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): August 18, 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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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
and nine months ended July 31, 2004, as described in Registrant's news release
dated August 18, 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
August 18, 2004.
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: August 18, 2004 /s/ William M. Steul
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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
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99.1 Copy of Registrant's news release dated August 18, 2004.
Page 4 of 10
EXHIBIT 99.1
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NEWS RELEASE
Eaton Vance Corp.
The Eaton Vance Building
{LOGO} 255 State Street, Boston, MA 02109
(617) 482-8260
Contact: William M. Steul
--------------------------------------------------
August 18, 2004
FOR IMMEDIATE RELEASE
EATON VANCE CORP.
REPORT FOR THE THREE MONTHS AND NINE MONTHS ENDED
JULY 31, 2004
BOSTON, MA--Eaton Vance Corp. reported diluted earnings per share of $0.50 in
the third quarter of fiscal 2004 compared to diluted earnings per share of $0.38
in the third quarter of fiscal 2003, an increase of 32 percent. Eaton Vance
earned $1.44 per diluted share in the first nine months of fiscal 2004, an
increase of 31 percent compared to earnings of $1.10 per diluted share in the
first nine months of fiscal 2003.
Assets under management of $89.4 billion at the end of the third quarter of
fiscal 2004 were $25.1 billion or 39 percent greater than the $64.3 billion at
the end of the third quarter last year. In the 12-month period ended July 31,
2004, the Company's assets under management were positively affected by
long-term fund and separate account net inflows of $13.2 billion, the
acquisition of Parametric Portfolio Associates which added $5.3 billion of
assets under management in September 2003, the acquisition of $2.0 billion of
assets under management from Deutsche Bank's Scudder Private Investment Counsel
Boston office in July 2004, and market price appreciation of $4.7 billion. Gross
sales and inflows of long-term funds and separate accounts in the last 12 months
were $24.0 billion, including $6.4 billion of assets raised in five successful
closed-end fund offerings.
Fund and separate account net inflows in the first nine months of fiscal 2004
were $10.6 billion, compared to net inflows of $5.7 billion in the first nine
months of fiscal 2003. This fiscal year's first nine month net inflows included
$5.1 billion of new assets raised from the successful offerings of four
closed-end funds: Eaton Vance Senior Floating-Rate Trust, Eaton Vance
Tax-Advantaged Global Dividend Income Fund, Eaton Vance Tax-Advantaged Global
Dividend Opportunities Fund and Eaton Vance Floating-Rate Income Trust, plus the
over-allotment common shares and preferred shares associated with the September
2003 offering of the 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 net
inflows of $5.5 billion in the first nine months of fiscal 2004. Tables 1, 2 and
3 (attached) summarize assets under management and asset flows by investment
objective.
Page 5 of 10
Average assets under management increased 43 percent to $83.4 billion in the
first nine months of fiscal 2004 from $58.3 billion in the first nine months of
the last fiscal year. As a result of higher average assets under management,
revenue in the first nine months of fiscal 2004 increased by $108.5 million or
29 percent to $488.2 million, compared to revenue in the first nine months of
fiscal 2003 of $379.7 million. Investment adviser and administration fees
increased 41 percent to $300.4 million, consistent with the increase in average
assets under management. Distribution and underwriter fees increased 6 percent,
reflecting an increase in Class A and Class C share and private fund assets and
an increase in Class A share underwriter commissions that offset in part, lower
distribution fees from Class B fund assets. Distribution fees from Class B share
assets declined because of lower Class B share sales and the second quarter
implementation of an automatic conversion of Class B shares to Class A shares
after eight years of ownership for certain of the Company's mutual funds which
reduced Class B share fund assets. Service fee revenue increased 25 percent,
consistent with the increase in average Class A and Class C share and private
equity fund assets that pay these fees. Other revenue increased 23 percent
primarily as a result of consolidating two investment companies in which Eaton
Vance is the majority shareholder.
Operating expenses in the first nine months of fiscal 2004 increased 25 percent
to $326.5 million compared to $261.8 million in the same period last year,
primarily because of higher compensation, service fee and distribution expenses.
Compensation expense increased 38 percent principally due to increased marketing
incentives associated with higher sales, the inclusion of Parametric Portfolio
Associates' employee compensation, the compensation of employees who joined
Eaton Vance from Deutsche Bank's Scudder Private Counsel Boston office and
higher operating income-based bonus accruals.
Amortization of deferred sales commissions declined 3 percent in the first nine
months of fiscal 2004 compared to the first nine months of fiscal 2003 because
of the decline in Class B share assets. Service fee expense increased 22
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 55 percent as a result of increases in closed-end fund fees, sales
support expense, certain Class A share fund sales commissions and Class C share
fund distribution fees. Other expense increased 14 percent primarily because of
higher travel, facilities, information technology, communications, legal,
recruiting and miscellaneous expense offset by lower fund related expense.
In the first nine months of fiscal 2004, operating income increased 37 percent
to $161.7 million and net income increased 30 percent to $101.0 million over the
first nine months of fiscal 2003. Interest income declined by $1.9 million to
$2.3 million, primarily because of the inclusion of interest income from two
consolidated investment companies in other revenue. Interest expense in both
periods was $4.3 million. The first nine months of fiscal 2003 included $2.0
million of gains on the sale of investments that were not repeated in the first
nine months of fiscal 2004. Equity in net income of affiliates increased $1.3
million in the first nine months of fiscal 2004 compared to the same period last
year primarily because of an increase in the earnings of Lloyd George Management
in which the Company has a 20 percent ownership position. The Company's
provision for income taxes was 36 percent in the first nine months of fiscal
2004 and 35 percent in the first nine months of fiscal 2003.
Page 6 of 10
Cash, cash equivalents and short-term investments were $339.1 million ($291.8
million excluding $47.3 million of minority shareholder investments in two
consolidated investment companies) on July 31, 2004, $242.8 million on October
31, 2003 and $270.7 million on July 31, 2003. The Company's strong operating
cash flow in the last 12 months allowed it to reduce its long-term debt by $5.8
million to $120.1 million and to pay $56.3 million in income taxes, $68.4
million in sales commissions, $89.5 million to repurchase 2.5 million shares of
its non-voting common stock and $32.7 million in dividends to shareholders.
There are no outstanding borrowings against the Company's $170.0 million credit
facility.
The year-over-year 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 nine months of fiscal 2004, the Company repurchased and retired
1,829,000 shares of its non-voting common stock at an average price of $37.12
per share under its repurchase authorization. Approximately 2.1 million shares
remain to be repurchased under the current 4.0 million-share authorization.
Subsequent to the end of the third quarter, on August 13, 2004, Eaton Vance
Management, the Company's principal operating subsidiary, in response to some of
its note holders exercising third anniversary put options, repurchased $46.0
million ($68.9 million principal amount at maturity) or 38 percent of its
30-year zero-coupon senior exchangeable notes. The notes were repurchased using
cash on hand. The amount of the repurchase is classified as a current liability
on the Company's July 31, 2004 balance sheet. The notes remaining after the
repurchase have an accreted value of $74.1 million on July 31, 2004 ($110.9
million principal amount at maturity). The Company will expense $1.0 million of
previously capitalized debt offering costs associated with the repurchase in its
fiscal 2004 fourth quarter.
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, %
2004 2003 Change 2004 2003 Change
-------- -------- ------ --------- --------- ------
Revenue:
Investment adviser and administration fees $ 105,489 $ 75,687 39 % $ 300,401 $ 212,696 41 %
Distribution and underwriter fees 35,585 37,605 (5) 115,098 108,833 6
Service fees 23,197 19,179 21 68,123 54,458 25
Other revenue 1,672 1,433 17 4,585 3,727 23
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Total revenue 165,943 133,904 24 488,207 379,714 29
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Expenses:
Compensation of officers and employees 37,676 30,735 23 111,968 81,256 38
Amortization of deferred sales commissions 19,919 21,139 (6) 62,551 64,168 (3)
Service fee expense 19,418 16,658 17 56,929 46,846 22
Distribution expense 21,120 14,054 50 59,594 38,434 55
Other expenses 12,412 10,446 19 35,489 31,134 14
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Total expenses 110,545 93,032 19 326,531 261,838 25
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Operating Income 55,398 40,872 36 161,676 117,876 37
Other Income/(Expense):
Interest income 826 1,252 (34) 2,275 4,189 (46)
Interest expense (1,315) (1,430) (8) (4,330) (4,334) (0)
Gain on investments 356 353 1 278 2,303 (88)
Foreign currency gain (loss) (15) 2 NM (62) 42 NM
Equity in net income (loss) of affiliates 584 160 265 1,222 (51) NM
----------- ---------- ----- ----------- ----------- -----
Income Before Income Taxes and Minority Interest 55,834 41,209 35 161,059 120,025 34
Income Taxes 20,100 14,423 39 57,981 42,008 38
Minority Interest, Net of Tax 701 259 171 2,063 567 264
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Net Income $ 35,033 $ 26,527 32 $ 101,015 $ 77,450 30
=========== ========== ===== =========== =========== =====
Earnings Per Share:
Basic $ 0.52 $ 0.39 33 $ 1.49 $ 1.12 33
=========== ========== ===== =========== =========== =====
Diluted $ 0.50 $ 0.38 32 $ 1.44 $ 1.10 31
=========== ========== ===== =========== =========== =====
Dividends Declared, Per Share $ 0.15 $ 0.12 25 $ 0.39 $ 0.28 39
=========== ========== ===== =========== =========== =====
Weighted Average Shares Outstanding:
Basic 67,211 68,876 (2) 67,721 69,041 (2)
=========== ========== ===== =========== =========== =====
Diluted 69,390 70,465 (2) 69,950 70,303 (1)
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Page 8 of 10
Eaton Vance Corp.
Balance Sheet
(in thousands, except per share figures)
July 31, October 31, July 31,
2004 2003 2003
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ASSETS
Current Assets:
Cash and cash equivalents $ 182,525 $ 138,328 $130,726
Short-term investments 156,579 104,484 139,980
Investment adviser fees and other receivables 32,011 25,922 22,911
Other current assets 14,139 3,583 4,405
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Total current assets 385,254 272,317 298,022
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Other Assets:
Deferred sales commissions 174,011 199,322 210,068
Goodwill 89,281 88,879 69,467
Other intangible assets, net 44,751 46,193 37,120
Long-term investments 35,870 36,490 32,353
Equipment and leasehold improvements, net 12,558 12,411 12,153
Other assets 2,851 3,090 3,105
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Total other assets 359,322 386,385 364,266
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Total assets $ 744,576 $ 658,702 $662,288
=========== =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accrued compensation $ 38,527 $ 35,339 $ 23,793
Accounts payable and accrued expenses 23,389 23,822 21,959
Dividend payable 10,042 8,189 8,257
Current portion of long-term debt 46,002 7,143 7,143
Other current liabilities 2,872 8,302 8,291
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Total current liabilities 120,832 82,795 69,443
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Long-Term Liabilities:
Long-term debt 74,071 118,736 118,291
Deferred income taxes 63,270 33,203 35,479
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Total long-term liabilities 137,341 151,939 153,770
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Total liabilities 258,173 234,734 223,213
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Minority interest 51,367 7,691 23,426
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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, 66,937,934, 68,250,464 and
68,813,555 shares, respectively 523 533 538
Notes receivable from stock option exercises (3,010) (2,995) (3,059)
Deferred compensation (2,800) (1,000) (1,275)
Accumulated other comprehensive income 1,556 1,245 814
Retained earnings 438,766 418,493 418,630
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Total shareholders' equity 435,036 416,277 415,649
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Total liabilities and shareholders' equity $ 744,576 $ 658,702 $662,288
=========== =========== ==========
Page 9 of 10
Table 1
Asset Flows (in millions)
Twelve Months Ended July 31, 2004
Assets7/31/2003 - Beginning of Period $ 64,322
Long-term fund sales and inflows 18,883
Long-term fund redemptions and outflows (7,864)
Long-term fund net exchanges (27)
Long-term fund mkt. value change 2,826
Long-term fund assets acquired 1 660
Institutional and HNW account inflows 3,203
Institutional and HNW account outflows (1,937)
Institutional and HNW assets acquired 1 2 4,768
Retail managed account inflows 1,868
Retail managed account outflows (950)
Retail managed account assets acquired 1 1,850
Separate account mkt. value change 1,861
Change in money market funds (21)
Net change 25,120
Assets 7/31/2004 - End of Period $ 89,442
Table 2
Assets Under Management
By Investment Objective (in millions)
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July 31 October 31 % July 31, %
2004 2003 Change 2003 Change
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Equity Funds $ 35,01 $ 28,854 21% $ 25,407 38%
Fixed Income Fund 17,090 17,801 -4% 17,580 -3%
Bank Loan Funds 13,777 9,547 44% 8,419 64%
Money Market Funds 403 445 -9% 424 -5%
Separate Accounts 23,154 18,397 26% 12,492 85%
-----------------------------------------------------
Total $ 89,44 $ 75,044 19% $ 64,322 39%
=====================================================
Table 3
Asset Flows by Investment Objective (in millions)
Three Months Ended Nine Months Ended
-------------------------- -------------------------
July 31, July 31, July 31, July 31,
2004 2003 2004 2003
-------------------------- -------------------------
Equity Fund Assets - Beginning of Period $ 34,539 $ 23,372 $ 28,854 $ 22,910
Sales/Inflows 1,498 881 7,218 2,116
Redemptions/Outflows (874) (597) (2,442) (1,893)
Exchanges 4 32 97 (59)
Market Value Change (149) 1,719 1,291 2,333
-------------------------- -------------------------
Net Change 479 2,035 6,164 2,497
-------------------------- -------------------------
Equity Assets - End of Period $ 35,018 $ 25,407 $ 35,018 $ 25,407
-------------------------- -------------------------
Fixed Income Fund Assets - Beginning of Period 17,649 15,573 17,801 13,302
Sales/Inflows 434 3,033 1,825 5,714
Redemptions/Outflows (661) (612) (1,904) (1,495)
Exchanges (114) (69) (263) 60
Market Value Change (218) (345) (369) (1)
-------------------------- -------------------------
Net Change (559) 2,007 (711) 4,278
-------------------------- -------------------------
Fixed Income Assets - End of Period $ 17,090 $ 17,580 $ 17,090 $ 17,580
-------------------------- -------------------------
Bank Loan Fund Assets - Beginning of Period 11,791 7,156 9,547 7,687
Sales/Inflows 2,570 1,485 5,768 1,846
Redemptions/Outflows (527) (339) (1,642) (1,217)
Exchanges 75 15 147 (78)
Market Value Change (132) 102 (43) 181
-------------------------- -------------------------
Net Change 1,986 1,263 4,230 732
-------------------------- -------------------------
Bank Loan Assets - End of Period $ 13,777 $ 8,419 $ 13,777 $ 8,419
-------------------------- -------------------------
Long-Term Fund Assets - Beginning of Period 63,979 46,101 56,202 43,899
Sales/Inflows 4,502 5,399 14,811 9,676
Redemptions/Outflows (2,062) (1,548) (5,988) (4,605)
Exchanges (35) (22) (19) (77)
Market Value Change (499) 1,476 879 2,513
-------------------------- -------------------------
Net Change 1,906 5,305 9,683 7,507
-------------------------- -------------------------
Total Long-Term Fund Assets - End of Period $ 65,885 $ 51,406 $ 65,885 $ 51,406
-------------------------- -------------------------
Separate Accounts - Beginning of Period 20,729 11,376 18,397 10,802
Institutional/ HNW Account Inflows 618 508 2,507 1,379
Institutional/ HNW Account Outflows (633) (220) (1,431) (1,169)
Institutional/ HNW Assets Acquired 2 1,996 - 1,996 -
Retail Managed Account Inflows 504 196 1,530 591
Retail Managed Account Outflows (232) (112) (808) (195)
Separate Accounts Market Value Change 172 744 963 1,084
-------------------------- -------------------------
Net Change 2,425 1,116 4,757 1,690
-------------------------- -------------------------
Separate Accounts - End of Period $ 23,154 $ 12,492 $ 23,154 $ 12,492
-------------------------- -------------------------
Money Market Fund Assets - End of Period 403 424 403 424
-------------------------- -------------------------
Total Assets Under Management - End of Period $ 89,442 $ 64,322 $ 89,442 $ 64,322
========================== =========================
1 Parametric Portfolio Associates assets acquired by Eaton Vance in September
2003
2 Deutsche Bank's Scudder Private Investment Counsel assets acquired by Eaton
Vance in July 2004
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