-----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, XFBBbBWCezhehnT9Z5itZSSOhnp0Xf1Tb6gZGQGT5ekc4ofvUIF4OchEP0A6ivi0 CCvwaeHGBoD6+H60c2J1hQ== 0000350797-94-000027.txt : 19940920 0000350797-94-000027.hdr.sgml : 19940920 ACCESSION NUMBER: 0000350797-94-000027 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940731 FILED AS OF DATE: 19940914 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: EATON VANCE CORP CENTRAL INDEX KEY: 0000350797 STANDARD INDUSTRIAL CLASSIFICATION: 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: 94549021 BUSINESS ADDRESS: STREET 1: 24 FEDERAL ST CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6174828260 10-Q 1 JULY 94 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 July 31, 1994 Commission File No. 1-8100 EATON VANCE CORP. (Exact name of registrant as specified in its charter) MARYLAND 04-2718215 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110 (Address of principal executive offices) (Zip Code) (617) 482-8260 Registrant's telephone number, including area code NONE (Former name, address and former fiscal year, if changed since last record) Shares outstanding as of July 31, 1994: Voting common stock - 19,360 shares Non-Voting Common Stock - 9,094,537 shares Indicate by check-mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Page 1 of 21 pages PART I FINANCIAL INFORMATION -2- Consolidated Balance Sheets (unaudited)
ASSETS July 31, October 31, 1994 1993 (all figures in thousands) CURRENT ASSETS: Cash and equivalents $ 13,510 $ 12,414 Receivable for investment company shares sold 782 3,007 Investment adviser fees and other receivables 2,641 2,923 Other current assets 1,531 1,390 Total current assets 18,464 19,734 INVESTORS BANK & TRUST COMPANY ASSETS: Cash and equivalents 4,880 16,241 Investment securities (market value $74,444 and $82,404, respectively) 75,391 80,206 Loans, less allowance for possible loan losses 12,913 10,221 Accrued interest and fees receivable 7,949 5,668 Equipment and leasehold improvements, net 3,321 3,010 Other assets 4,745 4,838 Total bank assets 109,199 120,184 OTHER ASSETS: Investments - Real estate 21,904 22,448 VenturesTrident, L.P. and VenturesTrident II, L.P. 2,732 6,924 Investment companies (market value $5,427 and $5,025, respectively) 3,880 3,377 Other investments 3,879 4,154 Notes receivable & receivables from affiliates 3,189 3,381 Deferred sales commissions 263,628 240,017 Property and equipment, net 3,786 3,329 Goodwill 1,914 1,999 Total other assets 304,912 285,629 Total assets $432,575 $425,547 See notes to consolidated financial statements
-3- Consolidated Balance Sheets (unaudited) (continued)
LIABILITIES AND July 31, October 31, SHAREHOLDERS' 1994 1993 EQUITY (all figures in thousands) CURRENT LIABILITIES: Payable for investment company shares purchased $ 796 $ 3,073 Accrued compensation 6,294 8,626 Accounts payable and accrued expenses 4,986 4,046 Accrued income taxes 6,679 1,443 Dividend payable 1,371 1,285 Other current liabilities 646 603 Total current liabilities 20,772 19,076 INVESTORS BANK & TRUST COMPANY LIABILITIES: Demand and time deposits 90,636 104,851 Other 4,159 3,624 Total bank liabilities 94,795 108,475 OTHER LIABILITIES: 6.22% Senior note due 2004 50,000 - Note payable to unaffiliated banks 4,850 42,300 Mortgage notes payable 16,505 16,759 10% subordinated debentures - 14,169 Minority interest in consolidated subsidiaries 2,877 2,340 Total other liabilities 74,232 75,568 Deferred income taxes 83,607 77,128 Commitments - - SHAREHOLDERS' EQUITY: Common stock, par value $.0625 per share- Authorized, 80,000 shares, Issued, 19,360 shares 1 1 Non-voting common stock, par value $.0625 per share-Authorized, 11,920,000 shares, Issued 9,094,537 and 9,134,218 shares, respectively 570 571 Additional paid-in capital 49,949 52,845 Notes receivable from stock sales (2,469) (1,804) Retained earnings 111,118 93,687 Total shareholders' equity 159,169 145,300 Total liabilities and shareholders' equity $432,575 $425,547 See notes to consolidated financial statements
-4- Consolidated Statements of Income (unaudited)
Three Months Ended Nine Months Ended July 31, July 31, 1994 1993 1994 1993 (in thousands, except per share figures) INCOME: Investment adviser & administration fees $21,276 $19,142 $64,399 $54,877 Distribution income 20,087 18,558 59,632 50,278 Bank fee income 11,214 8,201 31,021 23,868 Bank net interest income 1,160 1,265 3,502 3,283 Real estate, oil and gas & other income 1,077 1,378 3,621 3,829 Total income 54,814 48,544 162,175 136,135 EXPENSES: Compensation of officers and employees 15,268 15,279 49,635 44,411 Amortization of deferred sales commissions 13,797 10,929 39,345 29,709 Other expenses 11,704 9,822 33,205 26,913 Total expenses 40,769 36,030 122,185 101,033 Operating income 14,045 12,514 39,990 35,102 OTHER INCOME (EXPENSE): Interest earned 144 147 596 548 Share of partnership income (loss), etc. (1,341) 6,164 (1,447) 7,009 Interest expense (1,321) (1,036) (4,102) (3,746) Income before income taxes 11,527 17,789 35,037 38,913 See notes to consolidated financial statements
-5- Consolidated Statements of Income (unaudited) (continued)
Three Months Ended Nine Months Ended July 31, July 31, 1994 1993 1994 1993 (in thousands, except per share figures) Income taxes: Currently payable- Federal 4,442 177 5,149 949 State 1,772 21 1,910 290 Deferred- Federal ( 405) 5,254 6,672 11,783 State ( 439) 1,055 1,107 2,501 Total income taxes 5,370 6,507 14,838 15,523 Net income before cumulative effect of change in accounting for income taxes 6,157 11,282 20,199 23,390 Cumulative effect of change in accounting for income taxes - - 1,300 - Net income $ 6,157 $11,282 $21,499 $23,390 Earnings per share before cumulative effect of change in accounting for income taxes $0.65 $1.19 $2.11 $2.72 Cumulative effect of change in accounting for income taxes per share - - $0.14 - Earnings per share $0.65 $1.19 $2.25 $2.72 Dividends declared, per share $0.15 $0.12 $0.44 $0.35 Average common shares outstanding 9,464 9,496 9,536 8,616 See notes to consolidated financial statements
-6- Consolidated Statements of Cash Flows (unaudited)
Nine Months ended July 31, 1994 1993 (in thousands) Cash and equivalents (including IB&T), Beginning of period................................. $ 28,655 $ 9,535 CASH FLOWS FROM OPERATING ACTIVITIES: Net income........................................... $ 21,499 $ 23,390 Adjustments to reconcile net income to net cash provided by (used for) operating activities-- Share of net (income) loss of partnerships........... 703 (7,336) Deferred income taxes................................ 7,779 14,537 Cumulative effect of change in accounting principle.. (1,300) - Amortization of deferred sales commissions........... 39,144 29,389 Depreciation and other amortization.................. 3,739 3,090 Payments of sales commissions........................ (80,635) (100,158) Capitalized sales charges received................... 18,112 13,017 Change in refundable income taxes.................... - 4,030 Changes in other assets and liabilities.............. 3,160 (4,629) Net cash provided by (used for) operating activities $ 12,201 $(24,670) CASH FLOWS FROM INVESTING ACTIVITIES: Distributions from (investment in) partnerships...... $ ( 252) $ (75) Additions to real estate, property and equipment..... (2,548) (2,409) Net (increase) decrease in notes and other receivables.......................................... (473) 349 Net (increase) decrease in investment companies and other investments................................... (228) 142 Proceeds from sales and maturities of investments.... 6,680 1,667 Purchases of investment securities................... - (25,726) Decrease in federal funds sold....................... - 16,000 Net increase in loans................................ (2,692) (3,208) Net cash provided by investing activities.......... $ 487 $(13,260) See notes to consolidated financial statements
-7- Consolidated Statements of Cash Flows (unaudited) (continued)
Nine Months ended July 31, 1994 1993 (in thousands) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable.......................... $119,150 $ 68,900 Payments on notes payable............................ (106,841) (87,037) Payment of 10% subordinated debentures............... (14,169) Proceeds from the issuance of non-voting common stock 2,918 47,125 Dividends paid....................................... (3,982) (2,773) Repurchase of non-voting common stock................ (5,814) (791) Changes in demand and time deposits.................. (14,215) 27,013 Net cash provided by (used for) financing activities $(22,953) $ 52,437 Net increase (decrease) in cash and equivalents..... $(10,265) $ 14,507 Cash and equivalents (including IB&T), end of period. $ 18,390 $ 24,042 NONCASH INVESTING ACTIVITY: Distribution of securities from gold mining partnership......................................... $ 3,815 $ - SUPPLEMENTAL INFORMATION: Interest paid........................................ $ 3,684 $ 4,035 Income taxes paid (refunded)......................... $ 2,468 $ (2,803) See notes to consolidated financial statements
-8- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) July 31, 1994 (1) Consolidating Financial Statements The components of the July 31, 1994 Eaton Vance Corp. consolidated balance sheet and statement of income by major business segment follow: BALANCE SHEET July 31, 1994
ASSETS Investment Real Mining Consolidated Management Banking Estate Oil&Gas Eliminations Total -------------------------(in thousands)------------------------- CURRENT ASSETS: Cash and equivalents $ 14,617 $ 442 $ 183 ($ 1,732) $ 13,510 Receivables and other current assets 4,448 838 565 ( 897) 4,954 Total current assets 19,065 1,280 748 ( 2,629) 18,464 IB&T assets 109,199 109,199 OTHER ASSETS: Investments- Real estate 21,904 21,904 VenturesTrident,L.P. & VenturesTrident II, L.P. 2,732 2,732 Investments in and advances to Northeast Properties, Inc. 5,718 ( 5,718) Investors Bank & Trust Co. 9,795 ( 9,795) Marblehead Energy Corp. 188 ( 188) Mining related subsidiaries 6,481 ( 6,481) Investment companies 3,880 3,880 Other investments 1,791 2,088 3,879 Notes and other receivables 320 2,869 3,189 Deferred sales commissions 263,295 333 263,628 Property & equipment 3,708 1 77 3,786 Goodwill 1,904 10 1,914 Intercompany receivable (payable) 2,693 ( 204) ( 2,489) Total assets $ 315,825 $ 109,199 $ 26,541 $ 8,310 ($27,300) $ 432,575
-9- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) July 31, 1994 Consolidating Financial Statements (Continued)
BALANCE SHEET (continued) LIABILITIES AND SHAREHOLDER'S EQUITY July 31, 1994 Investment Real Mining Consolidated Management Banking Estate Oil&Gas Eliminations Total -------------------------(in thousands)---------------------------- CURRENT LIABILITIES: Payable for investment company shares purchased $ 796 $ 796 Accrued compensation 6,294 6,294 Accounts payable and accrued expenses 4,783 155 48 4,986 Accrued income taxes 5,578 ( 7) 1,108 6,679 Dividend payable 1,371 1,371 Other current liabilities 1,207 336 ( 897) 646 Total current liabilities 20,029 484 1,156 ( 897) 20,772 IB&T liabilities 96,527 ( 1,732) 94,795 OTHER LIABILITIES: 6.22% Senior Note due March 1, 2004 50,000 50,000 Note payable to unaffiliated banks 4,850 4,850 Mortgage notes payable 16,505 16,505 Minority interest in consolidated subsidiary 2,877 2,877 Total other liabilities 54,850 16,505 2,877 74,232 Deferred income taxes 82,254 1,142 211 83,607 Total shareholders' equity 158,692 12,672 8,410 6,943 ( 27,548) 159,169 Total liabilities & shareholders' equity $315,825 $109,199 $26,541 $8,310 ($27,300) $432,575 -10- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) July 31, 1994 Consolidating Financial Statements (Continued)
CONSOLIDATED STATEMENT OF INCOME July 31, 1994 Investment Real Mining Consolidated Management Banking Estate Oil&Gas Eliminations Total --------------------------(in thousands)-------------------------- INCOME: Investment adviser and administration fees $ 62,786 $ 1,613 $ 64,399 Distribution income 59,632 59,632 Bank fee income 31,437 ( 416) 31,021 Bank net interest income 3,434 68 3,502 Real estate, oil & gas and other income 688 3,943 137 ( 1,147) 3,621 Total income 123,106 34,871 3,943 1,750 ( 1,495) 162,175 EXPENSES: Compensation of officers and employees 29,099 19,940 448 148 49,635 Amortization of deferred sales commissions 39,345 39,345 Other expenses 18,783 11,237 2,661 1,536 ( 1,012) 33,205 Total expenses 87,227 31,177 3,109 1,684 ( 1,012) 122,185 Operating income (loss) 35,879 3,694 834 66 ( 483) 39,990 OTHER INCOME (EXPENSE): Interest earned 418 45 201 ( 68) 596 Share of partnership income (loss), etc. 78 ( 75) ( 1,450) ( 1,447) Interest expense ( 3,002) ( 1,100) ( 4,102) Income before income taxes 33,373 3,694 ( 296) ( 1,183) ( 551) 35,037
-11- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) July 31, 1994 Consolidating Financial Statements (Continued)
CONSOLIDATING STATEMENT OF INCOME (continued) Nine months ended July 31, 1994 Investment Real Mining Consolidated Management Banking Estate Oil&Gas Eliminations Total -------------------------(in thousands)----------------------------- Income taxes 13,756 1,274 ( 120) ( 72) 14,838 Net income (loss), before cumulative effect of change in accounting for income taxes 19,617 2,420 ( 176) ( 1,111) ( 551) 20,199 Cumulative effect of change in accounting for income taxes 1,374 129 ( 203) 1,300 Net income (loss) $ 20,991 $ 2,420 ($ 47) ($ 1,314) ($ 551) $ 21,499
-12- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) July 31, 1994 (2) Investment in VenturesTrident, L.P. ("V.T.") and VenturesTrident II, L.P. ("V.T.II") The balance sheets of V.T. and V.T.II at July 31, 1994, and October 31, 1993 follow:
VenturesTrident, L.P. (unaudited) July 31, October 31, 1994 1993 (in thousands) ASSETS: Cash and short-term investments............ $ 127 $ 280 Investments, at fair value................. 6,012 6,702 Other assets............................... 1,596 80 Total................................ $ 7,735 $ 7,062 LIABILITIES AND PARTNERS' CAPITAL: Liabilities................................ $ 1,896 $ 1,909 Partners' capital.......................... 5,839 5,153 Total................................ $ 7,735 $ 7,062
VenturesTrident II, L.P. (unaudited) July 31, October 31, 1994 1993 (in thousands) ASSETS: Cash and short-term investments............ $ 623 $ 818 Investments, at fair value................. 44,622 92,279 Other assets............................... 4,881 1,189 Total................................ $50,126 $94,286 LIABILITIES AND PARTNERS' CAPITAL: Liabilities................................ $ 1,794 $ 1,941 Partners' capital.......................... 48,332 92,345 Total................................ $50,126 $94,286
For the nine months ended July 31, 1994 and 1993 the unaudited operating results of V.T. reflect net operating income (losses) of $686,000 and $(2,786,000) respectively, including realized and unrealized gains (losses) on investments of $948,000 and $(2,907,000), respectively. For the nine months ended July 31, 1994 and 1993, the unaudited operating results of V.T.II reflect net operating income (losses) of ($497,000) and $46,803,000, respectively, including realized and unrealized gains on investments of $958,000 and $46,260,000, respectively. -13- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) July 31, 1994 (2) Investment in VenturesTrident, L.P. ("V.T.") and VenturesTrident II, L.P. ("V.T.II") (continued) On January 18, 1994, V.T.II distributed 1,750,000 shares of Pegasus Gold Corporation, with a value of $42 million, to its partners. The Company's share of this distribution was 159,000 shares. All but 14,000 shares of Pegasus Gold Corporation were sold between January 18, 1994 and July 31, 1994. On July 1, 1994, V.T.II made a net cash distribution of $1,516,000 to the Limited Partners for payment of taxes. The Company received $75,000 for its limited partnership interest. For the nine months ended July 31, 1994 and 1993, the Company's share of the income (losses) of V.T. and V.T.II as accounted for under the equity method was $(628,000) and $7,364,000, respectively. At July 31, 1994, the Company's investment in V.T. and V.T.II approximated its share of the underlying net assets of each partnership. (3) Non-Voting Common Stock Options Options to subscribe to shares of non-voting common stock are summarized as follows:
Shares Under Option Option Price Range Balance, October 31, 1992........ 740,400 $ 3.95 - 17.00 Exercised........................ (216,200) 3.95 - 15.75 Granted.......................... 202,084 27.25 - 33.50 Cancelled/Expired................ (7,600) 8.75 - 15.75 Balance, October 31, 1993........ 718,684 8.75 - 33.50 Exercised........................ (122,681) 8.75 - 27.25 Granted.......................... 129,970 27.375 - 34.00 Cancelled/Expired................ (4,725) 27.25 - 34.00 Balance, July 31, 1994........... 721,248 8.75 - 34.00
At July 31, 1994, options for 433,105 shares were exercisable. Options for 288,143 additional shares will become exercisable over the next four years. (4) Net Capital Requirements A subsidiary of the Company is subject to the Securities and Exchange Commission uniform net capital rule (Rule 15c3-1) requiring such subsidiary to maintain a certain level of net capital (as defined). For purposes of this rule the subsidiary had net capital of $6,100,000 at July 31, 1994, which exceeded the net capital requirement of $95,000 as of that date. -14- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) July 31, 1994 (5) Property and Equipment Property and equipment (including Bank furniture and equipment) at July 31, 1994, and October 31, 1993 follow:
July 31, October 31, 1994 1993 (all figures in thousands) At Cost: Furniture and equipment........................ $13,660 $11,544 Leasehold improvements......................... 728 530 Total........................................ 14,388 12,074 Less accumulated depreciation.................. 7,281 5,735 Net book value............................... $ 7,107 $ 6,339
(6) Real Estate Investments Real estate investments held at July 31, 1994 and October 31, 1993 follow:
July 31, October 31, 1994 1993 (all figures in thousands) Buildings................................. $27,230 $26,999 Land...................................... 2,464 2,478 Total................................... 29,694 29,477 Less: Accumulated depreciation............ 7,280 6,594 Net book value.......................... 22,414 22,883 Share of accumulated losses in escess of partnership interest..................... (510) (435) Total................................... $21,904 $22,448
-15- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (unaudited) July 31, 1994 (7) Other Liabilities On March 18, 1994, the Company privately placed, with three insurance companies, a $50 million 6.22% Senior note due March, 2004. Principal payments on the note are due in equal annual installments beginning March 18, 1998. The note may be prepaid in part or in whole on or after March 16, 1996. The Company also has an unsecured revolving credit and term loan agreement with two unaffiliated participating banks under which the Company may borrow up to $75 million. Certain covenants in the Senior note purchase agreement and the bank credit agreement require specific levels of cash flow and net income and others restrict additional investment and indebtedness. On July 31, 1994, the Company had borrowings of $4.9 million under the bank credit agreement. (8) Income Taxes The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes", effective November 1, 1993. The cumulative effect of adopting SFAS No. 109 on the Company's financial statements was to increase income by $1.3 million ($.14 per share). As of October 31, 1993, the Company has an operating loss carryforward of approximately $55 million, of which $13 million and $42 million can be carried forward to offset future taxable income through 2007 and 2008, respectively. Additionally, the Company has an alternative minimum tax credit carryforward of approximately $1.7 million, of which $1.3 million and $0.4 million can be carried forward to offset future regular tax liabilities through 2003 and 2005, respectively. (9) Earnings Per Common and Common Equivalent Share Earnings per share for the nine months ended July 31, 1994, and July 31, 1993, are based upon the weighted average number of common, non-voting common and non-voting common equivalent shares outstanding of 9,536,000 and 8,616,000. Earnings per common, non-voting common and common equivalent share assuming full dilution have not been presented because the dilutive effect is immaterial. (10) Certain prior year amounts have been reclassified to conform to the current presentation. (11) Opinion of Management In the opinion of management, the unaudited consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary to present fairly the results for the interim periods. -16- ITEM 2. Management's Discussion and Analysis RESULTS OF OPERATIONS Quarter ended July 31, 1994, compared with quarter ended July 31, 1993 INCOME Income is closely related to assets under management. The average assets under management in the third quarter of 1994 were $15.3 billion, 15% higher than the $13.3 billion average in the third quarter of 1993. Strong sales of mutual funds from the third quarter of 1993 through the second quarter of 1994 were the primary contributors to the increase in assets under management. Sales in the third quarter of 1994 were $525 million, slightly less than half of the sales in the third quarter of 1993. Redemptions of $408 million brought net sales in the third quarter of 1994 to $117 million. Total income of $54.8 million was 13% greater than that in the quarter ended July 31, 1993. Investment advisor and administration fees rose to $21.3 million, 11% higher than those in the third quarter of 1993. Distribution income rose 8% to $20.1 million despite the imposition of the new NASD rule on July 7, 1993, which reduced the rate at which Eaton Vance received distribution plan payments. Due to increased assets for which services are provided, bank fee income rose 37% to $11.2 million. EXPENSES A 13% increase in total expenses to $40.8 million included a 26% increase in the amortization of deferred sales commissions, due to increased assets under management sold with a deferred sales commission, and a 19% increase in other expenses. An increase in personnel and higher salaries were offset by a reduction in marketing incentives, resulting in a compensation expense which was approximately equal to that in the third quarter of 1993. OTHER INCOME (EXPENSE) The Company's gold mining partnerships, VenturesTrident and VenturesTrident II, contributed a loss of $1.3 million for the quarter ended July 31, 1994, compared with a $6.2 million gain in the same quarter a year earlier. Unrealized losses of $36,000 on shares of Pegasus Gold, which were distributed to Eaton Vance Corp. for its limited and general partnership interests are included in calculating the loss in the third quarter of 1994. This distribution is the first major step in the termination of the two partnerships which is scheduled to take place over the next three years. NET INCOME OR LOSS Net income after taxes fell to $6.2 million from $11.3 million in the corresponding quarter of 1993. Earnings per share fell to $0.65 from $1.19. The contribution per share from gold mining activities changed to $(0.11) from $0.50 the year before. The contribution from investment management operations rose to $0.78 from $0.75 in the third quarter of the prior year. DIVIDENDS The Company authorized a $0.15 per share dividend in the current quarter. -17- Item 2. Management's Discussion and Analysis RESULTS OF OPERATIONS (Continued) Nine months ended July 31, 1994, compared with nine months ended July 31, 1993 INCOME Average assets under management in the nine month period were $15.6 billion, 25% greater than the average of the first three quarters of 1993. Sales of mutual fund shares of $2.9 billion were 8% less than in the comparable period in 1993. A 19% increase in total income to $162.2 million from $136.1 million included a 17% increase in investment adviser and administration fees, a 19% increase in distribution income, and a 30% increase in bank fee income. EXPENSES In the nine months ended July 31, 1994, total expenses were $122 million, up 21% from those of the nine months ended July 31, 1993. Increased assets under management in funds with deferred sales commissions caused amortization of deferred sales commissions to increase 32% to $39.3 million for the nine months ended July 31, 1994. Investment management compensation for the nine months ended July 31, 1994 was $29.3 million, 7% higher than the $27.4 million in the nine months ended July 31, 1993, while Bank compensation increased 22% to $19.9 million. Other expenses rose $6.3 million, up 23% from a year ago, to $33.2 million at July 31, 1994. The increases were largely the result of an expanded product line and concerted marketing efforts. OTHER INCOME (EXPENSE) The Company's gold mining partnerships, VenturesTrident and VenturesTrident II, contributed a loss of $0.6 million for the nine months ended July 31, 1994, compared to a $7.4 million gain for the nine months ended July 31, 1993. Realized and unrealized losses of $715,000 on shares of Pegasus Gold which were distributed to Eaton Vance Corp. for its general and limited partnership interests are included in partnership income (loss), etc. for the nine months ended July 31, 1994. Unrealized losses of $327,000 on shares of Dakota Mining are included in partnership income (loss), etc. for the nine months ended July 31, 1993. NET INCOME OR LOSS Net income for the nine months ended July 31, 1994 amounted to $21.5 million, or $2.25 per share on 9.5 million average shares outstanding. Net income includes the cumulative effect of a change in accounting for income taxes of $1.3 million, or $0.14 per share. Net income for the nine months ended July 31, 1993 was $23.4 million or $2.72 per share on 8.6 million average shares outstanding. DIVIDENDS Dividends for the nine months ended July 31, 1994, and 1993 were $0.44 and $0.35, respectively. -18- Item 2. Management's Discussion and Analysis RESULTS OF OPERATIONS (Continued) Nine months ended July 31, 1994, compared with nine months ended July 31, 1993 BALANCE SHEET The Company's total assets increased 2%. An increase in deferred sales to $264 million from $240 million and a decrease in bank assets to $109 million from $120 million were the main contributors to the change in total assets. The difference between book and tax accounting treatment for the deferred sales commissions caused deferred income taxes to rise by $6.5 million. LIQUIDITY AND CAPITAL RESOURCES Most of the Company's income is received from its investment management and banking activities. Investment management income is provided primarily by investment adviser fees, administrative fees and distribution plan payments. These fees are directly related to the amount of assets under management. Those assets rose 11% to $15.4 billion on July 31, 1994 from $13.8 billion a year earlier. Banking income consists largely of accounting and custody fees for assets in trust or custody at the Company's 77.3% owned banking subsidiary, Investors Bank & Trust Company. Assets for which services are being provided rose 37% to $70 billion on July 31, 1994, from $51 billion a year earlier. In connection with the sales of the Company's spread commission mutual funds, the Company pays sales commissions at the time of sale to broker/dealers selling the funds. At July 31, 1994, the Company's investment in deferred sales commissions was $264 million, compared with $240 million at October 31, 1993. Investments in investment companies are carried at the lower of cost or market. At July 31, 1994 and October 31, 1993, the Company had gross unrealized gains of $1.5 million and $1.6 million, respectively. The Company, as a non-managing partner of certain investment company partnerships, is required to maintain a minimum investment in such partnerships. At July 31, 1994 a minimum investment of $2.8 million was required under the terms of the partnership agreements. On March 18, 1994, the Company privately placed, with three insurance companies, a $50 million 6.22% Senior note due March, 2004. Principal payments on the note are due in equal annual installments beginning March 18, 1998. The note may be prepaid in part or in whole on or after March 16, 1996. The proceeds were used to call the Company's outstanding $14 million of 10% Subordinated Debentures and to reduce the borrowings under a $75 million revolving line of credit with two unaffiliated banks. Certain covenants in the Senior note purchase agreement and the bank credit agreement require specific levels of cash flow and net income and others restrict additional investment and indebtedness. On July 31, 1994, the Company had borrowings of $4.9 million under the bank credit agreement. -19- PART II OTHER INFORMATION -20- SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EATON VANCE CORP. (Registrant) DATE: September 14, 1994 /s/Curtis H. Jones (Signature) Curtis H. Jones, Treasurer DATE: September 14, 1994 /s/John P. Rynne (Signature) John P. Rynne, Comptroller -21- -----END PRIVACY-ENHANCED MESSAGE-----