UNITED STATES 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): May 19, 2004
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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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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
and six months ended April 30, 2004, as described in Registrant's news release
dated May 19, 2004, 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, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits.
Exhibit No. Document
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99.1 Press release issued by the Registrant dated
May 19, 2004.
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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: May 19, 2004 /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 May 19, 2004.
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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May 19, 2004
FOR IMMEDIATE RELEASE
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EATON VANCE CORP.
REPORT FOR THE THREE MONTHS AND SIX MONTHS ENDED
APRIL 30, 2004
BOSTON, MA--Eaton Vance Corp. reported diluted earnings per share of $0.50 in
the second quarter of fiscal 2004 compared to diluted earnings per share of
$0.36 in the second quarter of fiscal 2003, an increase of 39 percent. Eaton
Vance earned $0.94 per diluted share in the first six months of fiscal 2004, an
increase of 29 percent compared to earnings of $0.73 per diluted share in the
first six months of fiscal 2003.
Assets under management of $85.1 billion at the end of the first half of fiscal
2004 were $27.2 billion or 47 percent greater than the $57.9 billion at the end
of the first half last year. In the 12-month period ended April 30, 2004, the
Company's assets under management were positively affected by long-term fund and
separate account net inflows of $14.7 billion, the acquisition of Parametric
Portfolio Associates, which added assets of $5.3 billion at the close of the
transaction on September 10, 2003, and market price appreciation of $7.2
billion. Gross sales and inflows of long-term funds and separate accounts in the
last 12 months were $24.4 billion, including $8.6 billion of assets raised in
five successful closed-end fund offerings.
Net fund and separate account inflows in the first half of fiscal 2004 were $7.9
billion compared to net inflows of $1.5 billion in the first half last year.
This year's first half net inflows included $4.3 billion of new assets raised
from the successful initial public offering of three closed-end funds, Eaton
Vance Senior Floating-Rate Trust, Eaton Vance Tax-Advantaged Global Dividend
Income Fund, and Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund,
in addition to the over-allotment common shares and preferred shares associated
with the September 2003 offering of Eaton Vance Tax-Advantaged Dividend Income
Fund. In addition to strong closed-end fund flows, the Company experienced
strong open-end fund, private fund, institutional and retail managed account
flows of $3.6 billion in the first half of fiscal 2004. Tables 1, 2 and 3
(attached) summarize assets under management and asset flows by investment
objective.
Average assets under management increased 45 percent to $81.5 billion in the
first half of fiscal 2004 from $56.3 billion in the first half last year. As a
result of higher average assets under management, fiscal 2004 first half revenue
increased by $76.5 million or 31 percent to $322.3 million compared to fiscal
2003 first half revenue of $245.8 million. Investment adviser and administration
Page 5 of 10
fees increased 42 percent to $194.9 million, in line with the increase in
average assets under management. Distribution and underwriter fees increased 12
percent, reflecting an increase in Class A and C share and private fund assets
under management and an increase in Class A share underwriter commissions. Class
B share assets declined because of lower Class B share sales and the second
quarter implementation of an 8-year Class B to Class A share conversion for
certain of the Company's mutual funds. Service fee revenue increased 27 percent,
consistent with the increase in average Class A and C share and private equity
fund assets which pay these fees. Other revenue increased 27 percent primarily
as a result of consolidating two investment companies in which Eaton Vance is
the majority shareholder.
Fiscal first half 2004 operating expenses increased 28 percent to $216.0 million
compared to $168.8 million of operating expenses in fiscal first half of 2003
primarily because of higher compensation, service fee and distribution expenses.
Compensation expense increased 47 percent principally due to increased marketing
incentives associated with higher sales, the inclusion of Parametric Portfolio
Associates' employee compensation and higher operating income-based bonus
accruals.
Amortization of deferred sales commissions declined 1 percent in the first half
of fiscal 2004 compared to the first half of fiscal 2003. Service fee expense
increased 24 percent, in line with the increase in service fee revenue. Eaton
Vance collects asset-based service fees from many of its funds and pays them to
the appropriate broker/dealers on fund assets in place more than one year.
Distribution expense increased 58 percent as a result of increases in sales
support expenses, certain Class A share fund sales commissions, Class C share
fund distribution fees and closed-end fund fees. Other expenses increased 12
percent primarily because of higher travel, facilities, information technology,
communications, legal and recruiting expenses offset by lower fund related
expenses.
Operating income in the first half of fiscal 2004 increased 38 percent to $106.3
million and net income increased 30 percent to $66.0 million over the first half
of fiscal 2003. Interest income declined by $1.5 million, or 51 percent,
primarily because of the inclusion of interest income from two consolidated
investment companies in other revenue. Interest expense increased 4 percent,
reflecting $0.2 million of interest accrued in conjunction with settlement of
the Company's IRS audits of fiscal years 1999 and 2000. The first half of fiscal
2003 included $2.0 million of gains on the sale of investments that were not
repeated in the first half of fiscal 2004. The Company's provision for income
taxes was 36 percent in the first half of fiscal 2004 and 35 percent in the
first half of fiscal 2003.
Cash, cash equivalents and short-term investments were $308.3 million (including
$47.1 million of minority shareholder investments in two consolidated investment
companies) on April 30, 2004, $242.8 million on October 31, 2003 and $238.3
million on April 30, 2003. The Company's strong operating cash flow in the last
12 months allowed it to reduce its long-term debt by $5.4 million to $119.6
million and to pay $64.7 million in income taxes, $72.3 million in sales
commissions, $73.0 million to repurchase 2.0 million shares of its non-voting
common stock and $30.1 million in dividends to shareholders. There are no
outstanding borrowings against the Company's $170.0 million credit facility. The
Company has sufficient cash and short-term investments to repurchase the $120.1
million of convertible notes issued by a subsidiary in the event note holders
choose to redeem them on the upcoming August 13, 2004 optional put date.
The increases in other current assets and deferred income taxes resulted
primarily from a recent change in IRS regulations allowing mutual fund sponsors
to deduct Class B share sales commissions when paid. These commissions were
previously capitalized and amortized for tax purposes.
During the first six months of fiscal 2004, the Company repurchased and retired
1,155,900 shares of its non-voting common stock at an average price of $37.05
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per share, under its repurchase authorization. Approximately 2.7 million shares
remain to be repurchased under the current 4.0 million-share 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 Six Months Ended
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April 30, April 30, % April 30, April 30, %
2004 2003 Change 2004 2003 Change
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Revenue:
Investment adviser and administration fees $ 101,162 $ 67,935 49% $ 194,912 $ 137,009 42%
Distribution and underwriter fees 39,637 34,223 16 79,513 71,228 12
Service fees 23,017 17,354 33 44,926 35,279 27
Other revenue 1,475 1,364 8 2,913 2,294 27
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Total revenue 165,291 120,876 37 322,264 245,810 31
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Expenses:
Compensation of officers and employees 36,793 24,118 53 74,292 50,521 47
Amortization of deferred sales commissions 21,869 21,635 1 42,632 43,029 (1)
Service fee expense 18,879 14,916 27 37,511 30,189 24
Distribution expense 19,695 11,961 65 38,474 24,380 58
Other expenses 11,880 9,630 23 23,077 20,687 12
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Total expenses 109,116 82,260 33 215,986 168,806 28
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Operating Income 56,175 38,616 45 106,278 77,004 38
Other Income/(Expense):
Interest income 661 1,406 (53) 1,449 2,937 (51)
Interest expense (1,364) (1,471) (7) (3,015) (2,904) 4
Gain (loss) on investments (83) 76 n/a (78) 1,950 n/a
Foreign currency gain (loss) (29) 135 n/a (47) 40 n/a
Equity in net income (loss) of affiliates 623 15 n/a 638 (211) n/a
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Income Before Income Taxes and Minority Interest 55,983 38,777 44 105,225 78,816 34
Income Taxes 20,154 13,572 48 37,881 27,585 37
Minority Interest, Net of Tax 660 191 246 1,362 308 342
Net Income $ 35,169 $ 25,014 41 $ 65,982 $ 50,923 30
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Earnings Per Share:
Basic $ 0.52 $ 0.36 44 $ 0.97 $ 0.74 31
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Diluted $ 0.50 $ 0.36 39 $ 0.94 $ 0.73 29
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Dividends Declared, Per Share $ 0.12 $ 0.08 50 $ 0.24 $ 0.16 50
=========== ========== ====== ========== ========== ======
Weighted Average Shares Outstanding:
Basic 67,766 68,967 (2) 67,976 69,096 (2)
=========== ========== ====== ========== ========== ======
Diluted 70,111 69,979 0 70,225 70,230 (0)
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Eaton Vance Corp.
Balance Sheet
(in thousands, except per share figures)
April 30, October 31, April 30,
2004 2003 2003
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ASSETS
Current Assets:
Cash and cash equivalents $ 152,734 $ 138,328 $ 140,728
Short-term investments 155,610 104,484 97,590
Investment adviser fees and other receivables 28,761 25,922 21,287
Other current assets 25,870 3,583 3,329
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Total current assets 362,975 272,317 262,934
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Other Assets:
Deferred sales commissions 182,349 199,322 216,615
Goodwill 89,281 88,879 69,467
Other intangible assets, net 44,971 46,193 37,094
Long-term investments 37,877 36,490 31,323
Equipment and leasehold improvements, net 12,215 12,411 12,768
Other assets 2,929 3,090 3,191
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Total other assets 369,622 386,385 370,458
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Total assets $ 732,597 $ 658,702 $633,392
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accrued compensation $ 26,925 $ 35,339 $ 14,993
Accounts payable and accrued expenses 21,296 23,822 17,538
Dividend payable 8,098 8,189 5,519
Current portion of long-term debt - 7,143 7,143
Other current liabilities 7,354 8,302 8,767
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Total current liabilities 63,673 82,795 53,960
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Long-Term Liabilities:
Long-term debt 119,621 118,736 117,844
Deferred income taxes 65,619 33,203 39,588
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Total long-term liabilities 185,240 151,939 157,432
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Total liabilities 248,913 234,734 211,392
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Minority interest 51,582 7,691 18,339
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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, 67,500,405, 68,250,464 and
68,993,224 shares, respective 527 533 539
Notes receivable from stock option exercises (2,891) (2,995) (3,279)
Deferred compensation (3,200) (1,000) (1,550)
Accumulated other comprehensive income 1,688 1,245 943
Retained earnings 435,977 418,493 407,007
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Total shareholders' equity 432,102 416,277 403,661
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Total liabilities and shareholders' equity $ 732,597 $ 658,702 $ 633,392
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Table 1
Asset Flows (in millions)
Twelve Months Ended April 30, 2004
Assets 4/30/2003 - Beginning of Period $ 57,893
Long-term fund sales and inflows 19,782
Long-term fund redemptions and outflows (7,350)
Long-term fund net exchanges (14)
Long-term fund mkt. value change 4,802
Long-term fund assets acquired1 660
Institutional and HNW account inflows 3,093
Institutional and HNW account outflows (1,524)
Institutional and HNW assets acquired1 2,772
Retail managed account inflows 1,560
Retail managed account outflows (830)
Retail managed account assets acquired1 1,850
Separate account mkt. value change 2,429
Change in money market funds (30)
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Net change 27,200
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Assets 4/30/2004 - End of Period $ 85,093
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Table 2
Assets Under Management
By Investment Objective (in millions)
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April 30,October 31, % April 30, %
2004 2003 Change 2003 Change
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Equity Funds $ 34,539 $ 28,854 20% $ 23,372 48%
Fixed Income Funds 17,649 17,801 -1% 15,573 13%
Bank Loan Funds 11,791 9,547 24% 7,156 65%
Money Market Funds 386 445 -13% 416 -7%
Separate Accounts 20,728 18,397 13% 11,376 82%
---------------------------------------------
Total $ 85,093 $ 75,044 13% $ 57,893 47%
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Table 3
Asset Flows by Investment Objective (in millions)
Three Months Ended Six Months Ended
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April 30, April 30, April 30, April 30,
2004 2003 2004 2003
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Equity Fund Assets - Beginning of Period $ 33,214 $ 22,401 $ 28,854 $ 22,910
Sales/Inflows 2,276 527 5,720 1,235
Redemptions/Outflows (868) (646) (1,568) (1,297)
Exchanges 42 (63) 93 (90)
Market Value Change (125) 1,153 1,440 614
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Net Change 1,325 971 5,685 462
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Equity Assets - End of Period $ 34,539 $ 23,372 $ 34,539 $ 23,372
------------------------------- ----------------------------
Fixed Income Fund Assets - Beginning of Period 18,252 14,601 17,801 13,302
Sales/Inflows 663 1,063 1,391 2,682
Redemptions/Outflows (689) (453) (1,243) (883)
Exchanges (61) 65 (149) 129
Market Value Change (516) 297 (151) 343
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Net Change (603) 972 (152) 2,271
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Fixed Income Assets - End of Period $ 17,649 $ 15,573 $ 17,649 $ 15,573
------------------------------- ----------------------------
Bank Loan Fund Assets - Beginning of Period 11,180 7,308 9,547 7,687
Sales/Inflows 1,215 205 3,197 361
Redemptions/Outflows (737) (364) (1,115) (879)
Exchanges 40 (29) 72 (93)
Market Value Change 93 36 90 80
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Net Change 611 (152) 2,244 (531)
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Bank Loan Assets - End of Period $ 11,791 $ 7,156 $ 11,791 $ 7,156
------------------------------- ----------------------------
Long-Term Fund Assets - Beginning of Period 62,646 44,310 56,202 43,899
Sales/Inflows 4,154 1,795 10,308 4,278
Redemptions/Outflows (2,294) (1,463) (3,926) (3,059)
Exchanges 21 (27) 16 (54)
Market Value Change (548) 1,486 1,379 1,037
------------------------------- ----------------------------
Net Change 1,333 1,791 7,777 2,202
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Total Long-Term Fund Assets - End of Period $ 63,979 $ 46,101 $ 63,979 $ 46,101
------------------------------- ----------------------------
Separate Accounts - Beginning of Period 20,529 10,881 18,397 10,802
Institutional/HNW Account Inflows 793 284 1,889 870
Institutional/HNW Account Outflows (467) (485) (799) (949)
Retail Managed Account Inflows 522 120 1,027 394
Retail Managed Account Outflows (366) (56) (576) (84)
Separate Accounts Market Value Change (283) 632 790 343
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Net Change 199 495 2,331 574
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Separate Accounts - End of Period $ 20,728 $ 11,376 $ 20,728 $ 11,376
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Money Market Fund Assets - End of Period 386 416 386 416
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Total Assets Under Management - End of Period $ 85,093 $ 57,893 $ 85,093 $ 57,893
=============================== ============================
1 Parametric Portfolio Associates acquired by Eaton Vance on September 10, 2003
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