
Net unrealized
gain/(loss) Notes
Additional on available receivable Total
Common paid-in Retained Treasury for sale for Common Stockholders'
stock capital earnings stock securities Stock issued equity
---------- ---------- ------------ ---------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $4,497 $279,576 $731,188 ($190,524) - ($148) $824,589
Adjustment to beginning balance
for effect of change in
accounting principle 3,972 3,972
Net Income 25,423 25,423
Cash dividends on Common
Stock (6,946) (6,946)
Increase (decrease) in net
unrealized gain / (loss) on
available for sale securities (5,380) (5,380)
Issuance of Treasury stock 53 2 55
Other 4 4
---------- ---------- ------------ ---------- ------------- ------------ ------------
Balance at March 31, 1994 $4,497 $279,633 $749,665 ($190,522) ($1,408) ($148) $841,717
========== ========== ============ ========== ============= ============ ============
See notes to condensed consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
FORM 10-Q
PAGE 7
THE DREYFUS CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(000'S OMITTED)
Three Months Ended
March 31,
------------------------
1994 1993
-------- --------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $15,664 $18,577
-------- --------
INVESTING ACTIVITIES
Proceeds from maturities of held to maturity securities 28,380 -
Proceeds from sales of available for sale securities 43,992 -
Proceeds from sales and maturities of securities - 319,048
Purchase of securities - (179,726)
Purchase of available for sale securities (240,833) -
Purchase of held to maturity securities (17,710) -
Acquisitions of fixed assets (10,136) (1,250)
Other investing activities 2,490 (26,001)
-------- --------
Net Cash Provided By (Used In) Investing Activities (193,817) 112,071
-------- --------
FINANCING ACTIVITIES
Dividends paid (6,946) (6,373)
Purchase of treasury stock - (10,744)
Decrease in banking customer deposits (1,040) (2,802)
Other financing activities 546 1,643
-------- --------
Net Cash Used In Financing Activities (7,440) (18,276)
-------- --------
Increase (Decrease) In Cash And Cash Equivalents (185,593) 112,372
Cash and cash equivalents at beginning of year 301,277 216,360
-------- --------
Cash And Cash Equivalents At End Of Period $115,684 $328,732
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the three months ended
March 31, 1994 and 1993:
Income taxes $6,349 $6,399
Interest 334 301
See notes to condensed consolidated financial statements.
</TABLE>
FORM 10-Q
PAGE 8
THE DREYFUS CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1--NATURE OF BUSINESS:
The Dreyfus Corporation and Subsidiary Companies ("Corporation")
comprise a financial service organization whose business consists
primarily of providing investment management services as the investment
adviser, manager and distributor for sponsored investment companies and as
an investment adviser to other accounts. In addition, the Corporation is
the sub-investment adviser and/or administrator of several investment
companies sponsored by others.
As prescribed by the Securities and Exchange Commission, the
accompanying consolidated financial statements and footnotes have been
condensed and therefore do not contain all disclosures required by
generally accepted accounting principles for annual financial reporting
purposes. Reference should be made to the consolidated financial
statements and footnotes thereto included in the Corporation's 1993 Annual
Report on Form 10-K. Certain prior year amounts have been reclassified to
conform to the current year's presentation.
In the opinion of Management, the accompanying condensed consolidated
financial statements contain all adjustments (consisting of those of a
normal recurring nature) considered necessary to present fairly the
condensed consolidated financial position of the Corporation at March 31,
1994, the condensed consolidated results of its operations for the three
months ended March 31, 1994 and March 31, 1993, the condensed consolidated
changes in Stockholders' Equity and the condensed consolidated cash flows for
the three months ended March 31, 1994 and March 31, 1993.
The condensed consolidated results of operations of the Corporation for
the three months ended March 31, 1994 are not necessarily indicative of
the results to be expected for the full year. In evaluating the future
operating results of the Corporation, several factors should be
considered, including: inflation and interest rates, competition, the
effects of the economy, the international situation, public attitude
towards mutual funds, the securities market and government regulations.
NOTE 2--INVESTMENTS:
In May 1993, the Financial Accounting Standards Board issued Statement
No. 115 ("FAS No. 115"), "Accounting for Certain Investments in Debt and
Equity Securities." The Corporation adopted the provisions of the new
standard for investments held as of or acquired after January 1, 1994. In
accordance with the Statement, prior period financial statements have not
been restated to reflect the change in accounting principle.
Stockholders' Equity at January 1, 1994, was increased $4 million (net of
$2.1 million in deferred income taxes) to reflect the net unrealized gains
at that date on securities classified as "available for sale" (previously
carried at lower of aggregate cost or market or at amortized cost).
FORM 10-Q
PAGE 9
THE DREYFUS CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2--INVESTMENTS: - (continued)
It is the Corporation's policy (pursuant to FAS No. 115), excluding
Dreyfus Service Corporation ("Service Corporation"), to classify
marketable debt or equity securities (consisting of long or short
positions) into one of three portfolios: trading securities, held to
maturity securities or available for sale securities. Securities are
classified as trading securities and carried at fair value, with
unrealized gains and losses included in earnings, when the intent is to
hold the securities for the purpose of selling them in the near term,
generally with the objective of generating profits on short-term market
movements. Debt securities are classified as held to maturity securities
and carried at amortized cost when management has the positive intent and
ability to hold to maturity. Marketable debt and equity securities not
classified as either trading or held to maturity securities are classified
as available for sale securities and are carried at fair value. Aggregate
net unrealized gains or losses on the available for sale securities
portfolio are credited or charged to Stockholders' Equity (net of deferred
income tax or tax benefit). Net realized gains or losses resulting from
the sale of investments are recorded on the identified cost basis and
included in operations.
The Corporation engages in short selling which obligates the
Corporation to replace the security borrowed by purchasing the identical
security at its then current fair value.
Service Corporation, a wholly-owned broker-dealer subsidiary of the
Corporation, carries its securities at fair value in accordance with the
practice in the brokerage industry; unrealized gains or losses are
credited or charged to operations.
The following table summarizes the carrying values of the Corporation's
investments in marketable securities, by portfolio (000's omitted) at
March 31, 1994:
Trading securities . . . . . . . . . . . . . . . . . . . . . . $ 329
Available for sale securities. . . . . . . . . . . . . . . . . 404,165
Held to maturity securities. . . . . . . . . . . . . . . . . . 132,152
________
Investments in marketable securities . . . . . . . . . . . . $536,646
========
Trading securities were carried at fair value at March 31, 1994.
Realized and unrealized gains and losses on trading securities are
included in Net gains on investment transactions. Aggregate net
unrealized losses on such securities for the period ended March 31, 1994,
amounted to $2.1 million.
FORM 10-Q
PAGE 10
THE DREYFUS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2--INVESTMENTS: - (continued)
At March 31, 1994, the Corporation's available for sale portfolio had
an aggregate net unrealized loss of $1.4 million (net of estimated
deferred tax benefit of $0.8 million) which was charged to Stockholders'
Equity. Proceeds from the sale of securities classified as available for
sale resulted in gross realized gains and losses of $2.7 million and $1
million, respectively.
The following tables summarize contractual maturities and gross
unrealized gains and losses for the aggregate positions in the available
for sale and held to maturity securities portfolios:
<TABLE>
<CAPTION>
Contractual Maturities at March 31, 1994 (000's omitted):
Debt securities available for sale | Held to maturity securities
____________________________________|_______________________________
Book Value Fair Value | Book Value Fair Value
__________ __________ | __________ __________
<S> <C> <C> | <C> <C>
Within 1 Year . . . . . . . . . $ 750 $ 757 | $ 50,195 $ 50,402
|
After 1 through 5 Years . . . . 1,250 1,273 | 53,607 53,990
|
After 5 through 10 Years. . . . 196,639 192,454 | 24,079 23,891
|
After 10 Years. . . . . . . . . -- -- | 4,271 4,265
-------- --------- | --------- --------
Totals . . . . . . . . . . $198,639 $194,484 | $132,152 $132,548
======== ========= | ========= ========
</TABLE>
<TABLE>
<CAPTION>
Gross unrealized gains and losses at March 31, 1994 (000's omitted):
Available for sale securities (including short ||
positions in marketable equity securities) || Held to maturity securities
------------------------------------------------||-----------------------------------------
Gross unrealized | || Gross unrealized |
Cost ---------------- | Fair || Amortized ---------------- | Fair
(Proceeds) Gains Losses | Value || Cost Gains Losses | Value
---------- ----- ------ | ----- || --------- ----- ------ | -----
<S> <C> <C> <C> | <C> || <C> <C> <C> | <C>
U.S. Treasury & Agency . . . . $196,639 -- ($4,185)| $192,454 || $22,524 $ 40 ($236) | $ 22,328
Obligations of States and | || |
Political Subdivisions. . . . -- -- -- | -- || 108,603 779 (208) | 109,174
Other Debt Securities . . . . 2,000 $ 30 -- | 2,030 || 1,025 21 -- | 1,046
-------- ------ -------| --------|| ------- ------- ------- | -------
Total Debt Securities. . . . . 198,639 30 (4,185)| 194,484 || 132,152 840 (444) | 132,548
Equity Securities - held long 207,791 8,200 (6,310)| 209,681 || -- -- -- | --
-------- ------ -------| --------|| ------- ------- ------- | -------
| || |
Total Securities - held long . $406,430 $8,230 ($10,495)| $404,165 || $132,152 $ 840 ($444) | $132,548
| || |
Short positions in marketable | || |
equity securities . . . . . (4,283) 293 (194)| (4,184)|| -- -- -- | --
-------- ------ -------| --------|| ------- ------- ------- | -------
| || |
Totals. . . . . . . . . . . $402,147 $8,523 ($10,689)| $399,981 || $132,152 $ 840 ($444) | $132,548
======== ====== =========| ======== || ======== ======= ======= | ========
</TABLE>
FORM 10-Q
PAGE 11
THE DREYFUS CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2--INVESTMENTS: - (continued)
For the three months ended March 31, 1993, the Corporation recorded a
charge to operations of $5 million in connection with "other than
temporary" declines in the value of the Corporation's investment
portfolios. There were no "other than temporary" declines in the value of
the Corporation's investment portfolios charged to operations for the
three months ended March 31, 1994.
The Corporation is a party to financial instruments with off-balance
sheet risk. These financial instruments include futures contracts,
forward contracts and options written. The Corporation enters into these
transactions as part of its trading activities, as well as to reduce its
own exposure to market risk in connection with its positions in certain
sponsored index funds.
Off-balance sheet financial instruments involve varying degrees of market
and credit risk that exceed the amounts recognized on the balance sheet.
Market risk arises from changes in the market value of contractual positions
due to movements in underlying securities or indices. Credit risk relates to
the ability of the Corporation's counter-party to meet its settlement
obligations under the contract and generally is limited to the estimated
aggregate replacement cost of those contracts in a gain position and was not
material at March 31, 1994. The estimated fair values for such financial
instruments at March 31, 1994 are summarized below (000's omitted):
Contract or
Notional Fair
Principal Value of
Amount Contracts
___________ __________
Long Positions:
S&P Index Futures, June 1994 . . . . . . . . . . . . $ 8,839 $ 96
U.S. Treasury Futures Contracts, June 1994 . . . . . 32,191 (316)
Foreign Government Futures Contracts, June 1994. . . 26,177 97
Short Positions:
Japanese Yen Forward Contracts, June 1994. . . . . . $10,919 $(124)
Deutsche Mark Forward Contract, June 1994. . . . . . 9,804 (143)
S&P Index Option Contracts, June 1994. . . . . . . . 95 71
FORM 10-Q
PAGE 12
THE DREYFUS CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3--DEFERRED SALES COMMISSIONS:
Certain sales commissions paid by the Corporation to broker-dealers are
capitalized by the Corporation and amortized to operations. At March 31,
1994, deferred sales commissions included in "Other assets", amounted to
$17.3 million (net of accumulated amortization of $2 million).
Amortization of deferred sales commissions (included in "Underwriting and
other fees") for the three months ended March 31, 1994 and March 31, 1993
amounted to $0.7 million and $48,000, respectively.
NOTE 4--STOCKHOLDERS' EQUITY:
At March 31, 1994, Additional paid-in capital and Retained earnings were
not available for payment of dividends to the extent of approximately
$196.9 million, substantially representing the cost of treasury stock and
required capital for the Corporation's regulated subsidiaries.
Pursuant to an Agreement and Plan of Merger (the "Merger Agreement")
(see Note 6), the Corporation may not declare dividends, other than the
regular quarterly dividend of $.19 per share, and may not purchase any
additional treasury shares.
On April 13, 1994, the Board of Directors of the Corporation declared a
second quarter dividend of $.19 per share, payable on May 11, 1994 to
stockholders of record at the close of business on May 2, 1994.
NOTE 5--INCENTIVE STOCK OPTION PLAN:
A full description of the Incentive Stock Option Plan (the "Plan") is
contained in the Corporation's 1993 Annual Report on Form 10-K. The
Plan expired in 1992, and no new Options may be granted under the Plan,
although any existing unexercised Options will continue in accordance with
their respective terms. Book Value Shares must be acquired from and sold
back to the Corporation at the book value (as defined in the Plan) of the
Corporation's Common Stock. If the Corporation had been obligated to
repurchase the shares issued and outstanding under the Plan and also the
shares related to exercisable Options under the Plan at March 31, 1994,
the net amount payable would have been approximately $3.5 million.
FORM 10-Q
PAGE 13
THE DREYFUS CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6--MERGER WITH MELLON BANK CORPORATION:
On December 5, 1993, the Corporation entered into a Merger Agreement
providing for the merger of the Corporation with a subsidiary of Mellon
Bank Corporation ("Mellon"). Under the terms of the agreement, the
Corporation's stockholders will be entitled to receive 0.88017 shares of
Mellon Common Stock for each share of the Corporation's Common Stock, in a
tax-free exchange. Following the merger, it is planned that the
Corporation will be a direct subsidiary of Mellon Bank, N.A. Closing of
the merger is subject to a number of contingencies, including the receipt
of certain regulatory approvals, the approvals of the stockholders of the
Corporation and Mellon, and approvals of the Boards of Directors and
shareholders of the mutual funds advised or administered by the
Corporation. The merger is expected to occur in mid-1994, but could occur
later. The Merger Agreement provides for the Corporation to pay Mellon
$50 million should the Corporation, among other matters, engage in
certain business combination transactions specified in the agreement, with
any person other than Mellon, or under certain other defined
circumstances. Costs incurred in connection with the merger, including
payments related to the Contingent Benefit Plan, will be charged against
operations of the merged entities. A description of the Contingent
Benefit Plan is contained in the Corporation's 1993 Annual Report on Form
10-K.
NOTE 7--LITIGATION:
A) Class Actions
_____________
Subsequent to the announcement of the proposed merger with Mellon (see
Note 6), public shareholders of the Corporation commenced six purported
class action suits in the Supreme Court of the State of New York, County
of New York, naming the Corporation, Mellon and the individual directors
of the Corporation as defendants, with respect to the transactions
contemplated by the Merger Agreement with Mellon. The Corporation
believes that these complaints lack merit and intends to defend them
vigorously.
B) SEC Application
_______________
On December 22, 1993, six shareholders of mutual funds of which the
Corporation is the adviser ("Dreyfus-managed mutual funds") filed an
application with the Securities and Exchange Commission (the "SEC")
for a statutory determination that the "non-interested" directors of the
individual Dreyfus-managed mutual funds are "interested" directors within
the meaning of the Investment Company Act of 1940 (the "1940 Act"),
thereby prohibiting them from voting on each of the fund's advisory
contracts and other related matters in connection with the merger with
Mellon (the "Application"). The non-interested directors opposed
the Application. By letter dated April 1, 1994, the SEC advised counsel
for the applicants that the SEC had determined not to conduct the proceeding
requested by the applicants.
FORM 10-Q
PAGE 14
THE DREYFUS CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7--LITIGATION: -- (continued)
C) Other Action
____________
On March 23, 1994, two shareholders of Dreyfus Liquid Assets, Inc.
("Dreyfus Liquid Assets") and Dreyfus Growth Opportunity Fund, Inc.
("Dreyfus Growth") filed a complaint in the Supreme Court of the State of
New York, County of Queens, naming the Corporation and Service Corporation
as defendants, and Dreyfus Liquid Assets and Dreyfus Growth, individually,
and as representatives of the management investment companies for which
the Corporation serves as investment adviser under the 1940 Act, as
nominal defendants. The complaint is brought derivatively on behalf of
Dreyfus Liquid Assets and Dreyfus Growth, individually, and as
representatives of the Dreyfus family of funds.
In the complaint, the plaintiffs allege, among other things, that the
Corporation and Service Corporation violated their fiduciary duties by
receiving pecuniary benefits from the sale of their "trust offices" in
connection with the Merger (see Note 6). The plaintiffs further allege
that the Corporation and Service Corporation breached their respective
fiduciary duties by charging the Dreyfus family of funds excessive fees of
at least $55 million, in order to maximize profits earned from the sale of
the "trust offices," and by acting solely to maximize their own profits
through the proposed sale of the "trust offices" to Mellon, in violation
of Section 15(f) of the 1940 Act. Finally, the plaintiffs allege that the
Merger will impose an "unfair burden" on the Dreyfus family of funds. On
April 12, 1994, the defendants and nominal defendants removed the action
to the federal district court for the Eastern District of New York.
The action seeks, among other things, to enjoin the Corporation and
Service Corporation from selling the profits from the "trust offices" to
Mellon, or, in the event that the Merger is consummated, a rescission of
such sale or an accounting and disgorgement of all profits earned by the
Corporation and Service Corporation as a result of the sale of the "trust
offices", unspecified compensatory damages, costs and disbursements.
Defendants' time to move, answer or otherwise respond to the complaint
has not yet expired. The Corporation believes that the complaint lacks
merit and intends to defend the suit vigorously.
FORM 10-Q
PAGE 15
PART I--ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition, Liquidity and Capital Resources
____________________________________________________
For the three months ended March 31, 1994, the Stockholders' Equity of
the Corporation increased from $824.6 million to $841.7 million, primarily
attributable to earnings applicable to investment management services net
of dividends paid to stockholders and an aggregate net unrealized loss on
the available for sale securities portfolio (see Note 2 to the condensed
consolidated financial statements).
The Corporation has generally maintained a substantial degree of
liquidity and believes that cash and cash flow from operations are
adequate to meet current and potential business operating needs. In
addition to the liquidity provided by cash and cash equivalents of $115.7
million at March 31, 1994, the Corporation maintains a significant
investment in marketable securities. The resources of the Corporation
have been utilized to sponsor, promote and market shares of the Dreyfus
Group of Mutual Funds and to sponsor and promote new business activities.
At March 31, 1994, the Corporation had investments in marketable
securities and certain other investments, consisting of limited
partnerships engaged in securities trading, with an aggregate cost and
fair value of $632.1 million and $629.3 million, respectively. In
determining the appropriate carrying amounts of these investments, the
Corporation considered whether any declines in market value below carrying
values were "other than temporary" (see Note 2 to condensed consolidated
financial statements).
Assets Managed, Advised or Administered
_______________________________________
The following table sets forth certain information with respect to net
assets managed, advised or administered by the Corporation by fund
category, at the dates shown (in billions):
March 31, December 31,
1994 1993
--------- ------------
Taxable money market funds . . . . . . . . . . . $28.8 $31.2
Tax-exempt bond funds. . . . . . . . . . . . . . 19.5 21.3
Tax-exempt money market funds. . . . . . . . . . 8.4 7.6
Equity funds . . . . . . . . . . . . . . . . . . 8.3 8.3
Fixed income funds . . . . . . . . . . . . . . . 4.6 4.8
Funds jointly advised/administered . . . . . . . 3.1 3.2
Separately advised accounts. . . . . . . . . . . 1.1 1.2
----- -----
Total. . . . . . . . . . . . . . . . . . . . . . $73.8 $77.6
===== =====
FORM 10-Q
PAGE 16
PART I--ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (continued)
Results of Operations
_____________________
The following table sets forth certain information with respect to the
Corporation's fee revenue for the periods shown (000's omitted):
<TABLE>
<CAPTION>
Three Months
Ended March 31,
_____________________
1994 1993
---- ----
<S> <C> <C>
Management, investment advisory and
administrative fees, net of fees waived*. . . . . . . . . . . . . . . . $72,739 $76,525
Less: Fund expense reimbursements . . . . . . . . . . . . . . . . . . . . (1,091) (2,416)
Management, investment advisory and ------- -------
administrative fees (net) . . . . . . . . . . . . . . . . . . . . . . . $71,648 $74,109
======= =======
* Amount of fees waived. . . . . . . . . . . . . . . . . . . . . . . . . $12,985 $11,942
======= =======
Management, investment advisory and
administrative fees, by fund category (net):
Tax-exempt bond funds . . . . . . . . . . . . . . . . . . . . . . . . . $26,862 $22,998
Taxable money market funds. . . . . . . . . . . . . . . . . . . . . . . 20,695 29,363
Equity funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,475 10,049
Fixed income funds. . . . . . . . . . . . . . . . . . . . . . . . . . . 5,257 4,381
Tax-exempt money market funds . . . . . . . . . . . . . . . . . . . . . 4,761 4,692
Separately advised accounts . . . . . . . . . . . . . . . . . . . . . . 847 1,320
Funds jointly advised/administered. . . . . . . . . . . . . . . . . . . 751 1,306
------- -------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $71,648 $74,109
======= =======
</TABLE>
The presentation of fee revenue for the three months ended March 31,
1993 has been reclassified to conform to the current period's
presentation.
Revenues of the Corporation are primarily fees from mutual funds
sponsored by the Corporation. These fees are at various rates and are
based on the average net assets of each respective fund. The decrease in
Management, investment advisory and administrative fees during 1994, as
shown in the preceding table, was principally due to a decrease in the
average net assets of sponsored taxable money market funds between the
periods. The decline in average net assets of sponsored taxable money
market funds was partially offset by an increase in assets under
management in sponsored tax-exempt bond, equity and fixed income funds.
Management fee rates charged to the aforementioned funds are generally
higher than the rates charged to taxable money market funds.
From time to time, for competitive reasons, the Corporation agrees to
waive certain management fees and/or reimburse certain fund expenses,
either for a specified or unspecified period of time, to increase the
fund's rate of return to investors and thereby promote the growth of fund
assets. In the future, the Corporation may continue to follow such
practices; however, it is not possible to predict what effect, if any, the
imposition of management fees and/or the discontinuance of fund expense
reimbursements may have on the future level of certain fund assets under
management. Furthermore, the Corporation presently is unable to determine
to what extent, if any, it may impose management fees on funds where fee
waivers presently exist, or to what extent fund expense reimbursements may
be reduced in the future.
FORM 10-Q
PAGE 17
PART I--ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (continued)
First Quarter 1994 Compared to the First Quarter 1993
_____________________________________________________
The average net assets of sponsored funds decreased $8.2 billion, from
an average of $81.8 billion during the first quarter of 1993 to an average
of $73.6 billion during the first quarter of 1994. This decrease resulted
principally from the decline in the average net assets of sponsored
taxable money market funds ($13.1 billion) partially offset by increases
in the average net assets of sponsored tax-exempt bond funds ($2.2
billion), equity funds ($1.6 billion) and fixed income funds ($0.6
billion).
Management fees waived increased $1 million during the first quarter of
1994 as compared to the similar period in 1993, primarily attributable to
certain sponsored tax-exempt money market funds.
Fund expense reimbursements (netted against management fee revenues)
decreased $1.3 million during the first three months of 1994 as compared
to 1993, primarily attributable to certain tax-exempt bond and taxable money
market funds.
Interest and dividends decreased from $6.1 million during the first
quarter of 1993 to $5.6 million during the first quarter of 1994,
primarily as a result of increased amounts invested in limited
partnerships (included in "Other investments" in the condensed
consolidated balance sheet) accounted for at cost.
Underwriting and other fees increased $1.7 million during the first
three months of 1994 as compared to the similar period in 1993, primarily
due to an increase in the amount of service fees retained under various
service plans adopted pursuant to Rule 12b-1 under the Investment Company
Act of 1940 ($2.5 million) and fees earned in connection with the sale of
variable annuity products ($1.4 million). These increases were partially
offset by a decrease in underwriting commissions ($1.6 million), resulting
from a decrease in the sale of funds sold with an up-front sales charge
and an increase in amortization of deferred sales commissions ($0.7
million) paid to broker-dealers in connection with the sale of funds sold
with a contingent deferred sales charge (see Note 3 to the condensed
consolidated financial statements.)
Net gains on investment transactions increased $9.1 million, from $3.5
million during the first quarter of 1993 to $12.6 million during the first
quarter of 1994, principally due to the liquidation of certain Investments
in limited partnerships accounted for at cost which resulted in net gains
of $13.4 million.
Operating expenses increased during the three months ended March 31,
1994 as compared to the corresponding period in 1993, primarily
attributable to an increase in salaries, employee benefits and occupancy
and communication costs.
The increase in the Corporation's effective tax rate from 37.4% in the
first quarter of 1993 to 38.3% in the first quarter of 1994, was primarily
due to an increase in the Federal statutory rate from 34% to 35%
retroactive to the beginning of 1993, effective July 1, 1993 and decrease
in the proportion of tax-exempt interest and dividend income to total pre-
tax income.
FORM 10-Q
PAGE 18
PART I--ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (continued)
Matters Relating to Competition
_______________________________
The mutual fund industry has grown dramatically over the past several
years and is highly competitive. Total assets managed by the industry
grew from approximately $810 billion at December 31, 1988 to over $2.1
trillion at February 28, 1994. There are presently almost 600 mutual fund
management companies in the United States, managing over 4,600 mutual
funds of varying sizes and investment policies. The Corporation and the
mutual fund industry are in competition with insurance companies, banking
organizations, securities dealers and other financial institutions that
provide investors with competing mutual funds and alternatives to mutual
funds. This competition has increased over the past several years, in
part, as a result of a number of rulings and interpretations issued by
Federal bank regulatory agencies that have expanded significantly the
range of mutual fund activities in which banks and bank holding companies
may engage. Competition is based upon investment performance in terms of
attaining the stated objectives of particular funds, advertising and sales
promotional efforts, available distribution channels (such as banks and
broker dealers) and the type and quality of services offered to investors.
Recent Mutual Fund Developments
_______________________________
Effective January 1, 1994, each of Dreyfus 100% U.S. Treasury Long Term
Fund, Dreyfus 100% U.S. Treasury Intermediate Term Fund, Dreyfus 100% U.S.
Treasury Money Market Fund, Dreyfus 100% U.S. Treasury Short Term Fund and
Dreyfus Investors GNMA Fund was reorganized from a Delaware limited
partnership to a Massachusetts business trust. Also effective January 1,
1994, Dreyfus Strategic World Investing, L.P. changed its name to Dreyfus
Global Growth, L.P. (A Strategic Fund).
During the first quarter of 1994, the Registration Statement for
Dreyfus Global Bond Fund, Inc. was declared effective and the fund
commenced operations. The fund's goal is total return consisting of
capital appreciation and income.
Effective March 15, 1994, Dreyfus BASIC Municipal Money Market Fund,
Inc. began operating under the name Dreyfus BASIC Municipal Fund and
registered two new series; Dreyfus BASIC Intermediate Municipal Bond Fund
and Dreyfus BASIC Municipal Bond Fund. The fund's post-effective
amendment has been declared effective by the SEC, but the two new series
have not yet commenced operations. The fund offers a third series,
Dreyfus BASIC Municipal Money Market Fund, which commenced operations in
1991.
The Corporation is continuing to consider the development of additional
funds to serve the diverse investment interests of various segments of the
public.
FORM 10-Q
PAGE 19
PART I--ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- (continued)
Consumer Financial Services
___________________________
The Dreyfus Security Savings Bank, F.S.B. (the "Savings Bank"), which
is an indirect subsidiary of the Corporation, is a Federally-chartered
savings bank and a member of the Federal Deposit Insurance Corporation.
The Savings Bank offers various bank products and services (including but
not limited to, certificates of deposit, residential mortgage loans and
secured personal loans) to investors in the mutual funds sponsored by the
Corporation and to the general public. The Savings Bank maintains its
principal office in Paramus, New Jersey, and has a branch office in San
Francisco, California. It also has received conditional approval from the
Office of Thrift Supervision to open additional branch offices in six
other states.
The Corporation has entered into a stock purchase agreement dated as of
March 31, 1994 for the sale of Dreyfus Consumer Life Insurance Company to
a third party for total consideration equalling approximately $10.2
million, subject to certain adjustments. The sale, which will be
conditioned, among other things, on regulatory approval by the Connecticut
insurance commissioner, is currently expected to occur on or about May 31,
1994. The sale is not expected to have a material impact on the
Corporation's current or future results of operations.
FORM 10-Q
PAGE 20
THE DREYFUS CORPORATION AND SUBSIDIARY COMPANIES
EXHIBIT I -- COMPUTATION OF EARNINGS PER SHARE (UNAUDITED)
(000's omitted except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1994 1993
------- -------
<S> <C> <C>
Basis for computation of earnings per
common share and primary earnings
per common share:
Net Income (1) $25,423 $25,240
Dividend equivalents and related
interest on unexercised incentive
stock options (net of taxes) 45 45
------- -------
Net Income as adjusted (2) $25,468 $25,285
======= =======
Weighted average number of shares
outstanding:
Weighted average number of shares
outstanding during the
period (3) 36,557 37,381
Net effect of dilutive stock options-based
on the treasury stock method using
the average value 641 483
------- -------
Total (4) 37,198 37,864
======= =======
EARNINGS PER SHARE:
No Dilution (1)/(3)=(5) $0.70 $0.68
======= =======
Primary (a) (2)/(4)=(6) $0.68 $0.67
======= =======
(Continued on following page)
FORM 10-Q
PAGE 21
THE DREYFUS CORPORATION AND SUBSIDIARY COMPANIES
EXHIBIT I -- COMPUTATION OF EARNINGS PER SHARE (UNAUDITED)
(000's omitted except per share data)
Three Months Ended
March 31,
--------------------------
1994 1993
------- -------
Basis for computation of earnings per
common share assuming full dilution:
Net Income $25,423 $25,240
Dividend equivalents and related
interest on unexercised incentive
stock options (net of taxes) 45 45
------- -------
Net Income as adjusted (7) $25,468 $25,285
======= =======
Weighted average number of shares
outstanding:
Weighted average number of shares
outstanding during the period 36,557 37,381
Net effect of dilutive stock options - based
on the treasury stock method using the
higher of the period end or average value 661 485
------- -------
Total (8) 37,218 37,866
======= =======
Fully Diluted Earnings Per
Share (a): (7)/(8)=(9) $0.68 $0.67
======= =======
Note: (a) The earnings per share data shown on lines 6 and 9 above are not presented in the
condensed consolidated statements of income included on page 5 of this report on
Form 10-Q since the dilution from the earnings per share amounts presented in
such statements is less than 3%.
</TABLE>
FORM 10-Q
PAGE 22
PART II--OTHER INFORMATION
ITEM 6--EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(11) Computation of earnings per share - Exhibit I to Part I
of this Report.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed covering events occurring
during the first quarter of 1994.
FORM 10-Q
PAGE 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 27, 1994 THE DREYFUS CORPORATION
-------------- -----------------------
(Registrant)
/s/ Daniel Maclean
----------------------------------------------
Daniel Maclean
General Counsel and Vice President
Date: April 27, 1994 /s/ Maurice Bendrihem
-------------- ----------------------------------------------
Maurice Bendrihem
Controller and Chief Accounting Officer
