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): November 23, 2004
-----------------
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
--------------
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
---------- ---------------------------------
Registrant has reported its results of operations for the three months and
Fiscal Year ended October 31, 2004, as described in Registrant's news release
dated November 18, 2004, a copy of which is filed herewith as Exhibit 99.1 and
incorporated herein by reference.
Exhibit No. Document
----------- --------
99.1 Press release issued by the Registrant dated November 23,
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: November 23, 2004 /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 November 23,
2004.
Page 4 of 10
--------------------------------------------------
NEWS RELEASE
Eaton Vance Corp.
The Eaton Vance Building
(LOGO) 255 State Street, Boston, MA 02109
(617) 482-8260
Contact: William M. Steul
--------------------------------------------------
November 23, 2004
FOR IMMEDIATE RELEASE
EATON VANCE CORP.
REPORT FOR THE THREE MONTHS AND FISCAL YEAR ENDED
OCTOBER 31, 2004
Boston, MA--Eaton Vance Corp. earned $1.99 per diluted share in fiscal 2004
compared to $1.51 per diluted share in fiscal 2003, an increase of 32 percent.
The Company earned $0.55 per diluted share in the fourth quarter of fiscal 2004,
an increase of 34 percent over the $0.41 per diluted share earned in the fourth
quarter of fiscal 2003.
Assets under management on October 31, 2004 were $94.3 billion, a 26 percent
increase over the $75.0 billion of managed assets on October 31, 2003. Total
gross inflows into Eaton Vance funds and separate accounts were $25.5 billion in
fiscal 2004, an increase of 52 percent from the $16.8 billion of gross inflows
in fiscal 2003. Net inflows (gross inflows less redemptions and withdrawals)
were $13.8 billion in fiscal 2004 compared to $8.3 billion in fiscal 2003, an
increase of 66 percent. Both gross and net flows in fiscal 2004 represented the
highest levels in Company history. Market appreciation added $3.6 billion and
the separate accounts acquired from Deutsche Bank last July added $1.9 billion
to assets under management in fiscal 2004. Tables 1, 2 and 3 (attached)
summarize assets under management and asset flows by investment objective.
Eaton Vance raised a record $6.3 billion in closed-end fund assets in fiscal
2004 compared to $5.0 billion raised in fiscal 2003. In the fourth quarter, the
Company introduced the Eaton Vance Enhanced Equity Income Fund, a closed-end
fund that raised $716 million in October. Earnings in fiscal 2004 were reduced
by $7.8 million of sales incentives and other expenses associated with the
assets raised in 5 closed-end fund offerings.
"Eaton Vance had another year of record growth in fiscal 2004," said James B.
Hawkes, Chairman and CEO. "Total assets under management increased 26 percent to
$94.3 billion. The Company was a leader among asset management firms in
closed-end fund sales with $6.3 billion of assets raised in fiscal 2004.
Overall, equity fund assets increased 28 percent, bank loan fund assets
increased 57 percent and separately managed account assets increased 33 percent.
The new assets added in fiscal 2004 should contribute meaningfully to revenue
and profit in fiscal 2005."
Page 5 of 10
Revenue in fiscal 2004 increased 27 percent to $661.8 million from $523.1
million in fiscal 2003. Fiscal 2004 investment adviser and administration fee
revenue increased 39 percent in line with the 40 percent increase in average
assets under management for the full year. Fiscal 2004 distribution and
underwriter fee revenue increased only 2 percent, primarily because of the
continuing shift in mutual fund sales and assets from Class B shares to other
fund share classes and other managed assets with low or no distribution fees.
Service fee revenue increased 23 percent due to the increase in average fund
assets that pay service fees. Other revenue increased 25 percent, primarily
because of investment income earned by two consolidated investment companies in
which Eaton Vance is the majority shareholder.
Operating expenses increased 22 percent to $439.3 million in fiscal 2004 from
$360.0 million in fiscal 2003 because of higher compensation, marketing,
distribution and other expenses. Compensation expense increased 30 percent in
fiscal 2004 due to higher marketing incentive payments associated with the
increase in fund and separate account sales, additional compensation expense
associated with the acquisition of Parametric Portfolio Associates in September
2003 and separate account assets of Deutsche Bank's Scudder Private Investment
Counsel Boston office in July 2004, other employee additions, increases in base
salaries and operating income-based performance bonuses.
Amortization of deferred sales commissions decreased 5 percent in fiscal 2004
compared to fiscal 2003 because of the decline in Class B share assets. Service
fee expense increased 19 percent because of the growth in fund assets retained
more than one year. Distribution expense increased 49 percent in fiscal 2004
primarily because of higher closed-end fund distribution expense, increases in
other sales-related marketing expenses and an increase in commissions paid on
certain Class A sales. Other expense increased 23 percent in fiscal 2004 because
of increased travel, facilities, information technology, legal, audit,
recruiting and other miscellaneous costs. Operating income increased 36 percent
to $222.6 million in fiscal 2004 from $163.1 million in fiscal 2003.
Fiscal year 2004 net income increased 31 percent to $138.9 million. Interest
income in fiscal 2004 declined 42 percent to $2.8 million primarily because of
the inclusion of interest income from two consolidated investment companies in
other revenue beginning in the second quarter of fiscal 2003. Interest expense
increased 2 percent, reflecting $1.0 million of previously capitalized debt
offering costs expensed in the fourth quarter associated with the repurchase of
$46.0 million of a subsidiary's exchangeable notes that was partly offset by the
decline in interest expense associated with the Company's overall reduction of
long-term debt in fiscal 2004. The Company's effective tax rate was 36 percent
in fiscal 2004 and 35 percent in fiscal 2003.
Cash, cash equivalents and short-term investments were $357.6 million on October
31, 2004 ($294.3 million excluding minority shareholder investments in two
consolidated investment companies) and $242.8 million on October 31, 2003
($238.8 million excluding minority interest). The Company's strong cash flow in
fiscal 2004 allowed it to pay $85.0 million to repurchase and retire 2,263,155
shares of its non-voting common stock (at an average price of $37.57 per share),
$34.5 million to pay dividends to its shareholders and $53.2 million to reduce
its long-term debt. There are no outstanding borrowings against the Company's
$170.0 million credit facility. Approximately 1.6 million shares remain of the
current stock 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 Twelve Months Ended
------------------------------------ -------------------------------------
October 31, October 31, % October 31, October 31, %
2004 2003 Change 2004 2003 Change
------------ ----------- ------ ----------- ----------- ------
Revenue:
Investment adviser and administration fees $112,701 $ 83,648 35 % $413,102 $296,344 39 %
Distribution and underwriter fees 34,920 38,074 (8) 150,018 146,907 2
Service fees 23,964 20,147 19 92,087 74,605 23
Other revenue 2,021 1,550 30 6,606 5,277 25
------------ ----------- ------ ----------- ----------- ------
Total revenue 173,606 143,419 21 661,813 523,133 27
------------ ----------- ------ ----------- ----------- ------
Expenses:
Compensation of officers and employees 38,521 34,173 13 150,489 115,429 30
Amortization of deferred sales commissions 18,651 21,024 (11) 81,202 85,192 (5)
Service fee expense 19,691 17,438 13 76,620 64,285 19
Distribution expense 21,965 16,356 34 81,559 54,790 49
Other expenses 13,892 9,160 52 49,381 40,293 23
------------ ----------- ------ ----------- ----------- ------
Total expenses 112,720 98,151 15 439,251 359,989 22
------------ ----------- ------ ----------- ----------- ------
Operating Income 60,886 45,268 35 222,562 163,144 36
Other Income/(Expense):
Interest income 524 659 (20) 2,799 4,848 (42)
Interest expense (1,568) (1,427) 10 (5,898) (5,761) 2
Gain on investments (3) 43 (107) 275 2,346 (88)
Foreign currency gain (loss) (23) (24) (4) (85) 18 n/a
Equity in net income of affiliates 783 314 149 2,005 263 662
------------ ----------- ------ ----------- ----------- ------
Income Before Income Taxes and Minority Interest 60,599 44,833 35 221,658 164,858 34
Income Taxes 21,816 15,691 39 79,797 57,700 38
Minority Interest, Net of Tax 855 469 82 2,918 1,035 182
------------ ----------- ------ ----------- ----------- ------
Net Income $ 37,928 $ 28,673 32 $138,943 $106,123 31
============ =========== ====== =========== =========== ======
Earnings Per Share:
Basic $ 0.57 $ 0.42 36 $ 2.06 $ 1.54 34
============ =========== ====== =========== =========== ======
Diluted $ 0.55 $ 0.41 34 $ 1.99 $ 1.51 32
============ =========== ====== =========== =========== ======
Dividends Declared, Per Share $ 0.16 $ 0.12 33 $ 0.55 $ 0.40 38
============ =========== ====== =========== =========== ======
Weighted Average Shares Outstanding:
Basic 66,739 68,493 (3) 67,469 68,916 (2)
============ =========== ====== =========== =========== ======
Diluted 69,293 70,446 (2) 69,789 70,375 (1)
============ =========== ====== =========== =========== ======
Page 8 of 10
Eaton Vance Corp.
Balance Sheet
(in thousands, except per share figures)
October 31, October 31,
2004 2003
----------- -----------
ASSETS
Current Assets:
Cash and cash equivalents $147,137 $138,328
Short-term investments 210,429 104,484
Investment adviser fees and other receivables 32,249 25,922
----------- -----------
Other current assets 4,861 3,583
----------- -----------
Total current assets 394,676 272,317
Other Assets:
Deferred sales commissions 162,259 199,322
Goodwill 89,281 88,879
Other intangible assets, net 43,965 46,193
Long-term investments 36,895 36,490
Equipment and leasehold improvements, net 12,413 12,411
Other assets 4,077 3,090
----------- -----------
Total other assets 348,890 386,385
Total assets $743,566 $658,702
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accrued compensation $ 52,299 $ 35,339
Accounts payable and accrued expenses 23,789 23,822
Dividend payable 10,660 8,189
Current portion of long-term debt - 7,143
Other current liabilities 7,451 8,302
----------- -----------
Total current liabilities 94,199 82,795
----------- -----------
Long-Term Liabilities:
Long-term debt 74,347 118,736
Deferred income taxes 57,644 33,203
----------- -----------
Total long-term liabilities 131,991 151,939
----------- -----------
Total liabilities 226,190 234,734
----------- -----------
Minority interest 67,870 7,691
----------- -----------
Commitments and contingencies - -
Shareholders' Equity:
Common stock, par value $0.0078125 per share:
Authorized, 640,000 shares
Issued, 154,880 shares 1 1
Non-voting common stock, par value $0.0078125
per share:
Authorized, 95,360,000 shares
Issued, 66,635,780 and 68,250,464 shares,
respectively 521 533
Notes receivable from stock option exercises (2,718) (2,995)
Deferred compensation (2,400) (1,000)
Accumulated other comprehensive income 1,854 1,245
Retained earnings 452,248 418,493
----------- -----------
Total shareholders' equity 449,506 416,277
----------- -----------
Total liabilities and shareholders' equity $743,566 $658,702
=========== ===========
Page 9 of 10
Table 1
Asset Flows (in millions)
Twelve Months Ended October 31, 2004
Assets 10/31/2003 - Beginning of Period $ 75,044
Long-term fund sales and inflows 19,823
Long-term fund redemptions and outflows (8,629)
Long-term fund net exchanges (27)
Long-term fund mkt. value change 2,113
Institutional and HNW account inflows 3,680
Institutional and HNW account outflows (2,001)
Institutional and HNW assets acquired(1) 1,943
Retail managed account inflows 1,998
Retail managed account outflows (1,053)
Separate account mkt. value change 1,511
Change in money market funds (56)
-----------
Net change 19,302
-----------
Assets 10/31/2004 - End of Period $ 94,346
===========
Table 2
Assets Under Management
By Investment Objective (in millions)
--------------------------------------
October 31, October 31, %
2004 2003 Change
--------------------------------------
Equity Funds $ 36,895 $ 28,854 28%
Fixed Income Funds 17,553 17,801 -1%
Bank Loan Funds 15,034 9,547 57%
Money Market Funds 389 445 -13%
Separate Accounts 24,475 18,397 33%
--------------------------------------
Total $ 94,346 $ 75,044 26%
======================================
Table 3
Asset Flows by Investment Objective (in millions)
Three Months Ended Twelve Months Ended
-------------------------------------------------------
October 31, October 31, October 31, October 31,
2004 2003 2004 2003
-------------------------------------------------------
Equity Fund Assets - Beginning of Period $ 35,018 $ 25,407 $ 28,854 $ 22,910
Sales/Inflows 2,559 2,073 9,776 4,189
Redemptions/Outflows (1,629) (885) (4,071) (2,778)
Exchanges (2) 61 95 3
Market Value Change 949 1,538 2,241 3,870
Assets Acquired1 - 660 - 660
-------------------------------------------------------
Net Change 1,877 3,447 8,041 5,944
-------------------------------------------------------
Equity Fund Assets - End of Period $ 36,895 $ 28,854 $ 36,895 $ 28,854
-------------------------------------------------------
Fixed Income Fund Assets - Beginning of Period 17,090 17,580 17,801 13,302
Sales/Inflows 644 667 2,469 6,382
Redemptions/Outflows (472) (681) (2,375) (2,176)
Exchanges (2) (144) (265) (84)
Market Value Change 293 379 (77) 377
-------------------------------------------------------
Net Change 463 221 (248) 4,499
-------------------------------------------------------
Fixed Income Fund Assets - End of Period $ 17,553 $ 17,801 $ 17,553 $ 17,801
-------------------------------------------------------
Bank Loan Fund Assets - Beginning of Period 13,777 8,419 9,547 7,687
Sales/Inflows 1,810 1,333 7,578 3,178
Redemptions/Outflows (541) (310) (2,183) (1,527)
Exchanges (4) 75 143 (3)
Market Value Change (8) 30 (51) 212
-------------------------------------------------------
Net Change 1,257 1,128 5,487 1,860
-------------------------------------------------------
Bank Loan Fund Assets - End of Period $ 15,034 $ 9,547 $ 15,034 $ 9,547
-------------------------------------------------------
Long-Term Fund Assets - Beginning of Period 65,885 51,406 56,202 43,899
Sales/Inflows 5,013 4,073 19,823 13,749
Redemptions/Outflows (2,642) (1,876) (8,629) (6,481)
Exchanges (8) (8) (27) (84)
Market Value Change 1,234 1,947 2,113 4,459
-------------------------------------------------------
Assets Acquired(1) - 660 - 660
-------------------------------------------------------
Net Change 3,597 4,796 13,280 12,303
-------------------------------------------------------
Total Long-Term Fund Assets - End of Period $ 69,482 $ 56,202 $ 69,482 $ 56,202
-------------------------------------------------------
Separate Accounts - Beginning of Period 23,154 12,492 18,397 10,802
Institutional/HNW Account Inflows 1,172 695 3,680 2,075
Institutional/HNW Account Outflows (569) (505) (2,001) (1,674)
Institutional and HNW Assets Acquired(1)(2) (53) 2,772 1,943 2,772
Retail Managed Account Inflows 468 338 1,998 929
Retail Managed Account Outflows (246) (142) (1,053) (337)
Retail Managed Account Assets Acquired(1) - 1,850 - 1,850
Separate accounts market value change 549 897 1,511 1,980
-------------------------------------------------------
Net Change 1,321 5,905 6,078 7,595
-------------------------------------------------------
Separate accounts - End of Period $ 24,475 $ 18,397 $ 24,475 $ 18,397
-------------------------------------------------------
Money market fund assets - End of Period 389 445 389 445
-------------------------------------------------------
Total Assets Under Management - End of Period $ 94,346 $ 75,044 $ 94,346 $ 75,044
=======================================================
1 Parametric Portfolio Associates acquired by Eaton Vance on September 10,
2003
2 Deutsche Bank's Scudder Private Investment Counsel assets acquired by Eaton
Vance in July 2004 Deustche Bank asset acquisition value adjusted in August
2004
Page 10 of 10