Eaton Vance Corp. Report for the Three Months and Fiscal Year Ended October 31, 2018
Eaton Vance Corp. Report for the Three Months and Fiscal Year Ended October 31, 2018
PR Newswire
BOSTON, Nov. 27, 2018
BOSTON, Nov. 27, 2018 /PRNewswire/ -- Eaton Vance Corp. (NYSE: EV) today reported earnings per diluted share of $3.11 for the fiscal year ended October 31, 2018, an increase of 29 percent from $2.42 of earnings per diluted share for the fiscal year ended October 31, 2017.
The Company reported adjusted earnings per diluted share(1) of $3.21 for the fiscal year ended October 31, 2018, an increase of 29 percent from $2.48 of adjusted earnings per diluted share for the fiscal year ended October 31, 2017. For the fiscal year ended October 31, 2018, adjusted earnings exceeded earnings under U.S. generally accepted accounting principles (U.S. GAAP) by $0.10 per diluted share, reflecting the add back of $24.0 million related to enactment of the Tax Cuts and Jobs Act (the 2017 Tax Act), a $6.5 million charge recognized upon the expiration of the Company's option to acquire an additional 26 percent ownership interest in 49 percent-owned Hexavest, Inc. (Hexavest) and the reversal of $17.5 million of net excess tax benefits recognized from the exercise of employee stock options and vesting of restricted stock awards during fiscal 2018. For the fiscal year ended October 31, 2017, adjusted earnings exceeded U.S. GAAP earnings by $0.06 per diluted share, reflecting the add back of $5.4 million of costs associated with the May 2017 retirement of $250 million aggregate principal amount of the Company's 6.5 percent senior notes due October 2, 2017 (2017 Senior Notes), $3.5 million of structuring fees paid in connection with the initial public offering of Eaton Vance Floating-Rate 2022 Target Term Trust (2022 Target Term Trust) in July 2017 and $0.5 million related to increases in the estimated redemption value of non-controlling interests in affiliates redeemable at other than fair value. Attachment 2 shows a reconciliation of GAAP earnings to adjusted earnings.
The Company reported earnings per diluted share of $0.87 for the fourth quarter of fiscal 2018, an increase of 26 percent from $0.69 of earnings per diluted share in the fourth quarter of fiscal 2017 and an increase of 5 percent from $0.83 of earnings per diluted share in the third quarter of fiscal 2018.
The Company reported adjusted earnings per diluted share of $0.85 for the fourth quarter of fiscal 2018, an increase of 21 percent from $0.70 of adjusted earnings per diluted share in the fourth quarter of fiscal 2017 and an increase of 4 percent from $0.82 of adjusted earnings per diluted share in the third quarter of fiscal 2018. In the fourth quarter of fiscal 2018, U.S. GAAP earnings exceeded adjusted earnings by $0.02 per diluted share, reflecting the reversal of $2.4 million of net excess tax benefits recognized from the exercise of employee stock options and vesting of restricted stock awards during the period. In the fourth quarter of fiscal 2017, adjusted earnings exceeded U.S. GAAP earnings by $0.01 per diluted share, reflecting the add back of $0.6 million related to increases in the estimated redemption value of non-controlling interests in affiliates redeemable at other than fair value. In the third quarter of fiscal 2018, U.S. GAAP earnings exceeded adjusted earnings by $0.01 per diluted share, reflecting the reversal of $1.3 million of net excess tax benefits recognized from the exercise of employee stock options and vesting of restricted stock awards during the period.
Net gains and other investment income related to seed capital investments contributed $0.03 and $0.04 to earnings per diluted share for the fiscal years ended October 31, 2018 and 2017, respectively. Net gains and other investment income related to seed capital investments contributed $0.01 to earnings per diluted share in each of the fourth quarter of fiscal 2018, the fourth quarter of fiscal 2017 and the third quarter of fiscal 2018.
Consolidated net inflows of $17.3 billion for the fiscal year ended October 31, 2018 represent a 4 percent internal growth rate in managed assets (consolidated net inflows divided by beginning of period consolidated assets under management). This compares to net inflows of $37.8 billion and 11 percent internal growth in managed assets for the fiscal year ended October 31, 2017. Excluding exposure management mandates, the Company's internal growth rate in managed assets was 8 percent and 10 percent for the fiscal years ended October 31, 2018 and 2017, respectively.
Consolidated net inflows of $2.1 billion in the fourth quarter of fiscal 2018 represent a 2 percent annualized internal growth rate in managed assets. This compares to net inflows of $8.0 billion and 8 percent annualized internal growth in managed assets in the fourth quarter of fiscal 2017 and net inflows of $3.7 billion and annualized internal growth in managed assets of 3 percent in the third quarter of fiscal 2018. Excluding exposure management mandates, the Company's annualized internal growth rate in managed assets was 5 percent in the fourth quarter of fiscal 2018, 6 percent in the fourth quarter of fiscal 2017 and 8 percent in the third quarter of fiscal 2018.
The Company's internal management fee revenue growth rate (management fees attributable to consolidated inflows less management fees attributable to consolidated outflows divided by beginning of period consolidated management fee revenue) was 5 percent and 7 percent for the fiscal years ended October 31, 2018 and 2017, respectively.
The Company's annualized internal management fee revenue growth rate was 2 percent in the fourth quarter of fiscal 2018 and 5 percent in both the fourth quarter of fiscal 2017 and third quarter of fiscal 2018.
Consolidated assets under management were $439.3 billion on October 31, 2018, up 4 percent from $422.3 billion of consolidated managed assets on October 31, 2017 and down 3 percent from $453.2 billion of consolidated managed assets on July 31, 2018. The year-over-year increase in consolidated assets under management reflects net inflows of $17.3 billion and market price declines of $0.4 billion in fiscal 2018. The sequential quarterly decrease in consolidated assets under management reflects net inflows of $2.1 billion and market price declines of $16.0 billion in the fourth quarter of fiscal 2018.
"Eaton Vance achieved record quarterly earnings in the fourth quarter of fiscal 2018 and record annual earnings for fiscal 2018 as a whole," said Thomas E. Faust Jr., Chairman and Chief Executive Officer. "While organic growth has softened over recent quarters amid a deteriorating market environment, we continue to believe the Company is positioned for continued long-term success."
Average consolidated assets under management were $442.4 billion for the fiscal year ended October 31, 2018, an increase of 16 percent from $382.4 billion for the fiscal year ended October 31, 2017. Average consolidated assets under management were $453.3 billion in the fourth quarter of fiscal 2018, up 10 percent from $413.9 billion in the fourth quarter of fiscal 2017 and up 2 percent from $446.0 billion in the third quarter of fiscal 2018.
Excluding performance-based fees, annualized management fee rates on consolidated assets under management averaged 33.5 basis points for the fiscal year ended October 31, 2018, a decrease of 3 percent from 34.5 basis points for the fiscal year ended October 31, 2017. Excluding performance-based fees, annualized management fee rates on consolidated assets under management averaged 33.4 basis points in the fourth quarter of fiscal 2018, down 1 percent from 33.9 basis points in the fourth quarter of fiscal 2017 and substantially unchanged from 33.5 basis points in the third quarter of fiscal 2018. Changes in average annualized management fee rates for the compared periods primarily reflect shifts in the Company's mix of business.
Attachments 5 and 6 summarize the Company's consolidated assets under management and net flows by investment mandate and investment vehicle. Attachments 7, 8 and 9 summarize the Company's ending consolidated assets under management by investment mandate, investment vehicle and investment affiliate. Attachment 10 shows the Company's average annualized management fee rates by investment mandate.
As shown in Attachments 5 and 6, consolidated sales and other inflows were $156.5 billion for the fiscal year ended October 31, 2018, a decrease of 7 percent from $168.3 billion for the fiscal year ended October 31, 2017. Excluding exposure management mandates, consolidated sales and other inflows for the fiscal year ended October 31, 2018 were up 3 percent from the fiscal year ended October 31, 2017. Consolidated sales and other inflows were $35.2 billion in the fourth quarter of fiscal 2018, down 21 percent from $44.6 billion in the fourth quarter of fiscal 2017 and down 7 percent from $38.0 billion in the third quarter of fiscal 2018. Excluding exposure management mandates, consolidated sales and other inflows in the fourth quarter of fiscal 2018 were up 9 percent from the fourth quarter of fiscal 2017 and down 3 percent from the third quarter of fiscal 2018.
Consolidated redemptions and other outflows were $139.1 billion for the fiscal year ended October 31, 2018, an increase of 7 percent from $130.4 billion for the fiscal year ended October 31, 2017. Excluding exposure management mandates, consolidated redemptions and other outflows for the fiscal year ended October 31, 2018 were up 6 percent from the fiscal year ended October 31, 2017. Consolidated redemptions and other outflows were $33.0 billion in the fourth quarter of fiscal 2018, down 10 percent from $36.6 billion in the fourth quarter of fiscal 2017 and down 4 percent from $34.2 billion in the third quarter of fiscal 2018. Excluding exposure management mandates, consolidated redemptions and other outflows in the fourth quarter of fiscal 2018 were up 14 percent from both the fourth quarter of fiscal 2017 and the third quarter of fiscal 2018.
As of October 31, 2018, Hexavest managed $13.8 billion of client assets, down 14 percent from $16.0 billion of managed assets on October 31, 2017 and down 9 percent from the $15.2 billion of managed assets on July 31, 2018. Hexavest had net outflows of $2.2 billion for the fiscal year ended October 31, 2018 versus net inflows of $0.1 billion for the fiscal year ended October 31, 2017. Hexavest had net outflows of $0.9 billion in the fourth quarter of fiscal 2018 versus net inflows of $0.3 billion in the fourth quarter of fiscal 2017 and net outflows of $0.8 billion in the third quarter of fiscal 2018. Attachment 11 summarizes the assets under management and net flows of Hexavest. Other than Eaton Vance-sponsored funds for which Hexavest is adviser or sub-adviser, the managed assets and flows of Hexavest are not included in Eaton Vance consolidated totals.
Financial Highlights | |||||||||||||
(in thousands, except per share figures) | |||||||||||||
Three Months Ended | Fiscal Year Ended | ||||||||||||
October 31, | July 31, | October 31, | October 31, | October 31, | |||||||||
2018 | 2018 | 2017 | 2018 | 2017 | |||||||||
Revenue | $ | 435,974 | $ | 430,602 | $ | 405,673 | $ | 1,702,249 | $ | 1,529,010 | |||
Expenses | 291,522 | 288,338 | 267,302 | 1,147,047 | 1,046,252 | ||||||||
Operating income | 144,452 | 142,264 | 138,371 | 555,202 | 482,758 | ||||||||
Operating margin | 33.1% | 33.0% | 34.1% | 32.6% | 31.6% | ||||||||
Non-operating income (expense) | (4,912) | (20) | (1,920) | (11,967) | (13,589) | ||||||||
Income taxes | (36,823) | (37,219) | (49,802) | (156,703) | (173,666) | ||||||||
Equity in net income of | |||||||||||||
affiliates, net of tax | 2,496 | 2,750 | 2,897 | 11,373 | 10,870 | ||||||||
Net income | 105,213 | 107,775 | 89,546 | 397,905 | 306,373 | ||||||||
Net (income) loss attributable | |||||||||||||
to non-controlling and | |||||||||||||
other beneficial interests | 274 | (5,981) | (7,462) | (15,967) | (24,242) | ||||||||
Net income attributable to | |||||||||||||
Eaton Vance Corp. shareholders | $ | 105,487 | $ | 101,794 | $ | 82,084 | $ | 381,938 | $ | 282,131 | |||
Adjusted net income attributable to | |||||||||||||
Eaton Vance Corp. shareholders | $ | 102,383 | $ | 100,469 | $ | 82,726 | $ | 394,138 | $ | 288,187 | |||
Earnings per diluted share | $ | 0.87 | $ | 0.83 | $ | 0.69 | $ | 3.11 | $ | 2.42 | |||
Adjusted earnings per diluted share | $ | 0.85 | $ | 0.82 | $ | 0.70 | $ | 3.21 | $ | 2.48 | |||
Fiscal 2018 vs. Fiscal 2017
In fiscal 2018, revenue increased 11 percent to $1.7 billion from $1.5 billion in fiscal 2017. Management fees were up 12 percent, as a 16 percent increase in average consolidated assets under management more than offset lower consolidated average management fee rates. Performance fees were $(1.7) million in fiscal 2018 compared to $0.4 million in fiscal 2017. Distribution and service fee revenues collectively were up 3 percent, reflecting higher managed assets in fund share classes that are subject to these fees.
Operating expenses increased 10 percent to $1.1 billion in fiscal 2018 from $1.0 billion in fiscal 2017, reflecting increases in compensation, distribution expense, service fee expense, amortization of deferred sales commissions, fund-related expenses and other operating expenses. The increase in compensation expense reflects higher salaries and benefits associated with increases in headcount, higher operating income- and performance-based bonus accruals and higher stock-based compensation, partially offset by a decrease in sales-based incentive compensation. The increase in distribution expense reflects an increase in intermediary marketing and sales support payments, higher distribution fee payments, primarily driven by higher average managed assets, and an increase in marketing and promotion costs, partially offset by a decrease in closed-end fund structuring fees and lower Class A sales commissions. The increase in service fee expense reflects higher average assets under management in certain fund share classes subject to service fee payments. The increase in amortization of deferred sales commissions reflects higher commission amortization for private funds, partially offset by lower Class B and Class C commission amortization. The increase in fund-related expenses reflects higher fund subsidies, higher sub-advisory fees paid and an increase in fund expenses borne by the Company on funds for which it earns an all-in fee, partially offset by a $1.9 million decrease in fund expenses borne by the Company related to a one-time reimbursement made by the Company to certain funds in fiscal 2017. Other operating expenses increased 13 percent, reflecting higher information technology, facilities, professional services and travel expenses, partially offset by a decrease in other corporate expenses.
Operating income increased 15 percent to $555.2 million in fiscal 2018 from $482.8 million in fiscal 2017. Operating margin increased to 32.6 percent in fiscal 2018 from 31.6 percent in fiscal 2017. As shown in Attachment 2, excluding the $3.5 million of closed-end fund structuring fees paid in fiscal 2017, adjusted operating income was up 14 percent year-over-year.
Non-operating expense totaled $12.0 million in fiscal 2018 and $13.6 million in fiscal 2017. The year-over-year change reflects $5.4 million of costs incurred in connection with retiring the Company's 2017 Senior Notes in fiscal 2017, a $3.9 million decrease in interest expense and $1.6 million of income contribution from consolidated CLO entities in fiscal 2018, partially offset by a $9.2 million decrease in net gains and other investment income from the Company's investments in sponsored strategies, including consolidated sponsored funds. The decrease in interest expense primarily reflects the retirement of the 2017 Senior Notes and the issuance in fiscal 2017 of $300 million in aggregate principal amount of 3.5 percent senior notes due April 6, 2027. Net gains and other investment income in fiscal 2018 included a $6.5 million charge to reflect the expiration during the period of the Company's option to acquire an additional 26 percent ownership interest in Hexavest under the terms of the option agreement entered into when the Company acquired its Hexavest position in 2012. Net gains and other investment income in fiscal 2017 included a $1.9 million gain recognized upon the release from escrow of payments received in connection with the sale of the Company's equity interest in Lloyd George Management (BVI) Ltd. in fiscal 2011.
The Company's effective tax rate, calculated as a percentage of income before income taxes and equity in net income of affiliates, was 28.8 percent in fiscal 2018 and 37.0 percent in fiscal 2017. The Company's effective tax rate in fiscal 2018 is discussed in greater detail in the section captioned "Taxation" below.
Equity in net income of affiliates was $11.4 million in fiscal 2018 and $10.9 million in fiscal 2017. Equity in net income of affiliates in fiscal 2018 included $11.0 million from the Company's investment in Hexavest and $0.4 million from the Company's investment in a private equity partnership. Equity in net income of affiliates in fiscal 2017 included $10.6 million from the Company's Hexavest investment and $0.3 million from the Company's private equity partnership investment.
As detailed in Attachment 3, net income attributable to non-controlling and other beneficial interests was $16.0 million in fiscal 2018 and $24.2 million in fiscal 2017. The year-over-year change primarily reflects a decrease in income of consolidated sponsored funds.
Fourth Quarter Fiscal 2018 vs. Fourth Quarter Fiscal 2017
In the fourth quarter of fiscal 2018, revenue increased 7 percent to $436.0 million from $405.7 million in the fourth quarter of fiscal 2017. Management fees were up 8 percent, as a 10 percent increase in average consolidated assets under management more than offset lower consolidated average management fee rates. Performance fees were $(0.3) million in the fourth quarter of both fiscal 2018 and fiscal 2017. Distribution and service fee revenues collectively were up 3 percent, reflecting higher managed assets in fund share classes that are subject to these fees.
Operating expenses increased 9 percent to $291.5 million in the fourth quarter of fiscal 2018 from $267.3 million in the fourth quarter of fiscal 2017. Increases in compensation, distribution expense, amortization of deferred sales commissions, fund-related expenses and other operating expenses were partially offset by lower service fee expense. The increase in compensation expense reflects higher salaries and benefits associated with increases in headcount, higher operating income- and performance-based bonus accruals, higher sales-based incentive compensation and higher stock-based compensation. The increase in distribution expense reflects an increase in intermediary marketing and sales support payments, higher distribution fee payments, primarily driven by higher average managed assets, and an increase in marketing and promotion costs. The increase in amortization of deferred sales commissions reflects higher commission amortization for private funds, partially offset by lower Class C commission amortization. The increase in fund-related expenses reflects increases in fund subsidies, higher sub-advisory fees paid and an increase in fund expenses borne by the Company on funds for which it earns an all-in fee. Other operating expenses increased 13 percent, reflecting higher facilities, information technology, professional services and other corporate expenses, partially offset by a decrease in travel expenses. The decrease in service fee expense reflects lower average assets under management in certain fund share classes that are subject to service fee payments.
Operating income increased 4 percent to $144.5 million in the fourth quarter of fiscal 2018 from $138.4 million in the fourth quarter of fiscal 2017. Operating margin decreased to 33.1 percent in the fourth quarter of fiscal 2018 from 34.1 percent in the fourth quarter of fiscal 2017.
Non-operating expense was $4.9 million in the fourth quarter of fiscal 2018 and $1.9 million in the fourth quarter of fiscal 2017. The year-over-year change primarily reflects a $3.4 million decrease in net gains and other investment income from the Company's investments in sponsored strategies, including consolidated sponsored funds, partially offset by $0.4 million of income contribution from consolidated CLO entities in the fourth quarter of fiscal 2018.
The Company's effective tax rate, calculated as a percentage of income before income taxes and equity in net income of affiliates, was 26.4 percent in the fourth quarter of fiscal 2018 and 36.5 percent in the fourth quarter of fiscal 2017. The Company's effective tax rate in the fourth quarter of fiscal 2018 is discussed in greater detail in the section captioned "Taxation" below.
Equity in net income of affiliates was $2.5 million and $2.9 million in the fourth quarters of fiscal 2018 and 2017, respectively. Equity in net income of affiliates in the fourth quarter of fiscal 2018 included $2.6 million from the Company's investment in Hexavest and $(0.1) million from the Company's investment in a private equity partnership. In the fourth quarter of fiscal 2017, substantially all equity in net income of affiliates related to the Company's Hexavest investment.
As detailed in Attachment 3, net income (loss) attributable to non-controlling and other beneficial interests was $(0.3) million in the fourth quarter of fiscal 2018 and $7.5 million in the fourth quarter of fiscal 2017. The year-over-year change primarily reflects a decrease in income of consolidated sponsored funds.
Fourth Quarter Fiscal 2018 vs. Third Quarter of Fiscal 2018
In the fourth quarter of fiscal 2018, revenue increased 1 percent to $436.0 million from $430.6 million in the third quarter of fiscal 2018. Management fees were up 1 percent, primarily reflecting a 2 percent increase in average consolidated assets under management. Performance fees were $(0.3) million in the fourth quarter of fiscal 2018 and $(0.4) million in the third quarter of fiscal 2018. Distribution and service fee revenues collectively were up 1 percent, reflecting higher managed assets in certain fund share classes that are subject to these fees.
Operating expenses increased 1 percent to $291.5 million in the fourth quarter of fiscal 2018 from $288.3 million in the third quarter of fiscal 2018. Increases in distribution expense, amortization of deferred sales commissions, fund-related expenses and other expenses were partially offset by lower compensation. The increase in distribution expense primarily reflects an increase in marketing and promotion costs and higher intermediary marketing and sales support payments, partially offset by lower Class C distribution fees. The increase in amortization of deferred sales commissions reflects higher private fund and Class C commission amortization. The increase in fund-related expenses primarily reflects higher fund subsidies and an increase in fund expenses borne by the Company on funds for which it earns an all-in fee. Other operating expenses increased 6 percent, primarily reflecting higher professional services, facilities, information technology, travel and other corporate expenses, partially offset by a decrease in communications expense. The decrease in compensation expense primarily reflects lower stock-based compensation, primarily driven by accelerations recognized in the third quarter of fiscal 2018 due to employee retirements, decreases in payroll taxes and benefits and lower operating-income based bonus accruals.
Operating income increased 2 percent to $144.5 million in the fourth quarter of fiscal 2018 from $142.3 million in the third quarter of fiscal 2018. Operating margin increased to 33.1 percent in the fourth quarter of fiscal 2018 from 33.0 percent in the third quarter of fiscal 2018.
Non-operating expense was $4.9 million in the fourth quarter of fiscal 2018 and negligible in the third quarter of fiscal 2018. The sequential change primarily reflects a $6.5 million decrease in net gains and other investment income from the Company's investments in sponsored strategies, including consolidated sponsored funds, partially offset by a $1.6 million increase in income contribution from consolidated CLO entities.
The Company's effective tax rate, calculated as a percentage of income before income taxes and equity in net income of affiliates, was 26.4 percent in the fourth quarter of fiscal 2018 and 26.2 percent in the third quarter of fiscal 2018. The Company's effective tax rate in the fourth and third quarters of fiscal 2018 is discussed in greater detail in the section captioned "Taxation" below.
Equity in net income of affiliates was $2.5 million in the fourth quarter of fiscal 2018 and $2.8 million in the third quarter of fiscal 2018. Equity in net income of affiliates in the fourth quarter of fiscal 2018 included $2.6 million from the Company's investment in Hexavest and $(0.1) million from the Company's investment in a private equity partnership. In the third quarter of fiscal 2018, substantially all equity in net income of affiliates related to the Company's Hexavest investment.
As detailed in Attachment 3, net income (loss) attributable to non-controlling and other beneficial interests was $(0.3) million in the fourth quarter of fiscal 2018 and $6.0 million in the third quarter of fiscal 2018. The sequential change primarily reflects a decrease in income of consolidated sponsored funds.
Taxation
On December 22, 2017, the 2017 Tax Act was signed into law in the U.S. Among other significant changes, the 2017 Tax Act reduced the statutory federal income tax rate for U.S. corporate taxpayers from a maximum of 35 percent to 21 percent and required the deemed repatriation of foreign earnings not previously subject to U.S. taxation. Because the lower federal income tax rate took effect two months into the Company's fiscal year, a blended federal tax rate of 23.3 percent applied to the Company for fiscal 2018 (see table below).
The Company's income tax provision for fiscal 2018 included a non-recurring charge of $24.0 million to reflect the effects of enactment of the 2017 Tax Act. The non-recurring charge was based on interpretation of the tax law changes, and included $21.2 million from the revaluation of the Company's deferred tax assets and liabilities and $2.8 million for the deemed repatriation of foreign-sourced net earnings not previously subject to U.S. taxation. The increase in the Company's effective tax rate for fiscal 2018 resulting from this charge was offset by an income tax benefit of $17.5 million related to the exercise of stock options and vesting of restricted stock during the period. Accounting guidance adopted in the first quarter of fiscal 2018 requires the net excess tax benefits or tax deficiencies related to stock-based compensation windfalls or shortfalls, respectively, to be recognized in earnings.
The Company's income tax provision in the fourth and third quarters of fiscal 2018 was reduced by net excess tax benefits of $2.4 million and $1.3 million, respectively, related to the exercise of stock options and vesting of restricted stock during those periods. In the fourth quarter of fiscal 2018, the Company's income tax provision was further reduced by $0.7 million due to the refinement of prior estimates used to calculate the non-recurring impact of the 2017 Tax Act.
The Company's calculations of adjusted net income and adjusted earnings per diluted share remove the tax impact of stock-based compensation shortfalls or windfalls recognized in connection with the accounting guidance adopted in the first quarter of fiscal 2018, and the non-recurring tax impact of U.S. tax law changes. On this basis, the Company's adjusted effective tax rate was 28.6 percent and 27.1 percent in the fourth and third quarters of fiscal 2018, respectively, and 27.6 percent for fiscal 2018 as a whole. On the same adjusted basis, the Company estimates that its effective tax rate will be approximately 25.9 to 26.4 percent for fiscal 2019. The Company's actual tax rates for fiscal 2019 may vary from this estimate due to changes in the Company's tax policy interpretations and assumptions, additional regulatory guidance that may be issued and other factors.
The following table reconciles the statutory federal income tax rate to the Company's effective tax rate for the fourth and third quarters of fiscal 2018 and fiscal 2018 as a whole:
Three Months Ended | Fiscal Year Ended | |||||||
October 31, | July 31, | October 31, | ||||||
2018 | 2018 | 2018 | ||||||
Statutory U.S. federal income tax rate(2) | 23.3 | % | 23.3 | % | 23.3 | % | ||
State income taxes for current year, net of federal income tax benefits | 4.4 | 4.4 | 4.4 | |||||
Net income attributable to non-controlling and other beneficial interests | - | (1.0) | (0.7) | |||||
Other items | 0.9 | 0.4 | 0.6 | |||||
Adjusted effective income tax rate(3) | 28.6 | 27.1 | 27.6 | |||||
Non-recurring impact of U.S. tax reform | (0.5) | - | 4.4 | |||||
Net excess tax benefits from stock-based compensation plans(4) | (1.7) | (0.9) | (3.2) | |||||
Effective income tax rate | 26.4 | % | 26.2 | % | 28.8 | % | ||
The Company continues to carefully evaluate the impact of the 2017 Tax Act, certain provisions of which do not take effect for the Company until fiscal 2019, including, but not limited to, the global intangible low-taxed income, foreign-derived intangible income and base erosion anti-abuse tax provisions.
Balance Sheet Information
As of October 31, 2018, the Company held $600.7 million of cash and cash equivalents and $273.3 million of investments in short-term debt securities with maturities between 90 days and one year. There were no outstanding borrowings under the Company's $300 million credit facility at such date. During fiscal 2018, the Company used $286.7 million to repurchase and retire approximately 5.6 million shares of its Non-Voting Common Stock under its repurchase authorizations. Of the current 8.0 million share repurchase authorization, approximately 7.3 million shares remain available.
Conference Call Information
Eaton Vance Corp. will host a conference call and webcast at 11:00 AM eastern time today to discuss the financial results for the three months and fiscal year ended October 31, 2018. To participate in the conference call, please dial 866-521-4909 (domestic) or 647-427-2311 (international) and refer to "Eaton Vance Corp. Fourth Fiscal Quarter Earnings." A webcast of the conference call can also be accessed via Eaton Vance's website, eatonvance.com.
A replay of the call will be available for one week by calling 800-585-8367 (domestic) or 416-621-4642 (international) or by accessing Eaton Vance's website, eatonvance.com. To listen to the replay, enter the conference ID number 1974043 when instructed.
About Eaton Vance Corp.
Eaton Vance is a leading global asset manager whose history dates to 1924. With offices in North America, Europe, Asia and Australia, Eaton Vance and its affiliates offer individuals and institutions a broad array of investment strategies and wealth management solutions. The Company's long record of providing exemplary service, timely innovation and attractive returns through a variety of market conditions has made Eaton Vance the investment manager of choice for many of today's most discerning investors. For more information about Eaton Vance, visit eatonvance.com.
Forward-Looking Statements
This news release may contain 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, client sales and redemption activity, the continuation of investment advisory, administration, distribution and service contracts, and other risks discussed in the Company's filings with the Securities and Exchange Commission.
Attachment 1 | ||||||||||||||||||||
Eaton Vance Corp. | ||||||||||||||||||||
Summary of Results of Operations | ||||||||||||||||||||
(in thousands, except per share figures) | ||||||||||||||||||||
Three Months Ended | Fiscal Year Ended | |||||||||||||||||||
% | % | |||||||||||||||||||
Change | Change | |||||||||||||||||||
Q4 2018 | Q4 2018 | |||||||||||||||||||
October 31, | July 31, | October 31, | vs. | vs. | October 31, | October 31, | % | |||||||||||||
2018 | 2018 | 2017 | Q3 2018 | Q4 2017 | 2018 | 2017 | Change | |||||||||||||
Revenue: | ||||||||||||||||||||
Management fees | $ | 379,967 | $ | 374,553 | $ | 351,993 | 1 | % | 8 | % | $ | 1,481,896 | $ | 1,318,141 | 12 | % | ||||
Distribution and underwriter fees | 20,085 | 20,099 | 19,785 | - | 2 | 80,478 | 78,776 | 2 | ||||||||||||
Service fees | 31,565 | 31,260 | 30,469 | 1 | 4 | 123,500 | 119,962 | 3 | ||||||||||||
Other revenue | 4,357 | 4,690 | 3,426 | (7) | 27 | 16,375 | 12,131 | 35 | ||||||||||||
Total revenue | 435,974 | 430,602 | 405,673 | 1 | 7 | 1,702,249 | 1,529,010 | 11 | ||||||||||||
Expenses: | ||||||||||||||||||||
Compensation and related costs | 148,673 | 152,921 | 141,012 | (3) | 5 | 604,631 | 553,952 | 9 | ||||||||||||
Distribution expense | 36,199 | 35,045 | 32,589 | 3 | 11 | 141,418 | 132,873 | 6 | ||||||||||||
Service fee expense | 28,686 | 28,760 | 29,135 | - | (2) | 113,337 | 112,519 | 1 | ||||||||||||
Amortization of deferred sales commissions | 5,052 | 4,637 | 4,177 | 9 | 21 | 18,394 | 16,239 | 13 | ||||||||||||
Fund-related expenses | 18,502 | 15,857 | 12,243 | 17 | 51 | 64,538 | 48,995 | 32 | ||||||||||||
Other expenses | 54,410 | 51,118 | 48,146 | 6 | 13 | 204,729 | 181,674 | 13 | ||||||||||||
Total expenses | 291,522 | 288,338 | 267,302 | 1 | 9 | 1,147,047 | 1,046,252 | 10 | ||||||||||||
Operating income | 144,452 | 142,264 | 138,371 | 2 | 4 | 555,202 | 482,758 | 15 | ||||||||||||
Non-operating income (expense): | ||||||||||||||||||||
Gains and other investment income, net | 598 | 7,131 | 3,984 | (92) | (85) | 10,066 | 19,303 | (48) | ||||||||||||
Interest expense | (5,913) | (5,906) | (5,904) | - | - | (23,629) | (27,496) | (14) | ||||||||||||
Loss on extinguishment of debt | - | - | - | NM | NM | - | (5,396) | (100) | ||||||||||||
Other income (expense) of consolidated | ||||||||||||||||||||
collateralized loan obligation (CLO) entities: | ||||||||||||||||||||
Gains and other investment income, net | 12,059 | 1,847 | - | 553 | NM | 16,882 | - | NM | ||||||||||||
Interest and other expense | (11,656) | (3,092) | - | 277 | NM | (15,286) | - | NM | ||||||||||||
Total non-operating income (expense) | (4,912) | (20) | (1,920) | NM | 156 | (11,967) | (13,589) | (12) | ||||||||||||
Income before income taxes and equity | ||||||||||||||||||||
in net income of affiliates | 139,540 | 142,244 | 136,451 | (2) | 2 | 543,235 | 469,169 | 16 | ||||||||||||
Income taxes | (36,823) | (37,219) | (49,802) | (1) | (26) | (156,703) | (173,666) | (10) | ||||||||||||
Equity in net income of affiliates, net of tax | 2,496 | 2,750 | 2,897 | (9) | (14) | 11,373 | 10,870 | 5 | ||||||||||||
Net income | 105,213 | 107,775 | 89,546 | (2) | 17 | 397,905 | 306,373 | 30 | ||||||||||||
Net (income) loss attributable to non-controlling | ||||||||||||||||||||
and other beneficial interests | 274 | (5,981) | (7,462) | NM | NM | (15,967) | (24,242) | (34) | ||||||||||||
Net income attributable to | ||||||||||||||||||||
Eaton Vance Corp. shareholders | $ | 105,487 | $ | 101,794 | $ | 82,084 | 4 | 29 | $ | 381,938 | $ | 282,131 | 35 | |||||||
Earnings per share: | ||||||||||||||||||||
Basic | $ | 0.93 | $ | 0.89 | $ | 0.73 | 4 | 27 | $ | 3.33 | $ | 2.54 | 31 | |||||||
Diluted | $ | 0.87 | $ | 0.83 | $ | 0.69 | 5 | 26 | $ | 3.11 | $ | 2.42 | 29 | |||||||
Weighted average shares outstanding: | ||||||||||||||||||||
Basic | 113,576 | 114,610 | 112,499 | (1) | 1 | 114,745 | 110,918 | 3 | ||||||||||||
Diluted | 121,021 | 122,741 | 118,823 | (1) | 2 | 122,932 | 116,418 | 6 | ||||||||||||
Dividends declared per share | $ | 0.35 | $ | 0.31 | $ | 0.31 | 13 | 13 | $ | 1.28 | $ | 1.15 | 11 | |||||||
Attachment 2 | ||||||||||||||||||||
Eaton Vance Corp. | ||||||||||||||||||||
Reconciliation of net income attributable to Eaton Vance Corp. | ||||||||||||||||||||
shareholders to adjusted net income attributable to Eaton Vance Corp. | ||||||||||||||||||||
shareholders and earnings per diluted share to adjusted earnings per diluted share | ||||||||||||||||||||
(in thousands, except per share figures) | ||||||||||||||||||||
Three Months Ended | Fiscal Year Ended | |||||||||||||||||||
% | % | |||||||||||||||||||
Change | Change | |||||||||||||||||||
Q4 2018 | Q4 2018 | |||||||||||||||||||
October 31, | July 31, | October 31, | vs. | vs. | October 31, | October 31, | % | |||||||||||||
2018 | 2018 | 2017 | Q3 2018 | Q4 2017 | 2018 | 2017 | Change | |||||||||||||
Net income attributable to Eaton Vance | ||||||||||||||||||||
Corp. shareholders | $ | 105,487 | $ | 101,794 | $ | 82,084 | 4 | % | 29 | % | $ | 381,938 | $ | 282,131 | 35 | % | ||||
Repatriation of undistributed earnings of | ||||||||||||||||||||
foreign subsidiaries(1) | (255) | 6 | - | NM | NM | 2,807 | - | NM | ||||||||||||
Net excess tax benefit from stock-based | ||||||||||||||||||||
compensation plans(2) | (2,416) | (1,331) | - | 82 | NM | (17,487) | - | NM | ||||||||||||
Revaluation of deferred tax amounts(3) | (433) | - | - | NM | NM | 21,220 | - | NM | ||||||||||||
Loss on write-off of Hexavest option, net of tax(4) | - | - | - | NM | NM | 5,660 | - | NM | ||||||||||||
Loss on extinguishment of debt, net of tax(5) | - | - | - | NM | NM | - | 3,346 | (100) | ||||||||||||
Closed-end fund structuring fees, net of tax(6) | - | - | 40 | NM | (100) | - | 2,179 | (100) | ||||||||||||
Non-controlling interest value adjustments | - | - | 602 | NM | (100) | - | 531 | (100) | ||||||||||||
Adjusted net income attributable to Eaton | ||||||||||||||||||||
Vance Corp. shareholders | $ | 102,383 | $ | 100,469 | $ | 82,726 | 2 | 24 | $ | 394,138 | $ | 288,187 | 37 | |||||||
Earnings per diluted share | $ | 0.87 | $ | 0.83 | $ | 0.69 | 5 | 26 | $ | 3.11 | $ | 2.42 | 29 | |||||||
Repatriation of undistributed earnings of | ||||||||||||||||||||
foreign subsidiaries | - | - | - | NM | NM | 0.02 | - | NM | ||||||||||||
Net excess tax benefit from stock-based | ||||||||||||||||||||
compensation plans | (0.02) | (0.01) | - | 100 | NM | (0.14) | - | NM | ||||||||||||
Revaluation of deferred tax amounts | - | - | - | NM | NM | 0.17 | - | NM | ||||||||||||
Loss on write-off of Hexavest option, net of tax | - | - | - | NM | NM | 0.05 | - | NM | ||||||||||||
Loss on extinguishment of debt, net of tax | - | - | - | NM | NM | - | 0.03 | (100) | ||||||||||||
Closed-end fund structuring fees, net of tax | - | - | - | NM | NM | - | 0.02 | (100) | ||||||||||||
Non-controlling interest value adjustments | - | - | 0.01 | NM | (100) | - | 0.01 | (100) | ||||||||||||
Adjusted earnings per diluted share | $ | 0.85 | $ | 0.82 | $ | 0.70 | 4 | 21 | $ | 3.21 | $ | 2.48 | 29 | |||||||
(1) Reflects the recognition of incremental tax expense related to the deemed repatriation of foreign earnings considered to be indefinitely reinvested abroad and not previously subject | ||||||||||||||||||||
to U.S. taxation. | ||||||||||||||||||||
(2) Reflects the impact of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which was adopted in the first quarter of fiscal 2018. | ||||||||||||||||||||
(3) Reflects the revaluation of deferred tax assets and deferred tax liabilities resulting from the enactment of the 2017 Tax Act on December 22, 2017. | ||||||||||||||||||||
(4) Reflects the $6.5 million loss recognized upon expiration of the Company's option to acquire an additional 26 percent ownership interest in Hexavest, net of the associated impact to | ||||||||||||||||||||
taxes of $0.8 million. | ||||||||||||||||||||
(5) Reflects the $5.4 million loss on extinguishment of debt associated with retiring the Company's 2017 Senior Notes in May 2017, net of the associated impact to taxes of $2.1 million. | ||||||||||||||||||||
(6) Reflects structuring fees of $3.5 million (net of the associated impact to taxes of $1.3 million) paid in connection with the July 2017 initial public offering of Eaton Vance Floating-Rate | ||||||||||||||||||||
2022 Target Term Trust. | ||||||||||||||||||||
Eaton Vance Corp. | ||||||||||||||||||||
Reconciliation of operating income and operating margin | ||||||||||||||||||||
to adjusted operating income and adjusted operating margin | ||||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Three Months Ended | Fiscal Year Ended | |||||||||||||||||||
% | % | |||||||||||||||||||
Change | Change | |||||||||||||||||||
Q4 2018 | Q4 2018 | |||||||||||||||||||
October 31, | July 31, | October 31, | vs. | vs. | October 31, | October 31, | % | |||||||||||||
2018 | 2018 | 2017 | Q3 2018 | Q4 2017 | 2018 | 2017 | Change | |||||||||||||
Operating income | $ | 144,452 | $ | 142,264 | $ | 138,371 | 2 | % | 4 | % | $ | 555,202 | $ | 482,758 | 15 | % | ||||
Closed-end fund structuring fees(1) | - | - | 65 | NM | (100) | - | 3,515 | (100) | ||||||||||||
Adjusted operating income | $ | 144,452 | $ | 142,264 | $ | 138,436 | 2 | 4 | $ | 555,202 | $ | 486,273 | 14 | |||||||
Operating margin | 33.1 | % | 33.0 | % | 34.1 | % | - | (3) | 32.6 | % | 31.6 | % | 3 | |||||||
Closed-end fund structuring fees | - | - | - | NM | NM | - | 0.2 | (100) | ||||||||||||
Adjusted operating margin | 33.1 | % | 33.0 | % | 34.1 | % | - | (3) | 32.6 | % | 31.8 | % | 3 | |||||||
(1) Reflects structuring fees of $3.5 million paid in connection with the July 2017 initial public offering of Eaton Vance Floating-Rate 2022 Target Term Trust. | ||||||||||||||||||||
Attachment 3 | ||||||||||||||||||
Eaton Vance Corp. | ||||||||||||||||||
Components of net income attributable | ||||||||||||||||||
to non-controlling and other beneficial interests | ||||||||||||||||||
(in thousands) | ||||||||||||||||||
Three Months Ended | Fiscal Year Ended | |||||||||||||||||
% | % | |||||||||||||||||
Change | Change | |||||||||||||||||
Q4 2018 | Q4 2018 | |||||||||||||||||
October 31, | July 31, | October 31, | vs. | vs. | October 31, | October 31, | % | |||||||||||
2018 | 2018 | 2017 | Q3 2018 | Q4 2017 | 2018 | 2017 | Change | |||||||||||
Consolidated sponsored funds | $ | (4,447) | $ | 1,862 | $ | 1,980 | NM | % | NM | % | $ | (232) | $ | 6,816 | NM | % | ||
Majority-owned subsidiaries | 4,173 | 4,119 | 4,880 | 1 | (14) | 16,199 | 16,895 | (4) | ||||||||||
Non-controlling interest value adjustments | - | - | 602 | NM | (100) | - | 531 | (100) | ||||||||||
Net income (loss) attributable to non-controlling | ||||||||||||||||||
and other beneficial interests | $ | (274) | $ | 5,981 | $ | 7,462 | NM | NM | $ | 15,967 | $ | 24,242 | (34) | |||||
Attachment 4 | ||||||
Eaton Vance Corp. | ||||||
Balance Sheet | ||||||
(in thousands, except per share figures) | ||||||
October 31, | October 31, | |||||
2018 | 2017 | |||||
Assets | ||||||
Cash and cash equivalents | $ | 600,696 | $ | 610,555 | ||
Management fees and other receivables | 236,736 | 200,453 | ||||
Investments | 1,078,627 | 898,192 | ||||
Assets of consolidated CLO entities: | ||||||
Cash | 216,598 | - | ||||
Bank loans and other investments | 874,304 | 31,348 | ||||
Other assets | 4,464 | - | ||||
Deferred sales commissions | 48,629 | 36,423 | ||||
Deferred income taxes | 45,826 | 67,100 | ||||
Equipment and leasehold improvements, net | 52,428 | 48,989 | ||||
Intangible assets, net | 80,885 | 89,812 | ||||
Goodwill | 259,681 | 259,681 | ||||
Loan to affiliate | 5,000 | 5,000 | ||||
Other assets | 95,454 | 83,348 | ||||
Total assets | $ | 3,599,328 | $ | 2,330,901 | ||
Liabilities, Temporary Equity and Permanent Equity | ||||||
Liabilities: | ||||||
Accrued compensation | $ | 233,836 | $ | 207,330 | ||
Accounts payable and accrued expenses | 91,410 | 68,115 | ||||
Dividend payable | 51,731 | 44,634 | ||||
Debt | 619,678 | 618,843 | ||||
Liabilities of consolidated CLO entities: | ||||||
Senior and subordinated note obligations | 873,008 | - | ||||
Line of credit | - | 12,598 | ||||
Other liabilities | 154,185 | - | ||||
Other liabilities | 131,952 | 116,298 | ||||
Total liabilities | 2,155,800 | 1,067,818 | ||||
Commitments and contingencies | ||||||
Temporary Equity: | ||||||
Redeemable non-controlling interests | 335,097 | 250,823 | ||||
Total temporary equity | 335,097 | 250,823 | ||||
Permanent Equity: | ||||||
Voting Common Stock, par value $0.00390625 per share: | ||||||
Authorized, 1,280,000 shares | ||||||
Issued and outstanding, 422,935 and 442,932 shares, respectively | 2 | 2 | ||||
Non-Voting Common Stock, par value $0.00390625 per share: | ||||||
Authorized, 190,720,000 shares | ||||||
Issued and outstanding, 116,527,845 and 118,077,872 shares, respectively | 455 | 461 | ||||
Additional paid-in capital | 17,514 | 148,284 | ||||
Notes receivable from stock option exercises | (8,057) | (11,112) | ||||
Accumulated other comprehensive loss | (53,181) | (47,474) | ||||
Retained earnings | 1,150,698 | 921,235 | ||||
Total Eaton Vance Corp. shareholders' equity | 1,107,431 | 1,011,396 | ||||
Non-redeemable non-controlling interests | 1,000 | 864 | ||||
Total permanent equity | 1,108,431 | 1,012,260 | ||||
Total liabilities, temporary equity and permanent equity | $ | 3,599,328 | $ | 2,330,901 | ||
Attachment 5 | |||||||||||||||
Eaton Vance Corp. | |||||||||||||||
Consolidated Assets under Management and Net Flows by Investment Mandate(1) | |||||||||||||||
(in millions) | |||||||||||||||
Three Months Ended | Fiscal Year Ended | ||||||||||||||
October 31, | July 31, | October 31, | October 31, | October 31, | |||||||||||
2018 | 2018 | 2017 | 2018 | 2017 | |||||||||||
Equity assets – beginning of period(2) | $ | 122,466 | $ | 117,757 | $ | 110,198 | $ | 113,472 | $ | 89,981 | |||||
Sales and other inflows | 4,666 | 5,385 | 5,156 | 21,840 | 21,111 | ||||||||||
Redemptions/outflows | (5,328) | (4,900) | (5,511) | (20,813) | (19,828) | ||||||||||
Net flows | (662) | 485 | (355) | 1,027 | 1,283 | ||||||||||
Assets acquired(3) | - | - | - | - | 5,704 | ||||||||||
Exchanges | 31 | 8 | 2 | 37 | 62 | ||||||||||
Market value change | (6,063) | 4,216 | 3,627 | 1,236 | 16,442 | ||||||||||
Equity assets – end of period | $ | 115,772 | $ | 122,466 | $ | 113,472 | $ | 115,772 | $ | 113,472 | |||||
Fixed income assets – beginning of period(4) | 76,819 | 74,024 | 68,708 | 70,797 | 60,607 | ||||||||||
Sales and other inflows(5) | 7,038 | 6,730 | 5,256 | 26,259 | 22,097 | ||||||||||
Redemptions/outflows | (4,788) | (4,065) | (3,131) | (16,715) | (16,137) | ||||||||||
Net flows | 2,250 | 2,665 | 2,125 | 9,544 | 5,960 | ||||||||||
Assets acquired(3) | - | - | - | - | 4,170 | ||||||||||
Exchanges | 5 | (16) | 8 | - | (139) | ||||||||||
Market value change | (1,230) | 146 | (44) | (2,497) | 199 | ||||||||||
Fixed income assets – end of period | $ | 77,844 | $ | 76,819 | $ | 70,797 | $ | 77,844 | $ | 70,797 | |||||
Floating-rate income assets – beginning of period | 42,955 | 42,282 | 38,754 | 38,819 | 32,107 | ||||||||||
Sales and other inflows | 4,079 | 3,387 | 2,348 | 14,301 | 15,222 | ||||||||||
Redemptions/outflows | (2,103) | (2,438) | (1,927) | (8,401) | (8,889) | ||||||||||
Net flows | 1,976 | 949 | 421 | 5,900 | 6,333 | ||||||||||
Exchanges | 46 | 25 | (10) | 86 | 136 | ||||||||||
Market value change | (140) | (301) | (346) | 32 | 243 | ||||||||||
Floating-rate income assets – end of period | $ | 44,837 | $ | 42,955 | $ | 38,819 | $ | 44,837 | $ | 38,819 | |||||
Alternative assets – beginning of period | 13,465 | 13,506 | 11,877 | 12,637 | 10,687 | ||||||||||
Sales and other inflows | 847 | 1,254 | 2,384 | 5,679 | 5,930 | ||||||||||
Redemptions/outflows | (1,570) | (999) | (1,716) | (4,947) | (4,067) | ||||||||||
Net flows | (723) | 255 | 668 | 732 | 1,863 | ||||||||||
Exchanges | (75) | (20) | 3 | (103) | (4) | ||||||||||
Market value change | (528) | (276) | 89 | (1,127) | 91 | ||||||||||
Alternative assets – end of period | $ | 12,139 | $ | 13,465 | $ | 12,637 | $ | 12,139 | $ | 12,637 | |||||
Portfolio implementation assets – beginning of period | 115,035 | 107,170 | 93,285 | 99,615 | 71,426 | ||||||||||
Sales and other inflows | 5,578 | 6,085 | 5,199 | 22,562 | 23,359 | ||||||||||
Redemptions/outflows | (3,819) | (3,025) | (3,178) | (14,141) | (12,438) | ||||||||||
Net flows | 1,759 | 3,060 | 2,021 | 8,421 | 10,921 | ||||||||||
Exchanges | (6) | (1) | - | (22) | 5 | ||||||||||
Market value change | (5,948) | 4,806 | 4,309 | 2,826 | 17,263 | ||||||||||
Portfolio implementation assets – end of period | $ | 110,840 | $ | 115,035 | $ | 99,615 | $ | 110,840 | $ | 99,615 | |||||
Exposure management assets – beginning of period | 82,443 | 85,333 | 82,763 | 86,976 | 71,572 | ||||||||||
Sales and other inflows | 12,946 | 15,131 | 24,239 | 65,812 | 80,532 | ||||||||||
Redemptions/outflows | (15,438) | (18,814) | (21,161) | (74,095) | (69,058) | ||||||||||
Net flows | (2,492) | (3,683) | 3,078 | (8,283) | 11,474 | ||||||||||
Market value change | (2,080) | 793 | 1,135 | (822) | 3,930 | ||||||||||
Exposure management assets – end of period | $ | 77,871 | $ | 82,443 | $ | 86,976 | $ | 77,871 | $ | 86,976 | |||||
Total assets under management – beginning of period | 453,183 | 440,072 | 405,585 | 422,316 | 336,380 | ||||||||||
Sales and other inflows(5) | 35,154 | 37,972 | 44,582 | 156,453 | 168,251 | ||||||||||
Redemptions/outflows | (33,046) | (34,241) | (36,624) | (139,112) | (130,417) | ||||||||||
Net flows | 2,108 | 3,731 | 7,958 | 17,341 | 37,834 | ||||||||||
Assets acquired(3) | - | - | - | - | 9,874 | ||||||||||
Exchanges | 1 | (4) | 3 | (2) | 60 | ||||||||||
Market value change | (15,989) | 9,384 | 8,770 | (352) | 38,168 | ||||||||||
Total assets under management – end of period | $ | 439,303 | $ | 453,183 | $ | 422,316 | $ | 439,303 | $ | 422,316 | |||||
(1) Consolidated Eaton Vance Corp. See Attachment 11 for directly managed assets and flows of 49 percent-owned Hexavest, which are not included in the table above. | |||||||||||||||
(2) Whenever presented, Equity assets include balanced and other multi-asset mandates. | |||||||||||||||
(3) Represents managed assets gained in the acquisition of the business assets of Calvert Investment Management, Inc. (Calvert Investments) on December 30, 2016. Equity assets acquired | |||||||||||||||
and total assets acquired exclude $2.1 billion of managed assets of Calvert Equity Fund, which is sub-advised by Atlanta Capital and whose managed assets were included in the | |||||||||||||||
Company's consolidated assets under management prior to the Calvert Investments acquisition. | |||||||||||||||
(4) Whenever presented, Fixed Income assets include cash management mandates. | |||||||||||||||
(5) Includes $0.8 billion of managed assets gained in assuming the fixed income business assets of the former Oechsle International Advisors, LLC on January 31, 2018. | |||||||||||||||
Attachment 6 | |||||||||||||||
Eaton Vance Corp. | |||||||||||||||
Consolidated Assets under Management and Net Flows by Investment Vehicle(1) | |||||||||||||||
(in millions) | |||||||||||||||
Three Months Ended | Fiscal Year Ended | ||||||||||||||
October 31, | July 31, | October 31, | October 31, | October 31, | |||||||||||
2018 | 2018 | 2017 | 2018 | 2017 | |||||||||||
Fund assets – beginning of period(2) | $ | 168,778 | $ | 162,869 | $ | 152,734 | $ | 156,853 | $ | 125,722 | |||||
Sales and other inflows | 11,303 | 10,855 | 10,303 | 44,470 | 40,967 | ||||||||||
Redemptions/outflows | (9,438) | (7,878) | (8,404) | (34,802) | (33,350) | ||||||||||
Net flows | 1,865 | 2,977 | 1,899 | 9,668 | 7,617 | ||||||||||
Assets acquired(3) | - | - | - | - | 9,821 | ||||||||||
Exchanges(4) | - | 304 | 10 | 305 | 2,196 | ||||||||||
Market value change | (5,675) | 2,628 | 2,210 | (1,858) | 11,497 | ||||||||||
Fund assets – end of period | $ | 164,968 | $ | 168,778 | $ | 156,853 | $ | 164,968 | $ | 156,853 | |||||
Institutional separate accounts – beginning of period | 162,701 | 163,816 | 154,253 | 159,986 | 136,451 | ||||||||||
Sales and other inflows(5) | 14,936 | 18,929 | 26,615 | 79,502 | 93,067 | ||||||||||
Redemptions/outflows | (18,278) | (22,293) | (24,112) | (85,638) | (81,096) | ||||||||||
Net flows | (3,342) | (3,364) | 2,503 | (6,136) | 11,971 | ||||||||||
Assets acquired(3) | - | - | - | - | 40 | ||||||||||
Exchanges(4) | - | (308) | (8) | 18 | (2,063) | ||||||||||
Market value change | (5,363) | 2,557 | 3,238 | 128 | 13,587 | ||||||||||
Institutional separate accounts – end of period | $ | 153,996 | $ | 162,701 | $ | 159,986 | $ | 153,996 | $ | 159,986 | |||||
High-net-worth separate accounts – beginning of period | 45,379 | 42,154 | 36,439 | 39,715 | 25,806 | ||||||||||
Sales and other inflows | 2,614 | 2,654 | 3,138 | 9,563 | 12,965 | ||||||||||
Redemptions/outflows | (1,202) | (1,297) | (1,477) | (5,414) | (5,370) | ||||||||||
Net flows | 1,412 | 1,357 | 1,661 | 4,149 | 7,595 | ||||||||||
Exchanges | 42 | 27 | 7 | (165) | (24) | ||||||||||
Market value change | (2,143) | 1,841 | 1,608 | 991 | 6,338 | ||||||||||
High-net-worth separate accounts – end of period | $ | 44,690 | $ | 45,379 | $ | 39,715 | $ | 44,690 | $ | 39,715 | |||||
Retail managed accounts – beginning of period | 76,325 | 71,233 | 62,159 | 65,762 | 48,401 | ||||||||||
Sales and other inflows | 6,301 | 5,534 | 4,526 | 22,918 | 21,252 | ||||||||||
Redemptions/outflows | (4,128) | (2,773) | (2,631) | (13,258) | (10,601) | ||||||||||
Net flows | 2,173 | 2,761 | 1,895 | 9,660 | 10,651 | ||||||||||
Assets acquired(3) | - | - | - | - | 13 | ||||||||||
Exchanges | (41) | (27) | (6) | (160) | (49) | ||||||||||
Market value change | (2,808) | 2,358 | 1,714 | 387 | 6,746 | ||||||||||
Retail managed accounts – end of period | $ | 75,649 | $ | 76,325 | $ | 65,762 | $ | 75,649 | $ | 65,762 | |||||
Total assets under management – beginning of period | 453,183 | 440,072 | 405,585 | 422,316 | 336,380 | ||||||||||
Sales and other inflows(5) | 35,154 | 37,972 | 44,582 | 156,453 | 168,251 | ||||||||||
Redemptions/outflows | (33,046) | (34,241) | (36,624) | (139,112) | (130,417) | ||||||||||
Net flows | 2,108 | 3,731 | 7,958 | 17,341 | 37,834 | ||||||||||
Assets acquired(3) | - | - | - | - | 9,874 | ||||||||||
Exchanges | 1 | (4) | 3 | (2) | 60 | ||||||||||
Market value change | (15,989) | 9,384 | 8,770 | (352) | 38,168 | ||||||||||
Total assets under management – end of period | $ | 439,303 | $ | 453,183 | $ | 422,316 | $ | 439,303 | $ | 422,316 | |||||
(1) Consolidated Eaton Vance Corp. See Attachment 11 for directly managed assets and flows of 49 percent-owned Hexavest, which are not included in the table above. | |||||||||||||||
(2) Whenever presented, Fund assets include assets of cash management funds. | |||||||||||||||
(3) Represents managed assets gained in the acquisition of the business assets of Calvert Investments on December 30, 2016. Fund assets acquired and total assets acquired exclude $2.1 | |||||||||||||||
billion of managed assets of Calvert Equity Fund, which is sub-advised by Atlanta Capital and whose managed assets were included in the Company's consolidated assets under | |||||||||||||||
management prior to the Calvert Investments acquisition. | |||||||||||||||
(4) Reflects the reclassification from institutional separate accounts to funds of $2.1 billion of managed assets of Calvert Equity Fund sub-advised by Atlanta Capital upon the Company's | |||||||||||||||
acquisition of the business assets of Calvert Investments on December 30, 2016. | |||||||||||||||
(5) Includes $0.8 billion of managed assets gained in assuming the fixed income business assets of the former Oechsle International Advisors, LLC on January 31, 2018. | |||||||||||||||
Attachment 7 | |||||||||||||
Eaton Vance Corp. | |||||||||||||
Consolidated Assets under Management by Investment Mandate(1) | |||||||||||||
(in millions) | |||||||||||||
October 31, | July 31, | % | October 31, | % | |||||||||
2018 | 2018 | Change | 2017 | Change | |||||||||
Equity(2) | $ | 115,772 | $ | 122,466 | -5% | $ | 113,472 | 2% | |||||
Fixed income(3) | 77,844 | 76,819 | 1% | 70,797 | 10% | ||||||||
Floating-rate income | 44,837 | 42,955 | 4% | 38,819 | 16% | ||||||||
Alternative | 12,139 | 13,465 | -10% | 12,637 | -4% | ||||||||
Portfolio implementation | 110,840 | 115,035 | -4% | 99,615 | 11% | ||||||||
Exposure management | 77,871 | 82,443 | -6% | 86,976 | -10% | ||||||||
Total | $ | 439,303 | $ | 453,183 | -3% | $ | 422,316 | 4% | |||||
(1) Consolidated Eaton Vance Corp. See Attachment 11 for directly managed assets and flows of 49 percent-owned Hexavest, which are not included in the table above. | |||||||||||||
(2) Includes balanced and other multi-asset mandates. | |||||||||||||
(3) Includes cash management mandates. | |||||||||||||
Attachment 8 | |||||||||||||
Eaton Vance Corp. | |||||||||||||
Consolidated Assets under Management by Investment Vehicle(1) | |||||||||||||
(in millions) | |||||||||||||
October 31, | July 31, | % | October 31, | % | |||||||||
2018 | 2018 | Change | 2017 | Change | |||||||||
Open-end funds(2) | $ | 102,426 | $ | 104,898 | -2% | $ | 97,601 | 5% | |||||
Closed-end funds | 23,998 | 24,947 | -4% | 24,816 | -3% | ||||||||
Private funds(3) | 38,544 | 38,933 | -1% | 34,436 | 12% | ||||||||
Institutional separate accounts | 153,996 | 162,701 | -5% | 159,986 | -4% | ||||||||
High-net-worth separate accounts | 44,690 | 45,379 | -2% | 39,715 | 13% | ||||||||
Retail managed accounts | 75,649 | 76,325 | -1% | 65,762 | 15% | ||||||||
Total | $ | 439,303 | $ | 453,183 | -3% | $ | 422,316 | 4% | |||||
(1) Consolidated Eaton Vance Corp. See Attachment 11 for directly managed assets and flows of 49 percent-owned Hexavest, which are not included in the table above. | |||||||||||||
(2) Includes assets in NextShares funds. | |||||||||||||
(3) Includes privately offered equity, fixed income and floating-rate income funds and CLO entities. | |||||||||||||
Attachment 9 | |||||||||||||
Eaton Vance Corp. | |||||||||||||
Consolidated Assets under Management by Investment Affiliate(1) | |||||||||||||
(in millions) | |||||||||||||
October 31, | July 31, | % | October 31, | % | |||||||||
2018 | 2018 | Change | 2017 | Change | |||||||||
Eaton Vance Management(2) | $ | 179,321 | $ | 179,558 | 0% | $ | 164,257 | 9% | |||||
Parametric | 224,238 | 236,272 | -5% | 224,941 | 0% | ||||||||
Atlanta Capital(3) | 23,355 | 25,004 | -7% | 22,379 | 4% | ||||||||
Calvert Research and Management(3) | 12,389 | 12,349 | 0% | 10,739 | 15% | ||||||||
Total | $ | 439,303 | $ | 453,183 | -3% | $ | 422,316 | 4% | |||||
(1) Consolidated Eaton Vance Corp. See Attachment 11 for directly managed assets and flows of 49 percent-owned Hexavest, which are not included in the table above. | |||||||||||||
(2) Includes managed assets of Eaton Vance-sponsored funds and separate accounts managed by Hexavest and unaffiliated third-party advisers under Eaton Vance supervision. | |||||||||||||
(3) Consistent with the Company's policies for reporting the managed assets and flows of investment portfolios for which multiple Eaton Vance affiliates have management responsibilities, | |||||||||||||
the managed assets of Atlanta Capital indicated above include the assets of Calvert Equity Fund, for which Atlanta Capital serves as sub-adviser. The total managed assets of Calvert | |||||||||||||
Research and Management, including assets sub-advised by other Eaton Vance affiliates, were $14.7 billion as of both October 31, 2018 and July 31, 2018, and $12.9 billion as of | |||||||||||||
October 31, 2017. | |||||||||||||
Attachment 10 | |||||||||
Eaton Vance Corp. | |||||||||
Average Annualized Management Fee Rates by Investment Mandate(1) | |||||||||
(in basis points on average managed assets) | |||||||||
Three Months Ended | Fiscal Year Ended | ||||||||
% | % | ||||||||
Change | Change | ||||||||
Q4 2018 | Q4 2018 | ||||||||
October 31, | July 31, | October 31, | vs. | vs. | October 31, | October 31, | % | ||
2018 | 2018 | 2017 | Q3 2018 | Q4 2017 | 2018 | 2017 | Change | ||
Equity | 59.2 | 59.9 | 60.7 | -1% | -2% | 59.9 | 61.7 | -3% | |
Fixed income | 34.7 | 35.1 | 37.1 | -1% | -6% | 35.5 | 38.0 | -7% | |
Floating-rate income | 50.3 | 50.4 | 51.5 | 0% | -2% | 50.7 | 51.6 | -2% | |
Alternative | 69.5 | 69.3 | 64.2 | 0% | 8% | 69.1 | 63.3 | 9% | |
Portfolio implementation | 14.7 | 14.5 | 14.8 | 1% | -1% | 14.6 | 14.7 | -1% | |
Exposure management | 5.4 | 5.2 | 5.3 | 4% | 2% | 5.2 | 5.2 | 0% | |
Consolidated average | |||||||||
annualized fee rates | 33.4 | 33.5 | 33.9 | 0% | -1% | 33.5 | 34.5 | -3% | |
(1) Excludes performance-based fees, which were $(0.3) million for the three months ended October 31, 2018, $(0.4) for the three months ended July 31, 2018, $(0.3) million for | |||||||||
the three months ended October 31, 2017, $(1.7) million for the fiscal year ended October 31, 2018 and $0.4 million for the fiscal year ended October 31, 2017. | |||||||||
Attachment 11 | ||||||||||||||||
Eaton Vance Corp. | ||||||||||||||||
Hexavest Inc. Assets under Management and Net Flows | ||||||||||||||||
(in millions) | ||||||||||||||||
Three Months Ended | Fiscal Year Ended | |||||||||||||||
October 31, | July 31, | October 31, | October 31, | October 31, | ||||||||||||
2018 | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Eaton Vance distributed: | ||||||||||||||||
Eaton Vance sponsored funds – beginning of period(1) | $ | 168 | $ | 179 | $ | 151 | $ | 182 | $ | 231 | ||||||
Sales and other inflows | 1 | 1 | 30 | 12 | 92 | |||||||||||
Redemptions/outflows | (4) | (14) | (3) | (35) | (177) | |||||||||||
Net flows | (3) | (13) | 27 | (23) | (85) | |||||||||||
Market value change | (6) | 2 | 4 | - | 36 | |||||||||||
Eaton Vance sponsored funds – end of period | $ | 159 | $ | 168 | $ | 182 | $ | 159 | $ | 182 | ||||||
Eaton Vance distributed separate accounts – | ||||||||||||||||
beginning of period(2) | $ | 2,522 | $ | 3,087 | $ | 2,655 | $ | 3,092 | $ | 2,492 | ||||||
Sales and other inflows | 58 | 32 | 399 | 230 | 1,124 | |||||||||||
Redemptions/outflows | (327) | (631) | (17) | (1,176) | (920) | |||||||||||
Net flows | (269) | (599) | 382 | (946) | 204 | |||||||||||
Market value change | (84) | 34 | 55 | 23 | 396 | |||||||||||
Eaton Vance distributed separate accounts – end of period | $ | 2,169 | $ | 2,522 | $ | 3,092 | $ | 2,169 | $ | 3,092 | ||||||
Total Eaton Vance distributed – beginning of period | $ | 2,690 | $ | 3,266 | $ | 2,806 | $ | 3,274 | $ | 2,723 | ||||||
Sales and other inflows | 59 | 33 | 429 | 242 | 1,216 | |||||||||||
Redemptions/outflows | (331) | (645) | (20) | (1,211) | (1,097) | |||||||||||
Net flows | (272) | (612) | 409 | (969) | 119 | |||||||||||
Market value change | (90) | 36 | 59 | 23 | 432 | |||||||||||
Total Eaton Vance distributed – end of period | $ | 2,328 | $ | 2,690 | $ | 3,274 | $ | 2,328 | $ | 3,274 | ||||||
Hexavest directly distributed – beginning of period(3) | $ | 12,553 | $ | 12,502 | $ | 12,638 | $ | 12,748 | $ | 11,021 | ||||||
Sales and other inflows | 233 | 440 | 290 | 1,149 | 1,140 | |||||||||||
Redemptions/outflows | (844) | (587) | (393) | (2,416) | (1,208) | |||||||||||
Net flows | (611) | (147) | (103) | (1,267) | (68) | |||||||||||
Market value change | (475) | 198 | 213 | (14) | 1,795 | |||||||||||
Hexavest directly distributed – end of period | $ | 11,467 | $ | 12,553 | $ | 12,748 | $ | 11,467 | $ | 12,748 | ||||||
Total Hexavest managed assets – beginning of period | $ | 15,243 | $ | 15,768 | $ | 15,444 | $ | 16,022 | $ | 13,744 | ||||||
Sales and other inflows | 292 | 473 | 719 | 1,391 | 2,356 | |||||||||||
Redemptions/outflows | (1,175) | (1,232) | (413) | (3,627) | (2,305) | |||||||||||
Net flows | (883) | (759) | 306 | (2,236) | 51 | |||||||||||
Market value change | (565) | 234 | 272 | 9 | 2,227 | |||||||||||
Total Hexavest managed assets – end of period | $ | 13,795 | $ | 15,243 | $ | 16,022 | $ | 13,795 | $ | 16,022 | ||||||
(1) Managed assets and flows of Eaton Vance-sponsored pooled investment vehicles for which Hexavest is adviser or sub-adviser. Eaton Vance receives management fees (and in some | ||||||||||||||||
cases also distribution fees) on these assets, which are included in Eaton Vance's consolidated assets under management and flows in Attachments 5 through 9. | ||||||||||||||||
(2) Managed assets and flows of Eaton Vance-distributed separate accounts managed by Hexavest. Eaton Vance receives distribution fees, but not management fees, on these assets, which | ||||||||||||||||
are not included in Eaton Vance's consolidated assets under management and flows in Attachments 5 through 9. | ||||||||||||||||
(3) Managed assets and flows of pre-transaction Hexavest clients and post-transaction Hexavest clients in Canada. Eaton Vance receives no management fees or distribution fees on these | ||||||||||||||||
assets, which are not included in Eaton Vance's consolidated assets under management and flows in Attachments 5 through 9. | ||||||||||||||||
(1)Although the Company reports its financial results in accordance with U.S. GAAP, management believes that certain non-U.S. GAAP financial measures, specifically, adjusted net income attributable to Eaton Vance Corp. shareholders and adjusted earnings per diluted share, while not a substitute for U.S. GAAP financial measures, may be effective indicators of the Company's performance over time. Non-U.S. GAAP financial measures should not be construed to be superior to U.S. GAAP measures. In calculating these non-U.S. GAAP financial measures, net income attributable to Eaton Vance Corp. shareholders and earnings per diluted share are adjusted to exclude items management deems non-operating or non-recurring in nature, or otherwise outside the ordinary course of business. These adjustments may include, when applicable, the add back of changes in the estimated redemption value of non-controlling interests in our affiliates redeemable at other than fair value (non-controlling interest value adjustments), closed-end fund structuring fees, costs associated with special dividends, debt repayments and tax settlements, the tax impact of stock-based compensation shortfalls or windfalls, and non-recurring charges for the effect of the tax law changes. Management and our Board of Directors, as well as certain of our outside investors, consider these adjusted numbers a measure of the Company's underlying operating performance. Management believes adjusted net income attributable to Eaton Vance Corp. shareholders and adjusted earnings per diluted share are important indicators of our operations because they exclude items that may not be indicative of, or are unrelated to, our core operating results, and may provide a useful baseline for analyzing trends in our underlying business.
(2)Statutory U.S. federal income tax rate is a blend of 35 percent and 21 percent based on the number of days in the Company's fiscal year before and after the January 1, 2018 effective date of the reduction in the federal corporate income tax rate pursuant to the 2017 Tax Act. Based on current law, the Company's fiscal 2019 statutory U.S. federal income tax rate will be 21 percent.
(3)Represents the Company's effective income tax rate, excluding the tax impact of stock-based compensation shortfalls or windfalls, which recently adopted accounting guidance requires to be recognized in earnings, and the non-recurring tax impact of U.S. tax law changes. Management believes that the Company's adjusted effective income tax rate is an important indicator of our operations because it excludes items that may not be indicative of, or are unrelated to, our core operating results, and may provide a useful baseline for analyzing trends in our underlying business.
(4)This amount reflects the impact of Accounting Standard Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting, which was adopted by the Company in the first quarter of fiscal 2018. The Company anticipates that the adoption of this guidance may cause fluctuations in the Company's effective tax rate, particularly in the first quarter of each fiscal year, when most of the Company's annual stock-based awards vest.
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SOURCE Eaton Vance Corp.
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