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 18, 2005
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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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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Page 1 of 10
INFORMATION INCLUDED IN THE REPORT
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
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Registrant has reported its results of operations for the six months ended
April 30, 2005, as described in Registrant's news release dated May 18, 2005, a
copy of which is filed herewith as Exhibit 99.1 and incorporated herein by
reference.
Exhibit No. Document
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99.1 Press release issued by the Registrant dated
May 18, 2005.
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 18, 2005 /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 May 18, 2005.
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 18, 2005
FOR IMMEDIATE RELEASE
EATON VANCE CORP.
REPORT FOR THE THREE MONTHS AND SIX MONTHS ENDED
APRIL 30, 2005
BOSTON, MA--Eaton Vance Corp. reported diluted earnings per share of $0.27 in
the second quarter of fiscal 2005 compared to diluted earnings per share of
$0.25 in the second quarter of fiscal 2004, an increase of 8 percent. Eaton
Vance earned $0.53 per diluted share in the first six months of fiscal 2005, an
increase of 15 percent compared to earnings of $0.46 per diluted share in the
first six months of fiscal 2004.
Assets under management of $98.8 billion at the end of the second quarter of
fiscal 2005 were $13.7 billion or 16 percent greater than the $85.1 billion at
the end of the second fiscal quarter last year. In the 12-month period ended
April 30, 2005, the Company's assets under management were positively affected
by long-term fund and separate account net inflows of $9.3 billion, market price
appreciation of $2.6 billion and $1.9 billion of separate accounts acquired from
Deutsche Bank in July 2004. Gross sales and inflows of long-term funds and
separate accounts in the last 12 months were $24.0 billion, including five new
closed-end funds that raised a total of $3.8 billion.
Fund and separate account net inflows of $2.1 billion in the second quarter of
fiscal 2005 compared to net inflows of $2.3 billion in the second quarter of
fiscal 2004. This year's second quarter net inflows included $1.0 billion raised
in two closed-end fund offerings: Eaton Vance Short Duration Diversified Income
Fund offered in February, Eaton Vance Tax-Managed Buy-Write Income Fund offered
in April and the over-allotment shares from Eaton Vance Enhanced Equity Income
Fund II offered in January. Last year's second quarter benefited from closed-end
fund inflows of $1.1 billion that included the offering of Eaton Vance Tax
Advantaged Global Dividend Opportunities Fund and the over-allotment common and
preferred shares related to Eaton Vance Tax-Advantaged Global Dividend Income
Fund offered in January 2004. Excluding closed-end funds, net flows for Eaton
Vance funds were $0.9 billion in the second quarter of fiscal 2005 compared to
$0.7 billion in the second quarter of fiscal 2004.
Page 5 of 10
The Company experienced institutional and high-net-worth separate account net
outflows of $0.4 billion in the second quarter of fiscal 2005 compared to net
inflows of $0.3 billion in the second quarter of fiscal 2004, primarily because
of management turnover at a subsidiary and portfolio rebalancing by certain
institutional clients. Retail managed account net inflows, however, increased by
over 200 percent to $0.5 billion in the second quarter of fiscal 2005 compared
to the same period last year. Tables 1-4 (attached) provide more details on
assets under management and asset flows.
As a result of higher average assets under management, revenue in the second
quarter of fiscal 2005 increased by $17.2 million or 10 percent to $182.5
million compared to revenue in the second quarter of fiscal 2004 of $165.3
million. Investment adviser and administration fees increased 20 percent to
$121.4 million, compared to the 17 percent increase in average assets under
management. Distribution and underwriter fees decreased 15 percent, reflecting
the continuing shift in sales and assets from class B mutual fund shares to
other fund share classes and other managed assets with low or no distribution
fees. Service fee revenue increased 9 percent due to the increase in average
fund assets that pay these fees. Other revenue increased 49 percent primarily as
a result of investment income earned by two consolidated investment companies.
Operating expenses increased 11 percent in the second quarter of fiscal 2005 to
$121.1 million compared to operating expenses of $109.1 million in the second
quarter of fiscal 2004, because of higher compensation, service fee,
distribution and other expenses. Compensation expense increased 19 percent
because of increases in employee headcount, separately managed account incentive
compensation and higher operating income-based bonus accruals.
Amortization of deferred sales commissions declined 23 percent in the second
quarter of fiscal 2005 compared to the second quarter of fiscal 2004 primarily
because of the continuing decline in class B share sales and assets under
management. Service fee expense increased 9 percent, in line with the increase
in service fee revenue. Distribution expense increased 18 percent as a result of
increases in class C share fund distribution fees and closed-end fund fees.
Other expense increased 38 percent primarily because of higher fund expenses,
facilities, information technology, legal, audit, compliance, recruiting and
other miscellaneous expenses.
Operating income increased 9 percent to $61.5 million and net income increased 7
percent to $37.6 million in the second quarter of fiscal 2005, compared to $56.2
million and $35.2 million, respectively, in the second quarter of fiscal 2004.
Interest income increased 60 percent because of higher interest earned on cash
and short-term investments. Interest expense decreased $1.0 million or 73
percent, reflecting a $44.7 million reduction in long-term debt. The Company
recognized a $1.8 million impairment loss on its equity in a collateralized debt
obligation fund on April 30, 2005. The Company's effective tax rate, before
minority interest and equity in net income of affiliates, was 36.3 percent in
the second quarter of fiscal 2005 and 35.3 percent in the second quarter of
fiscal 2004.
Cash, cash equivalents and short-term investments were $284.8 million on April
30, 2005, and $308.3 million, including $47.1 million of minority shareholder
investments in a consolidated investment company on April 30, 2004. In April
2005, because of the fund's overall growth, the Company became a minority
investor in the Eaton Vance Short-Term Income Fund and discontinued
consolidating the fund in its financial statements.
Page 6 of 10
The Company's strong operating cash flow in the last 12 months allowed it to
reduce its long-term debt by $44.7 million to $74.9 million and to pay $77.8
million in income taxes, $51.1 million in sales commissions, $115.3 million to
repurchase 5.2 million shares of its non-voting common stock and $39.4 million
in dividends to shareholders. There are currently no outstanding borrowings
against the Company's $180 million credit facility.
During the first six months of fiscal 2005, the Company repurchased and retired
2,982,077 shares of its non-voting common stock at an average price of $24.53
per share under its current and prior repurchase authorizations. Approximately
7.7 million shares remain of the current 8.0 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, %
2005 2004 Change 2005 2004 Change
------------- ----------- ---------- ----------- ----------- ----------
Revenue:
Investment adviser and administration fees $ 121,361 $ 101,162 20 % $ 240,276 $ 194,912 23 %
Distribution and underwriter fees 33,809 39,637 (15) 68,869 79,513 (13)
Service fees 25,139 23,017 9 50,616 44,926 13
Other revenue 2,195 1,475 49 4,521 2,913 55
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Total revenue 182,504 165,291 10 364,282 322,264 13
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Expenses:
Compensation of officers and employees 43,914 36,793 19 86,118 74,292 16
Amortization of deferred sales commissions 16,907 21,869 (23) 34,947 42,632 (18)
Service fee expense 20,594 18,879 9 41,766 37,511 11
Distribution expense 23,194 19,695 18 46,113 38,474 20
Other expenses 16,445 11,880 38 31,032 23,077 34
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Total expenses 121,054 109,116 11 239,976 215,986 11
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Operating Income 61,450 56,175 9 124,306 106,278 17
Other Income/(Expense):
Interest income 1,057 661 60 1,766 1,449 22
Interest expense (371) (1,364) (73) (732) (3,015) (76)
Gain (loss) on investments 77 (83) n/a 87 (78) n/a
Foreign currency gain (loss) 3 (29) n/a 25 (47) n/a
Impairment loss on investments (1,840) - n/a (1,840) - n/a
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Income Before Income Taxes, Minority Interest
and Equity in Net Income (Loss) of Affiliates 60,376 55,360 9 123,612 104,587 18
Income Taxes 21,911 19,559 12 44,764 36,885 21
Minority Interest 1,208 1,031 17 2,608 2,128 23
Equity in Net Income (Loss) of Affiliates, Net of Tax 370 399 (7) (207) 408 n/a
------------ ------------ ------- ------------ ----------- -------
Net Income $ 37,627 $ 35,169 7 $ 76,033 $ 65,982 15
============ ============ ======= ============ =========== =======
Earnings Per Share:
Basic $ 0.28 $ 0.26 8 $ 0.57 $ 0.48 19
============ ============ ======= ============ =========== =======
Diluted $ 0.27 $ 0.25 8 $ 0.53 $ 0.46 15
============ ============ ======= ============ =========== =======
Dividends Declared, Per Share $ 0.08 $ 0.06 33 $ 0.16 $ 0.12 33
============ ============ ======= ============ =========== =======
Weighted Average Shares Outstanding:
Basic 132,121 135,533 (3) 132,826 135,951 (2)
============ ============ ======= ============ =========== =======
Diluted 142,176 145,391 (2) 142,948 145,619 (2)
============ ============ ======= ============ =========== =======
Page 8 of 10
Eaton Vance Corp.
Balance Sheet
(in thousands, except per share figures)
April 30, October 31, April 30,
2005 2004 2004
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ASSETS
Current Assets:
Cash and cash equivalents $ 158,814 $ 147,137 $ 152,734
Short-term investments 125,953 210,429 155,610
Investment adviser fees and other receivables 32,506 32,249 28,761
Other current assets 6,217 4,861 25,870
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Total current assets 323,490 394,676 362,975
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Other Assets:
Deferred sales commissions 140,028 162,259 182,349
Goodwill 89,281 89,281 89,281
Other intangible assets, net 41,537 43,965 44,971
Long-term investments 40,071 36,895 37,877
Equipment and leasehold improvements, net 12,224 12,413 12,215
Other assets 4,416 4,077 2,929
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Total other assets 327,557 348,890 369,622
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Total assets $ 651,047 $ 743,566 $ 732,597
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accrued compensation $ 32,628 $ 52,299 $ 26,925
Accounts payable and accrued expenses 24,078 23,789 21,296
Dividend payable 10,506 10,660 8,098
Other current liabilities 9,144 7,451 7,354
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Total current liabilities 76,356 94,199 63,673
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Long-Term Liabilities:
Long-term debt 74,900 74,347 119,621
Deferred income taxes 49,617 57,644 65,619
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Total long-term liabilities 124,517 131,991 185,240
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Total liabilities 200,873 226,190 248,913
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Minority interest 4,472 67,870 51,582
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Commitments and contingencies - - -
Shareholders' Equity:
Common stock, par value $0.00390625 per share:
Authorized, 1,280,000 shares
Issued, 309,760 shares 1 1 1
Non-voting common stock, par value $0.00390625 per share:
Authorized, 190,720,000 shares
Issued, 131,565,793, 133,271,560 and 135,000,810 shares,
respectively 513 521 527
Notes receivable from stock option exercises (2,862) (2,718) (2,891)
Deferred compensation (3,000) (2,400) (3,200)
Accumulated other comprehensive income 1,996 1,854 1,688
Retained earnings 449,054 452,248 435,977
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Total shareholders' equity 445,702 449,506 432,102
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Total liabilities and shareholders' equity $ 651,047 $ 743,566 $ 732,597
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Page 9 of 10
Table 1
Asset Flows (in millions)
Twelve Months Ended April 30, 2005
Assets 4/30/2004 - beginning of period $ 85,093
Long-term fund sales and inflows 17,993
Long-term fund redemptions and outflows (9,573)
Long-term fund net exchanges (64)
Long-term fund mkt. value change 1,143
Institutional and HNW account inflows 3,269
Institutional and HNW account outflows (3,778)
Institutional and HNW assets acquired1 1,943
Retail managed account inflows 2,694
Retail managed account outflows (1,344)
Separate account mkt. value change 1,471
Change in money market funds (79)
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Net change 13,675
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Assets 4/30/2005 - end of period $ 98,768
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Table 2
Assets Under Management
By Investment Objective (in millions)
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April 30, October 31, % April 30, %
2005 2004 Change 2004 Change
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Equity funds $ 39,104 $ 36,895 6% $ 34,539 13%
Fixed income funds 17,958 17,553 2% 17,649 2%
Bank loan funds 16,416 15,034 9% 11,791 39%
Money market funds 307 389 -21% 386 -20%
Separate accounts 24,983 24,475 2% 20,728 21%
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Total $ 98,768 $ 94,346 5% $ 85,093 16%
======================================================
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,
2005 2004 2005 2004
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Equity fund assets - beginning of period $ 39,329 $ 33,214 $ 36,895 $ 28,854
Sales/inflows 1,705 2,276 3,762 5,720
Redemptions/outflows (1,191) (868) (2,185) (1,568)
Exchanges 11 42 30 93
Market value change (750) (125) 602 1,440
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Net change (225) 1,325 2,209 5,685
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Equity assets - end of period $ 39,104 $ 34,539 $ 39,104 $ 34,539
-------------------------- ------------------------
Fixed income fund assets - beginning of period 17,710 18,252 17,553 17,801
Sales/inflows 1,146 663 1,825 1,391
Redemptions/outflows (603) (689) (1,187) (1,243)
Exchanges (37) (61) (47) (149)
Market value change (258) (516) (186) (151)
-------------------------- ------------------------
Net change 248 (603) 405 (152)
-------------------------- ------------------------
Fixed income assets - end of period $ 17,958 $ 17,649 $ 17,958 $ 17,649
-------------------------- ------------------------
Bank loan fund assets - beginning of period 15,558 11,180 15,034 9,547
Sales/inflows 1,709 1,215 2,892 3,197
Redemptions/outflows (783) (737) (1,498) (1,115)
Exchanges 3 40 (4) 72
Market value change (71) 93 (8) 90
-------------------------- ------------------------
Net change 858 611 1,382 2,244
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Bank loan assets - end of period $ 16,416 $ 11,791 $ 16,416 $ 11,791
-------------------------- ------------------------
Long-term fund assets - beginning of period 72,597 62,646 69,482 56,202
Sales/inflows 4,560 4,154 8,479 10,308
Redemptions/outflows (2,577) (2,294) (4,870) (3,926)
Exchanges (23) 21 (21) 16
Market value change (1,079) (548) 408 1,379
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Net change 881 1,333 3,996 7,777
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Total long-term fund assets - end of period $ 73,478 $ 63,979 $ 73,478 $ 63,979
-------------------------- ------------------------
Separate accounts - beginning of period 25,087 20,529 24,475 18,397
Institutional/HNW account inflows 767 793 1,479 1,889
Institutional/HNW account outflows (1,140) (467) (2,577) (799)
Retail managed account inflows 895 522 1,722 1,027
Retail managed account outflows (421) (366) (866) (576)
Separate accounts market value change (205) (283) 750 790
-------------------------- ------------------------
Net change (104) 199 508 2,331
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Separate accounts - end of period $ 24,983 $ 20,728 $ 24,983 $ 20,728
-------------------------- ------------------------
Money market fund assets - end of period 307 386 307 386
-------------------------- ------------------------
Total assets under management - end of period $ 98,768 $ 85,093 $ 98,768 $ 85,093
========================== ========================
Table 4
Long-Term Fund and Separate Account Net Flows
Three Months Ended Six Months Ended
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April 30, April 30, April 30, April 30,
2005 2004 2005 2004
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Long-term funds:
Closed-end funds $ 1,042 $ 1,138 $ 1,909 $ 4,323
Open-end and other funds 941 722 1,700 2,059
Institutional/HNW accounts (373) 326 (1,098) 1,090
Retail managed accounts 474 156 856 451
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Total net flows $ 2,084 $ 2,342 $ 3,367 $ 7,923
======== ======== ======== ========
1 Deutsche Bank's Scudder Private Investment Counsel assets acquired by Eaton
Vance in July 2004
Page 10 of 10