-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, VKtmbM/OKzDQKI/sRxN4ocMcg0aasuxClQccRmUpp/K13DEbgOtpsfqFixQAsLIL 3nJkQqoa1776zyfHYkEwJQ== 0000350797-95-000021.txt : 19950605 0000350797-95-000021.hdr.sgml : 19950605 ACCESSION NUMBER: 0000350797-95-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950430 FILED AS OF DATE: 19950602 SROS: BSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EATON VANCE CORP CENTRAL INDEX KEY: 0000350797 STANDARD INDUSTRIAL CLASSIFICATION: INVESTMENT ADVICE [6282] IRS NUMBER: 042718215 STATE OF INCORPORATION: MD FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08100 FILM NUMBER: 95544510 BUSINESS ADDRESS: STREET 1: 24 FEDERAL ST CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6174828260 10-Q 1 APR 95 10Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended April 30, 1995 Commission File No. 1-8100 EATON VANCE CORP. (Exact name of registrant as specified in its charter) MARYLAND 04-2718215 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110 (Address of principal executive offices) (Zip Code) (617) 482-8260 (Registrant's telephone number, including area code) NONE (Former name, address and former fiscal year, if changed since last record) 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 Shares outstanding as of April 30, 1995: Voting common stock - 19,360 shares Non-Voting Common Stock - 9,158,361 shares Page 1 of 26 pages PART I FINANCIAL INFORMATION -2- Consolidated Balance Sheets (unaudited)
ASSETS April 30, October 31, 1995 1994 (all figures in thousands) CURRENT ASSETS: Cash and equivalents $ 39,745 $ 24,681 Short-term investments 11,131 - Receivable for investment company shares sold 1,078 1,073 Investment adviser fees and other receivables 3,314 2,632 Refundable income taxes 7,469 - Other current assets 791 1,233 Total current assets 63,528 29,619 INVESTORS BANK & TRUST COMPANY ASSETS: Cash and equivalents 4,596 9,344 Investment securities (market value $76,104 and $86,172, respectively) 77,105 88,278 Loans, less allowance for loan losses 12,604 13,570 Accrued interest and fees receivable 11,177 9,383 Equipment and leasehold improvements, net 3,969 3,251 Other assets 2,398 3,780 Total bank assets 111,849 127,606 OTHER ASSETS: Investments: Real estate 21,853 22,173 Gold mining partnerships 1,997 3,072 Investment companies (market value at October 31, 1994 $5,702) 6,756 4,088 Other investments 3,376 4,120 Notes receivable and receivables from affiliates 3,251 3,139 Deferred sales commissions 228,443 256,326 Equipment and leasehold improvements, net 2,919 3,477 Goodwill 1,829 1,886 Total other assets 270,424 298,281 Total assets $445,801 $455,506 See notes to consolidated financial statements
-3- Consolidated Balance Sheets (unaudited) (continued)
LIABILITIES AND April 30, October 31, SHAREHOLDERS' 1995 1994 EQUITY (in thousands, except share figures) CURRENT LIABILITIES: Payable for investment company shares purchased $ 1,100 $ 1,096 Accrued compensation 4,707 8,817 Accounts payable and accrued expenses 6,328 4,539 Accrued income taxes - 1,761 Dividend payable 1,472 1,461 Current portion of mortgage notes payable 6,423 6,449 Other current liabilities 643 688 Total current liabilities 20,673 24,811 INVESTORS BANK & TRUST COMPANY LIABILITIES: Demand and time deposits 87,790 106,909 Other 5,656 5,214 Total bank liabilities 93,446 112,123 OTHER LIABILITIES: 6.22% Senior Note 50,000 50,000 Mortgage notes payable 10,157 10,311 Minority interest in consolidated subsidiary 3,765 3,113 Total other liabilities 63,922 63,424 Deferred income taxes 90,611 89,540 Commitments - - SHAREHOLDERS' EQUITY: Common stock, par value $.0625 per share- Authorized, 80,000 shares, Issued, 19,360 shares 1 1 Non-voting common stock, par value $.0625 per share - Authorized, 11,920,000 shares, Issued 9,158,361 and 9,090,394 shares, respectively 574 568 Additional paid-in capital 50,102 49,595 Notes receivable from stock option exercises (3,104) (2,511) Unrealized gain on investments 776 - Retained earnings 128,800 117,955 Total shareholders' equity 177,149 165,608 Total liabilities and shareholders' equity $445,801 $455,506 See notes to consolidated financial statements
-4- Consolidated Statements of Income (unaudited)
Three Months Ended Six Months Ended April 30, April 30, 1995 1994 1995 1994 (in thousands, except per share figures) REVENUE: Investment adviser and administration fees $20,545 $21,679 $ 41,162 $ 43,123 Distribution income 19,066 19,402 38,819 39,545 Bank fee income 14,775 10,726 26,886 19,807 Bank net interest income 1,271 1,154 2,629 2,342 Income from real estate activities 865 995 1,721 1,912 Other income 281 298 537 632 Total revenue 56,803 54,254 111,754 107,361 EXPENSES: Compensation of officers and employees 17,349 16,928 34,823 34,367 Amortization of deferred sales commissions 12,743 12,797 24,426 25,548 Other expenses 13,275 11,727 26,088 21,501 Total expenses 43,367 41,452 85,337 81,416 Operating income 13,436 12,802 26,417 25,945 OTHER INCOME (EXPENSE): Interest income 519 321 878 452 Share of partnership losses (160) (524) (1,143) (106) Interest expense (1,221) (1,430) (2,444) (2,781) Income before income taxes 12,574 11,169 23,708 23,510 Income Taxes Current: Federal 5,852 704 6,420 704 State 1,584 (157) 3,223 138 Deferred: Federal (1,528) 2,595 1,963 7,080 State (720) 389 (1,687) 1,546 Total income taxes 5,188 3,531 9,919 9,468 See notes to consolidated financial statements
-5- Consolidated Statements of Income (unaudited) (continued)
Three Months Ended Six Months Ended April 30, April 30, 1995 1994 1995 1994 (in thousands, except per share figures) Net income before cumulative effect of change in accounting for income taxes 7,386 7,638 13,789 14,042 Cumulative effect of change in accounting for income taxes - - - 1,300 Net income $ 7,386 $ 7,638 $13,789 $15,342 Earnings per share before cumulative effect of change in accounting for income taxes $0.81 $0.80 $1.51 $1.47 Cumulative effect of change in accounting for income taxes per share - - - .14 Earnings per share $0.81 $0.80 $1.51 $1.61 Dividends declared, per share $0.16 $0.15 $0.32 $0.29 Average common shares outstanding 9,176 9,574 9,154 9,552 See notes to consolidated financial statements
-6- Consolidated Statements of Cash Flows (unaudited)
Six Months Ended April 30, 1995 1994 (in thousands) Cash and equivalents (including IB&T), Beginning of period $ 34,025 $ 28,655 CASH FLOWS FROM OPERATING ACTIVITIES: Net income 13,789 15,342 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Share of net losses of partnerships 1,143 106 Deferred income taxes 276 8,626 Cumulative effect of change in accounting for income taxes - (1,300) Amortization of deferred sales commissions 24,426 25,548 Amortization of premiums on investment securities, net of accretion of discounts 470 650 Depreciation and other amortization 1,641 1,786 Payments of sales commissions (15,664) (64,947) Capitalized sales charges received 18,969 11,807 Increase (decrease) in accrued income taxes (9,230) 17 Changes in other assets and liabilities (986) (2,534) Net cash provided by (used for) operating activities $ 34,834 $ (4,899) CASH FLOWS FROM INVESTING ACTIVITIES: Investment in partnerships (58) - Additions to real estate, equipment and leasehold improvements (1,897) (1,607) Net proceeds from notes and receivables from affiliates (705) (689) Net (increase) decrease in investment companies and other investments (736) 2,853 Purchase of short-term investment (11,000) - Proceeds from maturities of investment securities 10,703 3,112 Net (increase) decrease in loans 966 (1,930) Net cash provided by (used for) investing activities $ (2,727) $ 1,739 See notes to consolidated financial statements
-7- Consolidated Statements of Cash Flows (unaudited) (continued)
Six Months Ended April 30, 1995 1994 (in thousands) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable - 107,000 Payments on notes payable (180) (82,662) Payment of 10% subordinated debentures - (14,169) Proceeds from the issuance of non-voting common stock 1,745 2,243 Dividends paid (2,932) (2,711) Repurchase of non-voting common stock (1,305) (63) Changes in demand and time deposits (19,119) (15,474) Net cash used for financing activities $(21,791) $ (5,836) Net increase (decrease) in cash and equivalents $ 10,316 $ (8,996) Cash and equivalents (including IB&T), end of period $ 44,341 $ 19,659 SUPPLEMENTAL INFORMATION: Interest paid $ 2,988 $ 2,940 Income taxes paid $ 18,752 $ 1,142 See notes to consolidated financial statements
-8- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) April 30, 1995 (1) Consolidating Financial Statements The components of the April 30, 1995 Eaton Vance Corp. consolidated balance sheet and statement of income by major business segment follow:
CONSOLIDATING BALANCE SHEET April 30, 1995 ASSETS Investment Consolidated (in thousands) Management Banking Other Eliminations Total CURRENT ASSETS: Cash and equivalents $ 40,833 $ 729 $ (1,817) $ 39,745 Short-term investments 11,131 11,131 Receivable for investment company shares sold 1,078 1,078 Investment adviser fees and other receivables 2,777 537 3,314 Refundable income taxes 7,421 48 7,469 Other current assets 262 529 791 Total current assets 63,502 1,843 (1,817) 63,528 INVESTORS BANK & TRUST COMPANY ASSETS: Cash and equivalents 4,596 4,596 Investment securities 77,105 77,105 Loans, less allowance for loan losses 12,604 12,604 Accrued interest and fees receivable 11,177 11,177 Equipment and leasehold improvements, net 3,969 3,969 Other assets 2,398 2,398 Total bank assets 111,849 111,849
-9- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) April 30, 1995 (1) Consolidating Financial Statements (continued)
CONSOLIDATING BALANCE SHEET April 30, 1995 ASSETS (continued) Investment Consolidated (in thousands) Management Banking Other Eliminations Total OTHER ASSETS: Investments: Real estate 21,853 21,853 Gold mining partnerships 1,997 1,997 Banking subsidiary 12,821 (12,821) - Other subsidiaries 14,913 (14,913) - Investment companies 6,756 6,756 Other investments 1,799 1,577 3,376 Notes receivable and receivables from affiliates 162 3,251 (162) 3,251 Deferred sales commissions 228,090 353 228,443 Equipment and leasehold improvements, net 2,861 58 2,919 Goodwill 1,823 6 1,829 Intercompany receivable (payable) (2,551) 2,551 - Total other assets 266,674 31,646 (27,896) 270,424 Total assets $330,176 $111,849 $33,489 $(29,713) $445,801
-10- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) April 30, 1995 (1) Consolidating Financial Statements (continued)
CONSOLIDATING BALANCE SHEET April 30, 1995 LIABILITIES AND SHAREHOLDERS' EQUITY Investment Consolidated (in thousands) Management Banking Other Eliminations Total CURRENT LIABILITIES: Payable for investment company shares purchased $ 1,100 $ 1,100 Accrued compensation 4,707 4,707 Accounts payable and accrued expenses 6,186 142 6,328 Dividend payable 1,472 1,472 Current portion of mortgage notes payable 6,423 6,423 Other current liabilities 643 643 Total current liabilities 14,108 6,565 20,673 INVESTORS BANK & TRUST COMPANY LIABILITIES: Demand and time deposits 89,607 (1,817) 87,790 Other 5,656 5,656 Total bank liabilities 95,263 (1,817) 93,446 OTHER LIABILITIES: 6.22% Senior Note 50,000 50,000 Note payable to affiliate 162 (162) - Mortgage notes payable 10,157 10,157 Minority interest in consolidated subsidiary 3,765 3,765 Total other liabilities 50,000 10,319 3,603 63,922
-11- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) April 30, 1995 (1) Consolidating Financial Statements (continued)
CONSOLIDATING BALANCE SHEET (continued) April 30, 1995 LIABILITIES AND SHAREHOLDERS' EQUITY Investment Consolidated (in thousands) Management Banking Other Eliminations Total Deferred income taxes 88,447 2,164 90,611 Commitments - Shareholders' equity 177,621 16,586 14,441 (31,499) 177,149 Total liabilities & shareholders' equity $330,176 $111,849 $33,489 $(29,713) $445,801
-12- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) April 30, 1995 (1) Consolidating Financial Statements (continued)
CONSOLIDATING STATEMENT OF INCOME Six months ended (in thousands) April 30, 1995 Investment Consolidated Management Banking Other Eliminations Total REVENUE: Investment adviser and administration fees 40,264 898 41,162 Distribution income 38,819 38,819 Bank fee income 27,143 (257) 26,886 Bank net interest income 2,562 67 2,629 Income from real estate activities 2,475 (754) 1,721 Other income 444 93 537 Total revenue 79,527 29,705 3,466 (944) 111,754 EXPENSES: Compensation of officers and employees 18,698 15,781 344 34,823 Amortization of deferred sales commissions 24,426 24,426 Other expenses 14,179 9,238 3,016 (345) 26,088 Total expenses 57,303 25,019 3,360 (345) 85,337 Operating income 22,224 4,686 106 (599) 26,417 OTHER INCOME (EXPENSE): Interest income 795 150 (67) 878 Share of partnership income (losses) 46 (1,189) (1,143) Interest expense (1,699) (745) (2,444) Income (loss) before income taxes 21,366 4,686 (1,678) (666) 23,708
-13- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) April 30, 1995 (1) Consolidating Financial Statements (continued)
CONSOLIDATING STATEMENT OF INCOME (continued) Six months ended (in thousands) April 30, 1995 Investment Consolidated Management Banking Other Eliminations Total Income taxes 8,390 1,753 (224) 9,919 Net income (loss) $12,976 $ 2,933 $(1,454) $ (666) $ 13,789
-14- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) April 30, 1995 (2) Investment in VenturesTrident, L.P. ("VT") and VenturesTrident II, L.P. ("VT II") The balance sheets of VT and VT II at April 30, 1995 and October 31, 1994 follow:
VenturesTrident, L.P. (unaudited) April 30, October 31, 1995 1994 (in thousands) ASSETS: Cash and short-term investments $ 73 $ 144 Investments, at fair value 5,174 7,437 Other assets 100 110 Total $ 5,347 $ 7,691 LIABILITIES AND PARTNERS' CAPITAL: Liabilities $ 1,935 $ 1,891 Partners' capital 3,412 5,800 Total $ 5,347 $ 7,691
VenturesTrident II, L.P. (unaudited) April 30, October 31, 1995 1994 (in thousands) ASSETS: Cash and short-term investments $ 351 $ 471 Investments, at fair value 39,437 47,985 Other assets 170 118 Total $39,958 $48,574 LIABILITIES AND PARTNERS' CAPITAL: Liabilities $ 1,860 $ 1,749 Partners' capital 38,098 46,825 Total $39,958 $48,574
For the six months ended April 30, 1995 and 1994, the unaudited operating results of VT reflect net income (losses) of ($2,388,000) and $697,000, respectively, including realized and unrealized gains (losses) on investments of ($2,263,000) and $873,000, respectively. For the six months ended April 30, 1995 and 1994, the unaudited operating results of VT II reflect net income (losses) of ($8,727,000) and $2,948,000, respectively, including realized and unrealized gains (losses) on investments of ($7,816,000) and $3,946,000, respectively. -15- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) April 30, 1995 (2) Investment in VenturesTrident, L.P. ("VT") and VenturesTrident II, L.P. ("VT II") (continued) For the six months ended April 30, 1995 and 1994, the Company's share of the net income (losses) of VT and VT II as accounted for under the equity method, and allocated pursuant to the terms of the partnerships' agreements, was ($1,075,000) and $680,000, respectively. At April 30, 1995, the Company's investment in VT and VT II approximated its share of the partners' capital of each partnership. In January 1994, VT 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 the six months ended April 30, 1994 excludes the effect of this non-cash investing activity. At April 30, 1995, all but 14,000 of these shares were sold. (3) Non-Voting Common Stock Options Options to subscribe to shares of non-voting common stock are summarized as follows:
Shares Under Option Option Price Range 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 Exercised (104,450) 8.75 - 27.25 Granted 132,300 27.75 - 30.525 Cancelled/Expired - - Balance, April 30, 1995 760,598 $ 8.75 - 34.00
At April 30, 1995, options for 462,498 shares were exercisable. Options for 298,100 additional shares will become exercisable over the next four years. (4) Net Capital Requirements Two subsidiaries of the Company are subject to the Securities and Exchange Commission uniform net capital rule (Rule 15c3-1), requiring such subsidiaries to maintain a certain level of net capital (as defined). For purposes of this rule, the subsidiaries had net capital of $30,665,000 and $193,000, respectively, at April 30, 1995, which exceeded the net capital requirements of $217,000 and $5,000, respectively, as of that date. -16- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) April 30, 1995 (5) Equipment and Leasehold Improvements Equipment and leasehold improvements (including IB&T) at April 30, 1995 and October 31, 1994 follow:
April 30, October 31, 1995 1994 (in thousands) At Cost: Furniture and equipment $13,542 $13,036 Leasehold improvements 1,051 815 Total 14,593 13,851 Less accumulated depreciation 7,705 7,123 Net book value $ 6,888 $ 6,728
(6) Real Estate Investments Real estate investments held at April 30, 1995 and October 31, 1994 follow:
April 30, October 31, 1995 1994 (in thousands) Buildings $27,540 $27,347 Land 2,463 2,465 Total 30,003 29,812 Less: Accumulated depreciation 7,966 7,510 Net book value 22,037 22,302 Share of accumulated losses in excess of partnership interest (184) (129) Total $21,853 $22,173
(7) Investment Securities The Company adopted Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity Securities", effective November 1, 1994. SFAS No. 115 requires that certain investments in debt and equity securities be classified as trading, available-for-sale or held-to-maturity. Securities classified as trading are to be reported at fair value with the corresponding unrealized gain or loss included in income. Securities classified as available-for-sale are to be reported at fair value with the corresponding unrealized gain or loss included as a separate component of shareholders' equity. Securities classified as held-to-maturity are to be recorded at amortized cost. -17- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) April 30, 1995 (7) Investment Securities (continued) Securities classified as available-for-sale are included in the following balance sheet categories at April 30, 1995 (in thousands):
Gross Gross Estimated unrealized unrealized fair value gains losses Cost Current Assets: Short-term investments $11,131 $ 131 $ - $11,000 Investments: Investment companies 6,756 2,072 159 4,843 Other investments 1,103 - 473 1,576 Total $18,990 $2,203 $ 632 $17,419
Securities classified as held-to-maturity are included in the following balance sheet category at April 30, 1995 (in thousands):
Gross Gross Estimated unrealized unrealized Amortized fair value gains losses cost Investment securities: U.S. Treasury securities $65,076 $ - $ 606 $65,682 Mortgage-backed securities 11,028 6 401 11,423 Total $76,104 $ 6 $1,007 $77,105
The contractual maturities of debt securities held-to-maturity at April 30, 1995 follow (in thousands):
Estimated Amortized fair value cost Due within one year $19,968 $20,046 Due after one year through five years 45,108 45,636 Mortgage-backed securities 11,028 11,423 Total $76,104 $77,105
The adoption of SFAS No. 115 resulted in an increase in shareholders' equity, net of applicable taxes, of $776,000 through April 30, 1995. Prior year's financial statements have not been restated to reflect the change in accounting principle. -18- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) April 30, 1995 (8) Legal Proceedings The Company was informed on January 13, 1995, that a National Association of Securities Dealers (NASD) arbitration panel had awarded a former wholesaler for the firm $0.6 million in damages and an additional $1.2 million as punitive damages in response to his claim for wrongful termination of employment. At January 31, 1995, the Company accrued a liability of $2.0 million for these damages. The Company is examining all possible legal steps to overturn the decision. (9) Income Taxes As of October 31, 1994, the Company had a remaining operating loss carryforward of approximately $25 million that can be carried forward to offset future taxable income through 2008. Additionally, the Company has an alternative minimum tax credit carryforward of approximately $2.3 million which can be carried forward to offset future regular tax liabilities through 2006. (10) Earnings Per Common and Common Equivalent Share Earnings per share for the six months ended April 30, 1995 are based upon the weighted average number of common and non-voting common shares outstanding of 9,154,000. Earnings per share assuming primary and full dilution have not been presented because the dilutive effect is immaterial. Earnings per share for the six months ended April 30, 1994 are based upon the weighted average number of common, non-voting common and non-voting common equivalent shares outstanding of 9,552,000. Earnings per share assuming full dilution have not been presented because the dilutive effect is immaterial. (11) Employee Benefit Plans - Stock Purchase Plan On January 6, 1995, the Board of Directors of the Company reserved an additional 100,000 shares for issuance under the 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 April 30, 1995, 297,076 shares of the total 412,000 shares reserved have been issued pursuant to this plan. (12) Certain prior year amounts have been reclassified to conform to current year presentation. (13) Opinion of Management In the opinion of management, the unaudited consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary to present fairly the results for the interim periods. -19- ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS: The Company's largest sources of revenues are investment adviser fees and distribution fees received from the Eaton Vance funds and separately managed accounts. Such fees are generally based on the net asset value of the investment portfolios managed by the Company and fluctuate with changes in the total value of the assets under management. Bank fee income, also a significant source of revenue, is dependent upon assets custodied and administered by Investors Bank & Trust Company (IB&T). The Company's expenses other than the amortization of deferred sales commissions include primarily employee compensation, occupancy costs, service fees and other marketing costs. QUARTER ENDED APRIL 30, 1995 TO QUARTER ENDED APRIL 30, 1994: Assets under management of $15.1 billion on April 30, 1995, were 2 percent lower than the $15.4 billion reported a year earlier. Market appreciation and reinvested dividends have contributed to the stability of the Company's assets under management, despite the overall decline in mutual fund industry sales. Although mutual fund sales of $0.4 billion in the second quarter of 1995 were significantly lower than the $0.9 billion reported in the second quarter of 1994, monthly net sales have been steadily improving since December, 1994. Redemptions were $0.5 billion in both the second quarter of 1995 and the second quarter of 1994. Total revenue increased $2.5 million to $56.8 million in the second quarter of 1995 from $54.3 million in the second quarter of 1994. Investment adviser and distribution fees decreased 4 percent in the second quarter of 1995 to $39.6 million from $41.1 million a year earlier. The decrease in investment adviser and distribution fees can be primarily attributed to lower average assets under management. The decrease in distribution fees was partially offset by an increase in contingent deferred sales charges received on early redemptions. Bank fee income was a significant contributor to revenue growth in the second quarter of 1995, increasing 38 percent to $14.8 million from $10.7 million a year earlier. The increase in bank fee income can be partially attributed to the sale of part of IB&T's unit investment trust servicing to The Bank of New York. The remainder of the increase can be attributed to an increase in the assets custodied and administered by IB&T. These assets totalled $77.0 billion at April 30, 1995, an increase of $11.9 billion over April 30, 1994. Total expenses increased $1.9 million to $43.4 million in the second quarter of 1995. Compensation expense increased by only 2 percent, despite significant increases in personnel at IB&T in comparison with the prior year. The overall stability of the average dollar value of assets in spread commission funds resulted in a decrease in the amortization of deferred sales commissions of less than 1 percent. Other expenses rose a total of $1.6 million. The Company's two gold mining partnerships, VenturesTrident, L.P. and VenturesTrident II, L.P., contributed losses of $76,000 for the second quarter of 1995 and $57,000 for the second quarter of 1994. These losses resulted primarily from marking to market the investments held by the two -20- ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) gold mining partnerships. After accounting for management fees, operating expenses and income taxes, the Company's gold mining operations contributed a loss of $0.02 per share in the second quarter of 1995 and a gain of $0.08 per share in the second quarter of 1994. The termination of VenturesTrident, L.P., the first of the two gold mining partnerships offered by the Company, is expected to take place late in fiscal 1995. Net income of the Company amounted to $7.4 million in the second quarter of 1995 compared to $7.6 million in the second quarter of 1994. Earnings per share were $.81 and $.80 for the second quarters of 1995 and 1994, respectively. SIX MONTHS ENDED APRIL 30, 1995 TO SIX MONTHS ENDED APRIL 30, 1994: Mutual fund sales for the first half of 1995 of $0.6 billion were 74 percent below the record $2.4 billion reported in the first half of 1994. Redemptions of $1.1 billion in the first half of 1995 were 22 percent above the $0.9 billion in the first half of 1994. Total revenue increased $4.4 million to $111.8 million in the first half of 1995. Investment adviser and distribution fees decreased by $2.7 million in the first half of 1995 to $80.0 million from $82.7 million a year earlier. The decrease in investment adviser and distribution fees can be attributed primarily to lower average assets under management. The impact of the decrease in distribution fees was partially offset by an increase in contingent deferred sales charges received on early redemptions. Total expenses increased $3.9 million to $85.3 million in the first half of 1995. Compensation expense of $34.8 million was consistent with the prior year's expense of $34.4 million, despite significant increases in personnel at IB&T. A decrease in the average dollar value of assets in spread commission funds resulted in a decrease in the amortization of deferred sales commissions of $1.1 million. Other expenses rose a total of $4.6 million, due in part to the accrual of an National Association of Securities Dealers (NASD) arbitration panel award of $2.0 million in the first quarter. The Company is currently examining all possible legal steps to overturn the arbitration panel's decision. The Company's two gold mining partnerships contributed a loss of $1.1 million during the first half of 1995, in comparison with a gain of $0.7 million during the first half of 1994. This loss resulted primarily from marking to market the investments held by the two gold mining partnerships. After accounting for management fees, operating expenses and income taxes, the Company's gold mining operations contributed a loss of $0.12 per share in the first half of 1995 and a gain of $0.04 per share in the first half of 1994. Net income of the Company amounted to $13.8 million in the first half of 1995, compared to $15.3 million in the first half of 1994. Net income for the first half of 1994 included a gain of $1.3 million associated with the implementation of Statement of Financial Accounting Standards (SFAS) No. 109 effective November 1, 1993. Earnings per share were $1.51 and $1.47 for the first halves of 1995 and 1994, respectively, excluding the $.14 per share impact of the change in accounting for income taxes in 1994. -21- ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Total assets, excluding bank assets, increased in the second half of 1995 to $334.0 million from $327.9 million at October 31, 1994. The increase can be primarily attributed to an increase in cash, cash equivalents and short-term investments of $26.2 million and an increase in refundable income taxes of $7.5 million, net of a decrease in deferred sales commissions of $27.9 million. The decrease in deferred sales commissions can be attributed primarily to redemptions in excess of new sales in the first half of 1995. Total IB&T assets decreased by $15.8 million to $111.9 million in the first half of 1995. The net increase in investments in investment companies and other investments of $1.9 million can be attributed primarily to the adoption of Statement of Financial Accounting Standards (SFAS) No. 115 effective November 1, 1994. SFAS No. 115 requires that investment securities classified as "available-for-sale" be carried at fair value on the Company's balance sheet. The unrealized holding gains and losses for these securities are excluded from earnings and reported as a separate component of shareholders' equity, net of applicable taxes, until realized. LIQUIDITY AND CAPITAL RESOURCES: In the first half of 1995, retained earnings of $10.8 million, net proceeds of $1.1 million from the issuance of new stock to employees under stock purchase and stock option plans and the $0.8 million effect of the adoption of SFAS No. 115 effective November 1, 1994, contributed to the increase in the Company's consolidated shareholders' equity from $165.6 million at the end of fiscal 1994 to $177.1 million at April 30, 1995. These contributions were offset by the use of $1.3 million to repurchase 50,000 shares of the Company's stock on the open market at an average price per share of $26.00. The Company's primary sources of cash flows from operating activities were net income of $13.8 million and capitalized sales charges received on early redemption of spread-commission funds of $19.0 million, offset by the payment of sales commissions of $15.7 million. In the first six months of 1995, the primary use of capital was for the commission payments associated with the sales of spread-commission mutual funds, which were financed entirely by cash flows from operating activities of $34.8 million. The Company anticipates that the primary use of cash will continue to be the payment of sales commissions on sales of the Company's spread-commission funds and anticipates funding the payment of these commissions with cash flows generated from operating activities and, if necessary, with borrowings. At April 30, 1995, the Company, excluding IB&T, had $50.9 million in cash, cash equivalents and short-term investments and no borrowings under its $75.0 million bank credit facility. -22- ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) OTHER MATTERS: The Company has begun to explore the feasibility of distributing its 77.3% interest in IB&T to the Company's shareholders. A public offering of additional shares to increase the capital of IB&T in conjunction with the distribution is also being considered. The purpose of the distribution and public offering would be to remove from IB&T the constraint of the Competitive Equality Banking Act of 1987 (CEBA), which limits asset growth to seven percent per year, and to enhance the opportunities for IB&T's global custody and administrative services by making it an independent public company. Such a transaction would require the approval of Federal and Massachusetts banking authorities as well as a favorable ruling from the Internal Revenue Service. The Company is also exploring avenues to expand its existing relationship with Lloyd George Management (B.V.I.) Limited to increase Eaton Vance Corp.'s portfolio of international equity funds. -23- PART II OTHER INFORMATION Item 1. Legal Proceedings From time to time, the Company is a party to various employment-related claims, including claims of discrimination, before federal, state and local administrative agencies and courts. The Company vigorously defends itself against these claims. In the opinion of management, after consultation with counsel, it is unlikely that any adverse determination in one or more pending employment-related claims would have a material adverse effect on the Company's financial position or results of operations. -25- SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EATON VANCE CORP. (Registrant) DATE: June 2, 1995 /s/William M. Steul (Signature) William M. Steul Chief Financial Officer DATE: June 2, 1995 /s/John P. Rynne (Signature) John P. Rynne Corporate Controller -26- EX-27 2
5 0000350797 EATON VANCE CORP. 1000 3-MOS OCT-31-1995 APR-30-1995 39745 11131 4392 0 0 63528 2919 0 333952 20673 0 575 0 0 176574 333952 0 82239 0 0 60318 0 2444 19022 8166 10856 0 0 0 10856 0 0
EX-27 3
9 0000350797 EATON VANCE CORP. 1000 3-MOS OCT-31-1995 APR-30-1995 4596 0 0 0 0 77105 0 12604 0 111849 87790 0 5656 0 0 0 0 16586 111849 26886 0 0 0 0 0 2629 0 0 25019 4686 4686 0 0 2933 0 0 0 0 0 0 0 0 0 0 0 0 0 0
EX-27 4
CT 0000350797 EATON VANCE CORP. 1000 3-MOS OCT-31-1995 APR-30-1995 445801 575 0 0 176574 445801 111754 9919 13789 0 0 0 13789 1.51 1.51
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