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 26, 2002
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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 9
INFORMATION INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS
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Registrant has reported its results of operations for the three and
twelve months ended October 31, 2002, as described in Registrant's news release
dated November 26, 2002, a copy of which is filed herewith as Exhibit 99.1 and
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
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(c) Exhibits.
Exhibit No. Document
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99.1 Press release issued by the Registrant dated
November 26, 2002.
Page 2 of 9
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 26, 2002 /s/ William M. Steul
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William M. Steul, Chief Financial Officer
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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 26, 2002.
Page 4 of 9
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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 26, 2002
FOR IMMEDIATE RELEASE
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EATON VANCE CORP.
REPORT FOR THE THREE MONTHS AND FISCAL YEAR ENDED
OCTOBER 31, 2002
BOSTON, MA--Eaton Vance Corp. earned $0.34 per diluted share in the fourth
quarter of fiscal 2002 compared to $0.44 per diluted share in the fourth quarter
of fiscal 2001. In fiscal 2002 the Company earned $1.70 per diluted share
compared to $1.60 per diluted share in fiscal 2001.
Fourth quarter earnings in 2002 were adversely affected by the payment of $2.8
million of sales incentives in connection with the successful offering during
the quarter of three closed-end municipal bond funds that raised $2.5 billion of
assets. Management fee revenue from the new closed-end funds is expected to
exceed $8.0 million annually beginning in fiscal 2003. In addition, in this
year's fourth quarter the Company expensed $2.1 million of capitalized debt
offering costs associated with the repurchase of $87.0 million of a subsidiary's
zero-coupon exchangeable notes. The combined effect of these two items reduced
fourth quarter 2002 earnings by $0.05 per diluted share.
Assets under management on October 31, 2002 were $55.6 billion, a 2 percent
decrease from the $56.6 billion of managed assets at the end of fiscal 2001.
Fiscal 2002 year-end assets under management would have been approximately $5.6
billion higher without the impact of market price declines. Total gross asset
inflows into Eaton Vance funds and separate accounts were $12.8 billion, an
increase of 3 percent from fiscal 2001 and the second highest annual inflows in
Company history. Net inflows (gross asset inflows less redemptions and
withdrawals) were $4.9 billion in fiscal 2002 compared to $6.4 billion in fiscal
2001.
"Eaton Vance had another very good year considering the very difficult stock
market," said James B. Hawkes, Chairman and CEO. "Total assets under management
declined only 2 percent and equity fund assets were off only 9 percent in a
period when the S&P 500 declined 15 percent and the Nasdaq Composite declined 21
percent. The Company continued to achieve outstanding investment results in a
volatile and challenging investment climate. For example, at fiscal year end, 92
percent of the assets of equity mutual funds rated by Morningstar received 4 or
5 stars. The power of the Eaton Vance mutual fund brand is evidenced by the
strong gross and net sales achieved in fiscal 2002. Furthermore, our two
September 2001 acquisitions, Atlanta Capital Management, LLC and Fox Asset
Management LLC, added to the variety of the Company's mutual funds and provided
significant growth in separate accounts."
Page 5 of 9
Because of greater average assets under management for the full year, revenue
increased $20.4 million or 4 percent to $523.0 million in fiscal 2002 from
$502.6 million in fiscal 2001. Investment adviser and administration fee revenue
increased 11 percent. Distribution and underwriter fee revenue declined 5
percent primarily due to the continuing shift from sales of Class B and Class C
mutual fund shares to other share classes and assets with low or no distribution
fees. Service fee revenue did not increase in fiscal 2002 compared to fiscal
2001, reflecting flat average assets in mutual funds that pay service fees.
Operating expenses increased $27.4 million or 9 percent because of higher
compensation, marketing, distribution and other expenses. Compensation expense
increased 15 percent, primarily reflecting the full-year compensation expenses
of Atlanta Capital Management and Fox Asset Management in fiscal 2002 (compared
to one month in the prior year), incentive costs associated with the increase in
closed-end fund and separate account asset inflows, and completion of the
staffing of the managed account sales and marketing organization.
Amortization of deferred sales commissions increased 5 percent in fiscal 2002
due to the on-going sales of mutual fund Class B shares and equity fund private
placements and the residual effect of an accounting change in fiscal 1998.
Service fee expense increased 5 percent because of the growth in fund assets
retained more than one year. Distribution fee expense increased 5 percent due to
the increase in mutual fund Class C assets retained more than one year. Eaton
Vance collects Rule 12b-1 distribution fees on Class C shares and pays such fees
to broker/dealers on fund assets retained more than one year. Other expenses
increased 11 percent in fiscal 2002, reflecting increased travel and facilities
costs and higher information technology expenditures.
Fiscal 2002 operating income decreased 4 percent to $183.9 million. Net income
increased 4 percent to $121.1 million from $116.0 million in fiscal 2001. Fiscal
2001 net income included a $15.1 million impairment loss on investments and a
$2.6 million loss on the sale of an investment. Fiscal 2002 interest income of
$9.0 million includes $2.1 million of interest received from the settlement of a
fiscal 1993-1995 Massachusetts income tax dispute. As previously noted, 2002
interest expense includes $2.1 million of previously capitalized debt offering
costs associated with the repurchase in the fourth quarter of $87.0 million
($134 million principal amount at maturity) of a subsidiary's 30-year
zero-coupon senior exchangeable notes. The Company's effective tax rate was 35
percent in both fiscal 2002 and fiscal 2001.
Cash, cash equivalents and short-term investments were $188.0 million on October
31, 2002 and $210.7 million on October 31, 2001. Long-term debt was reduced by
$91.3 million from $222.6 million on October 31, 2001 to $131.3 million on
October 31, 2002. During fiscal 2002 the Company used $51.4 million of its cash
to repurchase and retire 1,606,400 shares of its non-voting common stock and
paid $20.0 million in dividends to its shareholders. Approximately 2.3 million
shares remain of the current 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 6 of 9
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, %
2002 2001 Change 2002 2001 Change
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Revenue:
Investment adviser and administration fees $ 66,898 $ 67,360 (0.7)% $ 280,794 $ 252,332 11.3 %
Distribution and underwriter fees 37,939 42,918 (11.6) 162,071 170,892 (5.2)
Service fees 18,024 19,897 (9.4) 77,833 77,777 0.1
Other income 957 565 69.4 2,287 1,558 46.8
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Total revenue 123,818 130,740 (5.3) 522,985 502,559 4.1
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Expenses:
Compensation of officers and employees 27,996 23,114 21.1 105,331 91,428 15.2
Amortization of deferred sales commissions 20,925 20,938 (0.1) 83,690 79,997 4.6
Service fee expense 15,584 16,012 (2.7) 65,424 62,044 5.4
Distribution fee expense 7,559 7,884 (4.1) 31,167 29,819 4.5
Other expenses 13,681 11,299 21.1 53,450 48,378 10.5
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Total expenses 85,745 79,247 8.2 339,062 311,666 8.8
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Operating Income 38,073 51,493 (26.1) 183,923 190,893 (3.7)
Other Income/(Expense):
Interest income 2,068 1,980 4.4 9,019 6,765 33.3
Interest expense (3,584) (985) 263.9 (7,098) (2,209) 221.3
Gain (loss) on investments 68 (2,491) n/a 1,344 (2,649) n/a
Foreign currency gain 8 - n/a 8 - n/a
Equity in net income (loss) of affiliates 163 (16) n/a 389 967 (59.8)
Impairment loss on investments - (1,307) n/a - (15,101) n/a
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Income Before Minority Interest and Income Taxes 36,796 48,674 (24.4) 187,585 178,666 5.0
Minority Interest (107) (177) n/a (1,344) (177) n/a
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Income Before Income Taxes 36,689 48,497 (24.3) 186,241 178,489 4.3
Income Taxes 12,841 16,973 (24.3) 65,184 62,469 4.3
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Net Income $ 23,848 $ 31,524 (24.3) $ 121,057 $ 116,020 4.3
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Earnings Per Share:
Basic $ 0.35 $ 0.46 (23.9) $ 1.75 $ 1.69 3.6
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Diluted $ 0.34 $ 0.44 (22.7) $ 1.70 $ 1.60 6.2
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Dividends Declared, Per Share $ 0.0800 $ 0.0725 10.3 $ 0.2975 $ 0.2525 17.8
========== ========== ======== ========== ========== =========
Weighted Average Shares Outstanding:
Basic 68,943 67,861 1.6 69,151 68,750 0.6
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Diluted 70,343 71,354 (1.4) 71,412 72,316 (1.3)
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Page 7 of 9
Eaton Vance Corp.
Balance Sheet
(in thousands)
October 31, October 31,
2002 2001
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ASSETS
Current Assets:
Cash and cash equivalents $ 144,078 $ 115,681
Short-term investments 43,886 95,028
Investment adviser fees and other receivables 19,502 22,559
Other current assets 6,101 4,212
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Total current assets 213,567 237,480
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Other Assets:
Deferred sales commissions 239,048 266,738
Goodwill 69,467 69,212
Other intangible assets, net 37,296 39,269
Long-term investments 39,982 36,704
Equipment and leasehold improvements, net 13,897 14,938
Other assets 3,362 10,960
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Total other assets 403,052 437,821
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Total assets $ 616,619 $ 675,301
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accrued compensation $ 31,899 $ 38,358
Accounts payable and accrued expenses 16,324 20,879
Dividend payable 5,522 4,955
Current portion of long-term debt 7,143 7,143
Other current liabilities 7,382 12,509
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Total current liabilities 68,270 83,844
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Long-term Liabilities:
Long-term debt 124,118 215,488
Deferred income taxes 50,531 73,878
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Total long-term liabilities 174,649 289,366
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Total liabilities 242,919 373,210
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Minority interest 1,398 965
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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, 69,102,459 and 68,462,051 shares, respectively 540 535
Notes receivable from stock option exercises (3,530) (2,641)
Deferred compensation (2,100) (3,200)
Accumulated other comprehensive income 2,585 4,898
Retained earnings 374,806 301,533
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Total shareholders' equity 372,302 301,126
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Total liabilities and shareholders' equity $ 616,619 $ 675,301
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Page 8 of 9
Table 1
Asset Flows (in millions)
Twelve Months Ended October 31, 2002
Assets 10/31/2001 - Beginning of Period $ 56,606
Long-term Fund Sales/Inflows 10,321
Long-term Fund Redemptions/Outflows (6,899)
Long-term Fund Net Exchanges (108)
Long-term Fund Mkt. Depreciation (4,439)
Separate Accounts Inflows - Institutional/HNW 1,778
Separate Accounts Outflows - Institutional/HNW (905)
Separate Accounts Inflows - Managed Accounts 714
Separate Accounts Outflows - Managed Accounts (104)
Separate Accounts Mkt. Depreciation (1,149)
Change in Money Market Funds (204)
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Net Decrease (995)
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Assets 10/31/2002 - End of Period $ 55,611
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Table 2
Assets Under Management
By Investment Objective (in millions)
October 31, October 31, %
2002 2001 Change
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Equity Funds $ 22,910 $ 25,277 -9%
Fixed Income Funds 13,302 10,165 31%
Bank Loan Funds 7,687 9,582 -20%
Money Market Funds 910 1,114 -18%
Separate Accounts 10,802 10,468 3%
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Total $ 55,611 $ 56,606 -2%
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Table 3
Asset Flows by Investment Objective (in millions)
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Three Months Ended Twelve Months Ended
Oct 31, Oct 31, Oct 31, Oct 31,
2002 2001 2002 2001
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Equity Fund Assets - Beginning of Period $ 23,684 $ 26,752 $ 25,277 $ 25,439
Sales/Inflows 627 1,435 4,400 7,198
Redemptions/Outflows (729) (689) (3,055) (2,048)
Exchanges (84) (68) (226) (73)
Market Value Change (588) (2,763) (3,486) (5,849)
Assets Acquired with Acquisitions1 - 610 - 610
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Net Change (774) (1,475) (2,367) (162)
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Equity Fund Assets - End of Period $ 22,910 $ 25,277 $ 22,910 $ 25,277
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Fixed Income Fund Assets - Beginning of Period 10,573 9,933 10,165 9,501
Sales/Inflows 3,268 540 4,955 1,944
Redemptions/Outflows (447) (316) (1,521) (1,257)
Exchanges 112 59 390 76
Market Value Change (204) (91) (687) (139)
Assets Acquired with Acquisitions1 - 40 - 40
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Net Change 2,729 232 3,137 664
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Fixed Income Fund Assets - End of Period $ 13,302 $ 10,165 $ 13,302 $ 10,165
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Bank Loan Fund Assets - Beginning of Period 8,415 9,612 9,582 10,058
Sales/Inflows 174 900 966 2,925
Redemptions/Outflows (666) (628) (2,323) (2,661)
Exchanges (93) (119) (272) (349)
Market Value Change (143) (183) (266) (391)
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Net Change (728) (30) (1,895) (476)
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Bank Loan Fund Assets - End of Period $ 7,687 $ 9,582 $ 7,687 $ 9,582
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Long-Term Fund Assets - Beginning of Period 42,672 46,297 45,024 44,998
Sales/Inflows 4,069 2,875 10,321 12,067
Redemptions/Outflows (1,842) (1,633) (6,899) (5,966)
Exchanges (65) (128) (108) (346)
Market Value Change (935) (3,037) (4,439) (6,379)
Assets Acquired with Acquisitions1 - 650 - 650
Net Change 1,227 (1,273) (1,125) 26
Total Long-Term Fund Assets - End of Period $ 43,899 $ 45,024 $ 43,899 $ 45,024
Separate Accounts - Beginning of Period 10,601 2,961 10,468 3,241
Inflows - Institutional/HNW Accounts 533 250 1,778 250
Outflows - Institutional/HNW Accounts (167) (27) (905) (27)
Assets Acquired with Acquisitions - Institutional Accounts1 - 6,863 - 6,863
Inflows - Managed Accounts 170 48 714 67
Outflows - Managed Accounts (42) (8) (104) (8)
Assets Acquired with Acquisitions - Managed Accounts1 - 343 - 343
Market Value Change (293) 38 (1,149) (261)
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Net Change 201 7,507 334 7,227
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Separate Accounts - End of Period $ 10,802 $ 10,468 $ 10,802 $ 10,468
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Money Market Fund Assets - End of Period 910 1,114 910 1,114
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Total Assets Under Management - End of Period $ 55,611 $ 56,606 $ 55,611 $ 56,606
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1 Atlanta Capital Management and Fox Asset Management acquired by Eaton Vance on September 30, 2001
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