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Eaton Vance Corp. Reports Operating Results (10-K)

December 21, 2011 | About:
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10qk

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Eaton Vance Corp. (EV) filed Annual Report for the period ended 2011-10-31.

Eaton Vance Corp. has a market cap of $2.72 billion; its shares were traded at around $23.26 with a P/E ratio of 13.6 and P/S ratio of 2.2. The dividend yield of Eaton Vance Corp. stocks is 3.2%. Eaton Vance Corp. had an annual average earning growth of 4.9% over the past 10 years. GuruFocus rated Eaton Vance Corp. the business predictability rank of 3-star.

Highlight of Business Operations:

Compensation expense increased by 19 percent, or $55.8 million, in fiscal 2010 over fiscal 2009, reflecting increases in base salaries and employee benefits, operating income-based incentives, stock-based compensation and sales and revenue-based incentives partly offset by a decrease in other compensation. Base salaries and employee benefits increased by 4 percent, or $5.4 million, primarily reflecting increases in base salaries associated with higher headcount, annual merit increases and an increase in payroll taxes associated with the increase in base salaries and operating income-based incentives. Operating income-based incentives increased by 40 percent, or $26.9 million, reflecting an increase in adjusted operating income. Stock-based compensation increased by 16 percent, or $6.5 million, primarily reflecting the increase in restricted stock grants made in the first quarter of fiscal 2010. Sales and revenue-based incentives increased by 43 percent, or $18.1 million, primarily reflecting a 34 percent increase in gross sales of long-term funds and the success of Eaton Vance Global Macro Absolute Return Fund, sales of which were compensated at an above-average level through the third quarter of fiscal 2010. Sales and revenue-based incentives include $0.4 million and $0.6 million in sales-based compensation associated with closed-end fund offerings in fiscal 2010 and 2009, respectively. Other compensation expense decreased by 36 percent, or $1.0 million, reflecting an increase in severance costs partly offset by a decrease in other compensation expense.

Distribution expense increased by 31 percent, or $30.1 million, to $126.1 million in fiscal 2010 over fiscal 2009, reflecting increases in marketing expenses associated with intermediary marketing support payments, Class A share commissions, Class C share distribution fees, payments made under certain closed-end fund compensation agreements and other marketing expenses. Marketing expenses associated with intermediary marketing support payments to our distribution partners increased by 37 percent, or $9.9 million, to $36.3 million, reflecting the increase in sales and average managed assets that are subject to these arrangements and changes in the terms of certain support agreements. Class A share commissions increased by 54 percent, or $4.0 million, to $11.3 million, reflecting an increase in certain Class A sales on which we pay a commission. Class C share distribution fees increased by 25 percent, or $9.1 million, to $46.3 million, reflecting an increase in Class C share assets held more than one year. Compensation arrangements associated with our closed-end funds increased by 14 percent, or $2.0 million, to $16.8 million, reflecting higher closed-end fund managed assets on which these fees are paid. Other distribution expenses increased by 66 percent, or $5.1 million, to $12.8 million, primarily reflecting a major commitment made in fiscal 2010 to elevate the scope and quality of the Companys marketing programs. Total distribution expense included $2.6 million and $2.7 million in closed-end fund structuring fees in fiscal 2010 and 2009, respectively.

Net income attributable to non-controlling and other beneficial interests decreased by $14.3 million in fiscal 2011 from the same period a year earlier, reflecting the recognition of $34.5 million of losses borne by other beneficial interest holders of the consolidated CLO entity partly offset by an $8.4 million increase in net income attributable to non-controlling interest holders in the Companys consolidated funds and majority owned subsidiaries and an $11.8 million increase in the estimated redemption values of the non-controlling interests in those subsidiaries. The increase in the estimated redemption values of non-controlling interests in our majority owned subsidiaries Parametric Portfolio Associates LLC (Parametric Portfolio Associates), Parametric Risk Advisors LLC (Parametric Risk Advisors) and Atlanta Capital Management Company LLC (Atlanta Capital Management) reflect the subsidiaries profit growth. In fiscal 2011, the adjustments in the estimated redemption value of non-controlling interests in Parametric Portfolio Associates, Parametric Risk Advisors and Atlanta Capital Management were $20.0 million, $1.9 million and $8.3 million, respectively. In fiscal 2010, the adjustments for Parametric Portfolio Associates, Parametric Risk Advisors and Atlanta Capital Management and Fox Asset Management were $1.2 million, $9.5 million, $7.5 million and $0.2 million, respectively. The Companys proportionate share of the losses of the CLO entity are eliminated in consolidation; management fees that the Company is entitled to are not.

The $204.2 million increase in liquid assets in fiscal 2011 can be attributed to an increase in cash and cash equivalent balances of $203.0 million and an increase in investment advisory fees and other receivables of $1.1 million. The increase in cash and cash equivalent balances in fiscal 2011 primarily reflects net cash provided by operating activities of $172.3 million, net proceeds from the sale of available-for-sale securities of $156.9 million, net inflows into consolidated funds from non-controlling interest holders of $118.5 million, proceeds from the issuance of Non-Voting Common Stock of $60.9 million offset by the repurchase of $198.6 million of Non-Voting Common Stock, the payment of $85.2 million of dividends to shareholders, $11.6 million in contingent payments made to the sellers of the former Tax-Advantaged Bond Strategies business of M.D. Sass Investors Services (TABS) in the second quarter of fiscal 2011 and the payment of $6.6 million to purchase additional interests in Parametric Portfolio Associates and Parametric Risk Advisors in the third quarter of fiscal 2011. The increase in investment advisory fees and other receivables can be attributed to the increase in our revenue run rate at the end of fiscal 2011 compared to the end of fiscal 2010.

The $18.7 million increase in liquid assets in fiscal 2010 can be attributed to an increase in investment advisory fees and other receivables of $21.4 million partly offset by a decrease in cash and cash equivalent balances of $2.7 million. The increase in investment advisory fees and other receivables can be attributed to the increase in our revenue run rate at the end of fiscal 2010 compared to the end of fiscal 2009. The decrease in cash and cash equivalent balances in fiscal 2010 primarily reflects the payment of $75.7 million of dividends to shareholders, the repurchase of $111.2 million of Non-Voting Common Stock, the payment of $11.2 million to purchase additional interests in Parametric Portfolio Associates and Parametric Risk Advisors in the third quarter of fiscal 2010, $8.8 million in contingent payments made to the sellers of TABS in the second quarter of fiscal 2010 and additions to equipment and leasehold improvements of $12.2 million partly offset by net cash provided by operating activities of $95.9 million, proceeds from the issuance of Non-Voting Common Stock of $56.2 million, net inflows into consolidated funds from non-controlling interest holders of $45.0 million, excess tax benefits of stock option exercises of $10.8 million and payments received on a note receivable from an affiliate of $8.0 million.

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