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): August 20, 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 July 31, 2003, as described in Registrant's news release dated August 20,
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 August 20,
2003.
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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: August 20, 2003 /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 August 20, 2003.
Page 4 of 10
EXHIBIT 99.1
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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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August 20, 2003
FOR IMMEDIATE RELEASE
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EATON VANCE CORP.
REPORT FOR THE THREE MONTHS AND NINE MONTHS ENDED
JULY 31, 2003
BOSTON, MA--Eaton Vance Corp. reported diluted earnings per share of $0.38 in
the third quarter of fiscal 2003 compared to diluted earnings per share of $0.44
in the third quarter of fiscal 2002. For the first nine months of fiscal 2003,
the Company earned $1.10 per diluted share compared to $1.35 per diluted share
last year.
Assets under management of $64.3 billion at the end of the third quarter of
fiscal 2003 were $9.6 billion or 17 percent greater than the $54.8 billion of
assets under management at the end of the third quarter last year. During the
12-month period ended July 31, 2003, long-term fund and separate account net
inflows contributed $8.4 billion and market appreciation contributed $2.4
billion to the increase in assets under management. The impact of market
depreciation in the third and fourth quarters of last year was not fully
recovered until the third quarter this year. Consequently, average assets under
management were the same at $58.3 billion in the first three quarters of fiscal
2003 and in the first three quarters of last year.
Net inflows of long-term fund assets and separate account assets were $5.7
billion in the first nine months of fiscal 2003 and $2.2 billion in the first
nine months of fiscal 2002. Long-term fund net inflows of $5.1 billion in the
first nine months of 2003 benefited from the successful offering of nine
closed-end municipal bond funds that added $0.7 billion of new assets in the
first quarter and the record-setting $3.1 billion offering of the innovative new
closed-end Eaton Vance Limited Duration Income Fund in the third quarter. Tables
1, 2 and 3 (attached) summarize assets under management and asset flows by
investment objective. As can be seen in Table 3, all long-term fund asset
classes and separate accounts had positive net flows in the third quarter and
the first nine months of fiscal 2003.
Page 5 of 10
Fiscal 2003 year-to-date revenue decreased by $19.5 million or 5 percent to
$379.7 million as a result of flat average assets under management in the first
nine months of fiscal 2003 compared to the first nine months of fiscal 2002 and
changes in the mix of assets under management affecting distribution and service
fee revenue. Investment adviser and administration fees declined $1.2 million or
1 percent to $212.7 million. Distribution and underwriter fees decreased $15.3
million or 12 percent, reflecting the continuing shift in managed assets from
Class B mutual fund shares to other mutual fund share classes and assets with
low or no distribution fees. Service fee revenue declined $5.3 million or 9
percent in the first nine months of fiscal 2003 because of the decline in mutual
fund assets that pay service fees. Other income increased 180 percent to $3.7
million 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 in the first three quarters of fiscal 2003 increased 3
percent to $261.8 million. Compensation expense increased 20 percent in the
third quarter and 5 percent year-to-date primarily because of higher sales
incentives associated with the increase in fund and separate account sales.
Amortization of deferred sales commissions increased 2 percent primarily due to
adjustments made to better align amortization expense with projected
distribution fee revenue. Service fee expense decreased 2 percent reflecting the
decline in the fund assets under management for which these expenses apply.
Other expenses increased 10 percent primarily because of non-recurring expenses
related to the Company's successful offering of nine closed-end municipal bond
funds, higher fund expenses, marketing, travel and promotion expenses, and
higher audit and consulting fees. Operating income in the first three quarters
of fiscal 2003 declined 19 percent to $117.9 million.
Net income in the first three quarters of fiscal 2003 declined 20 percent to
$77.5 million. Interest income declined 40 percent because of lower short-term
interest rates in the first nine months of fiscal 2003 compared to the same
period last year. Interest expense increased 23 percent primarily due to an
additional 2.5 percent per annum of cash interest paid by Eaton Vance Management
on its exchangeable notes. Gains on the sale of investments increased 81 percent
to $2.3 million. The Company's effective tax rate was 35 percent in both the
first nine months of fiscal 2003 and the first nine months of fiscal 2002.
Cash and cash equivalents and short-term investments were $270.7 million on July
31, 2003 and $255.9 million on July 31, 2002. The Company's strong operating
cash flow in the last 12 months allowed it to reduce its long-term debt by $92.3
million or 42 percent to $125.4 million, and pay $74.0 million in federal and
state income taxes (including reducing the deferred tax liability by $23.7
million to $35.5 million), $71.6 million in sales commissions, $37.5 million to
repurchase 1,312,900 shares of its non-voting common stock and $21.6 million in
dividends to shareholders. There are no outstanding borrowings against the
Company's $170.0 million credit facility.
Short-term investments on July 31, 2003 included the investment holdings of the
$124.4 million Eaton Vance Institutional Short-term Income Fund. The Company had
a $100.2 million investment in the fund. Because Eaton Vance is the majority
investor it is required to consolidate the fund in its financial statements.
Minority interest of $23.4 million on July 31, 2003 includes $22.1 million of
minority interest in the Eaton Vance Institutional Short-term Income Fund.
Page 6 of 10
During the first nine months of fiscal year 2003, the Company used $23.3 million
of its cash to repurchase and retire 793,200 shares of its non-voting common
stock. Approximately 1.5 million shares remain of the current 4.0 million-share
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 Nine Months Ended
------------------------------------- ----------------------------------
July 31, July 31, % July 31, July 31, %
2003 2002 Change 2003 2002 Change
--------- --------- -------- --------- --------- --------
Revenue:
Investment adviser and administration fees $ 75,687 $ 70,518 7.3% $ 212,696 $ 213,896 (0.6)%
Distribution and underwriter fees 37,605 40,168 (6.4) 108,833 124,132 (12.3)
Service fees 19,179 19,522 (1.8) 54,458 59,809 (8.9)
Other income 1,433 465 208.2 3,727 1,330 180.2
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Total revenue 133,904 130,673 2.5 379,714 399,167 (4.9)
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Expenses:
Compensation of officers and employees 30,735 25,546 20.3 81,256 77,335 5.1
Amortization of deferred sales commissions 21,139 20,328 4.0 64,168 62,765 2.2
Service fee expense 17,518 16,722 4.8 48,748 49,840 (2.2)
Distribution fee expense 8,552 7,824 9.3 23,878 23,608 1.1
Other expenses 15,088 13,847 9.0 43,788 39,769 10.1
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Total expenses 93,032 84,267 10.4 261,838 253,317 3.4
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Operating Income 40,872 46,406 (11.9) 117,876 145,850 (19.2)
Other Income/(Expense):
Interest income 1,252 3,447 (63.7) 4,189 6,951 (39.7)
Interest expense (1,430) (1,336) 7.0 (4,334) (3,514) 23.3
Gain (loss) on investments 353 (107) (429.9) 2,303 1,276 80.5
Foreign currency gain 2 - n/a 42 - n/a
Equity in net income (loss) of affiliates 160 207 (22.7) (51) 226 (122.6)
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Income Before Minority Interest and Income Taxes 41,209 48,617 (15.2) 120,025 150,789 (20.4)
Minority Interest in Income (398) (648) (38.6) (871) (1,237) (29.6)
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Income Before Income Taxes 40,811 47,969 (14.9) 119,154 149,552 (20.3)
Income Taxes 14,284 16,788 (14.9) 41,704 52,343 (20.3)
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Net Income $ 26,527 $ 31,181 (14.9) $ 77,450 $ 97,209 (20.3)
========= ========= ======== ========= ========= ========
Earnings Per Share:
Basic $ 0.39 $ 0.45 (13.3) $ 1.12 $ 1.40 (20.0)
========= ========= ======== ========= ========= ========
Diluted $ 0.38 $ 0.44 (13.6) $ 1.10 $ 1.35 (18.5)
========= ========= ======== ========= ========= ========
Dividends Declared, Per Share $ 0.1200 $ 0.0725 65.5 $ 0.2800 $ 0.2175 28.7
========= ========= ======== ========= ========= ========
Weighted Average Shares Outstanding:
Basic 68,876 69,161 (0.4) 69,041 69,226 (0.3)
========= ========= ======== ========= ========= ========
Diluted 70,465 71,194 (1.0) 70,303 71,759 (2.0)
========= ========= ======== ========= ========= ========
Page 8 of 10
Eaton Vance Corp.
Balance Sheet
(in thousands, except per share figures)
July 31, October 31, July 31,
2003 2002 2002
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ASSETS
Current Assets:
Cash and cash equivalents $ 130,726 $ 144,078 $ 160,845
Short-term investments 139,980 43,886 95,024
Investment adviser fees and other receivables 22,911 19,502 19,911
Other current assets 4,405 6,101 2,237
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Total current assets 298,022 213,567 278,017
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Other Assets:
Deferred sales commissions 210,068 239,048 250,454
Goodwill 69,467 69,467 69,464
Other intangible assets, net 37,120 37,296 37,793
Long-term investments 32,353 39,982 38,757
Equipment and leasehold improvements, net 12,153 13,897 14,233
Other assets 3,105 3,362 5,590
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Total other assets 364,266 403,052 416,291
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Total assets $ 662,288 $ 616,619 $ 694,308
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accrued compensation $ 23,793 $ 31,899 $ 24,845
Accounts payable and accrued expenses 21,959 16,324 17,372
Dividend payable 8,257 5,522 5,013
Current portion of long-term debt 7,143 7,143 94,115
Other current liabilities 8,291 7,382 4,912
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Total current liabilities 69,443 68,270 146,257
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Long-term Liabilities:
Long-term debt 118,291 124,118 123,633
Deferred income taxes 35,479 50,531 59,210
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Total long-term liabilities 153,770 174,649 182,843
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Total liabilities 223,213 242,919 329,100
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Minority interest 23,426 1,398 1,485
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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 1
Non-voting common stock, par value $0.0078125 per share:
Authorized, 95,360,000 shares
Issued, 68,813,555, 69,102,459 and 69,220,824 shares,
respectively 538 540 541
Notes receivable from stock option exercises (3,059) (3,530) (3,258)
Deferred compensation (1,275) (2,100) (2,375)
Accumulated other comprehensive income 814 2,585 2,963
Retained earnings 418,630 374,806 365,851
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Total shareholders' equity 415,649 372,302 363,723
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Total liabilities and shareholders' equity $ 662,288 $ 616,619 $ 694,308
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Table 1
Asset Flows (in millions)
Twelve Months Ended July 31, 2003
Assets 7/31/2002 - Beginning of Period $ 54,765
Long-term Fund Sales/Inflows 13,745
Long-term Fund Redemptions/Outflows (6,447)
Long-term Fund Net Exchanges (141)
Long-term Fund Mkt. Appreciation 1,577
Institutional/HNW Account Inflows 1,913
Institutional/HNW Account Outflows (1,335)
Retail Managed Account Inflows 760
Retail Managed Account Outflows (238)
Separate Accounts Mkt. Value Change 791
Change in Money Market Funds (1,068)
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Net Change 9,557
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Assets 7/31/2003 - End of Period $ 64,322
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Table 2
Assets Under Management
By Investment Objective (in millions)
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July 31, October 31, % July 31, %
2003 2002 Change 2002 Change
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Equity Funds $ 25,407 $ 22,910 11% $ 23,684 7%
Fixed Income Funds 17,580 13,302 32% 10,573 66%
Bank Loan Funds 8,419 7,687 10% 8,415 0%
Money Market Funds 424 910 -53% 1,492 -72%
Separate Accounts 12,492 10,802 16% 10,601 18%
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Total $ 64,322 $ 55,611 16% $ 54,765 17%
==============================================
Table 3
Asset Flows by Investment Objective (in millions)
Three Months Ended Nine Months Ended
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July 31, July 31, July 31, July 31,
2003 2002 2003 2002
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Equity Fund Assets - Beginning of Period $ 23,372 $ 27,540 $ 22,910 $ 25,277
Sales/Inflows 881 1,342 2,116 3,773
Redemptions/Outflows (597) (1,094) (1,893) (2,326)
Exchanges 32 (180) (59) (142)
Market Value Change 1,719 (3,924) 2,333 (2,898)
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Net Change 2,035 (3,856) 2,497 (1,593)
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Equity Assets - End of Period $ 25,407 $ 23,684 $ 25,407 $ 23,684
-------------------------- ---------------------------
Fixed Income Fund Assets - Beginning of Period 15,573 10,397 13,302 10,165
Sales/Inflows 3,033 568 5,714 1,686
Redemptions/Outflows (612) (416) (1,495) (1,074)
Exchanges (69) 108 60 277
Market Value Change (345) (84) (1) (481)
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Net Change 2,007 176 4,278 408
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Fixed Income Assets - End of Period $ 17,580 $ 10,573 $ 17,580 $ 10,573
-------------------------- ---------------------------
Bank Loan Fund Assets - Beginning of Period 7,156 8,830 7,687 9,582
Sales/Inflows 1,485 236 1,846 792
Redemptions/Outflows (339) (531) (1,217) (1,657)
Exchanges 15 (42) (78) (179)
Market Value Change 102 (78) 181 (123)
-------------------------- ---------------------------
Net Change 1,263 (415) 732 (1,167)
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Bank Loan Assets - End of Period $ 8,419 $ 8,415 $ 8,419 $ 8,415
-------------------------- ---------------------------
Long-Term Fund Assets - Beginning of Period 46,101 46,767 43,899 45,024
Sales/Inflows 5,399 2,146 9,676 6,251
Redemptions/Outflows (1,548) (2,041) (4,605) (5,057)
Exchanges (22) (114) (77) (44)
Market Value Change 1,476 (4,086) 2,513 (3,502)
-------------------------- ---------------------------
Net Change 5,305 (4,095) 7,507 (2,352)
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Total Long-Term Fund Assets - End of Period $ 51,406 $ 42,672 $ 51,406 $ 42,672
-------------------------- ---------------------------
Separate Accounts - Beginning of Period 11,376 11,372 10,802 10,468
Institutional/ HNW Account Inflows 508 637 1,379 1,446
Institutional/ HNW Account Outflows (220) (348) (1,169) (939)
Retail Managed Account Inflows 196 246 591 544
Retail Managed Account Outflows (112) (40) (195) (62)
Separate Accounts Market Value Change 744 (1,266) 1,084 (856)
-------------------------- ---------------------------
Net Change 1,116 (771) 1,690 133
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Separate Accounts - End of Period $ 12,492 $ 10,601 $ 12,492 $ 10,601
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Money Market Fund Assets - End of Period 424 1,492 424 1,492
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Total Assets Under Management - End of Period $ 64,322 $ 54,765 $ 64,322 $ 54,765
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