SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended July 31, 1994 Commission File No. 1-8100
EATON VANCE CORP.
(Exact name of registrant as specified in its charter)
MARYLAND 04-2718215
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
(Address of principal executive offices) (Zip Code)
(617) 482-8260
Registrant's telephone number, including area code
NONE
(Former name, address and former fiscal year, if changed since last record)
Shares outstanding as of July 31, 1994:
Voting common stock - 19,360 shares
Non-Voting Common Stock - 9,094,537 shares
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
Page 1 of 21 pages
PART I
FINANCIAL INFORMATION
-2-
<TABLE>
Consolidated Balance Sheets (unaudited)
<CAPTION>
ASSETS July 31, October 31,
1994 1993
(all figures in thousands)
CURRENT ASSETS:
<S> <C> <C>
Cash and equivalents $ 13,510 $ 12,414
Receivable for investment company shares sold 782 3,007
Investment adviser fees and other receivables 2,641 2,923
Other current assets 1,531 1,390
Total current assets 18,464 19,734
INVESTORS BANK & TRUST COMPANY ASSETS:
Cash and equivalents 4,880 16,241
Investment securities (market value $74,444 and
$82,404, respectively) 75,391 80,206
Loans, less allowance for possible loan losses 12,913 10,221
Accrued interest and fees receivable 7,949 5,668
Equipment and leasehold improvements, net 3,321 3,010
Other assets 4,745 4,838
Total bank assets 109,199 120,184
OTHER ASSETS:
Investments -
Real estate 21,904 22,448
VenturesTrident, L.P. and
VenturesTrident II, L.P. 2,732 6,924
Investment companies (market value $5,427 and
$5,025, respectively) 3,880 3,377
Other investments 3,879 4,154
Notes receivable & receivables from affiliates 3,189 3,381
Deferred sales commissions 263,628 240,017
Property and equipment, net 3,786 3,329
Goodwill 1,914 1,999
Total other assets 304,912 285,629
Total assets $432,575 $425,547
See notes to consolidated financial statements
</TABLE>
-3-
<TABLE>
Consolidated Balance Sheets (unaudited) (continued)
<CAPTION>
LIABILITIES AND July 31, October 31,
SHAREHOLDERS' 1994 1993
EQUITY (all figures in thousands)
CURRENT LIABILITIES:
<S> <C> <C>
Payable for investment company shares purchased $ 796 $ 3,073
Accrued compensation 6,294 8,626
Accounts payable and accrued expenses 4,986 4,046
Accrued income taxes 6,679 1,443
Dividend payable 1,371 1,285
Other current liabilities 646 603
Total current liabilities 20,772 19,076
INVESTORS BANK & TRUST COMPANY LIABILITIES:
Demand and time deposits 90,636 104,851
Other 4,159 3,624
Total bank liabilities 94,795 108,475
OTHER LIABILITIES:
6.22% Senior note due 2004 50,000 -
Note payable to unaffiliated banks 4,850 42,300
Mortgage notes payable 16,505 16,759
10% subordinated debentures - 14,169
Minority interest in consolidated subsidiaries 2,877 2,340
Total other liabilities 74,232 75,568
Deferred income taxes 83,607 77,128
Commitments - -
SHAREHOLDERS' EQUITY:
Common stock, par value $.0625 per share-
Authorized, 80,000 shares, Issued, 19,360 shares 1 1
Non-voting common stock, par value $.0625 per
share-Authorized, 11,920,000 shares, Issued
9,094,537 and 9,134,218 shares, respectively 570 571
Additional paid-in capital 49,949 52,845
Notes receivable from stock sales (2,469) (1,804)
Retained earnings 111,118 93,687
Total shareholders' equity 159,169 145,300
Total liabilities and shareholders' equity $432,575 $425,547
See notes to consolidated financial statements
</TABLE>
-4-
<TABLE>
Consolidated Statements of Income (unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
1994 1993 1994 1993
(in thousands, except per share figures)
INCOME:
<S> <C> <C> <C> <C>
Investment adviser &
administration fees $21,276 $19,142 $64,399 $54,877
Distribution income 20,087 18,558 59,632 50,278
Bank fee income 11,214 8,201 31,021 23,868
Bank net interest income 1,160 1,265 3,502 3,283
Real estate, oil and gas
& other income 1,077 1,378 3,621 3,829
Total income 54,814 48,544 162,175 136,135
EXPENSES:
Compensation of officers and
employees 15,268 15,279 49,635 44,411
Amortization of deferred
sales commissions 13,797 10,929 39,345 29,709
Other expenses 11,704 9,822 33,205 26,913
Total expenses 40,769 36,030 122,185 101,033
Operating income 14,045 12,514 39,990 35,102
OTHER INCOME (EXPENSE):
Interest earned 144 147 596 548
Share of partnership
income (loss), etc. (1,341) 6,164 (1,447) 7,009
Interest expense (1,321) (1,036) (4,102) (3,746)
Income before income taxes 11,527 17,789 35,037 38,913
See notes to consolidated financial statements
</TABLE>
-5-
<TABLE>
Consolidated Statements of Income (unaudited) (continued)
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
1994 1993 1994 1993
(in thousands, except per share figures)
<S> <C> <C> <C> <C>
Income taxes:
Currently payable-
Federal 4,442 177 5,149 949
State 1,772 21 1,910 290
Deferred-
Federal ( 405) 5,254 6,672 11,783
State ( 439) 1,055 1,107 2,501
Total income taxes 5,370 6,507 14,838 15,523
Net income before cumulative effect
of change in accounting for
income taxes 6,157 11,282 20,199 23,390
Cumulative effect of change in
accounting for income taxes - - 1,300 -
Net income $ 6,157 $11,282 $21,499 $23,390
Earnings per share before cumulative
effect of change in accounting for
income taxes $0.65 $1.19 $2.11 $2.72
Cumulative effect of change in
accounting for income taxes
per share - - $0.14 -
Earnings per share $0.65 $1.19 $2.25 $2.72
Dividends declared, per share $0.15 $0.12 $0.44 $0.35
Average common shares outstanding 9,464 9,496 9,536 8,616
See notes to consolidated financial statements
</TABLE>
-6-
<TABLE>
Consolidated Statements of Cash Flows (unaudited)
<CAPTION>
Nine Months ended
July 31,
1994 1993
(in thousands)
<S> <C> <C>
Cash and equivalents (including IB&T),
Beginning of period................................. $ 28,655 $ 9,535
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................... $ 21,499 $ 23,390
Adjustments to reconcile net income to net cash
provided by (used for) operating activities--
Share of net (income) loss of partnerships........... 703 (7,336)
Deferred income taxes................................ 7,779 14,537
Cumulative effect of change in accounting principle.. (1,300) -
Amortization of deferred sales commissions........... 39,144 29,389
Depreciation and other amortization.................. 3,739 3,090
Payments of sales commissions........................ (80,635) (100,158)
Capitalized sales charges received................... 18,112 13,017
Change in refundable income taxes.................... - 4,030
Changes in other assets and liabilities.............. 3,160 (4,629)
Net cash provided by (used for) operating activities $ 12,201 $(24,670)
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from (investment in) partnerships...... $ ( 252) $ (75)
Additions to real estate, property and equipment..... (2,548) (2,409)
Net (increase) decrease in notes and other
receivables.......................................... (473) 349
Net (increase) decrease in investment companies and
other investments................................... (228) 142
Proceeds from sales and maturities of investments.... 6,680 1,667
Purchases of investment securities................... - (25,726)
Decrease in federal funds sold....................... - 16,000
Net increase in loans................................ (2,692) (3,208)
Net cash provided by investing activities.......... $ 487 $(13,260)
See notes to consolidated financial statements
</TABLE>
-7-
<TABLE>
Consolidated Statements of Cash Flows (unaudited) (continued)
<CAPTION>
Nine Months ended
July 31,
1994 1993
(in thousands)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable.......................... $119,150 $ 68,900
Payments on notes payable............................ (106,841) (87,037)
Payment of 10% subordinated debentures............... (14,169)
Proceeds from the issuance of non-voting common stock 2,918 47,125
Dividends paid....................................... (3,982) (2,773)
Repurchase of non-voting common stock................ (5,814) (791)
Changes in demand and time deposits.................. (14,215) 27,013
Net cash provided by (used for) financing activities $(22,953) $ 52,437
Net increase (decrease) in cash and equivalents..... $(10,265) $ 14,507
Cash and equivalents (including IB&T), end of period. $ 18,390 $ 24,042
NONCASH INVESTING ACTIVITY:
Distribution of securities from gold mining
partnership......................................... $ 3,815 $ -
SUPPLEMENTAL INFORMATION:
Interest paid........................................ $ 3,684 $ 4,035
Income taxes paid (refunded)......................... $ 2,468 $ (2,803)
See notes to consolidated financial statements
</TABLE>
-8-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) July 31, 1994
(1) Consolidating Financial Statements
The components of the July 31, 1994 Eaton Vance Corp. consolidated balance
sheet and statement of income by major business segment follow:
<TABLE>
BALANCE SHEET July 31, 1994
<CAPTION>
ASSETS Investment Real Mining Consolidated
Management Banking Estate Oil&Gas Eliminations Total
-------------------------(in thousands)-------------------------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 14,617 $ 442 $ 183 ($ 1,732) $ 13,510
Receivables and other current
assets 4,448 838 565 ( 897) 4,954
Total current assets 19,065 1,280 748 ( 2,629) 18,464
IB&T assets 109,199 109,199
OTHER ASSETS:
Investments-
Real estate 21,904 21,904
VenturesTrident,L.P. &
VenturesTrident II, L.P. 2,732 2,732
Investments in and advances to
Northeast Properties, Inc. 5,718 ( 5,718)
Investors Bank & Trust Co. 9,795 ( 9,795)
Marblehead Energy Corp. 188 ( 188)
Mining related subsidiaries 6,481 ( 6,481)
Investment companies 3,880 3,880
Other investments 1,791 2,088 3,879
Notes and other
receivables 320 2,869 3,189
Deferred sales commissions 263,295 333 263,628
Property & equipment 3,708 1 77 3,786
Goodwill 1,904 10 1,914
Intercompany receivable
(payable) 2,693 ( 204) ( 2,489)
Total assets $ 315,825 $ 109,199 $ 26,541 $ 8,310 ($27,300) $ 432,575
</TABLE>
-9-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) July 31, 1994
Consolidating Financial Statements (Continued)
<TABLE>
<CAPTION>
BALANCE SHEET (continued)
LIABILITIES AND SHAREHOLDER'S EQUITY July 31, 1994
Investment Real Mining Consolidated
Management Banking Estate Oil&Gas Eliminations Total
-------------------------(in thousands)----------------------------
CURRENT LIABILITIES:
<S> <C> <C> <C> <C> <C> <C>
Payable for investment company
shares purchased $ 796 $ 796
Accrued compensation 6,294 6,294
Accounts payable and
accrued expenses 4,783 155 48 4,986
Accrued income taxes 5,578 ( 7) 1,108 6,679
Dividend payable 1,371 1,371
Other current liabilities 1,207 336 ( 897) 646
Total current liabilities 20,029 484 1,156 ( 897) 20,772
IB&T liabilities 96,527 ( 1,732) 94,795
OTHER LIABILITIES:
6.22% Senior Note due
March 1, 2004 50,000 50,000
Note payable to
unaffiliated banks 4,850 4,850
Mortgage notes payable 16,505 16,505
Minority interest in
consolidated subsidiary 2,877 2,877
Total other liabilities 54,850 16,505 2,877 74,232
Deferred income taxes 82,254 1,142 211 83,607
Total shareholders' equity 158,692 12,672 8,410 6,943 ( 27,548) 159,169
Total liabilities &
shareholders' equity $315,825 $109,199 $26,541 $8,310 ($27,300) $432,575
-10-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) July 31, 1994
Consolidating Financial Statements (Continued)
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME
July 31, 1994
Investment Real Mining Consolidated
Management Banking Estate Oil&Gas Eliminations Total
--------------------------(in thousands)--------------------------
INCOME:
<S> <C> <C> <C> <C> <C> <C>
Investment adviser and
administration fees $ 62,786 $ 1,613 $ 64,399
Distribution income 59,632 59,632
Bank fee income 31,437 ( 416) 31,021
Bank net interest income 3,434 68 3,502
Real estate, oil & gas and
other income 688 3,943 137 ( 1,147) 3,621
Total income 123,106 34,871 3,943 1,750 ( 1,495) 162,175
EXPENSES:
Compensation of officers
and employees 29,099 19,940 448 148 49,635
Amortization of deferred
sales commissions 39,345 39,345
Other expenses 18,783 11,237 2,661 1,536 ( 1,012) 33,205
Total expenses 87,227 31,177 3,109 1,684 ( 1,012) 122,185
Operating income (loss) 35,879 3,694 834 66 ( 483) 39,990
OTHER INCOME (EXPENSE):
Interest earned 418 45 201 ( 68) 596
Share of partnership
income (loss), etc. 78 ( 75) ( 1,450) ( 1,447)
Interest expense ( 3,002) ( 1,100) ( 4,102)
Income before income taxes 33,373 3,694 ( 296) ( 1,183) ( 551) 35,037
</TABLE>
-11-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) July 31, 1994
Consolidating Financial Statements (Continued)
<TABLE>
<CAPTION>
CONSOLIDATING STATEMENT OF INCOME (continued) Nine months ended
July 31, 1994
Investment Real Mining Consolidated
Management Banking Estate Oil&Gas Eliminations Total
-------------------------(in thousands)-----------------------------
<S> <C> <C> <C> <C> <C> <C>
Income taxes 13,756 1,274 ( 120) ( 72) 14,838
Net income (loss), before
cumulative effect of
change in accounting for
income taxes 19,617 2,420 ( 176) ( 1,111) ( 551) 20,199
Cumulative effect of
change in accounting for
income taxes 1,374 129 ( 203) 1,300
Net income (loss) $ 20,991 $ 2,420 ($ 47) ($ 1,314) ($ 551) $ 21,499
</TABLE>
-12-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) July 31, 1994
(2) Investment in VenturesTrident, L.P. ("V.T.") and VenturesTrident II, L.P.
("V.T.II")
The balance sheets of V.T. and V.T.II at July 31, 1994, and October 31, 1993
follow:
<TABLE>
<CAPTION>
VenturesTrident, L.P. (unaudited) July 31, October 31,
1994 1993
(in thousands)
ASSETS:
<S> <C> <C>
Cash and short-term investments............ $ 127 $ 280
Investments, at fair value................. 6,012 6,702
Other assets............................... 1,596 80
Total................................ $ 7,735 $ 7,062
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities................................ $ 1,896 $ 1,909
Partners' capital.......................... 5,839 5,153
Total................................ $ 7,735 $ 7,062
</TABLE>
<TABLE>
<CAPTION>
VenturesTrident II, L.P. (unaudited) July 31, October 31,
1994 1993
(in thousands)
ASSETS:
<S> <C> <C>
Cash and short-term investments............ $ 623 $ 818
Investments, at fair value................. 44,622 92,279
Other assets............................... 4,881 1,189
Total................................ $50,126 $94,286
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities................................ $ 1,794 $ 1,941
Partners' capital.......................... 48,332 92,345
Total................................ $50,126 $94,286
</TABLE>
For the nine months ended July 31, 1994 and 1993 the unaudited operating
results of V.T. reflect net operating income (losses) of $686,000 and
$(2,786,000) respectively, including realized and unrealized gains
(losses) on investments of $948,000 and $(2,907,000), respectively.
For the nine months ended July 31, 1994 and 1993, the unaudited operating
results of V.T.II reflect net operating income (losses) of ($497,000) and
$46,803,000, respectively, including realized and unrealized gains on
investments of $958,000 and $46,260,000, respectively.
-13-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) July 31, 1994
(2) Investment in VenturesTrident, L.P. ("V.T.") and VenturesTrident II,
L.P. ("V.T.II") (continued)
On January 18, 1994, V.T.II distributed 1,750,000 shares of Pegasus Gold
Corporation, with a value of $42 million, to its partners. The Company's
share of this distribution was 159,000 shares. All but 14,000 shares of
Pegasus Gold Corporation were sold between January 18, 1994 and July 31,
1994.
On July 1, 1994, V.T.II made a net cash distribution of $1,516,000 to the
Limited Partners for payment of taxes. The Company received $75,000 for
its limited partnership interest.
For the nine months ended July 31, 1994 and 1993, the Company's share of
the income (losses) of V.T. and V.T.II as accounted for under the equity
method was $(628,000) and $7,364,000, respectively. At July 31, 1994,
the Company's investment in V.T. and V.T.II approximated its share of the
underlying net assets of each partnership.
(3) Non-Voting Common Stock Options
Options to subscribe to shares of non-voting common stock are summarized
as follows:
<TABLE>
<CAPTION>
Shares Under Option Option Price Range
<S> <C> <C>
Balance, October 31, 1992........ 740,400 $ 3.95 - 17.00
Exercised........................ (216,200) 3.95 - 15.75
Granted.......................... 202,084 27.25 - 33.50
Cancelled/Expired................ (7,600) 8.75 - 15.75
Balance, October 31, 1993........ 718,684 8.75 - 33.50
Exercised........................ (122,681) 8.75 - 27.25
Granted.......................... 129,970 27.375 - 34.00
Cancelled/Expired................ (4,725) 27.25 - 34.00
Balance, July 31, 1994........... 721,248 8.75 - 34.00
</TABLE>
At July 31, 1994, options for 433,105 shares were exercisable. Options
for 288,143 additional shares will become exercisable over the next four
years.
(4) Net Capital Requirements
A subsidiary of the Company is subject to the Securities and Exchange
Commission uniform net capital rule (Rule 15c3-1) requiring such
subsidiary to maintain a certain level of net capital (as defined). For
purposes of this rule the subsidiary had net capital of $6,100,000 at
July 31, 1994, which exceeded the net capital requirement of $95,000 as
of that date.
-14-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) July 31, 1994
(5) Property and Equipment
Property and equipment (including Bank furniture and equipment) at July
31, 1994, and October 31, 1993 follow:
<TABLE>
<CAPTION>
July 31, October 31,
1994 1993
(all figures in thousands)
At Cost:
<S> <C> <C>
Furniture and equipment........................ $13,660 $11,544
Leasehold improvements......................... 728 530
Total........................................ 14,388 12,074
Less accumulated depreciation.................. 7,281 5,735
Net book value............................... $ 7,107 $ 6,339
</TABLE>
(6) Real Estate Investments
Real estate investments held at July 31, 1994 and October 31, 1993 follow:
<TABLE>
<CAPTION>
July 31, October 31,
1994 1993
(all figures in thousands)
<S> <C> <C>
Buildings................................. $27,230 $26,999
Land...................................... 2,464 2,478
Total................................... 29,694 29,477
Less: Accumulated depreciation............ 7,280 6,594
Net book value.......................... 22,414 22,883
Share of accumulated losses in escess of
partnership interest..................... (510) (435)
Total................................... $21,904 $22,448
</TABLE>
-15-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) July 31, 1994
(7) Other Liabilities
On March 18, 1994, the Company privately placed, with three insurance
companies, a $50 million 6.22% Senior note due March, 2004. Principal
payments on the note are due in equal annual installments beginning March
18, 1998. The note may be prepaid in part or in whole on or after March
16, 1996. The Company also has an unsecured revolving credit and term
loan agreement with two unaffiliated participating banks under which the
Company may borrow up to $75 million. Certain covenants in the Senior
note purchase agreement and the bank credit agreement require specific
levels of cash flow and net income and others restrict additional
investment and indebtedness. On July 31, 1994, the Company had
borrowings of $4.9 million under the bank credit agreement.
(8) Income Taxes
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes", effective November 1, 1993. The
cumulative effect of adopting SFAS No. 109 on the Company's financial
statements was to increase income by $1.3 million ($.14 per share).
As of October 31, 1993, the Company has an operating loss carryforward of
approximately $55 million, of which $13 million and $42 million can be
carried forward to offset future taxable income through 2007 and 2008,
respectively. Additionally, the Company has an alternative minimum tax
credit carryforward of approximately $1.7 million, of which $1.3 million
and $0.4 million can be carried forward to offset future regular tax
liabilities through 2003 and 2005, respectively.
(9) Earnings Per Common and Common Equivalent Share
Earnings per share for the nine months ended July 31, 1994, and July 31,
1993, are based upon the weighted average number of common, non-voting
common and non-voting common equivalent shares outstanding of 9,536,000
and 8,616,000. Earnings per common, non-voting common and common
equivalent share assuming full dilution have not been presented because
the dilutive effect is immaterial.
(10) Certain prior year amounts have been reclassified to conform to the
current presentation.
(11) Opinion of Management
In the opinion of management, the unaudited consolidated financial
statements include all adjustments, consisting of normal recurring
adjustments, necessary to present fairly the results for the interim
periods.
-16-
ITEM 2. Management's Discussion and Analysis
RESULTS OF OPERATIONS
Quarter ended July 31, 1994, compared with quarter ended July 31, 1993
INCOME
Income is closely related to assets under management. The average assets
under management in the third quarter of 1994 were $15.3 billion, 15%
higher than the $13.3 billion average in the third quarter of 1993.
Strong sales of mutual funds from the third quarter of 1993 through the
second quarter of 1994 were the primary contributors to the increase in
assets under management. Sales in the third quarter of 1994 were $525
million, slightly less than half of the sales in the third quarter of
1993. Redemptions of $408 million brought net sales in the third quarter
of 1994 to $117 million.
Total income of $54.8 million was 13% greater than that in the quarter
ended July 31, 1993. Investment advisor and administration fees rose to
$21.3 million, 11% higher than those in the third quarter of 1993.
Distribution income rose 8% to $20.1 million despite the imposition of
the new NASD rule on July 7, 1993, which reduced the rate at which Eaton
Vance received distribution plan payments. Due to increased assets for
which services are provided, bank fee income rose 37% to $11.2 million.
EXPENSES
A 13% increase in total expenses to $40.8 million included a 26% increase
in the amortization of deferred sales commissions, due to increased
assets under management sold with a deferred sales commission, and a 19%
increase in other expenses. An increase in personnel and higher salaries
were offset by a reduction in marketing incentives, resulting in a
compensation expense which was approximately equal to that in the third
quarter of 1993.
OTHER INCOME (EXPENSE)
The Company's gold mining partnerships, VenturesTrident and
VenturesTrident II, contributed a loss of $1.3 million for the quarter
ended July 31, 1994, compared with a $6.2 million gain in the same
quarter a year earlier. Unrealized losses of $36,000 on shares of Pegasus
Gold, which were distributed to Eaton Vance Corp. for its limited and
general partnership interests are included in calculating the loss in the
third quarter of 1994. This distribution is the first major step in the
termination of the two partnerships which is scheduled to take place over
the next three years.
NET INCOME OR LOSS
Net income after taxes fell to $6.2 million from $11.3 million in the
corresponding quarter of 1993. Earnings per share fell to $0.65 from
$1.19. The contribution per share from gold mining activities changed to
$(0.11) from $0.50 the year before. The contribution from investment
management operations rose to $0.78 from $0.75 in the third quarter of
the prior year.
DIVIDENDS
The Company authorized a $0.15 per share dividend in the current quarter.
-17-
Item 2. Management's Discussion and Analysis
RESULTS OF OPERATIONS (Continued)
Nine months ended July 31, 1994, compared with nine months ended July 31,
1993
INCOME
Average assets under management in the nine month period were $15.6
billion, 25% greater than the average of the first three quarters of
1993. Sales of mutual fund shares of $2.9 billion were 8% less than in
the comparable period in 1993.
A 19% increase in total income to $162.2 million from $136.1 million
included a 17% increase in investment adviser and administration fees, a
19% increase in distribution income, and a 30% increase in bank fee
income.
EXPENSES
In the nine months ended July 31, 1994, total expenses were $122 million,
up 21% from those of the nine months ended July 31, 1993. Increased
assets under management in funds with deferred sales commissions caused
amortization of deferred sales commissions to increase 32% to $39.3
million for the nine months ended July 31, 1994. Investment management
compensation for the nine months ended July 31, 1994 was $29.3 million,
7% higher than the $27.4 million in the nine months ended July 31, 1993,
while Bank compensation increased 22% to $19.9 million. Other expenses
rose $6.3 million, up 23% from a year ago, to $33.2 million at July 31,
1994. The increases were largely the result of an expanded product line
and concerted marketing efforts.
OTHER INCOME (EXPENSE)
The Company's gold mining partnerships, VenturesTrident and
VenturesTrident II, contributed a loss of $0.6 million for the nine
months ended July 31, 1994, compared to a $7.4 million gain for the nine
months ended July 31, 1993. Realized and unrealized losses of $715,000
on shares of Pegasus Gold which were distributed to Eaton Vance Corp. for
its general and limited partnership interests are included in partnership
income (loss), etc. for the nine months ended July 31, 1994. Unrealized
losses of $327,000 on shares of Dakota Mining are included in partnership
income (loss), etc. for the nine months ended July 31, 1993.
NET INCOME OR LOSS
Net income for the nine months ended July 31, 1994 amounted to $21.5
million, or $2.25 per share on 9.5 million average shares outstanding.
Net income includes the cumulative effect of a change in accounting for
income taxes of $1.3 million, or $0.14 per share. Net income for the
nine months ended July 31, 1993 was $23.4 million or $2.72 per share on
8.6 million average shares outstanding.
DIVIDENDS
Dividends for the nine months ended July 31, 1994, and 1993 were $0.44
and $0.35, respectively.
-18-
Item 2. Management's Discussion and Analysis
RESULTS OF OPERATIONS (Continued)
Nine months ended July 31, 1994, compared with nine months ended July 31,
1993
BALANCE SHEET
The Company's total assets increased 2%. An increase in deferred sales
to $264 million from $240 million and a decrease in bank assets to $109
million from $120 million were the main contributors to the change in
total assets.
The difference between book and tax accounting treatment for the deferred
sales commissions caused deferred income taxes to rise by $6.5 million.
LIQUIDITY AND CAPITAL RESOURCES
Most of the Company's income is received from its investment management
and banking activities. Investment management income is provided
primarily by investment adviser fees, administrative fees and
distribution plan payments. These fees are directly related to the
amount of assets under management. Those assets rose 11% to $15.4
billion on July 31, 1994 from $13.8 billion a year earlier. Banking
income consists largely of accounting and custody fees for assets in
trust or custody at the Company's 77.3% owned banking subsidiary,
Investors Bank & Trust Company. Assets for which services are being
provided rose 37% to $70 billion on July 31, 1994, from $51 billion a
year earlier.
In connection with the sales of the Company's spread commission mutual
funds, the Company pays sales commissions at the time of sale to
broker/dealers selling the funds. At July 31, 1994, the Company's
investment in deferred sales commissions was $264 million, compared with
$240 million at October 31, 1993.
Investments in investment companies are carried at the lower of cost or
market. At July 31, 1994 and October 31, 1993, the Company had gross
unrealized gains of $1.5 million and $1.6 million, respectively. The
Company, as a non-managing partner of certain investment company
partnerships, is required to maintain a minimum investment in such
partnerships. At July 31, 1994 a minimum investment of $2.8 million was
required under the terms of the partnership agreements.
On March 18, 1994, the Company privately placed, with three insurance
companies, a $50 million 6.22% Senior note due March, 2004. Principal
payments on the note are due in equal annual installments beginning March
18, 1998. The note may be prepaid in part or in whole on or after March
16, 1996. The proceeds were used to call the Company's outstanding $14
million of 10% Subordinated Debentures and to reduce the borrowings under
a $75 million revolving line of credit with two unaffiliated banks.
Certain covenants in the Senior note purchase agreement and the bank
credit agreement require specific levels of cash flow and net income and
others restrict additional investment and indebtedness. On July 31,
1994, the Company had borrowings of $4.9 million under the bank credit
agreement.
-19-
PART II
OTHER INFORMATION
-20-
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
EATON VANCE CORP.
(Registrant)
DATE: September 14, 1994 /s/Curtis H. Jones
(Signature)
Curtis H. Jones, Treasurer
DATE: September 14, 1994 /s/John P. Rynne
(Signature)
John P. Rynne, Comptroller
-21-
