Eaton Vance Corp. Form 10 Q As of January 31, 2017 and for the Three - PDF document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10 ‐ Q (Mark One) Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For the quarterly period ended January 31, 2017 or Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For the transition period from _____________ to ____________ Commission File Number: 1 ‐ 8100 EATON VANCE CORP. (Exact name of registrant as specified in its charter) Maryland 04 ‐ 2718215 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) Two International Place, Boston, Massachusetts 02110 (Address of principal executive offices) (zip code) (617) 482 ‐ 8260 (Registrant's telephone number, including area code) Indicate by check ‐ mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S ‐ T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non ‐ accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b ‐ 2 of the Exchange Act. Large accelerated filer Accelerated filer Non ‐ accelerated filer (Do not check if smaller reporting company) Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b ‐ 2 of the Exchange Act). Yes No Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. Class: Outstanding as of January 31, 2017 Non ‐ Voting Common Stock, $0.00390625 par value 114,770,708 shares Voting Common Stock, $0.00390625 par value 442,932 shares

Eaton Vance Corp. Form 10 ‐ Q As of January 31, 2017 and for the Three Month Period Ended January 31, 2017 Table of Contents Page Required Number Information Reference Part I Financial Information Item 1. Consolidated Financial Statements ............................................ 3 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations ....................................... 37 Item 3. Quantitative and Qualitative Disclosures About Market Risk ............................................................................... 59 Item 4. Controls and Procedures ............................................................ 59 Part II Other Information Item 1. Legal Proceedings ....................................................................... 60 Item 1A. Risk Factors ................................................................................. 60 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds .... 60 Item 6. Exhibits ....................................................................................... 61 Signatures .................................................................................................... 62 2

Part I ‐ Financial Information Item 1. Consolidated Financial Statements Eaton Vance Corp. Consolidated Balance Sheets (unaudited) January 31, October 31, (in thousands) 2017 2016 Assets Cash and cash equivalents 424,174 $ 320,113 $ Management fees and other receivables 186,172 186,330 Investments 589,773 705,197 Deferred sales commissions 27,076 31,396 Deferred income taxes 73,295 65,597 Equipment and leasehold improvements, net 44,427 45,023 Intangible assets, net 46,809 96,529 Goodwill 248,091 248,091 Loan to affiliate 5,000 5,000 Other assets 85,565 55,328 Total assets 1,730,382 $ 1,758,604 $ See notes to Consolidated Financial Statements. 3

Eaton Vance Corp. Consolidated Balance Sheets (unaudited) (continued) January 31, October 31, (in thousands, except share data) 2017 2016 Liabilities, Temporary Equity and Permanent Equity Liabilities: Accrued compensation 173,485 $ 65,305 $ Accounts payable and accrued expenses 59,927 67,723 Dividend payable 36,525 37,036 Debt 571,773 571,946 Other liabilities 75,069 123,354 Total liabilities 916,779 865,364 Commitments and contingencies (Note 18) Temporary Equity: Redeemable non ‐ controlling interests 109,028 149,418 Permanent Equity: Voting Common Stock, par value $0.00390625 per share: Authorized, 1,280,000 shares Issued and outstanding, 442,932 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, 114,770,708 and 113,545,008 shares, respectively 444 448 Additional paid ‐ in capital ‐ 2,777 Notes receivable from stock option exercises (12,074) (10,141) Accumulated other comprehensive loss (57,583) (51,455) Retained earnings 773,000 801,451 Total Eaton Vance Corp. shareholders' equity 703,789 743,082 Non ‐ redeemable non ‐ controlling interests 786 740 Total permanent equity 704,575 743,822 Total liabilities, temporary equity and permanent equity 1,730,382 $ 1,758,604 $ See notes to Consolidated Financial Statements. 4

Eaton Vance Corp. Consolidated Statements of Income (unaudited) Three Months Ended January 31, (in thousands, except per share data) 2017 2016 Revenue: Management fees $ 304,653 $ 283,042 Distribution and underwriter fees 18,959 19,058 Service fees 28,911 27,259 Other revenue 2,436 2,197 Total revenue 354,959 331,556 Expenses: Compensation and related costs 135,135 122,510 Distribution expense 31,117 28,483 Service fee expense 26,927 24,595 Amortization of deferred sales commissions 3,854 4,044 Fund ‐ related expenses 10,875 9,163 Other expenses 41,615 42,136 Total expenses 249,523 230,931 Operating income 105,436 100,625 Non ‐ operating income (expense): Gains and other investment income, net 494 2,840 Interest expense (7,347) (7,342) Other income (expense) of consolidated collateralized loan obligation (CLO) entity: Gains and other investment income, net ‐ 3,279 Interest and other expense ‐ (1,836) Total non ‐ operating expense (6,853) (3,059) Income before income taxes and equity in net income of affiliates 98,583 97,566 Income taxes (36,748) (36,843) Equity in net income of affiliates, net of tax 2,506 2,509 Net income 64,341 63,232 Net income attributable to non ‐ controlling and other beneficial interests (3,630) (4,846) Net income attributable to Eaton Vance Corp. shareholders $ 60,711 $ 58,386 Earnings per share: Basic $ 0.55 $ 0.52 Diluted $ 0.53 $ 0.50 Weighted average shares outstanding: Basic 110,267 111,641 Diluted 114,671 114,603 Dividends declared per share $ 0.280 $ 0.265 See notes to Consolidated Financial Statements. 5

Eaton Vance Corp. Consolidated Statements of Comprehensive Income (unaudited) Three Months Ended January 31, (in thousands) 2017 2016 Net income $ 64,341 $ 63,232 Other comprehensive income (loss): Amortization of net gains (losses) on derivatives, net of tax 4 3 Unrealized holding gains (losses) on available ‐ for ‐ sale investments and reclassification adjustments, net of tax 327 (658) Foreign currency translation adjustments, net of tax 5,797 (14,065) Other comprehensive income (loss), net of tax 6,128 (14,720) Total comprehensive income 70,469 48,512 Comprehensive income attributable to non ‐ controlling and other beneficial interests (3,630) (4,846) Total comprehensive income attributable to Eaton Vance Corp. shareholders $ 66,839 $ 43,666 See notes to Consolidated Financial Statements. 6