CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Item includes statements that are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding our expectations, intentions or strategies regarding the future. All statements, other than statements of historical facts, included in this Form 10-Q regarding our financial position, business strategy and other plans and objectives for future operations are forward-looking statements. The terms "may," "will," "could," "anticipate," "plan," "continue," "project," "intend," "estimate," "believe," "expect" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such words. Although we believe that the assumptions and expectations reflected in such forward-looking statements are reasonable, we can give no assurance that they will prove to be correct or that we will take any actions that may now be planned. Certain important factors that could cause actual results to differ materially from our expectations are disclosed in Risk Factors under Item 1A in our latest Annual Report on Form 10-K. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by such factors. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The discussion and analysis below should be read in conjunction with the consolidated financial statements appearing elsewhere in this report. Management has presumed that the readers of this interim financial information have read or have access to Management's Discussion and Analysis of Financial Condition and Results of Operations appearing in our Annual Report on Form 10-K for the year endedOctober 31, 2019 . OverviewEaton Vance Corp. provides advanced investment strategies and wealth management solutions to forward-thinking investors around the world. Our principal business is managing investment funds and providing investment management and advisory services to high-net-worth individuals and institutions. Our core strategy is to develop and sustain management expertise across a range of investment disciplines and to offer leading investment strategies and services through multiple distribution channels. In executing our core strategy, we have developed broadly diversified investment management capabilities and a highly functional marketing, distribution and customer service organization. We measure our success as a Company based principally on investment performance delivered, client satisfaction, reputation in the marketplace, progress achieving strategic objectives, employee development and satisfaction, business and financial results, and shareholder value created. We conduct our investment management and advisory business through wholly- and majority-owned investment affiliates, which include: Eaton Vance Management (EVM),Parametric Portfolio Associates LLC (Parametric),Atlanta Capital Management Company, LLC (Atlanta Capital ) andCalvert Research and Management (Calvert). We also offer investment management advisory services through minority-owned affiliateHexavest Inc. (Hexavest). Through EVM,Atlanta Capital , Calvert and our other affiliates, we manage active equity, income, alternative and blended strategies across a range of investment styles and asset classes, includingU.S. , global and international equities, floating-rate bank loans, municipal bonds, global income, high-yield and investment grade bonds, and mortgage-backed securities. Through Parametric, we manage a range of systematic 41
-------------------------------------------------------------------------------- investment strategies, including systematic equity, systematic fixed income, systematic alternatives and managed options strategies. Through Parametric, we also provide portfolio overlay services and manage custom separate account portfolios, including Custom Core™ equity, laddered fixed income, multi-asset and multi-manager portfolios. We also oversee the management of, and distribute, investment funds sub-advised by unaffiliated third-party managers, including global, emerging market and regional equity and asset allocation strategies. Our breadth of investment management capabilities supports a wide range of strategies and services offered to fund shareholders and separate account investors. Our equity strategies encompass a diversity of investment objectives, risk profiles, income levels and geographic representation. Our income investment strategies cover a broad duration, geographic representation and credit quality range and encompass both taxable and tax-free investments. We also offer alternative investment strategies that include global macro absolute return and commodity-based investments. Although we manage and distribute a wide range of investment strategies and services, we operate in one business segment, namely as an investment adviser to funds and separate accounts. As ofJanuary 31, 2020 , we had$518.2 billion in consolidated assets under management. We distribute our funds and individual separately managed accounts principally through financial intermediaries. We have broad market reach, with distribution partners including national and regional broker-dealers, independent broker-dealers, registered investment advisors, banks and insurance companies. We support these distribution partners with a team of approximately 160 sales professionals coveringU.S. and international markets. We employ a team of approximately 20 sales professionals focused on serving institutional and high-net-worth clients who access investment management services on a direct basis and through investment consultants. Through our wholly- and majority-owned affiliates, we manage investments for a broad range of clients in the institutional and high-net-worth marketplace in theU.S. and internationally, including corporations, sovereign wealth funds, endowments, foundations, family offices and public and private employee retirement plans. Our revenue is derived primarily from management, distribution and service fees received from Eaton Vance-, Parametric- and Calvert-branded funds and management fees received from individual and institutional separate accounts. Our fee revenues are based primarily on the value of the investment portfolios we manage, and fluctuate with changes in the total value and mix of assets under management. As a matter of course, investors in our sponsored open-end funds and separate accounts have the ability to redeem their investments at any time, without prior notice, and there are no material restrictions that would prevent them from doing so. Our major expenses are employee compensation, distribution-related expenses, service fee expense, fund-related expenses, facilities expense and information technology expense. Our discussion and analysis of our financial condition, results of operations and cash flows is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted inthe United States of America (U.S. GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to goodwill and intangible assets, temporary equity, income taxes, investments and stock-based compensation. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under current circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates. 42
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Current Developments We are currently pursuing four primary strategic priorities: (1) capitalizing on the near-term growth opportunities presented by our market-leading positions in customized individual separate accounts, responsible investing, specialty wealth management strategies and services, and the array of high-performing actively managed investment strategies we offer across asset classes and investment styles; (2) defending our floating-rate bank loan, global macro absolute return, systematic emerging market equity and closed-end fund business franchises; (3) enhancing our competitive position by developing new value-added investment offerings, lowering operating costs, advancing succession planning and opportunistically pursuing potential acquisitions; and (4) investing in technology and operating infrastructure, leadership and staff development, and diversity and inclusion. InJune 2019 , we announced a strategic initiative involving our Parametric, EVM and Eaton Vance Distributors affiliates to further strengthen our leadership positions in rules-based, systematic investment strategies, customized individual separate accounts and wealth management solutions. The initiative has three principal components: (1) rebranding EVM's rules-based, systematic investment-grade fixed income strategies as Parametric and aligning internal reporting consistent with the revised branding; (2) integrating under Eaton Vance Distributors the sales teams serving Parametric and EVM clients and business partners in the registered investment advisor and multi-family office market; and (3) combining under Parametric the technology and operating platforms supporting the individual separately managed account businesses of Parametric and EVM. The internal change process supporting this initiative is substantially complete. We now report equity, fixed income and multi-asset separate accounts managed by Parametric for which customization is a primary feature as Parametric custom portfolios. This new investment mandate reporting category includes the Parametric equity and multi-asset strategies that previously composed our former Portfolio Implementation category, primarily Custom Core and centralized portfolio management, as well as the laddered bond separate accounts that were formerly managed by EVM and previously categorized as fixed income for reporting purposes. These market-leading offerings combine the benefits of benchmark-based investing with the ability to customize portfolios to meet individual preferences and needs. In the first three months of fiscal 2020, net inflows into Parametric custom portfolios totaled$3.5 billion , generating annualized internal growth in managed assets of 9 percent. The Calvert Funds are one of the largest and most diversified families of responsibly invested mutual funds, encompassing actively and passively managed equity, fixed and floating-rate income, and multi-asset strategies managed in accordance with the Calvert Principles forResponsible Investment or other responsible investment criteria. Since Calvert became part of Eaton Vance inDecember 2016 , we have experienced significant growth in Calvert-branded investment strategies and further distinguished Calvert as a leader in environmental, social and governance (ESG) research and responsible engagement. Including theAtlanta Capital-subadvised Calvert Equity Fund , assets under management in Calvert strategies grew to a new high of$21.8 billion atJanuary 31, 2020 from$19.8 billion atOctober 31, 2019 , reflecting net inflows of$1.3 billion and market price appreciation of$0.7 billion . Calvert's$1.3 billion of net inflows in the first three months of fiscal 2020 equates to annualized internal growth in managed assets of 26 percent. While Calvert is the centerpiece of our responsible investment strategy, our commitment to responsible investing also encompasses our other investment affiliates.EVM and Atlanta Capital are increasingly utilizing Calvert's proprietary ESG research as a component of their fundamental research processes, and portfolio customization to reflect individual client's responsible investment criteria remains a central feature of Parametric separate account offerings. As ofJanuary 31, 2020 , Parametric managed$25.6 billion of client 43 -------------------------------------------------------------------------------- assets based on client-specified responsible investment criteria. On an overall basis, Eaton Vance is one of the largest participants in responsible investing, a position we are committed to growing in conjunction with rising demand for investment strategies that incorporate ESG-integrated investment research and/or seek to achieve both favorable investment returns and positive societal impact. Net outflows of our floating-rate bank loan strategies declined to$1.4 billion in the first quarter of fiscal 2020 from$2.9 billion in the first quarter of fiscal 2019 and$2.6 billion in the fourth quarter of fiscal 2019. The improved flow results reflect a more favorable market outlook for the performance of floating-rate loans, driven by theFederal Reserve's announced plan to pause benchmark short-term interest rate changes and confidence in the strength ofU.S. credit market conditions. Investor flows into and out of our global macro absolute return strategies netted to approximately zero in the first quarter of fiscal 2020, which compares to net outflows of$2.1 billion in the first quarter of fiscal 2019 and net outflows of$500 million in the fourth quarter of fiscal 2019. The improved flow results of these strategies, which hold long and short positions in currency and short-duration sovereign debt instruments of emerging and frontier market countries, reflect favorable investor returns in 2019 compared to disappointing investment performance in 2018. InFebruary 2019 , EVM and related parties filed an application for exemptive relief with theSEC , seeking permission to offer exchange-traded funds (ETFs) that would employ a novel method of supporting efficient secondary market trading of their shares. Because disclosure of current holdings would not be required, the portfolio trading activity of ETFs utilizing the proposed method could remain confidential. Different from other proposed approaches to less-transparent ETFs that have recently receivedSEC exemptive relief, we believe our method should be broadly applicable across fund asset classes and can support efficient secondary market trading of fund shares in all market conditions. In conjunction with filing the exemptive application, we formed a new wholly-owned subsidiary, Advanced Fund Solutions, to manage the development and commercialization of ETFs utilizing this new method, for which the timing and likelihood of approval remains uncertain. Performance As ofJanuary 31, 2020 , 77 Calvert, Eaton Vance and Parametric-branded mutual funds offered in theU.S. were rated 4 or 5 stars by MorningstarTM for at least one class of shares, including 32 five-star rated funds. As measured by total return net of expenses, atJanuary 31, 2020 30 percent of ourU.S. mutual fund assets ranked in the top quartile of their Morningstar peer groups over three years and 58 percent ranked in the top quartile over five and ten years. A good source of performance-related information for our funds is their websites, available at www.calvert.com and www.eatonvance.com. Information on these websites is not incorporated by reference into this Quarterly Report on Form 10-Q. On our funds' websites, investors can also obtain other current information about our funds, including investment objective and principal investment policies, portfolio characteristics, expenses and Morningstar ratings.
Consolidated Assets under Management
Prevailing equity and income market conditions and investor sentiment affect the sales and redemptions of our investment offerings, managed asset levels, operating results and the recoverability of our investments. During the first quarter of fiscal 2020, the S&P 500 Index, a broad measure ofU.S. equity market performance, had total returns of 6.7 percent and the MSCI Emerging Market Index, a broad measure of emerging market equity performance, had total returns of 2.3 percent. Over the same periods, the BarclaysU.S. Aggregate Bond Index, a broad measure ofU.S. bond market performance, had total returns of 1.8 percent. 44 -------------------------------------------------------------------------------- Consolidated assets under management reached a new record quarter-end high of$518.2 billion onJanuary 31, 2020 , up 17 percent from$444.7 billion of consolidated assets under management onJanuary 31, 2019 . The year-over-year increase reflects net inflows of$28.6 billion and market price appreciation of$45.0 billion . The following tables summarize our consolidated assets under management by investment mandate, investment vehicle and investment affiliate. Prior-period consolidated assets under management, average assets under management and net flows by investment mandate have been revised to reflect the reclassification of benchmark-based fixed income separate accounts from fixed income to Parametric custom portfolios. Prior-period consolidated assets under management by investment affiliate have been revised to reflect the shift in management responsibilities for the Company's systematically managed investment-grade fixed income strategies from EVM to Parametric in the first quarter of fiscal 2020 and the adoption of a new policy to report the managed assets of investment portfolios overseen by multiple Eaton Vance affiliates based on the strategy's primary identity. None of these reclassifications affected the Company's overall consolidated assets under management for any of the reported periods.
Consolidated Assets under Management by Investment Mandate(1)
January 31, % of % of % (in millions) 2020 Total 2019 Total Change Equity(2)$ 138,708 27%$ 116,990 26% 19% Fixed income(3) 64,262 12% 56,910 13% 13% Floating-rate income 33,836 7% 40,943 9% -17% Alternative(4) 8,553 2% 9,991 2% -14% Parametric custom portfolios(5) 175,318 33% 141,050 32% 24% Parametric overlay services(6) 97,514 19% 78,768 18% 24% Total$ 518,191 100% $
444,652 100% 17%
(1)
of 49 percent-owned Hexavest, which are not included in the
table above. (2) Includes balanced and other multi-asset mandates. Excludes equity mandates reported as
Parametric custom portfolios.
(3) Includes cash management mandates. Excludes benchmark-based fixed income separate accounts
reported as Parametric custom portfolios. Amounts for periods
prior to fiscal 2020 have
been revised to reflect the reclassification of benchmark-based
fixed income separate
accounts from fixed income to Parametric custom portfolios.
(4) Consists of absolute return, commodity and currency mandates. (5) Equity, fixed income and multi-asset separate accounts managed by Parametric for which
customization is a primary feature; other Parametric strategies
may also be customized.
Formerly "portfolio implementation." Amounts for periods prior
to fiscal 2020 have been
revised to reflect the reclassification of benchmark-based
fixed income separate accounts
from fixed income to Parametric custom portfolios. (6) Formerly "exposure management." Equity assets under management included$48.1 billion and$40.7 billion of assets managed for after-tax returns onJanuary 31, 2020 and 2019, respectively. Parametric custom portfolio assets under management included$133.6 billion and$103.0 billion of assets managed for after-tax returns and/or tax-exempt income onJanuary 31, 2020 and 2019, respectively. Fixed income assets included$29.1 billion and$25.6 billion of tax-exempt municipal income assets onJanuary 31, 2020 and 2019, respectively. 45
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Consolidated Assets under Management by Investment Vehicle(1)
January 31, % of % of % (in millions) 2020 Total 2019 Total Change Open-end funds$ 108,290 21%$ 99,846 22% 8% Closed-end funds 24,873 5% 23,633 5% 5% Private funds(2) 47,376 9% 39,271 9% 21% Institutional separate accounts 175,258 34% 155,224 35% 13% Individual separate accounts 162,394 31% 126,678 29% 28% Total$ 518,191 100%$ 444,652 100% 17%
(1)
49 percent-owned Hexavest, which are not included in the table
above.
(2) Includes privately offered equity, fixed and floating-rate income, and alternative funds and
CLO entities.
Consolidated Assets under Management by Investment Affiliate(1)(2)
January 31, % (in millions) 2020 2019 Change Eaton Vance Management(3)(4)$ 149,994 $ 143,473 5% Parametric(4) 320,848 264,945 21% Atlanta Capital(5) 25,552 20,833 23% Calvert(6) 21,797 15,401 42% Total$ 518,191 $ 444,652 17%
(1)
flows of 49 percent-owned Hexavest, which are not included in
the table above. (2) In the first quarter of fiscal 2020, the Company changed its policy for reporting
managed assets of investment portfolios overseen by multiple
Eaton Vance affiliates to
base classification on the strategy's primary identity. In
conjunction with this
change, managed assets of$2.4 billion as ofJanuary 31, 2019
were reclassified from
Atlanta Capital to Calvert and managed assets of$2.6 billion
as of
were reclassified from Parametric to Eaton Vance Management.
(3) Includes managed assets of Eaton Vance-sponsored funds and separate accounts managed by
Hexavest and unaffiliated third-party advisers under Eaton
Vance supervision. (4) In the first quarter of fiscal 2020, management responsibilities for the Company's
systematically managed fixed income strategies were shifted
from Eaton Vance Management
to Parametric. Managed assets of the reassigned strategies
were
January 31, 2019 .
(5) Excludes managed assets of
Capital. Including Calvert Equity Fund, the managed assets of
$29.5 billion and$23.2 billion , respectively, as of January
31, 2020 and
2019.
(6) Includes managed assets of
Capital, and Calvert-sponsored funds managed by unaffiliated
third-party advisers under
Calvert supervision. Consolidated average assets under management presented in the following tables are derived by averaging the beginning and ending assets of each month over the period. The tables are intended to provide information useful in the analysis of our asset-based revenue and distribution expenses. Separate account management fees are generally calculated as a percentage of either beginning, average or ending quarterly assets. Fund management, distribution and service fees, as well as certain expenses, are generally calculated as a percentage of average daily assets. 46
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Consolidated Average Assets under Management by Investment Mandate(1)
Three Months Ended January 31, % (in millions) 2020 2019 Change Equity(2)$ 136,644 $ 114,888 19% Fixed income(3) 63,034 55,191 14% Floating-rate income 34,372 42,702 -20% Alternative(4) 8,477 11,013 -23% Parametric custom portfolios(5) 171,260 135,931 26% Parametric overlay services(6) 96,132 77,685 24% Total$ 509,919
(1)
flows of 49 percent-owned Hexavest, which are not included in
the table above. (2) Includes balanced and other multi-asset mandates. Excludes equity mandates reported
as Parametric custom portfolios.
(3) Includes cash management mandates. Excludes benchmark-based fixed income separate
accounts reported as Parametric custom portfolios. Amounts for
periods prior to
fiscal 2020 have been revised to reflect the reclassification
of benchmark-based
fixed income separate accounts from fixed income to Parametric
custom portfolios. (4) Consists of absolute return, commodity and currency mandates. (5) Equity, fixed income and multi-asset separate accounts managed by Parametric for
which customization is a primary feature; other Parametric
strategies may also be
customized. Formerly "portfolio implementation." Amounts for
periods prior to
fiscal 2020 have been revised to reflect the reclassification
of benchmark-based
fixed income separate accounts from fixed income to Parametric custom portfolios. (6) Formerly "exposure management."
Consolidated Average Assets under Management by Investment Vehicle(1)
Three Months Ended January 31, % (in millions) 2020 2019 Change Open-end funds$ 106,995 $ 100,153 7% Closed-end funds 24,661 23,602 4% Private funds(2) 46,357 38,656 20% Institutional separate accounts 174,895 153,135 14% Individual separate accounts 157,011 121,864 29% Total $
509,919
(1)
flows of 49 percent-owned Hexavest, which are not included in
the table above. (2) Includes privately offered equity, fixed income and floating-rate income funds and
CLO entities. Consolidated Net Flows Consolidated net inflows of$6.1 billion in the first quarter of fiscal 2020 represent annualized internal growth in managed assets (consolidated net inflows divided by beginning of period consolidated assets under management) of 5 percent. For comparison, we had consolidated net inflows of$1.5 billion in the first quarter of fiscal 2019, representing annualized internal growth in managed assets of 1 percent. Excluding Parametric overlay services (formerly "exposure management"), which have lower fees and more variable flows than the 47 -------------------------------------------------------------------------------- rest of our business, our annualized internal growth in managed assets was 5 percent in the first quarter of fiscal 2020 and 2 percent in the first quarter of fiscal 2019. Our annualized internal management fee revenue growth (management fees attributable to consolidated inflows less management fees attributable to consolidated outflows, divided by beginning of period consolidated management fee revenue) was 5 percent in the first quarter of fiscal 2020, as the management fee revenue contribution from new sales and other inflows exceeded the management fee revenue lost from redemptions and other outflows. Our annualized internal management fee revenue growth was -4 percent in the first quarter of fiscal 2019, as the management fee revenue lost from redemptions and other outflows exceeded the management fee revenue contribution from sales and other inflows.
The following tables summarize our consolidated assets under management and asset flows by investment mandate and investment vehicle:
48 --------------------------------------------------------------------------------
Consolidated Assets under Management and Net Flows by Investment Mandate(1)
Three Months Ended January 31, % (in millions) 2020 2019 Change Equity assets - beginning of period(2)$ 131,895 $
115,772 14%
Sales and other inflows 7,806
6,220 25% Redemptions/outflows (6,182) (5,461) 13% Net flows 1,624 759 114% Exchanges 3 (108) NM(7) Market value change 5,186 567 815% Equity assets - end of period$ 138,708 $ 116,990 19% Fixed income assets - beginning of period(3) 62,378
54,339 15%
Sales and other inflows 5,086
6,545 -22%
Redemptions/outflows (3,947) (4,866) -19% Net flows 1,139 1,679 -32% Exchanges 23 326 -93%
Market value change 722 566 28% Fixed income assets - end of period$ 64,262 $ 56,910 13% Floating-rate income assets - beginning of period 35,103
44,837 -22%
Sales and other inflows 1,689
3,566 -53%
Redemptions/outflows (3,046) (6,478) -53% Net flows (1,357) (2,912) -53% Exchanges (27) (266) -90%
Market value change 117 (716) NM Floating-rate income assets - end of period$ 33,836 $ 40,943 -17% Alternative assets - beginning of period(4) 8,372
12,139 -31%
Sales and other inflows 675
1,044 -35% Redemptions/outflows (593) (3,264) -82% Net flows 82 (2,220) NM Exchanges - (27) -100% Market value change 99 99 0% Alternative assets - end of period$ 8,553 $
9,991 -14% Parametric custom portfolios assets - beginning of period(5)
164,895
134,345 23%
Sales and other inflows 9,745
10,164 -4%
Redemptions/outflows (6,221) (5,300) 17% Net flows 3,524 4,864 -28% Exchanges 1 75 -99% Market value change 6,898 1,766 291% Parametric custom portfolios assets - end of period$ 175,318 $ 141,050 24% Parametric overlay services assets - beginning of period(6) 94,789
77,871 22%
Sales and other inflows 21,313 17,122 24% Redemptions/outflows (20,199) (17,808) 13% Net flows 1,114 (686) NM Market value change 1,611 1,583 2% Parametric overlay services assets - end of period$ 97,514 $ 78,768 24% Total assets under management - beginning of period 497,432 439,303 13% Sales and other inflows 46,314 44,661 4% Redemptions/outflows (40,188) (43,177) -7% Net flows 6,126 1,484 313% Market value change 14,633
3,865 279%
Total assets under management - end of period
(1)
flows of 49 percent-owned Hexavest, which are not included in the table above. (2) Includes balanced and other multi-asset mandates. Excludes equity mandates reported
as Parametric custom portfolios. (3) Includes cash management mandates. Excludes benchmark-based fixed income separate
accounts reported as Parametric custom portfolios. Amounts for periods prior to
fiscal 2020 have been revised to reflect the reclassification of benchmark-based
fixed income separate accounts from fixed income to Parametric custom portfolios.
49 --------------------------------------------------------------------------------
(4) Consists of absolute return, commodity and currency mandates. (5) Equity, fixed income and multi-asset separate accounts managed by Parametric for
which customization is a primary feature; other Parametric strategies may also be
customized. Formerly "portfolio implementation." Amounts for periods prior to
fiscal 2020 have been revised to reflect the reclassification of benchmark-based
fixed income separate accounts from fixed income to Parametric custom portfolios. (6) Formerly "exposure management." (7) Not meaningful (NM). 50
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Consolidated Assets under Management and Net Flows by Investment Vehicle(1)
Three Months Ended January 31, % (in millions) 2020 2019 Change Funds - beginning of period$ 174,068 $ 164,968 6% Sales and other inflows 11,496 13,723 -16% Redemptions/outflows (9,161) (15,425) -41% Net flows 2,335 (1,702) NM Exchanges - (98) -100% Market value change 4,136 (418) NM Funds - end of period$ 180,539 $ 162,750 11% Institutional separate accounts - beginning of period 173,331 153,996 13% Sales and other inflows 23,605 20,829 13% Redemptions/outflows (25,449) (22,329) 14% Net flows (1,844) (1,500) 23% Exchanges - 98 -100% Market value change 3,771 2,630 43% Institutional separate accounts - end of period$ 175,258 $ 155,224 13% Individual separate accounts - beginning of period 150,033 120,339 25% Sales and other inflows 11,213 10,109 11% Redemptions/outflows (5,578) (5,423) 3% Net flows 5,635 4,686 20% Market value change 6,726 1,653 307% Individual separate accounts - end of period$ 162,394 $ 126,678 28% Total assets under management - beginning of period 497,432 439,303 13% Sales and other inflows 46,314 44,661 4% Redemptions/outflows (40,188) (43,177) -7% Net flows 6,126 1,484 313% Market value change 14,633 3,865 279% Total assets under management - end of period $
518,191
(1)
percent-owned Hexavest, which are not included in the table above. 51
-------------------------------------------------------------------------------- As ofJanuary 31, 2020 , our 49 percent-owned affiliate Hexavest managed$13.0 billion of client assets, down 2 percent from$13.2 billion of managed assets onJanuary 31, 2019 . Other than Eaton Vance-sponsored funds for which Hexavest is adviser or sub-adviser, the managed assets and flows of Hexavest are not included in our consolidated totals.
The following table summarizes assets under management and net flows of Hexavest:
Hexavest Assets under Management and Net Flows
Three Months Ended January 31, % (in millions) 2020 2019 Change Eaton Vance distributed: Eaton Vance sponsored funds - beginning of period(1)$ 152 $ 159 -4% Sales and other inflows 3 40 -93% Redemptions/outflows (26) (25) 4% Net flows (23) 15 NM Market value change 1 3 -67% Eaton Vance sponsored funds - end of period$ 130
$ 177 -27% Eaton Vance distributed separate accounts - beginning of period(2)
1,563 2,169 -28% Sales and other inflows 6 21 -71% Redemptions/outflows (22) (140) -84% Net flows (16) (119) -87% Market value change 19 15 27% Eaton Vance distributed separate accounts - end of period$ 1,566 $ 2,065 -24% Total Eaton Vance distributed - beginning of period 1,715 2,328 -26% Sales and other inflows 9 61 -85% Redemptions/outflows (48) (165) -71% Net flows (39) (104) -63% Market value change 20 18 11% Total Eaton Vance distributed - end of period$ 1,696 $ 2,242 -24% Hexavest directly distributed - beginning of period(3) 11,640 11,467 2% Sales and other inflows 96 519 -82% Redemptions/outflows (554) (1,134) -51% Net flows (458) (615) -26% Market value change 114 136 -16% Hexavest directly distributed - end of period$ 11,296 $ 10,988 3% Total Hexavest assets - beginning of period 13,355 13,795 -3% Sales and other inflows 105 580 -82% Redemptions/outflows (602) (1,299) -54% Net flows (497) (719) -31% Market value change 134 154 -13% Total Hexavest assets - end of period$ 12,992
(1) Managed assets and flows of Eaton Vance-sponsored funds 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 our consolidated assets under management,
flows and average annualized management fee rates. (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 our consolidated assets under management, flows and
average annualized management fee rates. (3) Managed assets and flows of pre-transaction Hexavest clients and post-transaction
Hexavest clients in
on these assets, which are not included in our consolidated assets under management,
flows and average annualized management fee rates. 52
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Results of Operations In evaluating operating performance, we consider net income attributable toEaton Vance Corp. shareholders and earnings per diluted share, which are calculated on a basis consistent withU.S. GAAP, as well as adjusted net income attributable toEaton Vance Corp. shareholders and adjusted earnings per diluted share, both of which are internally derived non-U.S. GAAP performance measures. Management believes that certain non-U.S. GAAP financial measures, specifically, adjusted net income attributable toEaton Vance Corp. shareholders and adjusted earnings per diluted share, while not a substitute forU.S. GAAP financial measures, may be effective indicators of our performance over time. Non-U.S. GAAP financial measures should not be construed to be superior toU.S. GAAP measures. In calculating these non-U.S. GAAP financial measures, net income attributable toEaton 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 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 tax law changes. Management and our Board of Directors, as well as certain of our outside investors, consider these adjusted numbers a measure of our underlying operating performance. Management believes adjusted net income attributable toEaton 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. The following table provides a reconciliation of net income attributable toEaton Vance Corp. shareholders and earnings per diluted share to adjusted net income attributable toEaton Vance Corp. shareholders and adjusted earnings per diluted share, respectively: Three Months Ended January 31, % (in thousands, except per share figures) 2020 2019 Change Net income attributable to Eaton Vance Corp. shareholders$ 103,985 $ 86,801 20% Net excess tax benefit from stock-based compensation plans (4,860) (2,949) 65% Adjusted net income attributable toEaton Vance Corp. shareholders$ 99,125 $ 83,852 18% Earnings per diluted share$ 0.91 $ 0.75 21% Net excess tax benefit from stock-based compensation plans (0.05) (0.02) 150% Adjusted earnings per diluted share$ 0.86 $ 0.73 18%
The 20 percent increase in net income attributable to
?An increase in revenue of
?An increase in operating expenses of
?An increase in non-operating income of
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sponsored funds, and a
?An increase in income taxes of
?An increase in equity in net income of affiliates, net of tax, of
?An increase in net income attributable to non-controlling and other beneficial
interests of
Weighted average diluted shares outstanding decreased by 0.8 million shares, or 1 percent, in the first quarter of fiscal 2020 compared to the first quarter of fiscal 2019, primarily reflecting share repurchases in excess of new shares issued upon the vesting of restricted stock awards and the exercise of employee stock options, partially offset by an increase in the dilutive effect of in-the-money options and unvested restricted stock awards due to higher market prices of the Company's shares. Revenue
The following table shows the components of our revenue:
Three Months Ended January 31, % (in thousands) 2020 2019 Change Management fees$ 394,801 $ 350,750 13% Distribution and underwriter fees 21,578 23,090 -7% Service fees 33,939 29,360 16% Other revenue 2,236 3,216 -30% Total revenue$ 452,554 $ 406,416 11% Management fees The$44.1 million increase in management fees in the first quarter of fiscal 2020 from the same period a year earlier is primarily attributable to a 17 percent increase in consolidated average assets under management and a$3.8 million decrease in fund subsidies, which are recorded as a contra-revenue component of management fees. The increase is partially offset by a 4 percent decrease in our consolidated average annualized management fee rates. 54 -------------------------------------------------------------------------------- The following table shows our consolidated average annualized management fee rates by investment mandate, excluding performance-based fees, which were$0.2 million and$(0.3) million in the first quarters of fiscal 2020 and 2019, respectively. Prior-period consolidated average annualized management fee rates by investment mandate have been revised to reflect the reclassification of benchmark-based fixed income separate accounts from fixed income to Parametric custom portfolios. This reclassification does not affect the Company's overall consolidated average annualized management fee rates for any of the reported periods. Three Months Ended January 31, % (in basis points on average managed assets) 2020 2019 Change Equity(1) 57.0 56.9 0% Fixed income(2) 41.4 41.8 -1% Floating-rate income 49.9 50.0 0% Alternative(3) 64.5 58.3 11% Parametric custom portfolios(4) 15.2 14.4 6% Parametric overlay services(5) 4.9 5.2 -6% Consolidated average annualized management fee rates
30.8 32.0 -4%
(1) Includes balanced and other multiasset mandates. Excludes equity mandates reported
as Parametric custom portfolios.
(2) Includes cash management mandates. Excludes benchmark-based fixed income separate
accounts reported as Parametric custom portfolios. Amounts for
periods prior to
fiscal 2020 have been revised to reflect the reclassification
of benchmark-based
fixed income separate accounts from fixed income to Parametric
custom portfolios. (3) Consists of absolute return, commodity and currency mandates. (4) Includes equity, fixed income and multi-asset separate accounts managed by
Parametric for which customization is a primary feature; other
Parametric
strategies may also be customized. Formerly "portfolio
implementation." Amounts for
periods prior to fiscal 2020 have been revised to reflect the
reclassification of
benchmark-based fixed income separate accounts from fixed
income to Parametric
custom portfolios. (5) Formerly "exposure management." Consolidated average assets under management by investment mandate to which these fee rates apply can be found in the Consolidated Average Assets under Management by Investment Mandate table in Management's Discussion and Analysis of Financial Condition and Results of Operations under Item 2 of this Quarterly Report on Form 10-Q. Changes in the consolidated average annualized management fee rates for the compared period primarily reflects shifts in the Company's mix of business. 55
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Distribution and underwriter fees
The following table shows fund distribution and underwriter fee revenue and other fund-related distribution income:
Three Months Ended January 31, % (in thousands) 2020 2019 Change Distribution fees: Class A $ 688 $ 866 -21% Class B - 44 -100% Class C 8,410 12,534 -33% Class F 402 373 8% Class N(1) 12 22 -45% Class R 499 447 12% Private funds 3,657 2,498 46% Total distribution fees 13,668 16,784 -19% Underwriter commissions 6,514 4,045 61%
Contingent deferred sales charges and other redemption fees
193 1,174 -84% Other distribution income 1,203 1,087 11% Total distribution and underwriter fees $ 21,578
$ 23,090 -7%
(1) Consists of Investor class shares of Parametric Funds and Advisers class shares of Eaton
Vance Funds. The$3.1 million decrease in distribution fees in the first quarter of fiscal 2020 from the same period a year earlier primarily reflects a decrease in Class C distribution fees driven by lower average managed assets of Class C mutual fund shares and an increase in distribution fees from private funds driven by higher average managed assets in these funds. The$1.5 million decrease in combined distribution and underwriter fees further reflects a$2.5 million increase in underwriter commissions and a$1.0 million decrease in contingent deferred sales charges and other redemption fees, primarily attributable to the early redemption of certain managed assets of a private fund in the first quarter of fiscal 2019. Service fees Service fee revenue increased 16 percent in the first quarter of fiscal 2020 from the same period a year earlier, primarily reflecting an increase in average assets in funds and fund share classes subject to service fees.
Other revenue
Other revenue, which consists primarily of fund shareholder servicing fees, referral fees and consultancy fees, decreased 30 percent in the first quarter of fiscal 2020 from the same period a year earlier, primarily reflecting a$0.8 million decreases in miscellaneous dealer income due to a terminated distribution agreement and a$0.1 million decrease in Hexavest-related referral fees. 56
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Expenses
The following table shows our operating expenses:
Three Months Ended January 31, % (in thousands) 2020 2019 Change Compensation and related costs$ 171,982 $ 153,888 12% Distribution expense 40,003 37,508 7% Service fee expense 29,755 25,517 17% Amortization of deferred sales commissions 5,968 5,547 8% Fund-related expenses 11,067 9,645 15% Other expenses 59,060 53,181 11% Total expenses$ 317,835 $ 285,286 11%
Compensation and related costs
The following table shows the details of our compensation and related costs: Three Months Ended January 31, % (in thousands) 2020 2019 Change
Base salaries and employee benefits
30,379 23,274 31% Operating income-based incentives 43,735 38,890 12% Sales-based incentives 16,601 17,034 -3% Other compensation expense 1,267 99 NM Total$ 171,982 $ 153,888 12% Compensation expense increased by$18.1 million , or 12 percent, in the first quarter of fiscal 2020 from the same period a year earlier. The increase was primarily driven by (1) a$7.1 million increase in stock-based compensation expense primarily due to the accelerated recognition of stock-based compensation expense in the first quarter of fiscal 2020 related to employee retirements; (2) a$5.4 million increase in base salaries and employee benefits associated with increases in headcount and fiscal year-end merit adjustments; (3) a$4.8 million increase in operating income-based bonus accruals due to the increase in consolidated pre-bonus operating income; and (4) a$1.2 million increase in other compensation expenses due to higher severance expenses. 57 --------------------------------------------------------------------------------
Distribution expense
The following table shows the breakdown of our distribution expense:
Three Months Ended January 31, % (in thousands) 2020 2019 Change Distribution fees$ 10,012 $ 13,939 -28% Intermediary marketing support payments 14,493 11,954 21% Front-end sales commission expense 6,853 3,841 78% Discretionary marketing expenses 5,355 4,846 11% Finder's fees 2,303 2,018 14%
Closed-end fund dealer compensation payments 987 910 8% Total
$ 40,003 $ 37,508 7% Distribution expense increased by$2.5 million , or 7 percent, in the first quarter of fiscal 2020, primarily reflecting higher front-end sales commission expenses due to increased sales of closed-end fund, private fund and Class A mutual fund shares and higher intermediary marketing support payments. The increase was partially offset by a decrease in lower Class C distribution expense driven by a decrease in average managed assets of Class C mutual fund shares. Service fee expense Service fee expense increased by$4.2 million , or 17 percent, in the first quarter of fiscal 2020 from the same period a year earlier, reflecting higher Class A and private fund service fee payments, partially offset by lower Class C service fee payments.
Amortization of deferred sales commissions
Amortization expense increased by$0.4 million , or 8 percent, in the first quarter of fiscal 2020 from the same period a year earlier, primarily reflecting higher private fund commission amortization, partially offset by lower Class C commission amortization. Fund-related expenses Fund-related expenses increased by$1.4 million , or 15 percent, in the first quarter of fiscal 2020 from the same period a year earlier, reflecting higher sub-advisory fees driven by increases in average managed assets in sub-advised funds. 58
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Other expenses
The following table shows our other expenses:
Three Months Ended January 31, % (in thousands) 2020 2019 Change Information technology$ 27,565 $ 23,409 18% Facilities-related 13,174 13,306 -1% Travel 5,517 4,474 23% Professional services 5,456 3,657 49% Communications 1,420 1,522 -7% Amortization of intangible assets 1,022 1,828 -44% Other corporate expense 4,906 4,985 -2% Total$ 59,060 $ 53,181 11% Other expenses increased by$5.9 million , or 11 percent, in the first quarter of fiscal 2020 from the same period a year earlier. The increase in information technology expense is primarily attributable to an increase in project-related IT consulting services associated with investments in technology and strategic initiatives, higher system maintenance costs and an increase in market data services. The increase in travel expenses relates to an increase in travel activity for the quarter. The increase in professional services expenses reflects an increase in legal expenses and higher consulting costs. These increases were partially offset by a decrease in amortization expense related to certain intangible assets that were fully amortized during the first quarter of fiscal 2019.
Non-operating Income (Expense)
The following table shows the main categories of non-operating income (expense): Three Months Ended January 31, % (in thousands) 2020 2019 Change Gains and other investment income, net$ 16,090 $ 5,833
176%
Interest expense (5,888) (6,131)
-4%
Other income (expense) of consolidated CLO entities: Gains and other investment income, net
15,563 5,441
186%
Interest and other expense (17,396) (8,336)
109%
Total non-operating income (expense)$ 8,369 $ (3,193) NM Gains and other investment income, net, increased by$10.3 million in the first quarter of fiscal 2020 compared to the same period a year ago, reflecting a$10.6 million increase in net investment gains primarily attributable to investments in sponsored strategies and associated hedges and a$0.1 million decrease in foreign losses, partially offset by a decrease in interest and other income of$0.5 million . The change in other income (expense) of consolidated CLO entities in the first quarter of 2020 compared to the same period a year earlier reflects a$1.1 million decrease in net expense from consolidated CLO entities, reflecting an increase in our economic interests in these entities. The Company consolidated two securitized 59
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CLO entities and one warehouse stage CLO entity as of
Income Taxes Our effective tax rate, calculated as a percentage of income before income taxes and equity in net income of affiliates, was 22.8 percent in the first quarter of fiscal 2020 and 23.4 percent in the first quarter of fiscal 2019. Our income tax provision for the three months endedJanuary 31, 2020 and 2019 includes charges of$1.3 million and$0.6 million , respectively, associated with certain provisions of the 2017 Tax Act taking effect in fiscal 2019, relating principally to limitations on the deductibility of executive compensation. Our income tax provision for the three months endedJanuary 31, 2020 and 2019 was reduced by net excess tax benefits of$4.9 million and$2.9 million , respectively, related to the exercise of employee stock options and vesting of restricted stock awards during those periods. Our calculations of adjusted net income and adjusted earnings per diluted share remove the tax impact of stock-based compensation shortfalls or windfalls. On this basis, our adjusted effective tax rate was 26.2 percent and 25.9 percent for the three months endedJanuary 31, 2020 and 2019, respectively.
Equity in Net Income of Affiliates, Net of Tax
Equity in net income of affiliates, net of tax, primarily reflects our 49 percent equity interest in Hexavest and our seven percent minority equity interest in a private equity partnership managed by a third party.
The following table summarizes the components of equity in net income of affiliates: Three Months Ended January 31, % (in thousands) 2020 2019 Change
Investment in Hexavest, net of tax and amortization
17 (1) NM Total$ 2,325 $ 1,948 19%
Net Income Attributable to Non-controlling and Other Beneficial Interests
The following table summarizes the components of net income attributable to non-controlling and other beneficial interests:
Three Months Ended January 31, % (in thousands) 2020 2019 Change Consolidated sponsored funds$ (7,177) $ (2,422) 196% Majority-owned subsidiaries (1,673) (3,037) -45% Net income attributable to non-controlling and other beneficial interests$ (8,850) $ (5,459) 62% 60
-------------------------------------------------------------------------------- Net income attributable to non-controlling and other beneficial interests increased by$3.4 million in the first quarter of fiscal 2020 compared to the same period a year ago, reflecting an increase in income earned by consolidated sponsored funds. Net income attributable to majority-owned subsidiaries decreased by$1.4 million , reflecting the Company's accelerated repurchase of certain profit and capital interests in Parametric entities held by current and former employees, which repurchase settled in the fourth quarter of fiscal 2019. Net income attributable to non-controlling and other beneficial interests is not adjusted for taxes due to the underlying tax status of our consolidated sponsored funds and consolidated majority-owned subsidiaries, which are treated as pass-through entities for tax purposes.
Changes in Financial Condition, Liquidity and Capital Resources
The assets and liabilities of our consolidated CLO entities do not affect our liquidity or capital resources. The collateral assets of our consolidated CLO entities are held solely to satisfy the obligations of these entities and we have no right to these assets beyond our direct investment in, and management fees generated from, these entities. The note holders and third-party creditors of these entities have no recourse to the general credit of the Company. As a result, the assets and liabilities of our consolidated CLO entities are excluded from the discussion of liquidity and capital resources below.
The following table summarizes certain key financial data relating to our liquidity and capital resources and the uses of cash:
Balance Sheet and Cash Flow Data
January 31, October 31, (in thousands) 2020 2019 Balance sheet data: Assets: Cash and cash equivalents $ 544,114 $ 557,668 Management fees and other receivables 237,579 237,864 Total liquid assets $ 781,693 $ 795,532 Investments $
1,095,103 $ 1,060,739
Liabilities: Debt(1) $ 625,000 $ 625,000
(1) Represents the principal amount of debt outstanding. The carrying value of the debt,
including debt issuance costs, was$620.7 million and
2020 and October 31, 2019, respectively. Three Months Ended January 31, (in thousands) 2020 2019 Cash flow data: Operating cash flows $ 17,691 $ 34,332 Investing cash flows 5,114 (283,089) Financing cash flows (55,712) (74,963) 61
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Liquidity and Capital Resources
Liquid assets consist of cash and cash equivalents and management fees and other receivables. Cash and cash equivalents consist of cash and short-term, highly liquid investments that are readily convertible to cash. Management fees and other receivables primarily represent receivables due from sponsored funds and separately managed accounts for investment advisory and distribution services provided. Excluding those assets identified as assets of consolidated CLO entities, liquid assets represented 29 percent and 32 percent of total assets onJanuary 31, 2020 andOctober 31, 2019 , respectively. Not included in the liquid asset amounts are$280.6 million and$297.8 million of highly liquid short-term debt securities with remaining maturities between three and 12 months held as ofJanuary 31, 2020 andOctober 31, 2019 , respectively. These securities are included within investments on our Consolidated Balance Sheets. Our seed investments in consolidated funds and separate accounts are not treated as liquid assets because they may be longer term in nature.
As of
We maintain a$300 million unsecured revolving credit facility with several banks that expires onDecember 11, 2023 . The facility, which we entered into onDecember 11, 2018 , provides that we may borrow at LIBOR or LIBOR-successor benchmark-based rates of interest that vary depending on our credit ratings. The credit facility agreement contains financial covenants with respect to leverage and interest coverage, and requires us to pay an annual commitment fee on any unused portion. We had no borrowings under our revolving credit facility atJanuary 31, 2020 or at any point during the first three months of fiscal 2020. We were in compliance with all debt covenants as ofJanuary 31, 2020 . We continue to monitor our liquidity daily. We remain committed to growing our business and returning capital to shareholders. We expect that our main uses of cash will be paying dividends, acquiring shares of our Non-Voting Common Stock, making seed investments in new investment strategies, potential strategic acquisitions, enhancing our technology infrastructure and paying the operating expenses of our business. We believe that our existing liquid assets, cash flows from operations and borrowing capacity under our credit facility are sufficient to meet our current and forecasted operating cash needs. The risk exists, however, that if we need to raise additional capital or refinance existing debt in the future, resources may not be available to us in sufficient amounts or on acceptable terms. Our ability to enter the capital markets in a timely manner depends on a number of factors, including the state of global credit and equity markets, interest rates, credit spreads and our credit ratings at such time. If we are unable to access capital markets to issue new debt, refinance existing debt or sell shares of our Non-Voting Common Stock as needed, or if we are unable to obtain such financing on acceptable terms, our business could be adversely affected.
Recoverability of our Investments
Our$1.1 billion of investments as ofJanuary 31, 2020 consisted of our 49 percent equity interest in Hexavest, our direct investments in Company-sponsored funds and separate accounts entered into for investment and business development purposes, investments held by the funds we consolidate and certain other investments held by the Company at cost. Investments in consolidated funds and separate accounts and investments held directly by the Company are generally in liquid debt or equity securities and are carried at fair market value. We test our investments held at cost for impairment on a quarterly basis using qualitative factors. As ofJanuary 31, 2020 , there were no indicators of impairment on our investments held at cost. 62 -------------------------------------------------------------------------------- We assess our investments in equity method investees, goodwill and indefinite-lived intangible assets for impairment in the fourth quarter of each fiscal year, or as facts and circumstances indicate that additional analysis is warranted. There have been no significant changes in financial condition in the first three months of fiscal 2020 that would indicate that an impairment loss exists atJanuary 31, 2020 . We periodically review our deferred sales commissions and amortizing identifiable intangible assets for impairment as events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. There have been no significant changes in financial condition in the first three months of fiscal 2020 that would indicate that an impairment loss exists atJanuary 31, 2020 . Operating Cash Flows Cash provided by operating activities totaled$17.7 million in the first three months of fiscal 2020 compared to cash provided by operating activities of$34.3 million in the first three months of fiscal 2019. The year-over-year change primarily reflects a decrease in net cash provided by operating activities of consolidated CLO entities, a decrease in net inflows related to the purchase and sale of short-term debt securities and an increase in net outflows from investment activity of consolidated sponsored funds and separately managed accounts, partially offset by increases due to timing differences in the cash settlements of our other assets and liabilities. Investing Cash Flows Cash provided by investing activities totaled$5.1 million in the first three months of fiscal 2020 compared to cash used for investing activities of$283.1 million in the first three months of fiscal 2019. The year-over-year change primarily reflects a$262.4 million decrease in net purchases of bank loans and other investments by consolidated CLO entities, a$27.2 million increase in proceeds received by the Company related to the sale of CLO entity note obligations and a$1.5 million decrease in additions to equipment and leasehold improvement, all partially offset by a$2.9 million decrease in net proceeds from sale of investments. Financing Cash Flows Cash used for financing activities totaled$55.7 million in the first three months of fiscal 2020. The Company used$80.3 million to repurchase and retire shares of our Non-Voting Common Stock under our authorized repurchase programs, paid$8.4 million to acquire additional interests inAtlanta Capital and Parametric and received proceeds of$36.0 million related to the issuance of shares of our Non-Voting Common Stock in connection with the exercise of stock options and other employee stock purchases. As ofJanuary 31, 2020 , we had authorization to purchase an additional 4.9 million shares of our Non-Voting Common Stock under our current share repurchase authorization. We anticipate that repurchases of our Non-Voting Common Stock will continue to be an ongoing use of cash. Our dividends declared per share were$0.375 in the first three months of fiscal 2020 and we paid an additional$2.3 million of dividends in the first three months of fiscal 2020 versus the first three months of fiscal 2019. We currently expect to declare and pay quarterly dividends on our Voting and Non-Voting Common Stock comparable to the dividend declared in the first quarter of fiscal 2020. Cash provided by financing activities of consolidated CLO entities in the first quarter of fiscal 2019 included$68.5 million of proceeds received from a warehouse line of credit. 63
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Contractual Obligations We have future obligations under various contracts relating to debt, interest payments and operating leases. During the first three months endedJanuary 31, 2020 , there were no material changes to our contractual obligations as previously reported in our Annual Report on Form 10-K for the year endedOctober 31, 2019 , except as discussed below. Vested profit units (noncontrolling interests) held by employees in theAtlanta Capital longterm equity incentive plan are not subject to mandatory redemption. Our repurchase of these noncontrolling interests is predicated on the exercise of a series of put options held by profit unit holders and call options held by us. The put options provide the profit unit holders the right to require us to repurchase their interests at specified intervals over time. The call options we hold provide us with the right to require the profit unit holders to sell their interests to us at specified intervals over time, as well as upon the occurrence of certain events such as death or permanent disability. These noncontrolling interests are redeemable at fair value. There is uncertainty as to the timing and amount of any purchases of vested profit units in the future. AtJanuary 31, 2020 , there are no amounts payable to non-controlling interest holders ofAtlanta Capital to repurchase vested profit units. In fiscal 2017, the Company introduced a phantom incentive plan forAtlanta Capital that provides for the award of phantom incentive units to eligible employees that are indexed to the per unit enterprise value ofAtlanta Capital and settled in shares of our NonVoting Common Stock at vesting. As a consequence of introducing this stockbased compensation plan, we ceased granting profit units to employees ofAtlanta Capital under the longterm equity incentive plan.
We report all redeemable noncontrolling interests in temporary equity on our Consolidated Balance Sheet at
estimated redemption value. The estimated redemption value of our non-controlling interests totaled$336.1 million onJanuary 31, 2020 compared to$285.9 million onOctober 31, 2019 . Redeemable non-controlling interests atJanuary 31, 2020 consisted of vested profit units held by employees ofAtlanta Capital granted under theAtlanta Capital longterm equity incentive plan of$25.6 million and equity interests in our consolidated sponsored funds held by thirdparty shareholders of$310.5 million .
Foreign Subsidiaries
As ofJanuary 31, 2020 , we consider the undistributed earnings of certain foreign subsidiaries to be indefinitely reinvested in foreign operations. As ofJanuary 31, 2020 , we had approximately$4.8 million of undistributed earnings, primarily from operations in theU.K. , that are not available to fund domestic operations or to distribute to our shareholders unless repatriated. In consideration of the treatment of taxable distributions, under the 2017 Tax Act, the impact of Global Intangible Low Taxed Income on the Company's future foreign earnings and lack of withholding tax imposed by certain foreign governments, any future tax liability with respect to these undistributed earnings is immaterial.
Off-Balance Sheet Arrangements
We do not invest in any off-balance sheet vehicles that provide financing, liquidity, market or credit risk support or engage in any leasing activities that expose us to any liability that is not reflected in our Consolidated Financial Statements.
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Critical Accounting Policies
There have been no updates to our critical accounting policies from those
disclosed in Management's Discussion and Analysis of Financial Condition in our
Form 10-K for the fiscal year ended
Accounting Developments OnNovember 1, 2019 , the Company fully adopted a new accounting standard related to leases. See Note 1, Summary of Significant Accounting Policies, in Item 1, Consolidated Financial Statements (unaudited) of this Quarterly Report on Form 10-Q.
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