SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1994
Commission File Number 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)
-1-
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 hereunto duly authorized.
EATON VANCE CORP.
(Registrant)
/s/ H. Day Brigham, Jr.
(Signature)
DATE: April 27, 1995 H. Day Brigham, Jr.
Vice President
-2-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
October 31, 1994 and 1993
<TABLE>
<CAPTION>
ASSETS 1994 1993
- -------------------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 24,681 $ 12,414
Receivable for investment company shares sold 1,073 3,007
Investment adviser fees and other receivables 2,632 2,923
Other current assets 1,233 1,390
- -------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 29,619 19,734
- -------------------------------------------------------------------------------------------------------
INVESTORS BANK & TRUST COMPANY ASSETS:
Cash and equivalents 9,344 16,241
Investment securities (market value $86,172
and $82,404, respectively) 88,278 80,206
Loans, less allowance for loan losses 13,570 10,221
Accrued interest and fees receivable 9,383 5,668
Equipment and leasehold improvements, net 3,251 3,010
Other assets 3,780 4,838
- -------------------------------------------------------------------------------------------------------
TOTAL BANK ASSETS 127,606 120,184
- -------------------------------------------------------------------------------------------------------
OTHER ASSETS:
Investments:
Real estate 22,173 22,448
Gold mining partnerships 3,072 6,924
Investment companies (market value $5,702
and $5,025, respectively) 4,088 3,377
Other investments 4,120 4,154
Notes receivable and receivables from affiliates 3,139 3,381
Deferred sales commissions 256,326 240,017
Equipment and leasehold improvements, net 3,477 3,329
Goodwill 1,886 1,999
- -------------------------------------------------------------------------------------------------------
TOTAL OTHER ASSETS 298,281 285,629
- -------------------------------------------------------------------------------------------------------
TOTAL ASSETS $455,506 $425,547
- -------------------------------------------------------------------------------------------------------
</TABLE>
59
<PAGE>
CONSOLIDATED BALANCE SHEETS (CONTINUED)
- --------------------------------------------------------------------------------
October 31, 1994 and 1993
<TABLE>
<CAPTION>
LIABILITIES & SHAREHOLDERS' EQUITY 1994 1993
- -------------------------------------------------------------------------------------------------------------
(in thousands, except share figures)
<S> <C> <C>
CURRENT LIABILITIES:
Payable for investment company shares purchased $ 1,096 $ 3,073
Accrued compensation 8,817 8,626
Accounts payable and accrued expenses 4,539 4,046
Accrued income taxes 1,761 1,443
Dividend payable 1,461 1,285
Current portion of mortgage notes payable 6,449 324
Other current liabilities 688 279
- -------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 24,811 19,076
- -------------------------------------------------------------------------------------------------------------
INVESTORS BANK & TRUST COMPANY LIABILITIES:
Demand and time deposits 106,909 104,851
Other 5,214 3,624
- -------------------------------------------------------------------------------------------------------------
TOTAL BANK LIABILITIES 112,123 108,475
- -------------------------------------------------------------------------------------------------------------
OTHER LIABILITIES:
6.22% Senior Note 50,000 --
Note payable to unaffiliated banks -- 42,300
Mortgage notes payable 10,311 16,759
Subordinated debentures -- 14,169
Minority interest in consolidated subsidiaries 3,113 2,340
- -------------------------------------------------------------------------------------------------------------
TOTAL OTHER LIABILITIES 63,424 75,568
- -------------------------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES 89,540 77,128
- -------------------------------------------------------------------------------------------------------------
Commitments -- --
- -------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Common stock, par value $.0625 per share:
Authorized, 80,000
Issued, 19,360 shares 1 1
Non-voting common stock, par value $.0625 per share:
Authorized, 11,920,000
Issued, 9,090,394 and 9,134,218 shares, respectively 568 571
Additional paid-in capital 49,595 52,845
Notes receivable from stock option exercises (2,511) (1,804)
Retained earnings 117,955 93,687
- -------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 165,608 145,300
- -------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $455,506 $425,547
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
60
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
Years Ended October 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share figures)
<S> <C> <C> <C>
INCOME:
Investment adviser and administration fees $ 85,769 $ 75,193 $ 68,493
Distribution income 80,069 71,651 47,059
Bank fee income 42,501 32,471 29,037
Bank net interest income 4,887 4,587 3,660
Income from real estate activities 3,626 3,569 3,801
Other income 1,154 1,674 1,103
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME 218,006 189,145 153,153
- -------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Compensation of officers and employees 66,564 61,810 55,312
Amortization of deferred sales commissions 52,794 40,892 27,965
Other expenses 46,442 39,003 32,317
- -------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 165,800 141,705 115,594
- -------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 52,206 47,440 37,559
OTHER INCOME (EXPENSE):
Interest income 757 602 697
Share of partnership income (losses) 115 3,883 (230)
Interest expense (5,337) (4,914) (4,893)
- -------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 47,741 47,011 33,133
INCOME TAXES 19,255 19,670 13,826
- -------------------------------------------------------------------------------------------------------------------------
NET INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES 28,486 27,341 19,307
Cumulative effect of change in accounting
for income taxes 1,300 -- --
- -------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 29,786 $ 27,341 $ 19,307
- -------------------------------------------------------------------------------------------------------------------------
Earnings per share before cumulative effect of change in
accounting for income taxes $3.00 $3.09 $2.49
Cumulative effect of change in accounting
for income taxes per share 0.14 -- --
- -------------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE $3.14 $3.09 $2.49
- -------------------------------------------------------------------------------------------------------------------------
DIVIDENDS DECLARED, PER SHARE $0.60 $0.49 $0.36
- -------------------------------------------------------------------------------------------------------------------------
AVERAGE COMMON SHARES OUTSTANDING 9,473 8,848 7,752
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
61
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Years Ended October 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
NON- NOTES
VOTING ADDITIONAL RECEIVABLE TOTAL
COMMON COMMON PAID-IN FROM STOCK RETAINED SHAREHOLDERS'
SHARES STOCK STOCK CAPITAL OPTION EXERCISES EARNINGS EQUITY
- ----------------------------------------------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, OCTOBER 31, 1991 7,410 $1 $463 $ 5,084 $(1,723) $ 54,056 $ 57,881
ADD (DEDUCT):
Net income -- -- -- -- -- 19,307 19,307
Dividends declared ($0.36 per share) -- -- -- -- -- (2,697) (2,697)
Issuance of non-voting
common stock -
On exercise of stock options 39 -- 1 420 (202) -- 219
For employee stock purchase plan 48 -- 3 527 -- -- 530
For purchase of minority interest
of Serio Exploration 19 -- 1 334 -- -- 335
Repurchase of non-voting
common stock (2) -- -- (21) -- -- (21)
Collection of notes receivable -- -- -- -- 247 -- 247
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, OCTOBER 31, 1992 7,514 $1 $468 $ 6,344 $(1,678) $ 70,666 $ 75,801
ADD (DEDUCT):
Net income -- -- -- -- -- 27,341 27,341
Dividends declared ($0.49 per share) -- -- -- -- -- (4,320) (4,320)
Issuance of non-voting
common stock -
On public stock offering 1,380 -- 86 43,810 -- -- 43,896
On exercise of stock options 216 -- 14 2,183 (648) -- 1,549
For employee stock purchase plan 40 -- 3 666 -- -- 669
For employee incentive plan 34 -- 2 768 -- -- 770
Repurchase of non-voting
common stock (30) -- (2) (926) -- -- (928)
Collection of notes receivable -- -- -- -- 522 -- 522
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, OCTOBER 31, 1993 9,154 $1 $571 $52,845 $(1,804) $ 93,687 $145,300
ADD (DEDUCT):
Net income -- -- -- -- -- 29,786 29,786
Dividends declared ($0.60 per share) -- -- -- -- -- (5,518) (5,518)
Issuance of non-voting
common stock -
On exercise of stock options 141 -- 9 1,742 (1,062) -- 689
For employee stock purchase plan 25 -- 2 731 -- -- 733
For employee incentive plan 24 -- 1 684 -- -- 685
Repurchase of non-voting
common stock (234) -- (15) (6,407) -- -- (6,422)
Collection of notes receivable -- -- -- -- 355 -- 355
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE, OCTOBER 31, 1994 9,110 $1 $568 $49,595 $(2,511) $117,955 $165,608
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
62
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
Years Ended October 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C> <C>
CASH AND EQUIVALENTS
(INCLUDING IB&T), BEGINNING OF YEAR $ 28,655 $ 9,535 $ 13,053
- ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 29,786 27,341 19,307
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Share of net (income) losses of partnerships (115) (3,883) 230
Deferred income taxes 13,712 17,105 15,633
Cumulative effect of change in accounting
for income taxes (1,300) -- --
Amortization of deferred sales commissions 52,794 40,892 27,965
Amortization of premiums on investments and
investment securities, net of accretion of discounts 1,300 1,469 183
Depreciation and other amortization 3,712 3,561 3,804
Payment of sales commissions (93,663) (139,339) (99,043)
Capitalized sales charges received 24,838 17,681 23,650
Change in refundable income taxes -- 4,030 (605)
Changes in other assets and liabilities 1,881 (843) 3,219
- ------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES 32,945 (31,986) (5,657)
- ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from (investment in) partnerships (252) 856 (97)
Additions to real estate, equipment and
leasehold improvements (3,338) (3,625) (3,302)
Net increase in notes and receivables from affiliates (465) (512) (1,464)
Net (increase) decrease in investment companies
and other investments (371) (1,357) 234
Proceeds from sales of investment securities 2,901 5,065 --
Proceeds from maturities of investment securities 16,264 3,016 25,024
Purchases of investment securities (25,636) (25,726) (38,367)
Decrease in federal funds sold -- 16,000 16,000
Net increase in loans (3,349) (4,338) (756)
- ---------------------------------------------------------------------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (14,246) (10,621) (2,728)
- ---------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from 6.22% Senior Note 50,000 -- --
Proceeds from note payable to unaffiliated banks 70,950 73,800 60,600
Payments on notes payable (113,573) (78,914) (46,172)
Redemption of subordinated debentures (14,169) -- --
Issuance of non-voting common stock 3,169 47,532 1,286
Dividends paid (5,342) (3,864) (2,461)
Repurchase of non-voting common stock (6,422) (928) (21)
Changes in demand and time deposits 2,058 24,101 (8,365)
- ---------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (13,329) 61,727 4,867
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 5,370 19,120 (3,518)
- ---------------------------------------------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS
(INCLUDING IB&T), END OF YEAR $ 34,025 $ 28,655 $ 9,535
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
63
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. The consolidated financial statements include the accounts of
Eaton Vance Corp. (the "Company") and all of its majority owned
subsidiaries. All material intercompany accounts and transactions have
been eliminated.
B. Cash equivalents consist principally of short-term, highly liquid
investments and are recorded at cost, which is equivalent to market
value. Cash equivalents of Investors Bank & Trust Company ("IB&T")
consist of cash due from banks.
C. Investments are accounted for as follows:
Investment securities held by IB&T are carried at cost, adjusted for
amortization of bond premium and accretion of bond discount, and consist
principally of U.S. Government obligations maturing in five years or less
and mortgage-backed securities. At October 31, 1994 and 1993, IB&T's
investment securities had gross unrealized gains of $0 and $2,246,000, and
gross unrealized losses of $2,106,000 and $48,000, respectively. The
carrying value of investment securities pledged to secure public funds
on deposit and for other required purposes amounted to $88,000,000 and
$80,000,000 at October 31, 1994 and 1993, respectively.
Real estate properties are carried at the lower of cost or net realizable
value, with depreciation provided using the straight-line method over the
estimated useful lives of the assets.
Investments in unconsolidated partnership interests are accounted for by
the equity method of accounting. This method requires the Company to
record its share of the unrealized gains and losses in the underlying
marketable securities of its two gold-mining limited partnerships'
portfolios.
Investments in investment companies are carried at the lower of cost or
market. At October 31, 1994 and 1993, the Company had gross unrealized
gains of $1,689,000 and $1,659,000, and gross unrealized losses of
$75,000 and $11,000, respectively. The Company, as a non-managing general
partner of certain investment company partnerships, is required to
maintain a minimum investment in such partnerships. At October 31, 1994,
a minimum investment of $2,837,000 was required under the terms of the
partnership agreements. Investments held in connection with the Company's
activities as principal underwriter are recorded at market value and
consist of Eaton Vance mutual funds.
Other investments are carried at the lower of cost or management's
estimate of net realizable value.
The Company will be required to adopt Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," in fiscal 1995. SFAS No. 115 requires that investments
in debt securities classified as "held to maturity securities" are
recorded at amortized cost, and investments in debt and equity securities
classified as either "available for sale" or "trading" are recorded at
fair value. Management does not believe the adoption of SFAS No. 115
will have a material impact on the consolidated financial statements.
64
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
D. Bank loan losses are provided for under the allowance method. Increases
in the loan loss allowance account are charged to operating expenses
based on a reasonable estimate of foreseeable losses. There have been no
loan charge-offs or recoveries during the periods presented.
E. Property, equipment and leasehold improvements are stated at cost, less
accumulated depreciation and amortization. Depreciation and amortization
are provided principally by the straight-line method over the estimated
useful lives of the related assets, or over the terms of the related
leases, if shorter.
F. Goodwill represents the excess of the cost of the Company's investment in
the net assets or stock of acquired companies over the fair value of
the underlying net assets at dates of acquisition and is being amortized on
the straight-line method over 36 to 40 years.
G. In connection with the Company's activities as principal underwriter, the
sales of shares of investment companies are accounted for on a settlement
date basis with the related commission income and expenses recorded on a
trade date basis.
H. Sales commissions paid to brokers and dealers in connection with sales of
shares of certain investment companies are charged to deferred sales
commissions and amortized over various periods, none of which exceeds six
years. Distribution plan payments received by the Company from investment
companies are recorded in income as earned. Early withdrawal charges
received by the Company from redeeming shareholders reduce unamortized
deferred sales commissions first, with any remaining amount recorded in
income.
I. The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes" effective November 1, 1993. The
impact of the change is discussed in Note 11 to the consolidated financial
statements. Deferred income taxes reflect the impact of temporary
differences between the amount of assets and liabilities recognized for
financial reporting purposes and such amounts recognized for tax
purposes, measured by applying currently enacted tax rates. Such taxes
relate principally to the recording of sales commissions paid to brokers
and dealers, which are deducted currently for tax purposes.
J. Earnings per share are based upon the weighted average number of common,
non-voting common and non-voting common equivalent shares outstanding.
Earnings per common and common equivalent share assuming full dilution
have not been presented because the dilutive effect is immaterial.
K. Certain prior year amounts have been reclassified to conform to the
current year presentation.
65
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
2. INVESTMENT IN GOLD MINING PARTNERSHIPS
The Company has a 79% general partnership interest in Fulcrum Management
Partners, L.P. (F.M.P.) and an 82% general partnership interest in
Fulcrum Management Partners II, L.P. (F.M.P.II), both Delaware limited
partnerships, of which a principal officer of the Company is the other
general partner. F.M.P. and F.M.P.II are 20% general partners of
VenturesTrident, L.P. (V.T.) and VenturesTrident II, L.P. (V.T.II),
respectively, both Delaware limited partnerships formed to invest in
equity securities of public and private gold-mining ventures. The Company
also has a 12% limited partnership interest in V.T. and a 3% limited
partnership interest in V.T.II. The balance sheets of V.T. and V.T.II at
October 31, 1994 and 1993, follow:
<TABLE>
<CAPTION>
1994 1993
------------------------------------------------------------------------------------------------------------
V.T. V.T.II V.T. V.T.II
------------------------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C> <C> <C>
ASSETS:
Cash and short-term investments $ 144 $ 471 $ 280 $ 818
Investments, at fair value 7,437 47,985 6,702 92,279
Other Assets 110 118 80 1,189
------------------------------------------------------------------------------------------------------------
TOTAL $7,691 $48,574 $7,062 $94,286
------------------------------------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities $1,891 $ 1,749 $1,909 $ 1,941
Partners' capital 5,800 46,825 5,153 92,345
------------------------------------------------------------------------------------------------------------
TOTAL $7,691 $48,574 $7,062 $94,286
------------------------------------------------------------------------------------------------------------
</TABLE>
For the years ended October 31, 1994, 1993 and 1992, the operating results
of V.T. reflect net income (losses) of $647,000, ($4,122,000) and
($1,482,000), respectively, including realized and unrealized gains
(losses) on investments of $733,000, ($3,837,000) and ($1,173,000),
respectively.
For the years ended October 31, 1994, 1993 and 1992, the operating results
of V.T.II reflect net income (losses) of ($2,004,000), $29,206,000 and
$1,717,000, respectively, including realized and unrealized gains (losses)
on investments of ($648,000), $29,391,000 and $7,687,000, respectively. In
January 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 with a value of $3.8 million.
The Company's Consolidated Statement of Cash Flows for 1994 excludes the
effect of this non-cash investing activity. At October 31, 1994, all but
14,000 of these shares were sold. In July 1994, V.T.II made a net cash
distribution of $1,516,000 to its limited partners for payment of taxes. The
Company received $75,000 for its limited partnership interest.
For the years ended October 31, 1994, 1993 and 1992, the Company's share
of the net income (losses) of V.T. and V.T.II, as accounted for under the
equity method and allocated pursuant to the terms of the partnerships'
agreements, was ($289,000), $3,894,000 and ($160,000), respectively. At
October 31, 1994 and 1993, the Company's investments in V.T. and V.T.II
approximated its share of the partners' capital of each partnership.
66
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. CONSOLIDATING FINANCIAL STATEMENTS
The components of the 1994 Eaton Vance Corp. consolidated balance sheet and
statement of income by major business segment follow:
<TABLE>
<CAPTION>
BALANCE SHEET PRECIOUS METAL OCT. 31, 1994,
INVESTMENT REAL MINING & ELIMI- CONSOLIDATED
ASSETS MANAGEMENT BANKING ESTATE OTHER NATIONS TOTAL
- ------------------------------------------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 25,685 $ -- $ 372 $ 394 $ (1,770) $ 24,681
Receivable for investment
company shares sold 1,073 -- -- -- -- 1,073
Investment adviser fees and
other receivables 2,244 -- 295 93 -- 2,632
Other current assets 513 -- 443 277 -- 1,233
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 29,515 -- 1,110 764 (1,770) 29,619
- ------------------------------------------------------------------------------------------------------------------------------
INVESTORS BANK & TRUST COMPANY ASSETS:
Cash and equivalents -- 9,344 -- -- -- 9,344
Investment securities -- 88,278 -- -- -- 88,278
Loans, less allowance for loan losses -- 13,570 -- -- -- 13,570
Accrued interest and fees receivable -- 9,383 -- -- -- 9,383
Equipment and leasehold
improvements, net -- 3,251 -- -- -- 3,251
Other assets -- 3,780 -- -- -- 3,780
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL BANK ASSETS -- 127,606 -- -- -- 127,606
- ------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS:
Investments:
Real estate -- -- 22,173 -- -- 22,173
Gold mining partnerships -- -- -- 3,072 -- 3,072
Northeast Properties, Inc. 8,487 -- -- -- (8,487) --
Investors Bank & Trust Co. 10,600 -- -- -- (10,600) --
Marblehead Energy Corp. 175 -- -- -- (175) --
Energex Corp. 270 -- -- -- (270) --
Mining related subsidiaries 7,659 -- -- -- (7,659) --
Investment companies 4,088 -- -- -- -- 4,088
Other investments 1,800 -- -- 2,320 -- 4,120
Notes receivable and receivables
from affiliates 100 -- 318 2,821 (100) 3,139
Deferred sales commissions 255,898 -- 428 -- -- 256,326
Equipment and leasehold
improvements, net 3,404 -- 1 72 -- 3,477
Goodwill 1,877 -- 9 -- -- 1,886
Intercompany receivables (2,645) -- 2,808 (163) -- --
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER ASSETS 291,713 -- 25,737 8,122 (27,291) 298,281
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $321,228 $127,606 $26,847 $8,886 $(29,061) $455,506
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
67
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. CONSOLIDATING FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
BALANCE SHEET (continued) PRECIOUS METAL OCT. 31, 1994,
LIABILITIES AND INVESTMENT REAL MINING & ELIMI- CONSOLIDATED
SHAREHOLDERS' EQUITY MANAGEMENT BANKING ESTATE OTHER NATIONS TOTAL
- --------------------------------------------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C> <C> <C> <C> <C>
CURRENT LIABILITIES:
Payable for investment
company shares purchased $ 1,096 $ -- $ -- $ -- $ -- $ 1,096
Accrued compensation 8,817 -- -- -- -- 8,817
Accounts payable and
accrued expenses 4,212 -- 276 51 -- 4,539
Accrued income taxes 1,805 -- (8) (36) -- 1,761
Dividend payable 1,461 -- -- -- -- 1,461
Current portion of mortgage
notes payable -- -- 6,449 -- -- 6,449
Other current liabilities 688 -- -- -- -- 688
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 18,079 -- 6,717 15 -- 24,811
- ------------------------------------------------------------------------------------------------------------------------------
INVESTORS BANK & TRUST
COMPANY LIABILITIES:
Demand and time deposits -- 108,679 -- -- (1,770) 106,909
Other -- 5,214 -- -- -- 5,214
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL BANK LIABILITIES -- 113,893 -- -- (1,770) 112,123
- ------------------------------------------------------------------------------------------------------------------------------
OTHER LIABILITIES:
6.22% Senior Note 50,000 -- -- -- -- 50,000
Note payable to affiliate -- -- -- 100 (100) --
Mortgage notes payable -- -- 10,311 -- -- 10,311
Minority interest in
consolidated subsidiaries -- -- -- -- 3,113 3,113
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER LIABILITIES 50,000 -- 10,311 100 3,013 63,424
- ------------------------------------------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES 87,368 -- 1,332 840 -- 89,540
- ------------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY 165,781 13,713 8,487 7,931 (30,304) 165,608
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $321,228 $127,606 $26,847 $8,886 $(29,061) $455,506
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
68
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
3. CONSOLIDATING FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
STATEMENT OF INCOME PRECIOUS METAL OCT. 31, 1994,
INVESTMENT REAL MINING & ELIMI- CONSOLIDATED
MANAGEMENT BANKING ESTATE OTHER NATIONS TOTAL
- ------------------------------------------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C> <C> <C> <C> <C>
INCOME:
Investment adviser and
administration fees $ 83,682 $ -- $ -- $2,087 $ -- $ 85,769
Distribution income 80,069 -- -- -- -- 80,069
Bank fee income -- 43,049 -- -- (548) 42,501
Bank net interest income -- 4,778 -- -- 109 4,887
Income from real estate activities -- -- 5,154 -- (1,528) 3,626
Other income 948 -- -- 206 -- 1,154
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME 164,699 47,827 5,154 2,293 (1,967) 218,006
- ------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Compensation of officers
and employees 38,486 27,299 586 193 -- 66,564
Amortization of deferred
sales commissions 52,794 -- -- -- -- 52,794
Other expenses 26,200 15,205 3,532 2,796 (1,291) 46,442
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 117,480 42,504 4,118 2,989 (1,291) 165,800
- ------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) 47,219 5,323 1,036 (696) (676) 52,206
OTHER INCOME (EXPENSE):
Interest income 546 -- 56 264 (109) 757
Share of partnership income (losses) 97 -- 307 (289) -- 115
Interest expense (3,857) -- (1,480) -- (5,337)
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE
INCOME TAXES 44,005 5,323 (81) (721) (785) 47,741
INCOME TAXES 17,821 1,862 19 (447) -- 19,255
- ------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) BEFORE
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES 26,184 3,461 (100) (274) (785) 28,486
Cumulative effect of change in
accounting for income taxes 1,374 -- 129 (203) -- 1,300
- ------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 27,558 $ 3,461 $ 29 $ (477) $ (785) $ 29,786
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Additional segment information is presented in Note 12.
69
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
4. REAL ESTATE INVESTMENTS
Real estate investments held at October 31, 1994 and 1993, follow:
<TABLE>
<CAPTION>
1994 1993
----------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C>
Buildings $27,347 $26,999
Land 2,465 2,478
----------------------------------------------------------------------------
TOTAL 29,812 29,477
Less accumulated depreciation 7,510 6,594
----------------------------------------------------------------------------
NET BOOK VALUE 22,302 22,883
Share of accumulated losses in excess
of partnership interest (129) (435)
----------------------------------------------------------------------------
TOTAL $22,173 $22,448
----------------------------------------------------------------------------
</TABLE>
5. EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements (including IB&T) at October 31, 1994
and 1993, follow:
<TABLE>
<CAPTION>
1994 1993
----------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C>
AT COST:
Equipment $13,036 $11,544
Leasehold improvements 815 530
----------------------------------------------------------------------------
TOTAL 13,851 12,074
Less accumulated depreciation 7,123 5,735
----------------------------------------------------------------------------
NET BOOK VALUE $ 6,728 $ 6,339
----------------------------------------------------------------------------
</TABLE>
6. OTHER LIABILITIES
6.22% SENIOR NOTE
In March 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 of
approximately $7.1 million, beginning March 1998. The note may be prepaid
in part or in whole on or after March 1996. Certain covenants in the
Senior Note Purchase Agreement require specific levels of cash flow and
net income and others restrict additional investment and indebtedness.
NOTE PAYABLE TO UNAFFILIATED BANKS
The Company has an unsecured revolving credit and term loan agreement
with two unaffiliated participating banks under which the Company may
borrow up to $75,000,000. Borrowings under the credit agreement are due
in March 1997, and bear interest at a combination of the following rates:
the banks' current money market rate (5.9 percent at October 31, 1994),
or 1 percent per annum above the banks' Eurodollar rate (6.1 percent at
October 31, 1994). In addition, a commitment fee of 0.375 percent per
annum is payable on unborrowed amounts. There were no borrowings under
this agreement at October 31, 1994. The loan agreement contains various
covenants with respect to, among other things, levels of operating cash
flow and net income, and allowable additional indebtedness and investments.
70
<PAGE>
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
6. OTHER LIABILITIES (CONTINUED)
MORTGAGE NOTES PAYABLE
The balance of mortgage notes payable on October 31, 1994 and 1993, follow:
<TABLE>
<CAPTION>
MATURITY 1994 1993
----------------------------------------------------------------------------------------------------------------------
INTEREST RATE (all figures in thousands)
<S> <C> <C> <C>
10.18% 1995 $ 6,200 $ 6,281
10.75% 1996 2,270 2,290
9.00% 1997 4,008 4,051
Prime +1% (8.75% at October 31, 1994) 1997 1,437 1,477
60% of Prime (4.65% at October 31, 1994) 2015-2016 2,845 2,984
----------------------------------------------------------------------------------------------------------------------
TOTAL $16,760 $17,083
----------------------------------------------------------------------------------------------------------------------
</TABLE>
These mortgage notes are secured by real property and require monthly or
quarterly payments of principal and interest with all unpaid principal due
at maturity. Principal payments due on mortgage notes outstanding at
October 31, 1994, for each of the next five years and in the aggregate
thereafter follow:
<TABLE>
<CAPTION>
YEAR ENDING OCTOBER 31 PAYMENTS DUE
-----------------------------------------------------------
(in thousands)
<S> <C>
1995 $ 6,449
1996 2,485
1997 5,402
1998 141
1999 141
Thereafter 2,142
-----------------------------------------------------------
TOTAL $16,760
-----------------------------------------------------------
</TABLE>
SUBORDINATED DEBENTURES
At October 31, 1993, the Company had outstanding $14,169,000 of 10
percent subordinated debentures. The debentures were subordinated to all
senior debt of the Company and paid interest semi-annually. The Company
redeemed the debentures on April 1, 1994.
INTEREST PAID
Interest paid by the Company for the years ended October 31, 1994, 1993 and
1992 by business segment follows:
<TABLE>
<CAPTION>
1994 1993 1992
------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C> <C>
Banking $ 807 $ 669 $1,075
Real Estate 1,493 1,458 1,567
Other 4,158 3,558 3,691
------------------------------------------------------------------------------------------
TOTAL $6,458 $5,685 $6,333
------------------------------------------------------------------------------------------
</TABLE>
71
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
7. LEASE COMMITMENTS
The Company leases certain equipment and facilities under noncancellable
operating leases. Future minimum lease commitments are as follows:
<TABLE>
<CAPTION>
Year ending October 31 Amount
------------------------------------------------------
(in thousands)
<S> <C>
1995 $ 4,500
199 64,036
1997 3,363
1998 759
1999 715
Thereafter 1,422
------------------------------------------------------
TOTAL $14,795
------------------------------------------------------
</TABLE>
Rent expense under these leases in 1994, 1993 and 1992 amounted to
$4,116,000, $3,219,000 and $2,660,000, respectively.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of Financial
Instruments." The estimated fair value amounts have been determined by the
Company using available market information and appropriate valuation
methodologies. The methodologies require management to develop assumptions on
such items as discount rates and future cash flows. Accordingly, such fair
value estimates are not necessarily indicative of the amounts the Company
would realize upon a current market exchange. The carrying amounts and
estimated fair value at October 31, 1994 and 1993, follow:
<TABLE>
<CAPTION>
1994 1993
- ---------------------------------------------------------------------------------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
- ---------------------------------------------------------------------------------------------------------
ASSETS: (all figures in thousands)
<S> <C> <C> <C> <C>
Cash and equivalents $ 34,025 $ 34,025 $ 28,655 $ 28,655
Investments -
Investment securities 88,278 86,172 80,206 82,404
Investment companies 4,088 5,702 3,377 5,025
Other investments 1,607 1,607 1,618 1,618
Loans 13,570 13,570 10,221 10,221
Notes receivable and
receivables from affiliates 5,650 5,650 5,185 5,282
LIABILITIES:
Demand and time deposits $106,909 $106,909 $104,851 $104,851
Senior note 50,000 44,529 -- --
Note payable to unaffiliated banks -- -- 42,300 42,300
Mortgage notes payable 16,760 16,548 17,083 16,993
Subordinated debentures -- -- 14,169 14,299
</TABLE>
72
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
CASH AND EQUIVALENTS - The carrying amounts of cash and equivalents
approximate their fair value.
INVESTMENTS - The estimated fair value of investment securities,
investment companies and common stock is based on quoted market prices.
Management believes it is impracticable to disclose fair values of
certain other investments (carrying amounts of $2,513,000 and $2,536,000
at October 31, 1994 and 1993, respectively) due to the difficulty of
predicting future returns and the period in which those amounts will be
received.
LOANS - Variable interest rate loans are subject to periodic repricing
and the carrying amount is a reasonable estimate of fair value.
NOTES RECEIVABLE AND RECEIVABLES FROM AFFILIATES - The estimated fair
value of notes receivable and receivables from affiliates has been
calculated by discounting expected future cash flows using management's
estimate of current market interest rates for such notes and receivables.
Included in this category are "Notes receivable from stock option
exercises" which are a component of shareholders' equity on the
consolidated balance sheet.
DEMAND AND TIME DEPOSITS - The carrying value of deposit accounts which
are subject to periodic repricing is a reasonable estimate of fair value.
6.22% SENIOR NOTE - The estimated fair value of the Senior Note has been
determined by discounting future cash flows using a market interest rate
calculated in the same manner as the fixed rate of interest applicable to
the note.
NOTE PAYABLE TO UNAFFILIATED BANKS - The note payable to unaffiliated
banks is subject to periodic repricing and the carrying amount
approximates its market value.
MORTGAGE NOTES PAYABLE - The estimated fair value for mortgage notes
payable is based on discounted cash flow analyses using current market
interest rates applicable to mortgaged properties.
SUBORDINATED DEBENTURES - The estimated fair value of the subordinated
debentures is based on the fair value of the debentures as calculated by
an independent valuation source.
9. NON-VOTING COMMON STOCK OPTIONS
Outstanding options to subscribe to shares of non-voting common stock are
summarized as follows:
<TABLE>
<CAPTION>
SHARES OPTION
UNDER 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 (141,181) 8.75 - 27.25
Granted 159,970 27.375 - 34.00
Cancelled/Expired (4,725) 27.25 - 34.00
-------------------------------------------------------------------------------------
BALANCE, OCTOBER 31, 1994 732,748 $ 8.75 - 34.00
-------------------------------------------------------------------------------------
</TABLE>
At October 31, 1994, options for 414,605 shares were exercisable. Options for
318,143 additional shares will become exercisable over the next two years.
In December 1994, the Company granted options for an additional 132,300
shares at a price of $27.75. These options will become exercisable over the
next four years.
73
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. EMPLOYEE BENEFIT PLANS
EXECUTIVE LOAN PROGRAM
The Company has established an Executive Loan Program under which a
maximum of $6,100,000 is available for loans to certain key employees for
purposes of financing or refinancing the exercise of stock options for
shares of the Company's non-voting common stock, other purchases of the
Company's non-voting stock, and any tax obligations arising from such
transactions. Such loans are written for a seven-year period, at varying
fixed interest rates (currently ranging from 5.3 percent to 9.5 percent),
and are payable in annual installments commencing with the third year in
which the loan is outstanding. Loans outstanding under this program at
October 31, 1994 and 1993, amounted to $2,511,000 and $1,804,000,
respectively.
PROFIT-SHARING RETIREMENT PLAN
The Company has a discretionary profit-sharing retirement plan for the
benefit of substantially all employees of its wholly owned subsidiaries
whereby up to 15 percent of eligible compensation of participants may be
contributed. The Company has contributed $2,709,000, $2,419,000 and
$2,228,000, the maximum amounts permitted under the plan, for the years
ended October 31, 1994, 1993 and 1992, respectively.
STOCK PURCHASE PLAN
A total of 312,000 shares of the Company's non-voting common stock was
reserved for issuance under an Employee Stock Purchase Plan. The plan
permits all eligible full-time employees to direct up to 15 percent of
their salaries toward the purchase of Eaton Vance Corp. non-voting common
stock at the lower of 90 percent of the fair market value of the
non-voting common stock at the beginning or at the end of each six-month
offering period. Through October 31, 1994, 285,076 shares have been
issued pursuant to this plan.
INCENTIVE PLAN - STOCK ALTERNATIVE
A total of 300,000 shares of the Company's non-voting common stock is
reserved for issuance under the Incentive Plan - Stock Alternative. The
plan permits employees and officers to direct up to half of their monthly
and annual incentive bonuses toward the purchase of non-voting common
stock at 90 percent of the fair market price of the stock. Through
October 31, 1994, 57,022 shares have been issued pursuant to this plan.
BANK PENSION PLAN
IB&T has a trusteed, noncontributory defined benefit pension plan
covering substantially all its employees. The benefits are based on years
of service and the employee's compensation during employment. IB&T's
funding policy is to contribute annually the maximum amount which can be
deducted for Federal income tax purposes. Contributions are intended to
provide not only for benefits attributed to service to date, but also for
benefits expected to be earned in the future.
74
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
10. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table sets forth the plan's funded status and amounts
recognized in IB&T's balance sheet at October 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
--------------------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C>
ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATIONS:
Accumulated benefit obligation, including vested benefits
of $3,440,000 for 1994 and $2,896,000 for 1993 $ 3,689 $ 3,153
--------------------------------------------------------------------------------------------------------
Projected benefit obligations for services rendered to date 5,717 5,352
Plan assets at fair value, primarily listed stocks
and U.S. Government obligations 4,754 4,390
--------------------------------------------------------------------------------------------------------
Funded status (963) (962)
Unrecognized net gain from past experience different
from that assumed and effects of changes in assumptions (397) (120)
Prior service cost not yet recognized in periodic pension cost 301 400
Unrecognized net asset (270) (501)
--------------------------------------------------------------------------------------------------------
Accrued pension cost $(1,329) $(1,183)
--------------------------------------------------------------------------------------------------------
</TABLE>
Net pension costs for 1994, 1993 and 1992 include the following components:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C> <C>
Service cost-benefits earned during the period $618 $497 $461
Interest cost on projected benefit obligations 425 388 349
Actual return on plan assets (420) (373) (300)
Net amortization and deferral (5) 1 (32)
--------------------------------------------------------------------------------------------------------
NET PERIODIC PENSION COST $618 $513 $478
--------------------------------------------------------------------------------------------------------
</TABLE>
The actuarial assumptions used in the above calculations are a weighted
average discount rate of 7.5 percent, a compensation rate of 5.0 percent,
and an expected long-term rate of return on assets of 8.5 percent.
75
<PAGE>
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
11. INCOME TAXES
Effective November 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," (SFAS)No.
109. This statement requires an asset and liability approach for
financial accounting and reporting for deferred income taxes. The
cumulative effect of the accounting change resulted in a $1.3 million
gain or $0.14 per share. Prior year financial statements have not been
restated to apply the provisions of SFAS No. 109.
Income taxes, as stated as a percentage of income before income taxes, are
composed of the following:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory tax rate 35.0% 34.8% 34.0%
Increases (decreases) in taxes from:
State income tax (net of effect of Federal tax) 4.9 6.6 6.3
Unrealized (gains) losses on mining investments (0.5) 0.4 1.0
Other 0.9 -- 0.4
--------------------------------------------------------------------------------------------------------
EFFECTIVE TAX RATE 40.3% 41.8% 41.7%
--------------------------------------------------------------------------------------------------------
TAXES ON INCOME CONSISTED OF:
Current: (all figures in thousands)
Federal $ 2,429 $ 1,163 $(2,199)
State 3,114 1,402 392
Deferred:
Federal 13,121 13,783 12,860
State 591 3,322 2,773
--------------------------------------------------------------------------------------------------------
INCOME TAXES $19,255 $19,670 $13,826
--------------------------------------------------------------------------------------------------------
</TABLE>
Income taxes paid (refunded) for the years ended October 31, 1994, 1993
and 1992 were $6,116,000, ($3,895,000) and ($1,085,000), respectively.
In 1994, the Company utilized a net operating loss carryforward of
approximately $29 million to offset current taxable income. The Company
has a remaining net operating loss of approximately $25 million that can
be carried forward to offset future taxable income through 2008. For
financial statement purposes, deferred income tax credits have been
reduced by the effect of the tax loss carryforward because such losses
are expected to offset the reversal of timing differences during the
permitted carryforward period.
In years prior to and in 1994, the Company incurred alternative minimum
tax of approximately $2.3 million. Such taxes incurred may be used as a
credit carryover to offset future regular tax liabilities. Accordingly,
at October 31, 1994, the deferred income tax liability account has been
reduced by the cumulative alternative minimum taxes incurred of $2.3
million.
76
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
11. INCOME TAXES (CONTINUED)
Under SFAS No. 109 deferred income taxes reflect the net tax effects of
(a) temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for
income tax purposes, and (b) operating loss and tax credit carryforwards.
The tax effects of significant items comprising the Company's net
deferred tax liability as of October 31, 1994, are as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
DEFERRED TAX LIABILITIES:
Deferred sales commissions $ 99,393
Differences between book and
tax basis of property 1,645
Other 199
------------------------------------------------------
Total 101,237
------------------------------------------------------
DEFERRED TAX ASSETS:
Operating loss carryforwards 8,932
Tax credit carryforwards 2,259
Other 506
------------------------------------------------------
Total 11,697
------------------------------------------------------
Valuation allowance --
------------------------------------------------------
NET DEFERRED TAX LIABILITY $ 89,540
------------------------------------------------------
</TABLE>
12. SEGMENT INFORMATION
A. The Company and its subsidiaries are engaged in the following business
segments:
1. Investment management operations, including portfolio
management of regulated investment companies and investment
counseling clients through Eaton Vance Management and Boston
Management and Research, and the sale of shares of investment
companies through Eaton Vance Distributors, Inc.
2. Banking, through ownership of 77.3% of the capital stock
of Investors Bank & Trust Company (IB&T). IB&T, a state-chartered
bank, provides custodial, accounting, and pricing services for
mutual funds, unit investment trusts and other pooled investment
vehicles, including the Eaton Vance mutual funds. IB&T also provides
custodial, trust, and banking services to individuals, investment
advisers, private trustees, lawyers and accountants, financial
planners, other banks and fiduciaries, and other institutions.
3. Real estate investment through wholly owned Northeast
Properties, Inc.
4. Precious Metal Mining and Other includes precious metal
mining venture investment and management through wholly owned
Minven, Inc., EV Gold Inc., and Fulcrum Management, Inc., and oil
and gas exploration and development through wholly owned Energex
Corporation and Marblehead Energy Corporation.
77
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
12. SEGMENT INFORMATION (CONTINUED)
B. Financial data applicable to each business segment follow:
<TABLE>
<CAPTION> PRECIOUS METAL
INVESTMENT REAL MINING & ELIMI- CONSOLIDATED
MANAGEMENT BANKING ESTATE OTHER NATIONS TOTAL
- -------------------------------------------------------------------------------------------------------------------------------
(all figures in thousands)
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED 10/31/94
Identifiable assets $321,228 $127,606 $26,847 $8,886 $(29,061) $455,506
Liabilities 155,447 113,893 18,360 955 1,243 289,898
Total income 164,699 47,827 5,154 2,293 (1,967) 218,006
Operating income (loss) 47,219 5,323 1,036 (696) (676) 52,206
Net income (loss) before
cumulative effect of change in
accounting for income taxes 26,184 3,461 (100) (274) (785) 28,486
Cumulative effect of change in
accounting for income taxes 1,374 -- 129 (203) -- 1,300
Net income (loss) 27,558 3,461 29 (477) (785) 29,786
Capital expenditures 1,394 1,616 325 3 -- 3,338
Depreciation and amortization 54,046 2,676 1,068 16 -- 57,806
YEAR ENDED 10/31/93
Identifiable assets $294,750 $120,184 $26,892 $12,852 $(29,131) $425,547
Liabilities 149,452 109,872 18,435 1,545 943 280,247
Total income 145,564 37,509 5,080 2,954 (1,962) 189,145
Operating income (loss) 43,829 3,570 1,102 (619) (442) 47,440
Net income (loss) 23,546 2,359 (293) 2,264 (535) 27,341
Capital expenditure 1,221 1,877 524 3 -- 3,625
Depreciation and amortization 42,173 2,696 1,037 16 -- 45,922
YEAR ENDED 10/31/92
Identifiable assets $214,078 $103,184 $27,362 $10,605 $(37,030) $318,199
Liabilities 136,613 95,171 18,612 599 (8,597) 242,398
Total income 113,003 33,323 5,337 3,652 (2,162) 153,153
Operating income (loss) 33,238 2,734 1,403 535 (351) 37,559
Net income (loss) 18,263 1,571 (178) 2 (351) 19,307
Capital expenditures 1,439 1,188 804 51 -- 3,482
Depreciation and amortization 29,144 1,309 1,403 96 -- 31,952
</TABLE>
78
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
12. SEGMENT INFORMATION (CONTINUED)
C. Major customers that provided over 10% of the total income of the
Company are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------
EATON VANCE NATIONAL MUNICIPALS FUND (all dollar figures in thousands)
<S> <C> <C> <C>
Investment adviser fees, distribution plan payments,
early withdrawal charges and custody fees $26,230 $24,726 $20,050
Percent of total income 12.0% 13.1% 13.1%
EATON VANCE PRIME RATE RESERVES
Investment adviser fees, administration fees,
early withdrawal charges and custody fees $8,244 $11,942 $18,393
Percent of total income 3.8% 6.3% 12.0%
</TABLE>
13. RELATED PARTY TRANSACTIONS
Investment advisory and distribution income earned from investment
companies sponsored by the Company were $163.8 million, $144.5 million
and $112.6 million in 1994, 1993 and 1992, respectively.
The Company provides management and administration services to
VenturesTrident and VenturesTrident II for which it earned fees of $2.1
million, $2.4 million and $3.0 million, in 1994, 1993 and 1992,
respectively. Amounts outstanding for these services were $2.8 million
and $3.0 million at October 31, 1994 and 1993, respectively, and are
included in "Notes receivable and receivables from affiliates."
IB&T earned fees from investment companies sponsored by the Company for
custodial, bookkeeping and pricing services of $3.6 million, $3.0 million
and $2.8 million in 1994, 1993 and 1992, respectively.
Investment companies sponsored by the Company had approximately $2.0
million and $0.3 million of cash on deposit at IB&T on October 31, 1994
and 1993, respectively.
IB&T has made loans to certain shareholders, officers and employees of
the Company totaling $1.6 million and $1.3 million, at October 31, 1994
and 1993, respectively.
14. SHAREHOLDERS' EQUITY
On April 15, 1994, the Company's Board of Directors authorized the
purchase by the Company of up to 500,000 shares of the Company's
non-voting common stock at a cost to be determined at the time of
purchase. Through October 31, 1994, 234,000 shares had been acquired
under this plan.
15. REGULATORY REQUIREMENTS
The broker/dealer subsidiary of the Company, Eaton Vance Distributors,
Inc., is subject to the Securities and Exchange Commission uniform net
capital rule (Rule 15c3 - 1) which requires the subsidiary to maintain a
certain minimum level of net capital (as defined). For purposes of this
rule the subsidiary had net capital of $16.5 million, which exceeded the
net capital requirement of $0.1 million at October 31, 1994.
The banking subsidiary, IB&T, is required to maintain certain average
cash reserve balances with the Federal Reserve Bank. The average reserve
balance requirement at October 31, 1994, was $3.3 million. IB&T is also
required to maintain certain minimum capital ratios. Management believes
that IB&T was in compliance with all such capital requirements at October
31, 1994.
79
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
16. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
At October 31, 1994, IB&T had off-balance sheet financial instruments
consisting of secured open lines of credit and interest-rate floor
contracts. The open lines of credit totaled $7.5 million, against which
$3.1 million in loans were drawn. IB&T uses interest rate floor contracts
as part of its overall interest rate risk management. The notional amount
of the interest-rate floor contracts was $80.0 million. Management of
IB&T does not anticipate significant credit loss from these instruments.
17. QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
TOTAL NET EARNINGS
INCOME INCOME PER SHARE
- --------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
QUARTER ENDED:
January 31, 1993 $ 42,121 $ 4,924 $0.62
April 30, 1993 45,470 7,184 0.86
July 31, 1993 48,544 11,282 1.19
October 31, 1993 53,010 3,951 0.41
-------------------------------------------------------------------------------------------------
Year ended October 31, 1993 $189,145 $27,341 $3.09
-------------------------------------------------------------------------------------------------
QUARTER ENDED:
January 31, 1994 $ 53,107 $ 7,706* $0.81*
April 30, 1994 54,254 7,638 0.80
July 31, 1994 54,814 6,157 0.65
October 31, 1994 55,831 8,285 0.89
-------------------------------------------------------------------------------------------------
Year ended October 31, 1994 $218,006 $29,786 $3.14
-------------------------------------------------------------------------------------------------
</TABLE>
*The quarter ended January 31, 1994, reflects the cumulative effect of the
change in accounting for income taxes of $1.3 million, or $0.14 per share.
Net income before the cumulative effect of the change in accounting for
income taxes was $6,406,000 for the quarter ended January 31, 1994.
Total income for the four quarters ended October 31, 1993, and for the
two quarters ended April 30, 1994, have been reclassified to reflect the
current financial statement presentation of recording trail commission
payments to brokers net of the related fees received from the Eaton Vance
mutual funds.
The per share earnings for each quarter of 1993 and 1994 include credits
(charges) of ($0.14), $0.16, $0.44, ($0.21) and ($0.04), $0.08, ($0.13),
$0.09, respectively, representing the earnings per share effect from the
Company's management of, and investment in, gold mining interests.
80
<PAGE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS AND
SHAREHOLDERS OF EATON VANCE CORP.
We have audited the accompanying consolidated balance sheets of Eaton Vance
Corp. and its subsidiaries as of October 31, 1994 and 1993, and the related
consolidated statements of income, shareholders' equity, and cash flows for
each of the three years in the period ended October 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Eaton Vance Corp. and its
subsidiaries as of October 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period
ended October 31, 1994 in conformity with generally accepted accounting
principles.
As discussed in Notes 1 and 11 to the consolidated financial statements,
effective November 1, 1993, the Company changed its method of accounting for
income taxes to conform with Statement of Financial Accounting Standards No.
109.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 13, 1994
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