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): February 26, 2003
-----------------
EATON VANCE CORP.
------------------
(Exact name of registrant as specified in its charter)
Maryland 1-8100 04-2718215
---------------------------- ------------------------ -------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
255 State Street, Boston, Massachusetts 02109
--------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 482-8260
--------------
Page 1 of 9
INFORMATION INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS
------- ------------
Registrant has reported its results of operations for the three months
ended January 31, 2003, as described in Registrant's news release dated February
26, 2003, a copy of which is filed herewith as Exhibit 99.1 and incorporated
herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
------- ----------------------------------
(c) Exhibits.
Exhibit No. Document
----------- --------
99.1 Press release issued by the Registrant dated
February 26, 2003.
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: February 26, 2003 /s/ William M. Steul
----------------- -----------------------------------------
William M. Steul, Chief Financial Officer
Page 3 of 9
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
----------- -----------
99.1 Copy of Registrant's news release dated February 26, 2003.
Page 4 of 9
--------------------------------------------------
NEWS RELEASE
--------------------------------------------------
Eaton Vance Corp.
The Eaton Vance Building
{LOGO} 255 State Street, Boston, MA 02109
(617) 482-8260
Contact: William M. Steul
--------------------------------------------------
February 26, 2003
FOR IMMEDIATE RELEASE
---------------------
EATON VANCE CORP.
REPORT FOR THE THREE MONTHS ENDED
JANUARY 31, 2003
BOSTON, MA--Eaton Vance Corp. reported diluted earnings per share of $0.37 in
the first three months of fiscal 2003 compared to diluted earnings per share of
$0.46 in the first three months of fiscal 2002.
Assets under management of $55.8 billion at the end of the first quarter of
fiscal 2003 were $3.5 billion or 6 percent below the $59.3 billion at the end of
the first fiscal quarter last year. This 6 percent decline compares to a 23
percent decline in the S&P 500 and a 31 percent decline in the Nasdaq Composite
for the same 12-month period. The Company's assets under management were
negatively affected by $8.1 billion of market depreciation, 57 percent of which
was offset by $4.6 billion of positive net inflows in the last 12 months. Gross
sales and inflows of long-term funds and separate accounts in the last 12 months
were $13.3 billion. The Company's strong position in fixed income investment
management continued to help offset the effects on Eaton Vance of the
unprecedented equity market declines of the past three years.
Net inflows of long-term fund assets and separate account assets in the first
three months of 2003 were $1.3 billion compared to $1.1 billion in the first
three months of last year. Net inflows in the first quarter of 2003 benefited
from the successful offering of nine closed-end municipal bond funds that added
$0.7 billion of new assets. Tables 1, 2 and 3 (attached) summarize assets under
management and asset flows by investment objective.
As a result of lower average assets under management, fiscal 2003 first quarter
revenue decreased by $10.7 million or 8 percent to $124.9 million, compared to
fiscal 2002 first quarter revenue. Investment adviser and administration fees
declined 4 percent to $69.1 million. Distribution and underwriter fees declined
14 percent reflecting lower fund assets under management and the continuing
Page 5 of 9
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
declined 11 percent in the first quarter of fiscal 2003 because of the decline
in average assets in mutual funds that pay service fees.
Fiscal first quarter 2003 operating expenses of $86.5 million were essentially
flat compared to $86.2 million in fiscal first quarter 2002. Compensation
expense decreased 6 percent primarily because of lower operating income based
bonus accruals.
Amortization of deferred sales commissions was flat at $21.4 million in the
first quarters of fiscal 2003 and 2002. Service fee expense and distribution fee
expense declined 4 percent and 3 percent respectively, reflecting the decline in
fund assets under management. Other expenses increased $2.9 million or 23
percent primarily because of $1.8 million of one-time closed-end municipal bond
fund offering expenses, as well as increases in marketing related travel and
promotion expenses.
First quarter 2003 operating income declined 23 percent to $38.4 million and net
income declined 22 percent to $25.9 million. Other income declined by $0.2
million, primarily because of a 9 percent decrease in interest income and the
accrual, beginning November 13, 2002, of an additional 2.5% per annum of cash
interest by a subsidiary on certain of its notes. Partly offsetting the lower
net interest income and additional items of other income was a $0.5 million
increase in gains on the sale of investments. The Company's provision for income
taxes was 35 percent in the first quarter of fiscal 2003 and in the first
quarter of fiscal 2002.
Cash, cash equivalents and short-term investments were $209.5 million on January
31, 2003, $188.0 million on October 31, 2002 and $222.8 million on January 31,
2002. The Company's strong operating cash flow in the last 12 months allowed it
to reduce its long-term debt by $91.7 million or 41 percent to $131.7 million,
and pay $82.4 million in income taxes (including reducing the deferred tax
liability by $24.3 million to $44.0 million), $80.6 million in sales
commissions, $44.7 million to repurchase 1,460,000 shares of its non-voting
common stock and $20.4 million in dividends to shareholders. There are no
outstanding borrowings against the Company's $170.0 million credit facility.
During the first three months of fiscal year 2003, the Company repurchased and
retired 324,600 shares of its non-voting common stock under its repurchase
authorization. Approximately 2.0 million shares remain of 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 6 of 9
Eaton Vance Corp.
Summary of Results of Operations
(in thousands, except per share amounts)
Three Months Ended
-------------------------------------
January 31, January 31, %
2003 2002 Change
----------- ----------- ------
Revenue:
Investment adviser and administration fees $ 69,074 $ 71,867 (3.9)%
Distribution and underwriter fees 37,005 43,242 (14.4)
Service fees 17,925 20,062 (10.7)
Other income 930 499 86.4
---------- --------- -------
Total revenue 124,934 135,670 (7.9)
---------- --------- -------
Expenses:
Compensation of officers and employees 26,403 28,060 (5.9)
Amortization of deferred sales commissions 21,394 21,403 (0.0)
Service fee expense 15,753 16,352 (3.7)
Distribution fee expense 7,683 7,890 (2.6)
Other expenses 15,313 12,447 23.0
---------- ---------- -------
Total expenses 86,546 86,152 0.5
---------- ---------- -------
Operating Income 38,388 49,518 (22.5)
Other Income/(Expense):
Interest income 1,531 1,689 (9.4)
Interest expense (1,433) (1,087) 31.8
Gain on sale of investments 1,874 1,383 35.5
Foreign currency (loss) (95) - n/a
Equity in net loss of affiliates (226) (131) 72.5
---------- ---------- -------
Income Before Minority Interest and Income Taxes 40,039 51,372 (22.1)
Minority Interest (180) (306) (41.2)
---------- ---------- -------
Income Before Income Taxes 39,859 51,066 (21.9)
Income Taxes 13,950 17,873 (21.9)
---------- ---------- -------
Net Income $ 25,909 $ 33,193 (21.9)
========== ========== =======
Earnings Per Share:
Basic $ 0.37 $ 0.48 (22.9)
========== ========== =======
Diluted $ 0.37 $ 0.46 (19.6)
========== ========== =======
Dividends Declared, Per Share $ 0.0800 $ 0.0725 10.3
========== ========== =======
Weighted Average Shares Outstanding:
Basic 69,163 69,042 0.2
========== ========== =======
Diluted 70,495 71,813 (1.8)
========== ========== =======
Page 7 of 9
Eaton Vance Corp.
Balance Sheet
(in thousands, except per share figures)
January 31, October 31, January 31,
2003 2002 2002
----------- ----------- -----------
ASSETS
Current Assets:
Cash and cash equivalents $ 114,525 $ 144,078 $ 129,378
Short-term investments 94,933 43,886 93,399
Investment adviser fees and other receivables 24,605 19,502 23,750
Other current assets 3,463 6,101 3,372
---------- ---------- ----------
Total current assets 237,526 213,567 249,899
---------- ---------- ----------
Other Assets:
Deferred sales commissions 228,038 239,048 263,035
Goodwill 69,467 69,467 69,258
Other intangible assets, net 37,110 37,296 38,788
Long-term investments 31,312 39,982 39,094
Equipment and leasehold improvements, net 13,352 13,897 14,556
Other assets 3,277 3,362 11,488
---------- ---------- ----------
Total other assets 382,556 403,052 436,219
----------- ----------- ----------
Total assets $ 620,082 $ 616,619 $ 686,118
=========== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accrued compensation $ 9,474 $ 31,899 $ 16,473
Accounts payable and accrued expenses 17,293 16,324 20,562
Dividend payable 5,528 5,522 5,035
Current portion of long-term debt 7,143 7,143 7,143
Other current liabilities 22,807 7,382 23,741
----------- ---------- ----------
Total current liabilities 62,245 68,270 72,954
----------- ---------- ----------
Long-term Liabilities:
Long-term debt 124,555 124,118 216,236
Deferred income taxes 43,993 50,531 68,259
----------- ---------- ----------
Total long-term liabilities 168,548 174,649 284,495
----------- ---------- ----------
Total liabilities 230,793 242,919 357,449
----------- ---------- ----------
Minority interest 1,483 1,398 1,271
----------- ---------- ----------
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, 69,115,168, 69,102,459 and 68,462,051 shares,
respectively 540 540 543
Notes receivable from stock option exercises (3,290) (3,530) (2,496)
Deferred compensation (1,825) (2,100) (2,925)
Accumulated other comprehensive income 886 2,585 3,899
Retained earnings 391,494 374,806 328,376
----------- ---------- ----------
Total shareholders' equity 387,806 372,302 327,398
----------- ---------- ----------
Total liabilities and shareholders' equity $ 620,082 $ 616,619 $686,118
=========== ========== ==========
Page 8 of 9
Table 1
Asset Flows (in millions)
Twelve Months Ended January 31, 2003
Assets 1/31/2002 - Beginning of Period $ 59,272
Long-term Fund Sales/Inflows 10,673
Long-term Fund Redemptions/Outflows (6,954)
Long-term Fund Net Exchanges (215)
Long-term Fund Mkt. Change (6,139)
Separate Accounts Inflows - Institutional/HNW 1,726
Separate Accounts Outflows - Institutional/HNW (982)
Separate Accounts Inflows - Managed Accounts 895
Separate Accounts Outflows - Managed Accounts (125)
Separate Accounts Mkt. Change (1,948)
Change in Money Market Funds (453)
---------
Net Decrease (3,522)
---------
Assets 1/31/2003 - End of Period $ 55,750
=========
Table 2
Assets Under Management
By Investment Objective (in millions)
January 31, October 31, % January 31, %
2003 2002 Change 2002 Change
----------- ----------- ------ ----------- ------
Equity Funds $ 22,401 $ 22,910 - 2.2% $ 27,459 -18.4%
Fixed Income Funds 14,601 13,302 9.8% 10,302 41.7%
Bank Loan Funds 7,308 7,687 - 4.9% 9,185 -20.4%
Money Market Funds 559 910 -38.6% 992 -43.6%
Separate Accounts 10,881 10,802 0.7% 11,334 - 4.0%
---------- ----------- ------ ----------- ------
Total $ 55,750 $ 55,611 0.3% $ 59,272 - 5.9%
========== =========== ====== =========== ======
Table 3
Asset Flows by Investment Objective (in millions)
------------------------------
Three Months Ended
January 31, January 31,
2003 2002
------------------------------
Equity Fund Assets - Beginning of Period $ 22,910 $ 25,277
Sales/Inflows 707 1,250
Redemptions/Outflows (650) (632)
Exchanges (28) 24
Market Value Change (538) 1,540
------------------------------
Net Change (509) 2,182
------------------------------
Equity Fund Assets - End of Period $ 22,401 $ 27,459
------------------------------
Fixed Income Fund Assets - Beginning of Period 13,302 10,165
Sales/Inflows 1,619 585
Redemptions/Outflows (430) (321)
Exchanges 64 151
Market Value Change 46 (278)
------------------------------
Net Change 1,299 137
------------------------------
Fixed Income Fund Assets - End of Period $ 14,601 $ 10,302
------------------------------
Bank Loan Fund Assets - Beginning of Period 7,687 9,582
Sales/Inflows 156 294
Redemptions/Outflows (515) (588)
Exchanges (64) (97)
Market Value Change 44 (6)
------------------------------
Net Change (379) (397)
------------------------------
Bank Loan Fund Assets - End of Period $ 7,308 $ 9,185
------------------------------
Long-Term Fund Assets - Beginning of Period 43,899 45,024
Sales/Inflows 2,482 2,129
Redemptions/Outflows (1,595) (1,541)
Exchanges (28) 78
Market Value Change (448) 1,256
------------------------------
Net Change 411 1,922
------------------------------
Total Long-Term Fund Assets - End of Period $ 44,310 $ 46,946
Separate Accounts - Beginning of Period 10,802 10,468
Separate Accounts Inflows - Institutional/HNW 587 589
Separate Accounts Outflows - Institutional/HNW (464) (202)
Separate Accounts Inflows - Managed Accounts 274 97
Separate Accounts Outflows - Managed Accounts (28) (7)
Separate Accounts Market Change (290) 389
------------------------------
Net Change 79 866
------------------------------
Separate Accounts - End of Period $ 10,881 $ 11,334
------------------------------
Money Market Fund Assets - End of Period 559 992
------------------------------
Total Assets Under Management - End of Period $ 55,750 $ 59,272
==============================
Page 9 of 9