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 21, 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 10
INFORMATION INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS AND REQUIRED FD DISCLOSURE
------- ---------------------------------------
REGULATION FD DISCLOSURE / RESULTS OF OPERATIONS
ITEMS 9. AND 12. AND FINANCIAL CONDITION
---------------- ------------------------------------------------
Registrant has reported its results of operations for the
three months ended April 30, 2003, as described in Registrant's news release
dated May 21, 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
----------- --------
99.1 Press release issued by the Registrant
dated May 21, 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: May 21, 2003 /s/ William M. Steul
------------ ------------------------------------------------
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
----------- -----------
99.1 Copy of Registrant's news release dated May 21, 2003.
Page 4 of 10
Exhibit 99.1
-------------------------------------------
NEWS RELEASE
-------------------------------------------
Eaton Vance Corp.
The Eaton Vance Building
{LOGO} 255 State Street, Boston, MA 02109
(617) 482-8260
Contact: William M. Steul
-------------------------------------------
May 21, 2003
FOR IMMEDIATE RELEASE
---------------------
EATON VANCE CORP.
REPORT FOR THE THREE MONTHS AND SIX MONTHS ENDED
APRIL 30, 2003
BOSTON, MA--Eaton Vance Corp. reported diluted earnings per share of $0.36 in
the second quarter of fiscal year 2003 compared to diluted earnings per share of
$0.46 in the second quarter of fiscal year 2002. Eaton Vance earned $0.73 per
diluted share for the first six months of fiscal 2003 compared to $0.92 for the
first six months of fiscal 2002.
Assets under management of $57.9 billion at the end of the second quarter of
fiscal 2003 were $1.3 billion or 2 percent lower than the $59.2 billion under
management at the end of the second quarter last year. Average assets under
management were $56.1 billion in the second quarter of fiscal 2003, 5 percent
lower than the average assets of $59.3 billion in the second quarter of last
year. During the 12-month period ended April 30, 2003, the S&P 500 and the
Nasdaq Composite each declined by 13 percent. The Company's superior long-term
investment performance, balanced product line (54 percent equity assets, 33
percent fixed income assets and 13 percent floating rate assets on April 30,
2003), and positive net flows helped offset approximately $5.2 billion of market
depreciation during the 12-month period.
Net inflows of long-term fund assets and separate account assets were $1.5
billion in the first half of fiscal 2003 and $1.6 billion in the first half of
fiscal 2002. Fund net inflows of $1.2 billion in the first six months of 2003
benefited from the successful offering of nine closed-end municipal bond funds
that added $0.7 billion of new assets. Managed account net inflows were $0.3
billion in the first half of 2003 and in the first half of 2002. 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 and changes in product mix,
fiscal 2003 first half revenue decreased by $22.7 million or 8 percent to $245.8
million. Investment adviser and administration fees declined $6.4 million or 4
Page 5 of 10
percent to $137.0 million. Distribution and underwriter fees decreased $12.8
million or 15 percent, reflecting lower fund assets under management and 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
declined $5.0 million or 12 percent in the first half of fiscal 2003 because of
the decline in mutual fund assets that pay service fees. Other income increased
165 percent to $2.3 million because of reimbursement payments for certain fund
shareholder services now performed by the Company, and interest income from a
consolidated investment company in which Eaton Vance is the majority
shareholder.
Fiscal 2003 first half operating expenses of $168.8 million were essentially
flat compared to $169.1 million in the first half of 2002. Compensation expenses
declined 2 percent because of lower marketing and sales incentives and lower
operating income-based bonus accruals. Amortization of deferred sales
commissions increased 1 percent primarily due to adjustments made to better
align amortization expense with projected distribution fee revenue. Service fee
expense and distribution fee expense decreased 6 percent and 3 percent,
respectively, reflecting the decline in fund assets under management. Other
expenses increased 11 percent primarily because of $1.8 million of non-recurring
expenses related to the Company's successful offering of nine closed-end
municipal bond funds, higher marketing-related travel expenses and higher audit
and consulting fees. Fiscal 2003 first half operating income declined 23 percent
to $77.0 million.
First half net income declined 23 percent to $50.9 million. Interest income
declined 16 percent because of lower short-term interest rates in the first half
of fiscal 2003 compared to the first half last year. Interest expense increased
33 percent primarily because of the accrual, beginning November 13, 2002, of 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 41
percent. The Company's provision for income taxes was 35 percent in both the
first half of fiscal 2003 and the first half of fiscal 2002.
Cash and cash equivalents and short-term investments were $238.3 million on
April 30, 2003 and $217.1 million on April 30, 2002. The Company's strong
operating cash flow in the last 12 months allowed it to reduce its long-term
debt by $92.0 million or 42 percent to $125.0 million, and pay $76.8 million in
federal and state income taxes (including reducing the deferred tax liability by
$24.1 million to $39.6 million), $74.0 million in sales commissions, $38.6
million to repurchase 1,361,000 shares of its non-voting common stock and $21.1
million in dividends to shareholders. There are no outstanding borrowings
against the Company's $170 million credit facility.
Short-term investments on April 30, 2003 included the investment holdings of the
$67.2 million Eaton Vance Institutional Short-term Income Fund. Even though the
Company's $50.1 million investment in the fund is considered to be temporary,
Statement of Financial Accounting Standards No. 144 requires the Company to
consolidate funds in its financial statements in which it is the majority
investor. Minority interest of $18.3 million on April 30, 2003 includes $17.1
million of minority interest in the Eaton Vance Institutional Short-term Income
Fund.
During the first six months of fiscal year 2003, the Company used $14.7 million
of its cash to repurchase and retire 523,900 shares of its non-voting common
stock. Approximately 1.8 million shares remain of the current 4.0 million-share
repurchase authorization.
Page 6 of 10
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
------------------------------------ ----------------------------------
April 30, April 30, % April 30, April 30, %
2003 2002 Change 2003 2002 Change
--------- --------- ------ --------- --------- ------
Revenue:
Investment adviser and administration fees $ 67,935 $ 71,511 (5.0)% $ 137,009 $ 143,378 (4.4)%
Distribution and underwriter fees 34,223 40,722 (16.0) 71,228 83,964 (15.2)
Service fees 17,354 20,225 (14.2) 35,279 40,287 (12.4)
Other income 1,364 366 272.7 2,294 865 165.2
--------- --------- ------- --------- --------- --------
Total revenue 120,876 132,824 (9.0) 245,810 268,494 (8.4)
--------- --------- ------- --------- --------- --------
Expenses:
Compensation of officers and employees 24,118 23,729 1.6 50,521 51,789 (2.4)
Amortization of deferred sales commissions 21,635 21,034 2.9 43,029 42,437 1.4
Service fee expense 15,477 16,767 (7.7) 31,230 33,118 (5.7)
Distribution fee expense 7,643 7,894 (3.2) 15,326 15,784 (2.9)
Other expenses 13,387 13,474 (0.6) 28,700 25,922 10.7
--------- --------- ------- --------- --------- --------
Total expenses 82,260 82,898 (0.8) 168,806 169,050 (0.1)
--------- --------- ------- --------- --------- --------
Operating Income 38,616 49,926 (22.7) 77,004 99,444 (22.6)
Other Income/(Expense):
Interest income 1,406 1,815 (22.5) 2,937 3,504 (16.2)
Interest expense (1,471) (1,091) 34.8 (2,904) (2,178) 33.3
Gain on investments 76 - n/a 1,950 1,383 41.0
Foreign currency gain 135 150 (10.0) 40 19 110.5
Equity in net income (loss) of affiliates 15 - n/a (211) - n/a
--------- --------- ------- --------- --------- --------
Income Before Minority Interest and Income Taxes 38,777 50,800 (23.7) 78,816 102,172 (22.9)
Minority Interest in Income (293) (283) 3.5 (473) (589) (19.7)
--------- --------- ------- --------- --------- --------
Income Before Income Taxes 38,484 50,517 (23.8) 78,343 101,583 (22.9)
Income Taxes 13,470 17,682 (23.8) 27,420 35,555 (22.9)
--------- --------- ------- --------- --------- --------
Net Income $ 25,014 $ 32,835 (23.8) $ 50,923 $ 66,028 (22.9)
========= ========= ======= ========= ========= ========
Earnings Per Share:
Basic $ 0.36 $ 0.47 (23.4) $ 0.74 $ 0.95 (22.1)
========= ========= ======= ========= ========= ========
Diluted $ 0.36 $ 0.46 (21.7) $ 0.73 $ 0.92 (20.7)
========= ========= ======= ========= ========= ========
Dividends Declared, Per Share $ 0.0800 $ 0.0725 10.3 $ 0.1600 $ 0.1450 10.3
========= ========= ======= ========= ========= ========
Weighted Average Shares Outstanding:
Basic 68,967 69,352 (0.6) 69,096 69,245 (0.2)
========= ========= ======= ========= ========= ========
Diluted 69,979 72,097 (2.9) 70,230 72,013 (2.5)
========= ========= ======= ========= ========= ========
Page 8 of 10
Eaton Vance Corp.
Balance Sheet
(in thousands, except per share figures)
April 30, October 31, April 30,
2003 2002 2002
--------- ----------- ---------
ASSETS
Current Assets:
Cash and cash equivalents $ 140,728 $ 144,078 $123,333
Short-term investments 97,590 43,886 93,804
Investment adviser fees and other receivables 21,287 19,502 22,698
Other current assets 3,329 6,101 2,241
---------- ---------- ---------
Total current assets 262,934 213,567 242,076
---------- ---------- ---------
Other Assets:
Deferred sales commissions 216,615 239,048 257,758
Goodwill 69,467 69,467 69,356
Other intangible assets, net 37,094 37,296 38,291
Long-term investments 31,323 39,982 40,607
Equipment and leasehold improvements, net 12,768 13,897 14,527
Other assets 3,191 3,362 11,509
---------- ---------- ---------
Total other assets 370,458 403,052 432,048
---------- ---------- ---------
Total assets $ 633,392 $ 616,619 $674,124
========== ========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accrued compensation $ 14,993 $ 31,899 $ 17,025
Accounts payable and accrued expenses 17,538 16,324 18,081
Dividend payable 5,519 5,522 5,031
Current portion of long-term debt 7,143 7,143 7,143
Other current liabilities 8,767 7,382 6,876
---------- ---------- ---------
Total current liabilities 53,960 68,270 54,156
---------- ---------- ---------
Long-term Liabilities:
Long-term debt 117,844 124,118 209,835
Deferred income taxes 39,588 50,531 63,683
---------- ---------- ---------
Total long-term liabilities 157,432 174,649 273,518
---------- ---------- ---------
Total liabilities 211,392 242,919 327,674
---------- ---------- ---------
Minority interest 18,339 1,398 1,323
---------- ---------- ---------
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, 68,993,224, 69,102,459 and 69,465,745 shares,
respectively 539 540 541
Notes receivable from stock option exercises (3,279) (3,530) (2,412)
Deferred compensation (1,550) (2,100) (2,650)
Accumulated other comprehensive income 967 2,585 3,879
Retained earnings 406,983 374,806 345,768
---------- ---------- ---------
Total shareholders' equity 403,661 372,302 345,127
---------- ---------- ---------
Total liabilities and shareholders' equity $ 633,392 $ 616,619 $674,124
========== ========== =========
Page 9 of 10
Table 1
Asset Flows (in millions)
Twelve Months Ended April 30, 2003
Assets 4/30/2002 - Beg. of Period $ 59,231
Long-term Fund Sales/Inflows 10,493
Long-term Fund Redemptions/Outflows (6,942)
Long-term Fund Net Exchanges (234)
Long-term Fund Mkt. Change (3,982)
Institutional/HNW Account Inflows 2,041
Institutional/HNW Account Outflows (1,464)
Retail Managed Account Inflows 811
Retail Managed Account Outflows (166)
Separate Accounts Market Value Change (1,219)
Change in Money Market Funds (676)
----------
Net Change (1,338)
----------
Assets 4/30/2003 - End of Period $ 57,893
==========
Table 2
Assets Under Management
By Investment Objective (in millions)
--------------------------------------------------------
April 30, October 31, % April 30, %
2003 2002 Change 2002 Change
--------------------------------------------------------
Equity Funds $ 23,372 $ 22,910 2% $ 27,540 -15%
Fixed Income Funds 15,573 13,302 17% 10,397 50%
Bank Loan Funds 7,156 7,687 -7% 8,830 -19%
Money Market Funds 416 910 -54% 1,092 -62%
Separate Accounts 11,376 10,802 5% 11,372 0%
--------------------------------------------------------
Total $ 57,893 $ 55,611 4% $ 59,231 -2%
========================================================
Table 3
Asset Flows by Investment Objective (in millions)
Three Months Ended Six Months Ended
--------------------------- -----------------------------
April 30, April 30, April 30, April 30,
2003 2002 2003 2002
--------------------------- -----------------------------
Equity Fund Assets - Beginning of Period $ 22,401 $ 27,459 $ 22,910 $ 25,277
Sales/Inflows 527 1,195 1,235 2,445
Redemptions/Outflows (646) (600) (1,297) (1,232)
Exchanges (63) 14 (90) 39
Market Value Change 1,153 (528) 614 1,011
--------------------------- -----------------------------
Net Change 971 81 462 2,263
--------------------------- -----------------------------
Equity Assets - End of Period $ 23,372 $ 27,540 $ 23,372 $ 27,540
--------------------------- -----------------------------
Fixed Income Fund Assets - Beginning of Period 14,601 10,302 13,302 10,165
Sales/Inflows 1,063 533 2,682 1,119
Redemptions/Outflows (453) (337) (883) (658)
Exchanges 65 18 129 169
Market Value Change 297 (119) 343 (398)
--------------------------- -----------------------------
Net Change 972 95 2,271 232
--------------------------- -----------------------------
Fixed Income Assets - End of Period $ 15,573 $ 10,397 $ 15,573 $ 10,397
--------------------------- -----------------------------
Bank Loan Fund Assets - Beginning of Period 7,308 9,185 7,687 9,582
Sales/Inflows 205 262 361 556
Redemptions/Outflows (364) (538) (879) (1,127)
Exchanges (29) (40) (93) (136)
Market Value Change 36 (39) 80 (45)
--------------------------- -----------------------------
Net Change (152) (355) (531) (752)
--------------------------- -----------------------------
Bank Loan Assets - End of Period $ 7,156 $ 8,830 $ 7,156 $ 8,830
--------------------------- -----------------------------
Long-Term Fund Assets - Beginning of Period 44,310 46,946 43,899 45,024
Sales/Inflows 1,795 1,990 4,278 4,120
Redemptions/Outflows (1,463) (1,475) (3,059) (3,017)
Exchanges (27) (8) (54) 72
Market Value Change 1,486 (686) 1,037 568
--------------------------- -----------------------------
Net Change 1,791 (179) 2,202 1,743
--------------------------- -----------------------------
Total Long-Term Fund Assets - End of Period $ 46,101 $ 46,767 $ 46,101 $ 46,767
--------------------------- -----------------------------
Separate Accounts - Beginning of Period 10,881 11,334 10,802 10,468
Institutional/HNW Account Inflows 284 219 870 808
Institutional/HNW Account Outflows (485) (388) (949) (590)
Retail Managed Account Inflows 120 204 394 297
Retail Managed Account Outflows (56) (15) (84) (22)
Separate Accounts Market Value Change 632 18 343 411
--------------------------- -----------------------------
Net Change 495 38 574 904
--------------------------- -----------------------------
Separate Accounts - End of Period $ 11,376 $ 11,372 $ 11,376 $ 11,372
--------------------------- -----------------------------
Money Market Fund Assets - End of Period 416 1,092 416 1,092
--------------------------- -----------------------------
Total Assets Under Management - End of Period $ 57,893 $ 59,231 $ 57,893 $ 59,231
=========================== =============================
Page 10 of 10