<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
---------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 1-9818
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ALLIANCE CAPITAL MANAGEMENT L.P.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3434400
- ------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1345 Avenue of the Americas, New York, NY 10105
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(212) 969-1000
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(Registrant's telephone number, including area code)
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
---------- ----------
The number of Units representing assignments of beneficial ownership of Limited
Partnership Interests outstanding as of September 30, 1994 was 78,079,720 Units.
<PAGE>
ALLIANCE CAPITAL MANAGEMENT L.P.
Index to Form 10-Q
Part I
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS PAGE
Condensed Consolidated Statements of Financial Condition 2
Condensed Consolidated Statements of Income 3
Condensed Consolidated Statements of Changes in
Partners' Capital 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6-9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10-14
Part II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS 15
Item 2. CHANGES IN SECURITIES 15
Item 3. DEFAULTS UPON SENIOR SECURITIES 15
Item 4. SUBMISSION OF MATTERS TO A VOTE OF 15
SECURITY HOLDERS
Item 5. OTHER INFORMATION 15
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 15
- 1 -
<PAGE>
Part I
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
ALLIANCE CAPITAL MANAGEMENT L.P.
Condensed Consolidated Statements of Financial Condition
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
ASSETS 9/30/94 12/31/93
------ -------- --------
<S> <C> <C>
Cash and cash equivalents....................... $104,369 $ 96,315
Fees receivable:
Alliance mutual funds......................... 31,937 29,594
Other affiliated clients...................... 10,518 17,262
Institutional clients......................... 40,099 40,685
Receivable from brokers and dealers for sale
of shares of Alliance mutual funds............ 38,594 103,921
Other receivables............................... 3,344 4,894
Investments in Alliance mutual funds............ 32,852 56,552
Other investments............................... 4,862 4,966
Furniture, equipment and leasehold
improvements, net............................. 39,683 28,767
Intangible assets, net.......................... 95,089 30,707
Deferred sales commissions, net................. 162,850 140,558
Prepaid expenses and other assets............... 7,904 7,066
-------- --------
Total assets.............................. $572,101 $561,287
-------- --------
-------- --------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses........... $ 63,337 $ 56,526
Payable to Alliance mutual funds for share
purchases..................................... 54,913 145,684
Accrued expenses under employee benefit plans... 72,694 35,597
Debt............................................ 4,118 109,435
-------- --------
Total liabilities......................... 195,062 347,242
Partners' capital................................. 377,039 214,045
-------- --------
Total liabilities and partners' capital... $572,101 $561,287
-------- --------
-------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
ALLIANCE CAPITAL MANAGEMENT L.P.
Condensed Consolidated Statements of Income
(unaudited)
(in thousands, except per Unit amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------- ------------------------
9/30/94 9/30/93 9/30/94 9/30/93
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Investment advisory and services fees:
Alliance mutual funds............................ $ 54,429 $ 42,865 $158,047 $119,274
Other affiliated clients......................... 10,131 9,481 30,629 25,409
Institutional clients............................ 41,226 37,298 120,865 107,086
Distribution plan fees from Alliance mutual funds.. 34,159 27,380 102,944 73,487
Shareholder servicing and administration fees...... 10,226 8,325 30,250 23,957
Other revenues..................................... 1,799 4,504 6,673 8,249
------- ------- -------- ---------
151,970 129,853 449,408 357,462
------- ------- -------- ---------
Expenses:
Employee compensation and benefits................. 42,632 38,430 127,659 107,227
General and administrative......................... 18,190 15,963 51,782 49,804
Interest........................................... 2,342 2,502 6,770 7,902
Promotion and servicing:
Distribution plan payments to financial
intermediaries:
Affiliated..................................... 5,222 3,198 15,185 9,145
Unaffiliated................................... 20,910 17,217 64,211 45,922
Amortization of deferred sales commissions....... 13,273 9,356 38,136 25,742
Other............................................ 10,896 8,660 34,359 22,324
Amortization of intangible assets.................. 2,186 1,743 6,263 5,231
Nonrecurring transaction expenses.................. -- -- -- 40,842
------- ------- -------- ---------
115,651 97,069 344,365 314,139
------- ------- -------- ---------
Income before income taxes and cumulative effect
of accounting change............................... 36,319 32,784 105,043 43,323
Income taxes....................................... 1,634 2,657 6,663 7,139
------- ------- -------- ---------
Income before cumulative effect of accounting
change............................................. 34,685 30,127 98,380 36,184
Cumulative effect of change in accounting
for income taxes................................. - - - 900
Net income........................................... $ 34,685 $ 30,127 $ 98,380 $ 37,084
-------- -------- -------- --------
-------- -------- -------- --------
Earnings per Unit:
Income before cumulative effect of accounting
change........................................... $ .43 $ .41 $ 1.27 $ .50
Cumulative effect of change in accounting
for income taxes................................. -- -- -- .01
-------- -------- -------- --------
Net income per Unit................................ $ .43 $ .41 $ 1.27 $ .51
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average number of Units and Unit
equivalents outstanding............................ 80,393 72,862 76,703 71,496
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
ALLIANCE CAPITAL MANAGEMENT L.P.
Condensed Consolidated Statements of
Changes in Partners' Capital
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------- -----------------------
9/30/94 9/30/93 9/30/94 9/30/93
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Partners' capital - beginning of period. . . . . . . . $271,615 $131,968 $214,045 $160,626
Net income . . . . . . . . . . . . . . . . . . . . . 34,685 30,127 98,380 37,084
Capital contribution received from Alliance
Capital Management Corporation . . . . . . . . . . 883 226 2,260 1,031
Distributions to partners. . . . . . . . . . . . . . (31,233) (20,166) (91,120) (58,676)
Proceeds from sale of Units and Class B Limited
Partnership Interest . . . . . . . . . . . . . . . 100,000 50,000 150,000 50,000
Unit options exercised . . . . . . . . . . . . . . . 1,088 965 3,462 2,518
Units sold pursuant to Retention Unit Bonus Plan . . -- 12,840 -- 12,840
Excess of liabilities not assumed over assets not
acquired from ECMC . . . . . . . . . . . . . . . . -- 2,528 -- 2,528
Foreign currency translation adjustment. . . . . . . 1 226 12 763
-------- -------- -------- --------
Partners' capital - end of period. . . . . . . . . . . $377,039 $208,714 $377,039 $208,714
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
ALLIANCE CAPITAL MANAGEMENT L.P.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands, except per Unit amounts)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------
9/30/94 9/30/93
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 98,380 $ 37,084
Adjustments to reconcile net income to
net cash provided from operating activities:
Amortization and depreciation . . . . . . . . . . . . . . . . . . 50,047 36,568
Deferred compensation expense . . . . . . . . . . . . . . . . . . 3,770 2,379
Nonrecurring transaction expenses. . . . . . . . . . . . . . . . -- 15,442
Cumulative effect of change in accounting for
income taxes . . . . . . . . . . . . . . . . . . . . . . . . . -- (900)
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . 705 (1,045)
Changes in assets and liabilities:
(Increase) decrease in fees receivable from Alliance
mutual funds, other affiliated clients and
institutional clients . . . . . . . . . . . . . . . . . . . . 8,759 (3,481)
(Increase) decrease in receivables from brokers and
dealers for sale of shares of Alliance mutual funds . . . . . 65,327 (118,542)
Increase (decrease) in other receivable . . . . . . . . . . . . 1,628 (6,573)
(Increase) in deferred sales commissions. . . . . . . . . . . . (60,428) (48,779)
(Increase) decrease in prepaid expenses and
other assets. . . . . . . . . . . . . . . . . . . . . . . . . (1,886) 1,007
Increase in accounts payable and accrued expenses . . . . . . . 4,884 18,121
Increase (decrease) in payable to Alliance
mutual funds for share purchases. . . . . . . . . . . . . . . (90,771) 142,834
Increase in accrued expenses under employee benefit
plans, less deferred compensation . . . . . . . . . . . . . . 35,189 25,869
-------- --------
Net cash provided from operating activities . . . . . . . . 115,604 99,984
-------- --------
Cash flows from investing activities:
Purchase of Alliance mutual funds. . . . . . . . . . . . . . . . . (30,437) (48,905)
Proceeds from sale of Alliance mutual funds. . . . . . . . . . . . 54,137 6,101
Acquisition of Shields and Regent. . . . . . . . . . . . . . . . . (73,570) --
Increase (decrease) in other investments . . . . . . . . . . . . . (126) 1,210
Additions to furniture, equipment and
leasehold improvements, net . . . . . . . . . . . . . . . . . . (15,223) (5,756)
-------- --------
Net cash used in investing activities . . . . . . . . . . . (65,219) (47,350)
-------- --------
Cash flows from financing activities:
Proceeds from borrowings . . . . . . . . . . . . . . . . . . . . . 100,093 --
Repayment of debt. . . . . . . . . . . . . . . . . . . . . . . . . (205,176) (460)
Distributions to partners. . . . . . . . . . . . . . . . . . . . . (91,120) (58,676)
Proceeds from sale of Units and Class B Limited
Partnership Interest . . . . . . . . . . . . . . . . . . . . . . 150,000 51,284
Capital contribution received from Alliance Capital
Management Corporation. . . . . . . . . . . . . . . . . . . . . 398 398
Unit options exercised . . . . . . . . . . . . . . . . . . . . . . 3,462 2,518
-------- --------
Net cash used in financing activities. . . . . . . . . . . (42,343) (4,936)
-------- --------
Effect of exchange rate changes on cash and
cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . 12 641
-------- --------
Net increase in cash and cash equivalents. . . . . . . . . . . . . . 8,054 48,339
Cash and cash equivalents at beginning of period . . . . . . . . . . 96,315 76,787
-------- --------
Cash and cash equivalents at end of period . . . . . . . . . . . . . $104,369 $125,126
-------- --------
-------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
ALLIANCE CAPITAL MANAGEMENT L.P.
Notes to Condensed Consolidated Financial Statements
September 30, 1994
(unaudited)
1. BASIS OF PRESENTATION
The unaudited interim condensed consolidated financial statements of
Alliance Capital Management L.P. ("Partnership") included herein have been
prepared in accordance with the instructions to Form 10-Q pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of
(a) financial position at September 30, 1994, (b) results of operations for
the three months and nine months ended September 30, 1994 and 1993 and (c)
cash flows for the nine months ended September 30, 1994 and 1993, have been
made.
2. RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform to the
current period presentation.
3. ACQUISITIONS
On March 7, 1994, the Partnership completed the acquisition of the business
and substantially all of the assets of Shields Asset Management,
Incorporated ("Shields") and its wholly-owned subsidiary, Regent Investor
Services Incorporated ("Regent"), from Xerox Financial Services, Inc. for a
purchase price of approximately $74 million in cash, including $.6 million
in acquisition costs. In addition, the Partnership issued 645,160 new
Units to key employees of Shields and Regent having an aggregate value of
approximately $15 million in connection with the employees entering into
long-term employment agreements with the Partnership. The aggregate value
of these Units is being amortized as employee compensation expense ratably
over five years. The acquisition was accounted for under the purchase
method with the results of Shields and Regent included from the acquisition
date. Goodwill of $70.6 million was recorded which represents the excess
of the purchase price, including acquisition expenses, over the estimated
fair value of the net assets of the acquired business.
On July 22, 1993, the Partnership acquired the business and substantially
all of the assets of Equitable Capital Management Corporation ("ECMC"), an
indirect wholly-owned subsidiary of The Equitable Companies Incorporated
("Equitable"). The acquisition was accounted for in a manner similar to
the pooling of interests method and, accordingly, consolidated financial
information for the three months and nine months ended September 30, 1993
has been restated to include the results of operations of ECMC.
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<PAGE>
4. INTANGIBLE ASSETS
Intangible assets, consisting principally of goodwill and client files, are
being amortized on a straight line basis over their estimated useful lives
ranging from twelve to forty years. The Partnership periodically evaluates
the value or recoverability of the carrying amount of its intangible assets
utilizing forecasted undiscounted cash flows.
5. DEFERRED SALES COMMISSIONS
Sales commissions paid to financial intermediaries in connection with the
sale of shares of mutual funds managed by the Partnership ("Alliance mutual
funds") sold without a front-end sales charge are capitalized and amortized
over periods not exceeding five and one half years, which approximate the
periods of time during which the sales commissions are expected to be
recovered from distribution plan payments received from the Alliance mutual
funds and contingent deferred sales charges received from shareholders of
the Alliance mutual funds. Contingent deferred sales charges reduce
unamortized deferred sales commissions when received.
6. DEBT
During August 1994, the Partnership repaid in full senior notes aggregating
$105,000,000.
During February 1994, the Partnership established a $100,000,000 revolving
credit facility with several banks. The revolving credit facility converts
on March 31, 1997 into a term loan repayable in equal installments
quarterly through March 31, 1999. Outstanding borrowings generally bear
interest at the Eurodollar Rate plus .875% per annum through March 31, 1997
and at the Eurodollar Rate plus 1.125% per annum after conversion through
March 31, 1999. In addition, a quarterly commitment fee of .25% per annum
is paid on the average daily unused amount. The revolving credit facility
contains covenants which require the Partnership, among other things, to
meet certain financial ratios. At September 30, 1994, there were no
amounts outstanding under the facility.
Debt includes promissory notes contributed to certain investment
partnerships in the aggregate principal amount of $3,875,000 at September
30, 1994. The principal amounts of the notes will be reduced
proportionately as partners receive return of capital distributions from
the investment partnerships.
7. PARTNERS' CAPITAL
On May 6, 1994, the Partnership issued a newly created Class B Limited
Partnership Interest to The Equitable Life Assurance Society of the United
States for $50 million in cash. The Class B Limited Partnership Interest
will be converted into 2,266,288 newly issued Units during the fourth
quarter of 1994 after approval by the holders of a majority of the
outstanding Units. On July 1, 1994, the Partnership issued 2,482,030 newly
issued Units to a wholly-owned subsidiary of Oversea-Chinese Banking
Corporation Limited for $50 million in cash. On August 12, 1994, the
Partnership sold a convertible note to Banco Bilbao Vizcaya, S.A. for $50
million in cash. The note was subsequently converted into 2,482,030 newly
issued Units.
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<PAGE>
8. INCOME TAXES
The Partnership is a publicly traded partnership for Federal income tax
purposes and, accordingly, is not currently subject to Federal and state
corporate income taxes but is subject to the New York City unincorporated
business tax. Current law generally provides that certain publicly traded
partnerships, including the Partnership, will be taxable as a corporation
beginning in 1998.
Domestic corporate subsidiaries of the Partnership, which are subject to
Federal, state and local income taxes, file a consolidated Federal income
tax return and separate state and local income tax returns. Foreign
corporate subsidiaries are generally subject to taxes in the foreign
jurisdictions where they are located.
ECMC is included in the Federal income tax return of Equitable and, prior
to its acquisition by the Partnership, a Federal income tax equivalent
provision was computed on a separate return basis. In addition, ECMC filed
separate state and local income tax returns.
The provision for income taxes is comprised of (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1994 1993 1994 1993
------ ------ ----- -----
<S> <C> <C> <C> <C>
Partnership................ $1,634 $2,265 $6,663 $3,993
ECMC....................... - 392 -- 3,146
------ ------ ------ ------
$1,634 $2,657 $6,663 $7,139
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
9. NET INCOME PER UNIT
Net income per Unit is computed by reducing net income by 1% for the 1%
general partnership interest held by the General Partner and dividing the
remaining 99% by the weighted average number of Units and Unit equivalents
outstanding during each period, including Units issuable upon conversion of
the Class A and Class B Limited Partnership Interests.
10. SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest and income taxes were as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1994 1993 1994 1993
------ ------ ----- -----
<S> <C> <C> <C> <C>
Interest................... $1,788 $220 $6,801 $5,537
Income taxes............... 1,892 919 8,051 5,679
</TABLE>
The 1994 consolidated statement of cash flows does not include the issuance
by the Partnership of new Units to key employees of Shields and Regent
having an aggregate value of approximately $15 million in connection with
their entering into long-term employment agreements since this transaction
did not provide or use cash.
- 8 -
<PAGE>
11. SUBSEQUENT EVENTS
On October 20, 1994, the Board of Directors of the General Partner declared
a distribution of $32,847,000 or $.41 per Unit representing the Available
Cash Flow (as defined in the Partnership Agreement) of the Partnership for
the three months ended September 30, 1994. The distribution was paid on
November 7, 1994 to holders of record on October 31, 1994.
- 9 -
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Partnership acquired the business and substantially all of the assets of
Equitable Capital Management Corporation ("ECMC") on July 22, 1993. The
acquisition was accounted for in a manner similar to the pooling of interests
method and, accordingly, the condensed consolidated financial statements of the
Partnership and its subsidiaries for the three and nine months ended September
30, 1993 have been restated to include the results of operations of ECMC. On
March 7, 1994, the Partnership acquired the business and substantially all of
the assets of Shields Asset Management, Incorporated ("Shields") and its wholly-
owned subsidiary, Regent Investor Services, Incorporated ("Regent"), from Xerox
Financial Services, Inc. for a purchase price of approximately $74 million in
cash, including $.6 million in acquisition costs. The acquisition was accounted
for under the purchase method with the results of Shields and Regent included in
the Partnership's condensed consolidated financial statements from the
acquisition date.
THREE MONTHS ENDED SEPTEMBER 30, 1994 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1993
The Partnership recorded net income for the three months ended September 30,
1994 of $34.7 million or $.43 per Unit. This represents an increase of $4.6
million or $.02 per Unit compared to net income of $30.1 million or $.41 per
Unit for the three months ended September 30, 1993.
Assets under management by the Partnership at September 30, 1994 were
approximately $123.1 billion, an increase of $11.6 billion or 10.4% from
September 30, 1993. The increase is primarily the result of net mutual fund
sales of $6.0 billion and the acquisition of Shields and Regent, which increased
assets under management by $7.8 billion, offset partially by market depreciation
of $1.2 billion.
Revenues for the three months ended September 30, 1994 were $152.0 million, an
increase of 17.0% from the prior year period. Investment advisory and services
fees, which are based on assets under management, increased 18.0%. Investment
advisory fees from Alliance mutual funds increased by 27.0% due to higher
average assets under management, principally due to the launching of a new
closed-end fund, The Global Privatization Fund, and the acquisition of the
"wrap-free" business of Regent. Investment advisory fees from other affiliated
clients increased by 6.9% principally due to an increase in revenues from the
general accounts of The Equitable Life Assurance Society of the United States
("ELAS") and its insurance company subsidiaries. Investment advisory fees from
institutional clients increased by 10.5% due to an increase in average assets
under management resulting from the acquisition of Shields and from new account
additions.
Distribution plan fees increased 24.8% due principally to higher average load
mutual fund assets attributable to Class B and Class C Shares under the
Partnership's mutual fund distribution system described under "Capital Resources
and Liquidity". Shareholder servicing and administration fees increased 22.8%
due primarily to an increase in the number of shareholder accounts serviced by
- 10 -
<PAGE>
the Partnership and an increase in closed-end mutual fund administration fees.
Other revenues, consisting of commissions, interest and dividends, decreased
60.1% as a result of the launching of Alliance World Dollar Government II in the
third quarter of 1993 for which the Partnership earned $2.5 million in
commissions. Alliance Short-Term Multi-Market Trust accounted for approximately
4% and 8% of the Partnership's aggregate revenues during the three months ended
September 30, 1994 and 1993, respectively.
Expenses for the three months ended September 30, 1994 were $115.7 million, an
increase of 19.1% from the prior year period. Employee compensation and
benefits increased 10.9% principally due to an increase of 188 employees since
September 1993, including the addition of 84 Shields and Regent employees, and
higher incentive compensation expense resulting from increased operating
earnings. General and administrative expenses increased 14.0% principally due
to higher occupancy costs and increases in sub-advisory and administration fees
related to closed-end funds. Promotion and servicing expenses, which include
distribution plan payments to financial intermediaries for distribution of the
Partnership's mutual fund and cash management services products, amortization of
deferred sales commissions paid to brokers for the sale of Class B Shares,
advertising, promotional materials and travel and entertainment, increased
30.9%. Distribution plan payments increased 28.0% due principally to higher
average load mutual fund assets attributable to Class B and Class C Shares.
Amortization of deferred sales commissions increased by 41.9% due to continuing
sales of Class B Shares. Other promotional expenditures increased by 25.8% as a
result of costs associated with the Partnership's new mutual fund advertising
campaign and the launching of The Global Privatization Fund. Amortization of
intangibles increased 25.4% due to the amortization of goodwill associated with
the Shields and Regent acquisition.
The provision for income taxes for the three months ended September 30, 1994
decreased 38.5%. The 1993 provision reflects the income tax expense of ECMC's
operations prior to the acquisition at the historical effective income tax rate
of approximately 46.0%.
NINE MONTHS ENDED SEPTEMBER 30, 1994 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1993
The Partnership recorded net income for the nine months ended September 30, 1994
of $98.4 million or $1.27 per Unit, compared to net income of $37.1 million or
$.51 per Unit for the nine months ended September 30, 1993. Net income for the
nine months ended September 30, 1993 includes a charge of $40.8 million for
expenses incurred in connection with the acquisition of ECMC and a $900,000 or
$0.01 per Unit deferred income tax benefit resulting from the adoption of
Statement of Financial Accounting Standards No. 109 "Accounting For Income
Taxes" as of January 1, 1993. Excluding these nonrecurring items, net income
for the nine months ended September 30, 1994 increased $23.2 million or 30.9%
over net income of $75.2 million, or $1.04 per Unit, for the prior year period.
Assets under management by the Partnership at September 30, 1994 were
approximately $123.1 billion, an increase of $11.6 billion or 10.4% from
September 30, 1993. The increase is primarily the result of net mutual fund
sales of $6.0 billion and the acquisition of Shields and Regent, which increased
assets under management by $7.8 billion, offset partially by market depreciation
of $1.2 billion.
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<PAGE>
Revenues for the nine months ended September 30, 1994 were $449.4 million, an
increase of 25.7% from the prior year period. Investment advisory and services
fees, which are based on assets under management, increased 22.9%. Investment
advisory fees from Alliance mutual funds increased by 32.5% due to higher
average assets under management, principally due to the launching of The Global
Privatization Fund and the acquisition of the "wrap-free" business of Regent.
Investment advisory fees from other affiliated clients increased by 20.5%
principally due to a $2.5 million increase in performance fees. Investment
advisory fees from institutional clients increased by 12.9% due to an increase
in average assets under management resulting from the acquisition of Shields and
from new account additions.
Distribution plan fees increased 40.1% due principally to higher average load
mutual fund assets attributable to Class B and Class C Shares under the
Partnership's mutual fund distribution system described under "Capital Resources
and Liquidity". Shareholder servicing and administration fees increased 26.3%
due primarily to an increase in the number of shareholder accounts serviced by
the Partnership and an increase in closed-end mutual fund administration fees.
Other revenues, consisting of commissions, interest and dividends, decreased
19.1% as a result of lower sales of Class A mutual fund shares subject to a
conventional front-end sales charge. Alliance Short-Term Multi-Market Trust
accounted for approximately 5% and 10% of the Partnership's aggregate revenues
during the nine months ended September 30, 1994 and 1993, respectively.
Expenses for the nine months ended September 30, 1994 were $344.4 million, an
increase of 9.6% from the prior year period. Excluding the $40.8 million in
nonrecurring transaction expenses incurred in connection with the ECMC
acquisition in 1993, expenses increased 26.0% from the prior year period.
Employee compensation and benefits increased 19.1% principally due to an
increase of 188 employees since September 1993, including the addition of 84
Shields and Regent employees, and higher incentive compensation expense
resulting from increased operating earnings. Promotion and servicing expenses,
which include distribution plan payments to financial intermediaries for
distribution of the Partnership's mutual fund and cash management services
products, amortization of deferred sales commissions paid to brokers for the
sale of Class B Shares, advertising, promotional materials and travel and
entertainment, increased 47.3%. Distribution plan payments increased 44.2% due
principally to higher average load mutual fund assets attributable to Class B
and Class C Shares. Amortization of deferred sales commissions increased by
48.1% due to continuing sales of Class B Shares. Other promotional expenditures
increased by 53.9% as a result of costs associated with the Partnership's new
mutual fund advertising campaign and the launching of The Global Privatization
Fund. Amortization of intangibles increased 19.7% due to amortization of
goodwill associated with the Shields and Regent acquisition.
The effective income tax rate decreased from 16% to 6% since the 1993 provision
includes the tax effect of the nonrecurring transaction expenses increased in
connection with the 1993 ECMC acquisition that were not deductible for tax
purposes. Additionally, the income tax provision related to ECMC's operations
prior to the acquisition was calculated using a combined Federal and state
corporate statutory income tax rate of approximately 46%.
- 12 -
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
Cash provided by operating activities and proceeds from sales of newly issued
Units and a new Class B Limited Partnership Interest were the Partnership's
principal sources of working capital during the nine month period ended
September 30, 1994.
On May 6, 1994, the Partnership issued a newly created Class B Limited
Partnership Interest to ELAS for $50 million in cash. The Class B Limited
Partnership Interest will be converted into 2,266,288 newly issued Units during
the fourth quarter of 1994 after approval by the holders of a majority of the
outstanding Units. The Partnership issued 2,482,030 newly issued Units on July
1, 1994 to a wholly-owned subsidiary of Oversea-Chinese Banking Corporation
Limited for $50 million in cash. On August 12, 1994, the Partnership sold a
convertible note to Banco Bilbao Vizcaya, S.A. for $50 million in cash. The
note was subsequently converted into 2,482,030 newly issued Units. The proceeds
from these transactions were used to repay in full the Partnership's $105
million senior notes and the outstanding balance under its revolving credit
facility.
The Partnership's cash and cash equivalents increased by $8.1 million. Cash
inflows included the $50.0 million proceeds from the sale of the Class B Limited
Partnership Interest, proceeds from issuance of Units to OCBC and BBV of $50.0
million each, $115.6 million from operations and $23.7 million of net
redemptions of investments in Alliance mutual funds. These cash inflows were
partially offset by the purchase of Shields and Regent for $73.6 million in
cash, the repayment in full of the Partnership's $105.0 million senior notes,
capital expenditures of $15.2 million and cash distributions to Unitholders of
$91.1 million.
The Partnership's mutual fund distribution system (the "System") includes three
distribution options. The System permits the Alliance mutual funds to offer
investors the option of purchasing shares (a) subject to a conventional front-
end sales charge ("Class A Shares"), (b) without a front-end sales charge but
subject to a contingent deferred sales charge payable by shareholders ("CDSC")
and higher distribution fees payable by the funds ("Class B Shares"), or (c)
without either a front-end sales charge or the CDSC but with higher distribution
fees payable by the funds ("Class C Shares"). During the nine months ended
September 30, 1994, payments made to financial intermediaries in connection with
the sale of Class B Shares under the System, net of CDSC received, totaled $60.4
million.
Management believes that the Partnership's substantial equity base will enhance
access to public and private debt financing should the need arise, on attractive
terms. Increased capital availability should provide the Partnership with the
financial flexibility to take advantage of strategic growth opportunities and
global alliances, to finance capital requirements for mutual fund sales and
service technology, and for general corporate purposes.
- 13 -
<PAGE>
CASH DISTRIBUTIONS
The Partnership is required to distribute all of its Available Cash Flow, as
defined in the Partnership Agreement, to the General Partner and Unitholders
(including the holders of the Class A and Class B Limited Partnership Interests
based on Units issuable upon conversion of these Limited Partnership Interests).
Available Cash Flow and Available Cash Flow Per Unit amounts do not include
Available Cash Flow resulting from the operations of ECMC prior to the
acquisition. The Partnership's Available Cash Flow was as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Available Cash Flow (in thousands).. $32,847 $29,115 $94,309 $68,837
------- ------- ------- -------
------- ------- ------- -------
Available Cash Flow Per Unit........ $ .41 $ .40 $1.23 $1.09
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
- 14 -
<PAGE>
Part II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 2. CHANGES IN SECURITIES
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(b) Reports on Form 8-K
The Partnership filed a Current Report on Form 8-K dated August
18, 1994 reporting the issuance of a convertible note in the
principal amount of $50 million to Banco Bilbao Vizcaya, S.A.
("BBV"). The note was subsequently converted and 2,482,030 Units
were issued to BBV upon conversion of the note.
- 15 -
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALLIANCE CAPITAL MANAGEMENT L.P.
Dated: November 9, 1994 By: Alliance Capital Management
Corporation, its General Partner
By: /s/ Myles R. Itkin
------------------------------
Myles R. Itkin
Senior Vice President &
Chief Financial Officer
- 16 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 104,369
<SECURITIES> 32,852
<RECEIVABLES> 124,492
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 261,713
<PP&E> 39,683
<DEPRECIATION> 0
<TOTAL-ASSETS> 572,101
<CURRENT-LIABILITIES> 190,944
<BONDS> 4,118
<COMMON> 0
0
0
<OTHER-SE> 377,039
<TOTAL-LIABILITY-AND-EQUITY> 572,101
<SALES> 449,408
<TOTAL-REVENUES> 449,408
<CGS> 0
<TOTAL-COSTS> 331,332
<OTHER-EXPENSES> 6,263
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,770
<INCOME-PRETAX> 105,043
<INCOME-TAX> 6,663
<INCOME-CONTINUING> 98,380
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 98,380
<EPS-PRIMARY> 1.27
<EPS-DILUTED> 1.27
</TABLE>
