SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 25, 2003
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EATON VANCE CORP.
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(Exact name of registrant as specified in its charter)
Maryland 1-8100 04-2718215
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
255 State Street, Boston, Massachusetts 02109
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 482-8260
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Page 1 of 10
INFORMATION INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS AND REQUIRED FD DISCLOSURE
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
Registrant has reported its results of operations for the three months
ended October 31, 2003, as described in Registrant's news release dated November
25, 2003, a copy of which is filed herewith as Exhibit 99.1 and incorporated
herein by reference.
This information is being filed pursuant to Item 5. Other Events and
Required FD Disclosure and is being provided under Item 12. Results of
Operations and Financial Condition.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
Exhibit No. Document
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99.1 Press release issued by the Registrant dated November 25,
2003.
Page 2 of 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
EATON VANCE CORP.
(Registrant)
Date: November 25, 2003 /s/ William M. Steul
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William M. Steul, Chief Financial Officer
Page 3 of 10
EXHIBIT INDEX
Each exhibit is listed in this index according to the number assigned to it
in the exhibit table set forth in Item 601 of Regulation S-K. The following
exhibit is filed as part of this Report:
Exhibit No. Description
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99.1 Copy of Registrant's news release dated November 25, 2003.
Page 4 of 10
EXHIBIT 99.1
NEWS RELEASE
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Eaton Vance Corp.
The Eaton Vance Building
(LOGO) 255 State Street, Boston, MA 02109
(617) 482-8260
Contact: William M. Steul
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November 25, 2003
FOR IMMEDIATE RELEASE
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EATON VANCE CORP.
REPORT FOR THE THREE MONTHS AND FISCAL YEAR ENDED
OCTOBER 31, 2003
BOSTON, MA--Eaton Vance Corp. earned $0.41 per diluted share in the fourth
quarter of fiscal 2003, an increase of 21 percent over the $0.34 per diluted
share earned in the fourth quarter of fiscal 2002. In fiscal 2003 the Company
earned $1.51 per diluted share compared to $1.70 per diluted share in fiscal
2002.
Assets under management on October 31, 2003 were $75.0 billion, a 35 percent
increase over the $55.6 billion of managed assets on October 31, 2002. The
acquisition of Parametric Portfolio Associates (PPA) on September 10, 2003 added
$5.3 billion of assets. Excluding the assets acquired with PPA, total gross
inflows into Eaton Vance funds and separate accounts were $16.8 billion in
fiscal 2003, an increase of 29 percent from the $13.0 billion of gross inflows
in fiscal 2002 and the highest annual gross inflows in Company history. Net
inflows (gross inflows less redemptions and withdrawals) were $8.3 billion in
fiscal 2003 compared to $4.9 billion in fiscal 2002, an increase of 69 percent.
Tables 1, 2 and 3 (attached) summarize assets under management and asset flows
by investment objective.
Eaton Vance raised a record $5.0 billion in closed-end fund assets in fiscal
2003. In the fourth quarter, the Company introduced the Eaton Vance
Tax-Advantaged Dividend Income Fund, a closed-end fund that raised $1.3 billion
in late September. When the over-allotment option on common shares and the
planned issuance of preferred shares are completed in early fiscal 2004, the
fund is expected to have assets of about $2.1 billion and contribute
approximately $9.5 million in revenue annually. Earnings in the fourth quarter
of 2003 were reduced by the payment of $2.4 million of sales incentives and
other marketing expenses incurred in connection with the successful offering of
the fund. Earnings in fiscal 2003 were reduced by $8.5 million of sales
incentives and other expenses associated with the $5.0 billion in 11 closed-end
fund offerings.
"Eaton Vance had its best asset growth year ever in fiscal 2003," said James B.
Hawkes, Chairman and CEO. "Total assets under management increased 35 percent to
$75.0 billion. The Company was a leader among asset management firms in
closed-end fund sales with $5.0 billion of assets raised in fiscal 2003. Equity
fund assets increased 26 percent, fixed income fund assets increased 34 percent,
bank loan fund assets increased 24 percent and separately managed account
assets, including those managed by PPA, increased 70 percent. The new assets
added in fiscal 2003 should result in meaningful revenue and profit growth in
fiscal 2004."
5 of 10
Revenue in the fourth quarter of fiscal 2003 increased $19.6 million or 16
percent to $143.4 million from the fourth quarter a year ago. Revenue in fiscal
year 2003 was essentially even with fiscal 2002 at $523.1 million. Fourth
quarter 2003 investment adviser and administration fees increased 25 percent
over fourth quarter 2002 consistent with the 26 percent growth in average assets
under management. Fiscal 2003 investment adviser and administration fee revenue
increased 6 percent in line with the 6 percent increase in average assets under
management for the full year. Fiscal 2003 distribution and underwriter fee
revenue declined 9 percent primarily because of the continuing shift in mutual
fund sales and assets from Class B to other fund share classes and to other
managed assets with low or no distribution fees. Service fee revenue increased
12 percent in the fourth quarter of fiscal 2003 over the fourth quarter of
fiscal 2002 because of an increase in fund assets that pay service fees. For
fiscal 2003, service fee revenue declined 4 percent due to the full-year decline
in average fund assets that pay service fees. Other income increased 131 percent
primarily because of reimbursement payments for certain fund shareholder
services now performed by the Company and investment income from a consolidated
investment company in which Eaton Vance is the majority shareholder.
Operating expenses increased $20.9 million or 6 percent in fiscal 2003 because
of higher compensation, marketing, distribution and other expenses. Compensation
expense increased 22 percent in the fourth quarter and 10 percent in fiscal 2003
due to higher marketing incentive payments associated with the increase in fund
and separate account sales, and increases in the number of employees, base
salaries and performance bonuses.
Amortization of deferred sales commissions increased 2 percent in fiscal 2003
due primarily to deferred sales commissions added in fiscal 2002 and adjustments
made to better align amortization expense with projected distribution fee
revenue. Service fee expense increased 15 percent in the fourth quarter and 1
percent in fiscal 2003 because of the growth in fund assets retained more than
one year. Distribution expense increased 31 percent in the fourth quarter and 9
percent in fiscal 2003 primarily because of distribution expenses on the new
closed-end funds, the increase in sales-related marketing expenses and the
increase in commissions paid on certain Class A sales. (Note that distribution
expense now includes certain distribution costs previously included in service
fee expense and other expenses.) Other expenses increased 13 percent in fiscal
2003 because of non-recurring expenses related to the 11 closed-end fund
offerings, higher on-going fund expenses, increased travel expenses, higher
information technology costs, and higher audit and consulting fees. Operating
income in the fourth quarter of fiscal 2003 increased 19 percent to $45.3
million from $38.1 million in the fourth quarter of fiscal 2002. Fiscal year
2003 operating income declined 11 percent to $163.1 million.
Net income in the fourth quarter of fiscal 2003 increased 20 percent to $28.7
million compared to $23.8 million in the fourth quarter of fiscal 2002. Fiscal
year 2003 net income declined 12 percent to $106.1 million. Interest income in
fiscal 2003 declined to $4.8 million from $9.0 million last year because of
lower interest rates and the inclusion in fiscal 2002 of $2.1 million of
interest received from the settlement of a fiscal 1993-1995 Massachusetts income
tax dispute. Interest expense declined by $1.3 million in fiscal 2003 because of
a reduction in the Company's long-term debt in the fourth quarter of fiscal
2002. Fiscal 2002 interest expense included $2.1 million of previously
capitalized debt offering costs associated with the repurchase in the fourth
quarter of $87.0 million of a subsidiary's 30-year zero-coupon senior
exchangeable notes. Fiscal 2003 interest expense included a $2.8 million accrual
of an additional 2.5 percent per annum of cash interest payable through August
13, 2004 on the subsidiary's outstanding exchangeable notes. The Company's
effective tax rate was 35 percent in both fiscal 2003 and fiscal 2002.
Cash, cash equivalents and short-term investments were $242.8 million on October
31, 2003 and $188.0 million on October 31, 2002. The Company's strong cash flow
in fiscal 2003 allowed it to pay $71.0 million of federal and state income taxes
Page 6 of 10
($54.8 million of current and $16.2 million of deferred taxes), $70.0 million in
sales commissions, $44.9 million to repurchase and retire 1,417,300 shares of
its non-voting common stock, $28.0 million to acquire 80 percent of Parametric
Portfolio Associates, $24.8 million to pay dividends to its shareholders and
$7.1 million to reduce its long-term debt. Approximately 3.9 million shares
remain of the current stock repurchase authorization.
Eaton Vance Corp., a Boston-based investment management firm, is traded on the
New York Stock Exchange under the symbol EV.
This news release contains statements that are not historical facts, referred to
as "forward-looking statements." The Company's actual future results may differ
significantly from those stated in any forward-looking statements, depending on
factors such as changes in securities or financial markets or general economic
conditions, the volume of sales and repurchases of fund shares, the continuation
of investment advisory, administration, distribution and service contracts, and
other risks discussed from time to time in the Company's filings with the
Securities and Exchange Commission.
Page 7 of 10
Eaton Vance Corp.
Summary of Results of Operations
(in thousands, except per share amounts)
Three Months Ended Twelve Months Ended
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October 31, October 31, % October 31, October 31, %
2003 2002 Change 2003 2002 Change
----------- ----------- ------ ----------- ----------- ------
Revenue:
Investment adviser and administration fees $ 83,648 $ 66,898 25.0% $ 296,344 $ 280,794 5.5%
Distribution and underwriter fees 38,074 37,939 0.4 146,907 162,071 (9.4)
Service fees 20,147 18,024 11.8 74,605 77,833 (4.1)
Other income 1,550 957 62.0 5,277 2,287 130.7
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Total revenue 143,419 123,818 15.8 523,133 522,985 0.0
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Expenses:
Compensation of officers and employees 34,173 27,996 22.1 115,429 105,331 9.6
Amortization of deferred sales commissions 21,024 20,925 0.5 85,192 83,690 1.8
Service fee expense 17,438 15,181 14.9 64,285 63,852 0.7
Distribution expense 16,356 12,452 31.4 54,790 50,398 8.7
Other expenses 9,160 9,191 (0.3) 40,293 35,791 12.6
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Total expenses 98,151 85,745 14.5 359,989 339,062 6.2
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Operating Income 45,268 38,073 18.9 163,144 183,923 (11.3)
Other Income/(Expense):
Interest income 659 2,068 (68.1) 4,848 9,019 (46.2)
Interest expense (1,427) (3,584) (60.2) (5,761) (7,098) (18.8)
Gain on investments 43 68 (36.8) 2,346 1,344 74.6
Foreign currency gain (loss) (24) 8 n/a 18 8 125.0
Equity in net income of affiliates 314 163 92.6 263 389 (32.4)
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Income Before Minority Interest and Income Taxes 44,833 36,796 21.8 164,858 187,585 (12.1)
Minority Interest in Income (722) (107) 574.8 (1,593) (1,344) 18.5
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Income Before Income Taxes 44,111 36,689 20.2 163,265 186,241 (12.3)
Income Taxes 15,438 12,841 20.2 57,142 65,184 (12.3)
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Net Income $ 28,673 $ 23,848 20.2 $ 106,123 $ 121,057 (12.3)
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Earnings Per Share:
Basic $ 0.42 $ 0.35 20.0 $ 1.54 $ 1.75 (12.0)
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Diluted $ 0.41 $ 0.34 20.6 $ 1.51 $ 1.70 (11.2)
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Dividends Declared, Per Share $ 0.1200 $ 0.0800 50.0 $ 0.4000 $ 0.2975 34.5
========== ========== ======= =========== =========== ========
Weighted Average Shares Outstanding:
Basic 68,493 68,943 (0.7) 68,916 69,151 (0.3)
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Diluted 70,446 70,343 0.1 70,375 71,412 (1.5)
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Page 8 of 10
Eaton Vance Corp.
Balance Sheet
(in thousands, except per share figures)
October 31, October 31,
2003 2002
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ASSETS
Current Assets:
Cash and cash equivalents $ 138,328 $ 144,078
Short-term investments 104,484 43,886
Investment adviser fees and other receivables 25,922 19,502
Other current assets 3,583 6,101
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Total current assets 272,317 213,567
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Other Assets:
Deferred sales commissions 199,322 239,048
Goodwill 88,879 69,467
Other intangible assets, net 46,193 37,296
Long-term investments 36,490 39,982
Equipment and leasehold improvements, net 12,411 13,897
Other assets 3,090 3,362
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Total other assets 386,385 403,052
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Total assets $ 658,702 $ 616,619
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accrued compensation $ 35,339 $ 31,899
Accounts payable and accrued expenses 23,822 16,324
Dividend payable 8,189 5,522
Current portion of long-term debt 7,143 7,143
Other current liabilities 8,302 7,382
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Total current liabilities 82,795 68,270
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Long-term Liabilities:
Long-term debt 118,736 124,118
Deferred income taxes 33,203 50,531
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Total long-term liabilities 151,939 174,649
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Total liabilities 234,734 242,919
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Minority interest 7,691 1,398
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Commitments and contingencies - -
Shareholders' Equity:
Common stock, par value $0.0078125 per share:
Authorized, 640,000 shares
Issued, 154,880 shares 1 1
Non-voting common stock, par value $0.0078125 per share:
Authorized, 95,360,000 shares
Issued, 68,250,464 and 69,102,459 shares, respectively 533 540
Notes receivable from stock option exercises (2,995) (3,530)
Deferred compensation (1,000) (2,100)
Accumulated other comprehensive income 1,245 2,585
Retained earnings 418,493 374,806
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Total shareholders' equity 416,277 372,302
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Total liabilities and shareholders' equity $ 658,702 $ 616,619
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Page 9 of 10
Table 1
Asset Flows (in millions)
Twelve Months Ended October 31, 2003
Assets 10/31/2002 - Beginning of Period $ 55,611
Long-term fund sales and inflows 13,749
Long-term fund redemptions and outflows (6,481)
Long-term fund net exchanges (84)
Long-term fund mkt. value change 4,459
Long-term fund assets acquired 660
Institutional and HNW account inflows 2,075
Institutional and HNW account outflows (1,674)
Institutional and HNW assets acquired with acquisition(1) 2,772
Retail managed account inflows 929
Retail managed account outflows (337)
Retail managed account assets acquired with acquisition(1) 1,850
Separate account mkt. value change 1,980
Change in money market funds (465)
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Net change 19,433
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Assets 10/31/2003 - End of Period $ 75,044
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Table 2
Assets Under Management
By Investment Objective (in millions)
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October 31, October 31, %
2003 2002 Change
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Equity Funds $ 28,854 $ 22,910 26%
Fixed Income Funds 17,801 13,302 34%
Bank Loan Funds 9,547 7,687 24%
Money Market Funds 445 910 -51%
Separate Accounts 18,397 10,802 70%
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Total $ 75,044 $ 55,611 35%
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Table 3
Asset Flows by Investment Objective (in millions)
Three Months Ended Twelve Months Ended
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October 31, October 31, October 31, October 31,
2003 2002 2003 2002
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Equity Fund Assets - Beginning of Period $ 25,407 $ 23,684 $ 22,910 $ 25,277
Sales and inflows 2,073 627 4,189 4,400
Redemptions and outflows (885) (729) (2,778) (3,055)
Exchanges 61 (84) 3 (226)
Market value change 1,538 (588) 3,870 (3,486)
Assets acquired with acquisition(1) 660 - 660 -
Net change 3,447 (774) 5,944 (2,367)
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Equity Fund Assets - End of Period $ 28,854 $ 22,910 $ 28,854 $ 22,910
------------------------------- ----------------------------
Fixed Income Fund Assets - Beginning of Period 17,580 10,573 13,302 10,165
Sales and inflows 667 3,268 6,382 4,955
Redemptions and outflows (681) (447) (2,176) (1,521)
Exchanges (144) 112 (84) 390
Market value change 379 (204) 377 (687)
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Net change 221 2,729 4,499 3,137
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Fixed Income Fund Assets - End of Period $ 17,801 $ 13,302 $ 17,801 $ 13,302
------------------------------- ----------------------------
Bank Loan Fund Assets - Beginning of Period 8,419 8,415 7,687 9,582
Sales and inflows 1,333 174 3,178 966
Redemptions and outflows (310) (666) (1,527) (2,323)
Exchanges 75 (93) (3) (272)
Market value change 30 (143) 212 (266)
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Net change 1,128 (728) 1,860 (1,895)
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Bank Loan Fund Assets - End of Period $ 9,547 $ 7,687 $ 9,547 $ 7,687
------------------------------- ----------------------------
Long-Term Fund Assets - Beginning of Period 51,406 42,672 43,899 45,024
Sales and inflows 4,073 4,069 13,749 10,321
Redemptions and outflows (1,876) (1,842) (6,481) (6,899)
Exchanges (8) (65) (84) (108)
Market value change 1,947 (935) 4,459 (4,439)
Assets acquired with acquisition(1) 660 - 660 -
------------------------------- ----------------------------
Net change 4,796 1,227 12,303 (1,125)
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Total Long-Term Fund Assets - End of Period $ 56,202 $ 43,899 $ 56,202 $ 43,899
------------------------------- ----------------------------
Separate Accounts - Beginning of Period 12,492 10,601 10,802 10,468
Institutional and HNW account inflows 695 533 2,075 1,980
Institutional and HNW account outflows (505) (167) (1,674) (1,106)
Institutional and HNW assets acquired with
acquisition(1) 2,772 - 2,772 -
Retail managed account inflows 338 170 929 713
Retail managed account outflows (142) (42) (337) (104)
Retail managed account assets acquired with
acquisition(1) 1,850 - 1,850 -
Separate accounts market value change 897 (293) 1,980 (1,149)
------------------------------- ----------------------------
Net change 5,905 201 7,595 334
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Separate accounts - End of Period $ 18,397 $ 10,802 $ 18,397 $ 10,802
------------------------------- ----------------------------
Money market fund assets - End of Period 445 910 445 910
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Total Assets Under Management - End of Period $ 75,044 $ 55,611 $ 75,044 $ 55,611
=============================== ============================
(1) Parametric Portfolio Associates acquired by Eaton Vance on September 10,
2003
Page 10 of 10