CLMS-2014-03-31-10Q


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
 FORM 10-Q
________________
 
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
FOR THE QUARTERLY PERIOD ENDED: March 31, 2014
 
 
or
 
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

Commission File Number: 000-51003
________________
 CALAMOS ASSET MANAGEMENT, INC.
(Exact Name of Registrant as Specified in its Charter)
________________
 
Delaware
 
32-0122554
(State or Other Jurisdiction of
 
(I.R.S. Employer
Incorporation or Organization)
 
Identification No.)
 
 
 
2020 Calamos Court, Naperville, Illinois
 
60563
(Address of Principal Executive Offices)
 
(Zip Code)

(630) 245-7200
(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. þ 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). þ 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 þ
Non-accelerated filer ¨
Smaller reporting company ¨
 
(Do not check if a 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 þ No
At April 25, 2014, there were 20,531,774 shares of Class A common stock and 100 shares of Class B common stock outstanding.




TABLE OF CONTENTS

 
 
 



2


PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except share data)
 
March 31, 2014
 
December 31, 2013
 
(unaudited)
 
 
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
81,335

 
$
39,078

Receivables:
 
 
 
Affiliates and affiliated funds
16,726

 
16,306

Customers
4,538

 
5,806

Investment securities
360,256

 
472,241

Partnership investments, net
39,323

 
34,047

Prepaid expenses
4,015

 
2,812

Deferred tax assets, net
7,319

 
10,165

Other current assets
3,094

 
2,283

Total current assets
516,606

 
582,738

Non-current assets:
 
 
 
Deferred tax assets, net
37,139

 
36,575

Goodwill
6,380

 
6,380

Property and equipment, net of accumulated depreciation and amortization ($61,445 at March 31, 2014 and $60,339 at December 31, 2013)
16,133

 
16,990

Other non-current assets
3,352

 
3,183

Total non-current assets
63,004

 
63,128

Total assets
$
579,610

 
$
645,866

LIABILITIES AND EQUITY
 
 
 
LIABILITIES
 
 
 
Current liabilities:
 
 
 
Distribution fees payable
$
9,912

 
$
10,655

Accrued compensation and benefits
10,632

 
22,527

Current portion of long-term debt
46,160

 
46,160

Interest payable
1,240

 
2,729

Accrued expenses and other current liabilities
5,226

 
7,224

Total current liabilities
73,170

 
89,295

Non-current liabilities:
 
 
 
Long-term debt
45,955

 
45,955

Deferred rent
8,932

 
9,013

Other non-current liabilities
3,082

 
3,121

Total non-current liabilities
57,969

 
58,089

Total liabilities
131,139

 
147,384

 
 
 
 
Redeemable non-controlling interest in partnership investments
7,614

 
7,551

 
 
 
 
EQUITY
 
 
 
Class A Common Stock, $0.01 par value; authorized 600,000,000 shares; 24,822,945 shares issued and 18,566,000 shares outstanding at March 31, 2014; 24,696,095 shares issued and 19,475,765 shares outstanding at December 31, 2013
248

 
247

Class B Common Stock, $0.01 par value; authorized 1,000 shares; 100 shares issued and outstanding at March 31, 2014 and December 31, 2013

 

Additional paid-in capital
219,691

 
218,359

Retained earnings
85,772

 
86,115

Accumulated other comprehensive income
3,320

 
2,863

Treasury stock; 6,256,945 shares at March 31, 2014 and 5,220,330 shares at December 31, 2013
(103,336
)
 
(99,528
)
Calamos Asset Management, Inc. stockholders’ equity
205,695

 
208,056

Non-controlling interest in Calamos Investments LLC (Calamos Interests)
235,162

 
282,875

Total equity
440,857

 
490,931

Total liabilities and equity
$
579,610

 
$
645,866

See accompanying notes to consolidated financial statements.

3



CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
(unaudited)
 
Three Months Ended
 
March 31, 2014
 
March 31, 2013
REVENUES
 
 
 
Investment management fees
$
50,278

 
$
55,942

Distribution and underwriting fees
12,989

 
14,328

Other
663

 
683

Total revenues
63,930

 
70,953

EXPENSES
 

 
 

Employee compensation and benefits
23,996

 
22,565

Distribution expenses
12,651

 
13,931

Marketing and sales promotion
3,705

 
3,389

General and administrative
9,502

 
8,953

Total operating expenses
49,854

 
48,838

Operating income
14,076

 
22,115

NON-OPERATING INCOME
 

 
 

Net interest expense
(1,465
)
 
(1,419
)
Investment and other income
1,583

 
3,219

Total non-operating income
118

 
1,800

Income before income taxes
14,194

 
23,915

Income tax provision
1,362

 
1,976

Net income
12,832

 
21,939

Net income attributable to non-controlling interest in
Calamos Investments LLC (Calamos Interests)
(10,630
)
 
(17,997
)
Net income attributable to redeemable non-controlling interest in
partnership investments
(63
)
 
(708
)
Net income attributable to Calamos Asset
Management, Inc.
$
2,139

 
$
3,234


Earnings per share:
 

 
 

Basic
$
0.11

 
$
0.16

Diluted
$
0.11

 
$
0.16

Weighted average shares outstanding:
 

 
 

Basic
19,079,163

 
20,301,373

Diluted
19,805,828

 
20,836,996

 
 
 
 
Cash dividends declared per share
$
0.125

 
$
0.125

See accompanying notes to consolidated financial statements.

4



CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)

 
Three Months Ended
 
March 31, 2014
 
March 31, 2013
Net income
$
12,832

 
$
21,939

Other comprehensive income, before income tax provision
 

 
 

Unrealized gains on available-for-sale securities:
 

 
 

Unrealized gains
2,518

 
7,750

Reclassification adjustment for realized gains included in net income
(816
)
 
(1,423
)
Other comprehensive income, before income tax provision
1,702

 
6,327

Income tax provision related to other comprehensive income
269

 
517

Other comprehensive income, after income tax provision
1,433

 
5,810

Comprehensive income
14,265

 
27,749

Comprehensive income attributable to non-controlling interest in Calamos Investments LLC (Calamos Interests)
(11,587
)
 
(22,927
)
Comprehensive income attributable to redeemable non-controlling interest in partnership investments
(63
)
 
(708
)
Comprehensive income attributable to Calamos Asset Management, Inc.
$
2,615

 
$
4,114

See accompanying notes to consolidated financial statements.

5



CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Three Months Ended March 31, 2014
(in thousands, except share data)
(unaudited)
 
Calamos Asset Management, Inc. Stockholders
 
 
 
 
 
 
(in thousands)
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Treasury Stock
 
Non-controlling Interest in Calamos Investments LLC (Calamos Interests)
 
Total
 
Redeemable Non-controlling Interest in Partnership Investments
Balance at December 31, 2013
$
247

 
$
218,359

 
$
86,115

 
$
2,863

 
$
(99,528
)
 
$
282,875

 
$
490,931

 
$
7,551

Net income

 

 
2,139

 

 

 
10,630

 
12,769

 
63

Changes in unrealized gains on available-for-sale securities, net of income taxes

 

 

 
590

 

 
1,592

 
2,182

 

Reclassification adjustment for realized gains on available-for-sale securities included in income, net of income tax

 

 

 
(114
)
 

 
(635
)
 
(749
)
 

Issuance of common stock (126,850 Class A common shares)
1

 
(1
)
 

 

 

 

 

 

Repurchase of common stock by Calamos Investments LLC (1,036,615 Class A common shares)

 

 
(8
)
 

 
(2,711
)
 
(9,487
)
 
(12,206
)
 

Impact of the redemption of common stock from Calamos Investments LLC by Calamos Asset Management, Inc. (126,850 Class A common shares)

 
1,097

 

 

 
(1,097
)
 

 

 

Cumulative impact of changes in ownership of Calamos Investments LLC

 
(100
)
 
8

 
(19
)
 

 
(248
)
 
(359
)
 

Compensation expense recognized under stock incentive plans

 
455

 

 

 

 
1,590

 
2,045

 

Impact on non-controlling interests as a result of dividends paid to Calamos Investments LLC on repurchased common stock

 
(119
)
 

 

 

 
119

 

 

Dividend equivalent accrued under stock incentive plans

 

 
(68
)
 

 

 
(241
)
 
(309
)
 

Distributions to non-controlling interests

 

 

 

 

 
(51,033
)
 
(51,033
)
 

Dividends declared

 

 
(2,414
)
 

 

 

 
(2,414
)
 

Balance at March 31, 2014
$
248

 
$
219,691

 
$
85,772

 
$
3,320

 
$
(103,336
)
 
$
235,162

 
$
440,857

 
$
7,614

See accompanying notes to consolidated financial statements.

6



CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Three Months Ended
 
March 31, 2014
 
March 31, 2013
Cash and cash equivalents at beginning of period
$
39,078

 
$
106,796

Cash flows (used in) provided by operating activities:
 

 
 

Net income                                                                        
12,832

 
21,939

Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
 

 
 

Amortization of deferred sales commissions
638

 
714

Other depreciation and amortization                                                                      
1,121

 
1,198

Deferred rent                                                                      
(81
)
 
(50
)
Change in unrealized (gains) losses on trading securities, derivative assets, derivative liabilities and partnership investments, net
(8,779
)
 
63

Net realized losses (gains) on sale of investment securities, derivative assets, derivative liabilities and partnership investments, net
7,992

 
(1,640
)
Deferred taxes, net                                                                      
1,989

 
1,866

Stock based compensation                                                                      
2,045

 
1,490

Employee taxes paid on vesting under stock incentive plans
(335
)
 
(157
)
(Increase) decrease in assets:
 

 
 

Receivables:
 

 
 

Affiliates and affiliated funds, net                                                                 
(420
)
 
639

Customers                                                                 
1,268

 
1,514

Other assets                                                                   
(2,836
)
 
(2,184
)
Increase (decrease) in liabilities:
 

 
 

Distribution fees payable                                                                
(743
)
 
(1,728
)
Accrued compensation and benefits
(11,895
)
 
(15,393
)
Accrued expenses and other liabilities                                                                   
(3,811
)
 
(348
)
Net cash (used in) provided by operating activities                                                                 
(1,015
)
 
7,923

Cash flows provided by investing activities:
 

 
 

Net additions to property and equipment                                                                        
(249
)
 
(239
)
Purchases of investment securities                                                                        
(8,618
)
 
(55,890
)
Proceeds from sale of investment securities                                                                        
122,875

 
54,996

Net purchases of derivatives                                                                        

 
(1,822
)
Net changes in partnership investments                                                                        
(5,059
)
 
19,297

Net cash provided by investing activities                                                                      
108,949

 
16,342

Cash flows used in financing activities:
 

 
 

Deferred tax expense on vesting under stock incentive plans
(24
)
 
(93
)
Repurchase of common stock by Calamos Investments LLC (1,036,615 at March 31, 2014, and 312,469 at March 31, 2013 Class A common shares)
(12,206
)
 
(3,368
)
Equity distributions paid to non-controlling interests (Calamos Interests)
(38,897
)
 
(7,006
)
Tax distributions paid to non-controlling interests (Calamos Interests)
(12,136
)
 
(12,646
)
Cash dividends paid to common stockholders
(2,414
)
 
(2,559
)
Net cash used in financing activities                                                                      
(65,677
)
 
(25,672
)
Net increase (decrease) in cash and cash equivalents
42,257

 
(1,407
)
Cash and cash equivalents at end of period                                                                           
$
81,335

 
$
105,389

Supplemental disclosure of cash flow information:
 

 
 

Cash paid for:
 

 
 

Income taxes, net                                                                  
$
111

 
$
1,636

Interest                                                                      
$
2,977

 
$
2,977


See accompanying notes to consolidated financial statements.


7


CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)    Organization and Description of Business
Calamos Asset Management, Inc. (“CAM”) is a holding company and as of March 31, 2014 owned 22.2% of Calamos Investments LLC (“Calamos Investments”). CAM, together with Calamos Investments and Calamos Investments’ subsidiaries (the “Company”), operates the investment advisory and distribution services businesses reported within these consolidated financial statements. CAM operates and is the sole manager, thus controls all of the business and affairs of Calamos Investments and, as a result of this control, consolidates the financial results of Calamos Investments with its own financial results. The remaining 77.8% ownership interest in Calamos Investments is held by Calamos Family Partners, Inc. (“CFP”), a Delaware corporation, and John P. Calamos, Sr. the Chairman, Chief Executive Officer and Global Co-Chief Investment Officer of CAM. CFP and John P. Calamos, Sr. (collectively "Calamos Interests"), ownership interest, in accordance with applicable accounting guidance, is reflected and referred to within these consolidated financial statements as “non-controlling interest in Calamos Investments LLC”. As shown in the diagram below, CFP also owns all of CAM’s outstanding Class B common stock, which represents 97.4% of the combined voting power of all classes of CAM’s voting stock. The graphic below illustrates our organizational and ownership structure as of March 31, 2014:

(1)
Represents combined economic interest of Calamos Family Partners, Inc. and John P. Calamos, Sr. who is also a member of Calamos Investments LLC.
(2)
Represents combined economic interest of all public stockholders, including John P. Calamos, Sr. and John P. Calamos, Jr.’s combined 15.24% ownership interest of Class A common stock. The calculation of ownership interest includes options and RSUs that vest within 60 days, as well as CFP’s ownership interest in Class A common stock purchased by Calamos Investments LLC, pursuant to the Company’s share repurchase plan.

8


CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company primarily provides investment advisory services to individuals and institutional investors through a number of investment products that include open-end funds and closed-end funds (the “Funds”), separate accounts, offshore funds and partnerships, as well as provides model portfolio design and oversight for separately managed accounts. The subsidiaries through which the Company provides these services include: Calamos Advisors LLC (“CAL”), a Delaware limited liability company and registered investment advisor; Calamos Financial Services LLC (“CFS”), a Delaware limited liability company and registered broker-dealer; Calamos Wealth Management LLC, a Delaware limited liability company and registered investment advisor; and Calamos Investments LLP, a United Kingdom limited liability partnership, registered investment advisor with the Financial Conduct Authority in the United Kingdom, and a global distributor of the offshore funds and Company products. For reporting purposes, the offshore funds are reported within the open-end funds.
(2)Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), which require the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Management believes the accounting estimates are appropriate and reasonably stated; however, due to the inherent uncertainties in making estimates, actual amounts could differ from these estimates.
The consolidated financial statements as of March 31, 2014 and for the three months ended March 31, 2014 and 2013 have not been audited by the Company’s independent registered public accounting firm. In the opinion of management, these statements contain all adjustments, including those of a normal recurring nature, necessary for fair presentation of the financial condition and results of operations. The results for the interim periods presented are not necessarily indicative of the results to be obtained for a full fiscal year. This Form 10-Q filing should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.
Principles of Consolidation
The Company consolidates investments in which the Company’s ownership exceeds 50% or in which the Company operates and controls the business and affairs of the entity or is deemed to be the primary beneficiary. In order to make this determination, an analysis is performed to determine if the investment in an affiliate or partnership is a variable interest entity ("VIE"). The Company has evaluated its investments in affiliates and partnerships and has concluded that they are not VIEs. With respect to partnership investments, the limited partners have no control of the business and affairs of the partnership, no substantive ability to dissolve (liquidate) the partnership, or otherwise remove the general partner (CAL and Calamos Investments) without cause or have other substantive rights.
The consolidated financial statements include the financial statements of CAM, Calamos Investments, Calamos Investments’ wholly- and majority-owned subsidiaries, and the Company’s partnerships in which it owns a majority interest or in which it has operating control. The equity method of accounting is used for investments in which the Company has significant influence, but less than 50% ownership. All significant intercompany balances and transactions have been eliminated.
The Calamos Interests’ combined 77.8% interest in Calamos Investments at March 31, 2014 and December 31, 2013, is represented as a non-controlling interest in Calamos Investments LLC in the Company’s consolidated financial statements. Non-controlling interest in Calamos Investments is derived by multiplying the historical equity of Calamos Investments by the Calamos Interests’ aggregate ownership percentage for the periods presented. Issuances and repurchases of CAM’s common stock may result in changes to CAM’s ownership percentage and to the non-controlling interests’ ownership percentage of Calamos Investments with resulting changes reflected in the consolidated statements of changes in equity. Income is allocated based on the average ownership interest during the period in which the income is earned.
CAM owns certain assets to which common stockholders have exclusive economic rights. As of March 31, 2014 and 2013, these assets include cash, cash equivalents and investment securities of $91.1 million and $68.5 million, net current and non-current deferred tax assets of $44.5 million and $52.8 million, and net current income taxes receivable of $3.0 million and $2.1 million, respectively, that are reported together with Calamos Investments’ consolidated assets in the consolidated statements of financial condition. Additionally, net income before income taxes, of $14.2 million and $23.9 million for the three months ended March 31, 2014 and 2013, respectively, each included $38,000 and $87,000, respectively, of interest income on cash and cash equivalents held solely by CAM. These portions of CAM’s income and expense are not affected by non-controlling interests.


9


CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


CAL is the general partner and controls the operations of Calamos International Growth Fund LP and Calamos Investments, through a wholly owned subsidiary, is indirectly the general partner and controls the operations of Calamos Arista Strategic Fund LP (formerly Black Strategic Fund, LP) a U.S. feeder fund to Calamos Arista Strategic Master Fund LTD (formerly Black Strategic Master Fund Ltd.) a hedge fund in the Cayman Islands. As CAL and Calamos Investments are the general partners and control the operations of Calamos International Growth Fund LP and Calamos Arista Strategic Fund LP, respectively, and as Calamos Investments has a majority interest in Calamos Arista Strategic Fund LP, the results of these partnerships and the master fund are included into the Company’s consolidated financial results. In December 2013, the limited partners of Calamos International Growth Fund LP redeemed all of their interests in the fund. As a result, the Company deconsolidated Calamos International Growth Fund LP and accounted for this partnership investment using the equity method as of December 31, 2013. Calamos International Growth Fund LP was dissolved on April 10, 2014. See Note 5, Partnership Investments, for more discussion regarding these funds.
For the periods the partnerships are consolidated, the assets and liabilities of the partnerships are presented on a net basis within partnership investments, net in the consolidated statements of financial condition. The net income for these partnerships is included in investment and other income in the consolidated statements of operations, and the change in partnership investments is included in the net changes in partnership investments in the consolidated statements of cash flows. The partnerships are presented on a net basis in order to provide more clarity to the financial position and results of the core operations of the Company. The underlying assets and liabilities that are being consolidated are described in Note 5, Partnership Investments. The combined interests of all of the consolidated partnerships, not owned by the Company and that are redeemable at the option of the holder, are presented as redeemable non-controlling interest in partnership investments in the Company’s consolidated financial statements for the periods those partnerships were consolidated.
The Company holds non-controlling interests in certain other partnership investments that are included in partnership investments, net in the consolidated statements of financial condition. These other partnership investments are accounted for under the equity method.
Restricted Cash
The Company has a $430,000 security deposit that is restricted from the Company’s general corporate use and is being reported in other non-current assets in the consolidated statements of financial condition.
Treasury Stock
During the first quarter of 2013, the Company’s board of directors approved a Class A common share repurchase program. Under the repurchase program, Calamos Investments is authorized to repurchase up to 3 million shares of CAM’s common stock. The share repurchases are expected to occur over the next 2 years. The program was implemented primarily to manage the dilution from share issuances under the Company’s incentive compensation plan. During the three months ended March 31, 2014, Calamos Investments repurchased 1,036,615 shares of Class A common stock, at an average purchase price of $11.77 and a total cost of $12.2 million. As Calamos Investments is consolidated with CAM, the repurchased shares are reported as treasury shares.  As such, CAM’s 22.2% ownership interest in these shares totaling $2.7 million is reported in treasury stock, with Calamos Interests’ 77.8% ownership interest in these shares totaling $9.5 million reported in non-controlling interest in the consolidated statements of financial condition. The total shares repurchased are not included in the calculation of basic and diluted earnings per share in accordance with GAAP.
During the three months ended March 31, 2014, CAM redeemed 126,850 Class A common shares from Calamos Investments for a value of $1.4 million which represents the fair value of the shares on the date of redemption. As Calamos Investments is consolidated with CAM, the impact of the distribution reflecting the non-controlling interest is $1.1 million
During the three months ended March 31, 2014, dividends on shares held by Calamos Investments totaled $153,000. The payment of these dividends increased Calamos Investments' equity resulting in a $119,000 adjustment from additional paid in capital to non-controlling interest in Calamos Investments LLC in the consolidated statement of changes in equity. This adjustment represents Calamos Interests' ownership interest in those dividend payments.
For a comprehensive disclosure of the Company's significant accounting policies, see the Company's Annual Report on Form 10-K for the year ended December 31, 2013.





10


CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


(3)Investment Securities
The Company is required to carry all investment securities it owns at fair value and record all changes in fair value in current earnings. As such, unrealized gains and losses on trading securities, as well as realized gains and losses on all investment securities, are included in investment and other income in the consolidated statements of operations. Unrealized gains and losses on available-for-sale securities are reported, net of CAM's deferred income tax, as a separate component of accumulated other comprehensive income in equity until realized.
The following table provides a summary of investment securities as of March 31, 2014 and December 31, 2013:
(in thousands)
 
 
 
 
 
 
 
 
March 31, 2014
 
Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value
Available-for-sale securities:
 
 
 
 
 
 
 
 
Funds
 
 
 
 
 
 
 
 
Equity
 
$
197,416

 
$
11,416

 
$
(768
)
 
$
208,064

Fixed income
 
29,887

 
818

 
(1
)
 
30,704

Lower-volatility equity
 
67,841

 
3,954

 
(171
)
 
71,624

Alternative
 
40,664

 
2,522

 
(3
)
 
43,183

Other
 
1,432

 
196

 
(1
)
 
1,627

Total Funds
 
337,240

 
18,906

 
(944
)
 
355,202

Common stock
 
134

 
65

 

 
199

Total available-for-sale securities
 
$
337,374

 
$
18,971

 
$
(944
)
 
$
355,401

Trading securities:
 
 

 
 

 
 

 
 

Funds
 
 
 
 
 
 
 
 
Equity
 
$
4,539

 
$
316

 
$

 
$
4,855

Total investment securities
 
 

 
 

 
 

 
$
360,256

(in thousands)
 
 
 
 
 
 
 
 
December 31, 2013
 
Cost
 
Unrealized Gains
 
Unrealized Losses
 
Fair Value
Available-for-sale securities:
 
 
 
 
 
 
 
 
Funds
 
 
 
 
 
 
 
 
Equity
 
$
211,970

 
$
11,997

 
$
(679
)
 
$
223,288

Fixed income
 
98,834

 
430

 
(4
)
 
99,260

Lower-volatility equity
 
67,836

 
2,385

 
(15
)
 
70,206

Alternative
 
35,436

 
2,000

 

 
37,436

Other
 
1,414

 
133

 
(2
)
 
1,545

Total Funds
 
415,490

 
16,945

 
(700
)
 
431,735

Common stock
 
133

 
80

 

 
$
213

Total available-for-sale securities
 
$
415,623

 
$
17,025

 
$
(700
)
 
$
431,948

Trading securities:
 
 

 
 

 
 

 
 

Funds
 
 
 
 
 
 
 
 
Equity
 
$
48,539

 
$
320

 
$
(8,566
)
 
$
40,293

Total investment securities
 
 

 
 

 
 

 
$
472,241

Of the $360.1 million and $472.0 million investments in Funds at March 31, 2014 and December 31, 2013, respectively, $360.1 million and $427.6 million, respectively, were invested in affiliated funds and accounts that are separately managed.
The aggregate fair value of available-for-sale investment securities that were in an unrealized loss position at March 31, 2014 and December 31, 2013 was $50.3 million and $14.0 million, respectively. As of March 31, 2014 and December 31, 2013, the Company had no investment securities that had been in a continuous loss position for 12 months or longer.


11


CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


As of March 31, 2014 and December 31, 2013, the Company believes that the $900,000 and $700,000, respectively, in unrealized losses on certain available-for-sale securities are only temporary in nature, as these losses are a result of short-term declines in the net asset value of the funds. Further, the Company has the intent and ability to hold these securities for a period of time sufficient to allow for recovery of the market value. The Company also considered current market conditions and the nature of the securities held when determining the recoverability of those securities' market value. As of March 31, 2014, no other-than-temporary impairment charge was recorded.
The following table provides a summary of changes in investment securities for the three months ended March 31, 2014 and 2013:
 
Three Months Ended March 31,
(in thousands)
2014
 
2013
Available-for-sale securities:
 
 
 
Proceeds from sales                                                                  
$
87,263

 
$
54,996

Gross realized gains on sales                                                                  
$
454

 
$
1,420

Trading securities:
 

 
 

Change in unrealized gains/losses                                                            
$
8,562

 
$
366

The table below summarizes the tax provision (benefit) on unrealized gains and gains reclassified out of accumulated other comprehensive income on available-for-sale securities for the three months ended March 31, 2014 and 2013:
 
Three Months Ended 
 March 31, 2014
 
Three Months Ended 
 March 31, 2013
(in thousands)
Before-Tax Amount
 
Tax Provision (Benefit)
 
After-Tax
Amount
 
Before-Tax Amount
 
Tax Provision (Benefit)
 
After-Tax
Amount
Available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
Changes in unrealized gains
$
2,518

 
$
336

 
$
2,182

 
$
7,750

 
$
634

 
$
7,116

Reclassification adjustment for realized gains included in income
(816
)
 
(67
)
 
(749
)
 
(1,423
)
 
(117
)
 
(1,306
)
Other comprehensive income
$
1,702

 
$
269

 
$
1,433

 
$
6,327

 
$
517

 
$
5,810

Reclassification of realized gains out of accumulated other comprehensive income are reported in non-operating income, in investment income, in the consolidated statement of operations.  See Note 9, Non-Operating Income.
(4)Derivative Assets and Liabilities
The Company used exchange-traded option contracts as an economic hedge of price changes in its investment securities portfolio in order to reduce the volatility equity markets have on the fair value of the Company's corporate investment portfolio and to assist in compliance with its debt covenants during the first quarter of 2013. The Company's investment securities, totaled $358.4 million at March 31, 2013, consisting primarily of positions in several Calamos equity and fixed income funds. The equity price risk in the investment portfolio was hedged using exchange-traded option contracts that correlate most closely with the change in value of the portfolio being hedged. The use of these option contracts was part of a hedge overlay strategy to minimize downside risk in the hedged portfolio. The Company may adjust its hedge position in response to movement and volatility in prices and changes in the composition of the hedged portfolio, but generally is not actively buying and selling contracts.
The Company has elected not to offset its derivative assets with its derivative liabilities even if a right of offset exists. When applicable, the fair value of option contracts is reported on a gross basis in derivative assets and derivative liabilities in the consolidated statements of financial condition. Net gains and losses on these contracts are reported in investment and other income in the consolidated statements of operations. The Company had no derivative instruments outstanding as of March 31, 2014. The Company recorded a net loss of $1.7 million for the quarter ended March 31, 2013. The Company used these derivatives for risk management purposes but has not designated the contracts as hedges for accounting purposes.

12


CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


(5)Partnership Investments
Presented below are the underlying assets and liabilities of the partnerships that the Company reports on a net consolidated basis, as well as partnership investments that the Company accounts for under the equity method. These investments are presented collectively as partnership investments, net in its consolidated statements of financial condition as of March 31, 2014 and December 31, 2013.
(in thousands)
March 31, 2014
 
December 31, 2013
Consolidated partnerships:
 
 
 
Securities owned                                                                                     
$
30,430

 
$
29,149

Cash and cash equivalents                                                                                     
15,087

 
12,208

Receivables for securities sold
1,332

 
1,076

Other current assets                                                                                     

 
30

Exchange-traded option contracts                                                                                     
23

 
94

Securities sold not yet purchased                                                                                     
(8,957
)
 
(10,670
)
Payables for securities purchased
(2,317
)
 
(1,576
)
Accrued expenses and other current liabilities                                                                                     
(141
)
 
(76
)
Total                                                                                  
35,457

 
30,235

Equity method investment in partnerships                                                                                        
3,866

 
3,812

Partnership investments, net                                                                                    
$
39,323

 
$
34,047

(6)Fair Value Measurements
The Company utilizes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows: Level 1 — observable inputs such as quoted prices for identical assets and liabilities in active markets; Level 2 — inputs, other than the quoted prices in active markets, that are observable either directly or indirectly (including quoted prices of similar securities, interest rates, credit risk, fair value adjustments to quoted foreign securities, etc.); and Level 3 — unobservable inputs in which there is little or no market data, and require the reporting entity to develop its own assumptions. For each period presented, the Company did not have any assets or liabilities measured at fair value using Level 3 measurements. Transfers between levels are measured at the end of the reporting period. The Company had no transfers between levels during the period.
Investments are presented in the consolidated financial statements at fair value in accordance with GAAP. Investments in open-end funds are stated at fair value based on end of day published net asset values of shares owned by the Company. The fair value of investments in open-end funds was $333.4 million and $450.4 million at the end of March 31, 2014 and December 31, 2013, respectively. There are no unfunded commitments related to these investments. These investments may be redeemed daily with a redemption notice period of up to seven days. Investments in securities traded on a national securities exchange are stated at the last reported sales price on the day of valuation. Other securities, including derivatives, traded in the over-the-counter market and listed securities for which no sale was reported on that date are stated at the last quoted bid price. However, short sales positions and call options written are reported at the last quoted asked price. Convertible bonds, fixed income securities and other securities for which quotations are not readily available are valued at fair value based on observable inputs such as market prices for similar instruments as validated by third party pricing agencies and the Company’s prime broker.
The following tables provide the hierarchy of inputs used to derive the fair value of the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2014 and December 31, 2013, respectively. Foreign currency contracts are carried in the Company's partnership investments and are presented on a net basis where the right of offset exists, and had no impact for either period presented.

13


CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


 
 
 
 
Fair Value Measurements Using
(in thousands)
 
Description
 
March 31, 2014
 
Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)
 
Significant Other Observable Inputs (Level 2)
Cash and cash equivalents
 
 
 
 
 
 
Money market funds
 
$
21,253

 
$
21,253

 
$

Investment securities (Note 3)
 
 

 
 

 
 

Funds
 
 

 
 

 
 

Equity
 
212,919

 
212,919

 

Fixed income
 
30,704

 
30,704

 

Lower-volatility equity
 
71,624

 
71,624

 

Alternative
 
43,183

 
43,183

 
 
Other
 
1,627

 
1,627

 

Total Funds
 
360,057

 
360,057

 

Common stock
 
199

 
199

 

Investment securities
 
360,256

 
360,256

 

Securities and derivatives owned by partnership (Note 5)
 
 
 
 
 
 
Common stocks
 
30,430

 
30,430

 

Exchange-traded put option contracts
 
59

 
59

 

 
 
30,489

 
30,489

 

Securities sold but not yet purchased by partnership (Note 5)
 
 

 
 

 
 

Common stocks
 
(8,590
)
 
(8,590
)
 

Exchange-traded funds
 
(367
)
 
(367
)
 
 
Exchange-traded call option contracts
 
(36
)
 
(36
)
 

 
 
(8,993
)
 
(8,993
)
 

Total                                                        
 
$
403,005

 
$
403,005

 
$


14


CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


 
 
 
 
Fair Value Measurements Using
(in thousands)
 
Description
 
December 31, 2013
 
Quoted Prices in Active Markets for Identical Assets
and Liabilities
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
Cash and cash equivalents
 
 
 
 
 
 
Money market funds
 
$
1,752

 
$
1,752

 
$

Investment securities (Note 3)
 
 
 
 
 
 
Funds
 
 
 
 
 
 
Equity
 
263,581

 
263,581

 

Fixed income
 
99,260

 
99,260

 

Lower-volatility equity
 
70,206

 
70,206

 

Alternative
 
37,436

 
37,436

 
 
Other
 
1,545

 
1,545

 

Total Funds
 
472,028

 
472,028

 

Common stock
 
213

 
213

 

Investment securities
 
472,241

 
472,241

 

Securities and derivatives owned by partnership (Note 5)
 
 
 
 
 
 
Common stocks
 
29,149

 
29,149

 

Exchange-traded put option contracts
 
150

 
150

 

 
 
29,299

 
29,299

 

Securities sold but not yet purchased by partnership (Note 5)
 
 
 
 
 


Common stocks
 
(10,185
)
 
(10,185
)
 

Exchange-traded funds
 
(485
)
 
(485
)
 

Exchange-traded call option contracts
 
(56
)
 
(56
)
 

 
 
(10,726
)
 
(10,726
)
 

Total
 
$
492,566

 
$
492,566

 
$

The fair value of the Company’s long-term debt, including the current portion of long-term debt, which has a total carrying value of $92.1 million at March 31, 2014 and December 31, 2013, was $102.2 million and $104.4 million, respectively. The fair value of the Company’s payment obligation, which has a carrying value of $1.7 million and $3.4 million at March 31, 2014 and December 31, 2013, was $1.6 million and $3.3 million, respectively. This obligation is associated with the Company's purchase of Black Capital in 2012, reported in other non-current liabilities in the consolidated statements of financial condition. These fair value estimates are calculated using discounted cash flows based on the Company’s incremental borrowing rates and market inputs for similar bonds for the debt, and the treasury yield curve plus market spread for the payment obligation. The fair values of the debt and payment obligation are based on Level 2 inputs within the fair value hierarchy.
The carrying value of all other financial instruments approximates fair value due to the short maturities of these financial instruments.
(7)Loans Payable
The Company has access to margin loans for the settlement of call options, as well as an additional source of liquidity. The interest rate that can be charged on margin loans is 2.5% per annum, based on the brokerage firm’s lending rate. These loans are due on demand. The Company can borrow up to 70% of its marginable securities on deposit with its brokerage firm. The Company had no margin loan balances outstanding at March 31, 2014 and December 31, 2013.






15


CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


(8)Stock Based Compensation
Under the Company’s incentive compensation plan, certain employees of the Company receive stock based compensation comprised of stock options and restricted stock units (“RSUs”). Historically, RSUs have been settled with newly issued shares so that no cash was used by the Company to settle awards; however, the Company may also use treasury shares upon the exercise of stock options and upon conversion of RSUs. The Company’s Annual Report on Form 10-K for the year ended December 31, 2013 provides details of this plan and its provisions.
During the three months ended March 31, 2014, the Company granted 834,949 RSUs and there were 11,051 RSUs forfeited. During the same period, the Company granted no stock options and there were 122,711 stock options forfeited.
During the three months ended March 31, 2014, 157,006 RSUs vested with 30,156 units withheld for taxes and 126,850 RSUs converted into an equal number of shares of CAM’s Class A common stock. The total intrinsic value and the fair value of the converted shares was $1.4 million. The total tax benefit realized in connection with the vesting of the RSUs during the three months ended March 31, 2014 was $170,000, as the Company receives tax benefits based upon the portion of Calamos Investments’ expense that it recognizes.
During the three months ended March 31, 2014 and 2013, compensation expense recorded in connection with the RSUs and stock options was $2.0 million and $1.5 million, respectively, of which $455,000 and $330,000, respectively, was credited as additional paid-in capital after giving effect to the non-controlling interests. The amount of deferred tax asset created was $168,000 and $122,000 during the three months ended March 31, 2014 and 2013, respectively. As of March 31, 2014, $24.3 million of total unrecognized compensation expense related to unvested stock option and RSU awards is expected to be recognized over a weighted-average period of 3.4 years.
(9)Non-Operating Income
Non-operating income was comprised of the following components for the three months ended March 31, 2014 and 2013:
 
Three Months Ended March 31,
(in thousands)
2014
 
2013
Interest income
$
39

 
$
87

Interest expense
(1,504
)
 
(1,506
)
Net interest expense
(1,465
)
 
(1,419
)
Investment income
857

 
2,284

Dividend income
663

 
892

Miscellaneous other income
63

 
43

Investment and other income
1,583

 
3,219

Non-operating income
$
118

 
$
1,800

(10)Income Taxes
Calamos Investments is subject to certain income-based state taxes; therefore, income taxes reflect not only the portion attributed to CAM stockholders but also a portion of income taxes attributable to non-controlling interests.
 
Three Months Ended 
 March 31,
 
2014
 
2013
(in thousands)
 
 
 
Income tax provision
$
1,362

 
$
1,976

Income tax provision attributable to non-controlling interest in Calamos Investments
(45
)
 
(31
)
Income tax provision attributable to CAM
1,317

 
1,945

Net income attributable to CAM
2,139

 
3,234

Income before taxes attributable to CAM
$
3,456

 
$
5,179

CAM’s effective income tax rate
38.1
%
 
37.6
%

16


CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


(11)Earnings Per Share
The following table reflects the calculation of basic and diluted earnings per share:
 
Three Months Ended 
 March 31,
(in thousands, except per share amounts)
2014
 
2013
Earnings per share – basic:
 
 
 
Earnings available to common shareholders
$
2,139

 
$
3,234

Weighted average shares outstanding
19,079

 
20,301

Earnings per share – basic
$
0.11

 
$
0.16

Earnings per share – diluted:
 

 
 

Earnings available to common shareholders
$
2,139

 
$
3,234

Weighted average shares outstanding
19,079

 
20,301

Dilutive impact of restricted stock units
727

 
536

Weighted average shares outstanding
19,806

 
20,837

Earnings per share – diluted
$
0.11

 
$
0.16

When dilutive, diluted shares outstanding are calculated (a) assuming that Calamos Interests exchanged all of their ownership interest in Calamos Investments and their CAM Class B common stock for shares of CAM’s Class A common stock (the "Exchange") and (b) including the effect of outstanding dilutive equity incentive compensation awards. As of March 31, 2014, and 2013, the impact of the Exchange was anti-dilutive and, therefore, excluded from the calculation of diluted earnings per share.
The Company uses the treasury stock method to reflect the dilutive effect of unvested RSUs and unexercised stock options on diluted earnings per share. Under the treasury stock method, if the average market price of common stock increases above the option’s exercise price, the proceeds that would be assumed to be realized from the exercise of the option would be used to acquire outstanding shares of common stock. However, the awards may be anti-dilutive even when the market price of the underlying stock exceeds the option’s exercise price. This result is possible because compensation cost attributed to future services and not yet recognized is included as a component of the assumed proceeds upon exercise. The dilutive effect of such options and RSUs would increase the weighted average number of shares used in the calculation of diluted earnings per share.
The Company amended its certificate of incorporation requiring that the Exchange be based on a fair value approach (details of the amendment are set forth in the Company’s Schedule 14C filed with the Securities and Exchange Commission on January 12, 2009). The amendment results in the same or fewer shares of Class A common stock being issuable at the time of the Exchange.
The shares issuable upon the Exchange as presented are estimated solely on the formula as described in Schedule 14C that does not necessarily reflect all inputs used in a fair valuation. It is critical to note that this formula does not incorporate certain economic factors and as such, in the event of an actual Exchange, the majority of the Company’s independent directors may determine the fair market value of CAM’s net assets and its ownership in Calamos Investments. For example, premiums and/or discounts for control and marketability as well as a different discount rate for future cash flows may be applied. Therefore, the directors’ valuation may result in the actual number of shares being materially different from the shares presented. Further, based upon currently available information, the Company believes it is unlikely that any Exchange would transpire without a fair market valuation of CAM’s net assets and possibly an agreement by Calamos Interests to Exchange, based upon that fair market valuation.
The following table shows the number of shares which were excluded from the computation of diluted earnings per share as they were anti-dilutive:

17


CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)


 
Three Months Ended March 31,
 
2014
 
2013
Shares of Class A common stock issuable upon an Exchange of Calamos Interests’ ownership in Calamos Investments*
31,167,271

 
39,102,589

Stock options
1,978,857

 
2,187,005

Total
33,146,128

 
41,289,594

* Number of shares calculated with the value of Calamos Investments LLC determined by using the closing price of our shares as of March 31, 2014 ($12.93) and March 31, 2013 ($11.77) as well as assuming said closing prices fully reflect all of CAM's assets; including the application of a 12% discount rate to certain deferred tax assets at each of March 31, 2014 and 2013. The value of Calamos Investments is then multiplied by Calamos Interests' percentage ownership in Calamos Investments LLC, with the result divided by the applicable period-end closing price. See Note 2, Summary of Significant Accounting Policies - Principles of Consolidation, for a description of certain assets owned by CAM.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
We are a firm of 358 full-time associates that primarily provides investment advisory services to institutions and individuals, managing and servicing $26.1 billion and $28.3 billion in assets under management as of March 31, 2014 and 2013, respectively. Assets under management do not include assets under advisement of $791 million and $939 million as of March 31, 2014 and 2013, respectively, for which the Company provides model portfolio design and oversight.
Our operating results fluctuate primarily due to changes in the total value and composition of our assets under management. The value and composition of our assets under management are, and will continue to be, influenced by a variety of factors including: purchases and redemptions of shares of open-end funds; net inflows into and withdrawals from separate accounts that we manage; fluctuations in the financial markets around the world that result in appreciation or depreciation of assets under management; and the number and types of our investment strategies and products.
We market our investment strategies to our clients through a variety of products designed to suit their investment needs. We currently categorize the portfolios that we manage within four investment product types captured in our funds and separate accounts. The following table lists our assets under management by product as of March 31, 2014 and 2013.
 
March 31,
(in millions)
2014
 
2013
Funds
 
 
 
Open-end funds
$
16,009

 
$
16,825

Closed-end funds
6,337

 
5,734

   Total funds
22,346

 
22,559

Separate Accounts
 

 
 

Institutional accounts
2,757

 
4,646

Managed accounts
1,044

 
1,120

   Total separate accounts
3,801

 
5,766

Total assets under management
$
26,147

 
$
28,325

Our revenues are substantially comprised of investment management fees earned under contracts with funds and separate accounts that we manage or service. Our revenues are also comprised of distribution and underwriting fees, including asset-based distribution and/or service fees received pursuant to Rule 12b-1 plans. Investment management fees and distribution and underwriting fees may fluctuate based on a number of factors including: the total value and composition of our assets under management; market appreciation and depreciation on investments; the level of net inflows and outflows, which represent the sum of new and existing client funding, withdrawals and terminations; and purchases and redemptions of open-end fund shares. The mix of assets under management among our investment products impacts our revenues as our fee schedules vary by product.
Our largest operating expenses are typically related to: employee compensation and benefits expenses, which include salaries, incentive compensation and related benefits costs; distribution expenses, which include open-end funds distribution cost (such as Rule 12b-1 payments) and amortization of deferred sales commissions; and marketing and sales promotion expenses, which include

18



expenses necessary to market products offered by us. Operating expenses may fluctuate due to a number of factors including variations in staffing and compensation, changes in distribution expense as a result of fluctuations in open-end fund net sales and market appreciation or depreciation, and marketing-related expenses that include supplemental distribution payments.
Operating Results
Three Months Ended March 31, 2014 Compared with Three Months Ended March 31, 2013
Assets Under Management
Assets under management decreased by $2.2 billion, or 8%, to $26.1 billion as of March 31, 2014 from $28.3 billion as of March 31, 2013. Our assets under management consisted of 85% funds and 15% separate accounts as of March 31, 2014 and 80% funds and 20% separate accounts as of March 31, 2013.
 
Three Months Ended March 31,
 
 
 
 
 
Change
(in millions)
2014
 
2013
 
Amount
 
Percent
Open-end Funds
 
 
 
 
 
 
 
Beginning assets under management
$
16,128

 
$
17,829

 
$
(1,701
)
 
(10)%
Sales
1,213

 
1,131

 
82

 
7
Redemptions
(1,416
)
 
(2,861
)
 
1,445

 
(51)
Market appreciation
84

 
726

 
(642
)
 
(88)
   Ending assets under management
16,009

 
16,825

 
(816
)
 
(5)
   Average assets under management                                                   
16,017

 
17,485

 
(1,468
)
 
(8)
Closed-end Funds
 
 
 
 
 
 
 
Beginning assets under management
6,266

 
5,500

 
766

 
14
Sales
8

 
86

 
(78
)
 
(91)
Market appreciation
63

 
148

 
(85
)
 
(57)
   Ending assets under management
6,337

 
5,734

 
603

 
11
   Average assets under management                                                   
6,290

 
5,678

 
612

 
11
Institutional Accounts
 

 
 

 
 

 
 
Beginning assets under management
3,081

 
5,191

 
(2,110
)
 
(41)
Sales
93

 
103

 
(10
)
 
(10)
Redemptions
(452
)
 
(863
)
 
411

 
(48)
Market appreciation
35

 
215

 
(180
)
 
(84)
   Ending assets under management
2,757

 
4,646

 
(1,889
)
 
(41)
   Average assets under management                                                   
2,883

 
4,921

 
(2,038
)
 
(41)
Managed Accounts
 

 
 

 
 

 
 
Beginning assets under management
1,068

 
1,135

 
(67
)
 
(6)
Sales
19

 
49

 
(30
)
 
(61)
Redemptions
(39
)
 
(112
)
 
73

 
(65)
Market appreciation (depreciation)
(4
)
 
48

 
(52
)
 
*
   Ending assets under management
1,044

 
1,120

 
(76
)
 
(7)
   Average assets under management                                                   
1,052

 
1,140

 
(88
)
 
(8)
Total Assets Under Management
 

 
 

 
 

 
 
Beginning assets under management
26,543

 
29,655

 
(3,112
)
 
(10)
Sales
1,333

 
1,369

 
(36
)
 
(3)
Redemptions
(1,907
)
 
(3,836
)
 
1,929

 
(50)
Market appreciation
178

 
1,137

 
(959
)
 
(84)
   Ending assets under management
$
26,147

 
$
28,325

 
$
(2,178
)
 
(8)
   Average assets under management                                                   
$
26,242

 
$
29,224

 
$
(2,982
)
 
(10)%
________________
* Not meaningful

19


Fund inflows in the first quarter of 2014 were primarily due to sales in our alternative, equity, and convertible strategies, but were not sufficient to overcome the outflows sustained from redemptions in our equity, alternative, and lower-volatility equity(1) strategies. Net redemptions in our funds were $195 million in the first quarter of 2014 and represent a favorable change of $1.4 billion from redemptions of $1.6 billion in the first quarter of 2013. Appreciation of $147 million in the first quarter of 2014 was $727 million less than market appreciation of $874 million in the first quarter of 2013.
Separate accounts, which represent managed accounts for both institutions and individuals, combined net redemptions were $379 million in the first quarter of 2014, compared with net redemptions of $823 million in the first quarter of 2013. Institutional net redemptions of $359 million were driven primarily from lower-volatility equity strategies and were an improvement of $401 million over the net redemptions in the first quarter of 2013. Institutional account appreciation of $35 million in the first quarter of 2014 was $180 million less than appreciation of $215 million in the first quarter of 2013. Managed account net redemptions of $20 million improved from net redemptions of $63 million in the first quarter of 2013 and depreciation of $4 million in the first quarter of 2014 was $52 million less than the first quarter of 2013.
(1) Lower-volatility equity strategies attempt to achieve equity-like returns with lower than equity market risk by managing a portfolio that the firm believes will exhibit less volatility over full market cycles.
Financial Overview
 
Three Months Ended March 31,
 
 
 
 
 
Change
 
2014
 
2013
 
Amount
 
Percent
(in thousands, except margin)
 
 
 
 
 
 
 
Operating income
$
14,076

 
$
22,115

 
$
(8,039
)
 
(36
)%
Operating margin
22.0
%
 
31.2
%
 
(9.2
)%
 
(29
)%
Net income attributable to Calamos Asset Management, Inc.
$
2,139

 
$
3,234

 
$
(1,095
)
 
(34
)%
Operating income for the first quarter of 2014 of $14.1 million decreased by $8.0 million, or 36%, from the first quarter of 2013. Operating margin for the first quarter of 2014 decreased to 22.0% from 31.2% from the first quarter of 2013. The decrease in both operating income and operating margin is attributable to the decrease in investment management fees.
In order to grow assets under management, we engage in distribution and underwriting activities, principally with respect to our family of open-end funds. When analyzing our business, we consider the result of these distribution activities on a net revenue basis as they are typically a result of a single open-end fund share purchase. Generally accepted accounting principles in the United States of America (“GAAP”) requires that we present these activities on a gross revenue basis, thus resulting in a reduction to our overall operating margin, as the margin on distribution activities is lower than the margins on the remainder of our business. While we do not adjust our margin for these activities on a net revenue basis, we believe the margin table below is useful for understanding the impact of distribution activities on our margin.
The following table summarizes the net distribution fee margin for the first quarter ended March 31, 2014 and 2013:
 
Three Months Ended March 31,
 
2014
 
2013
(in thousands)
 
 
 
Distribution and underwriting fees
$
12,989

 
$
14,328

Distribution expenses
(12,651
)
 
(13,931
)
Net distribution fees
$
338

 
$
397

Net distribution fee margin
3
%
 
3
%
Net distribution fee margin varies by share class because each share class has different distribution and underwriting activities, which are described in our 2013 Annual Report on Form 10-K. Distribution fee revenues and the majority of distribution expenses vary with average open-end fund assets, while deferred sales commissions included in distribution expenses are typically amortized on a straight-line basis with adjustments made upon redemption of existing assets.



20


Revenues
Total revenues decreased by $7.0 million, or 10%, to $63.9 million for the first quarter of 2014 from $71.0 million for the first quarter of 2013. The decrease was primarily due to lower investment management fees.
 
Three Months Ended March 31,
 
 
 
Change
(in thousands)
2014
 
2013
 
Amount
 
Percent
Investment management fees                                               
$
50,278

 
$
55,942

 
$
(5,664
)
 
(10
)%
Distribution and underwriting fees
12,989

 
14,328

 
(1,339
)
 
(9
)%
Other                                               
663

 
683

 
(20
)
 
(3
)%
Total revenues                                             
$
63,930

 
$
70,953

 
$
(7,023
)
 
(10
)%
Investment management fees decreased by 10% in the first quarter of 2014 compared with the first quarter of 2013, which was primarily due to a $3.0 billion, or 10%, decrease in average assets under management for the same periods. Investment management fees from open-end funds decreased by 10% to $30.2 million for the first quarter of 2014, from $33.7 million for the first quarter of 2013, driven by an 8% decrease in average open-end fund assets. Investment management fees from our closed-end funds increased by 11% to $14.2 million for the first quarter of 2014, from $12.8 million for the first quarter of 2013, due to an 11% increase in average closed-end fund assets. Investment management fees from our separately managed accounts decreased by 40% to $5.3 million for the first quarter of 2014, from $8.8 million for the first quarter of 2013, due to a 35% decrease in average separately managed accounts assets under management. Investment management fees that we earned as a percentage of average assets under management for the first quarter of 2014 and 2013 were 0.77%. Investment management fees from assets under advisement for which we provide model portfolio design and oversight were $609,000 for the first quarter of 2014, compared with $693,000 for the first quarter of 2013. Investment management fees that we earned as a percentage of assets under advisement for the first quarter of 2014 and 2013 were 0.30%.
Distribution and underwriting fees decreased by 9%, or $1.3 million to $13.0 million for the first quarter of 2014, primarily due to a decrease of 8% in average open-end fund assets across most share classes. The decrease in average open-end fund assets when compared with the prior year is largely due to net redemptions in our equity and lower-volatility equity strategies.
Operating Expenses
Operating expenses increased by 2% to $49.9 million for the first quarter of 2014 from the first quarter of 2013. This change reflects increases in employee compensation and benefits expenses, general and administrative expenses, and marketing and sales promotion expenses, partially offset by a decrease in distribution expenses.
 
Three Months Ended March 31,
 
 
 
Change
(in thousands)
2014
 
2013
 
Amount
 
Percent
Employee compensation and benefits
$
23,996

 
$
22,565

 
$
1,431

 
6
 %
Distribution expenses                                                          
12,651

 
13,931

 
(1,280
)
 
(9
)%
Marketing and sales promotion                                                          
3,705

 
3,389

 
316

 
9
 %
General and administrative                                                          
9,502

 
8,953

 
549

 
6
 %
Total operating expenses                                                        
$
49,854

 
$
48,838

 
$
1,016

 
2
 %
Employee compensation and benefits expenses increased by $1.4 million, or 6% for the first quarter of 2014, when compared with the first quarter of 2013, due to an increase in the corporate bonus accrual and equity compensation expenses. Corporate bonus increased primarily due to increases in the number of associates we employ in our investment team. The increase in equity compensation expenses in the first quarter of 2014 is primarily a result of a first quarter 2013 reversal of expenses due to forfeitures.

Distribution expenses decreased by $1.3 million, or 9% for the first quarter of 2014, when compared with the first quarter of 2013. The decreases were primarily due to a reduction in average assets for open-end funds of 8%, which was across most share classes, as well as a decrease in amortization of deferred sales commissions of $76,000.


21


Marketing and sales promotion expenses increased by $316,000 for the first quarter of 2014, when compared with the first quarter of 2013, largely the result of a fee rate increase for distribution intermediaries.
General and administrative expenses increased by $549,000 for the first quarter of 2014, when compared with the first quarter of 2013. Many offsetting factors gave rise to the net increases in expenses during the quarter; however, the main driver was an increase in travel expenses related to global business development.
Non-Operating Activities, Net of Redeemable Non-controlling Interest in Partnership Investments
Non-operating income, net of redeemable non-controlling interest in partnership investments decreased by $1.0 million to $55,000 for the first quarter of 2014, when compared with the first quarter of 2013. The decrease in the first quarter of 2014 was driven by a decrease in investment income of $1.4 million when compared with the first quarter of 2013. The decrease in investment income was mainly due to a decrease in realized gains generated from tax harvesting activities.
The following table summarizes our non-operating activities, net of redeemable non-controlling interest in partnership investments for the first quarter ended March 31, 2014 and 2013:
 
Three Months Ended March 31,
(in thousands)
2014
 
2013
 
Change
Interest income
$
39

 
$
87

 
$
(48
)
Interest expense
(1,504
)
 
(1,506
)
 
2

Net interest expense
(1,465
)
 
(1,419
)
 
(46
)
Investment income
857

 
2,284

 
(1,427
)
Dividend income
663

 
892

 
(229
)
Miscellaneous other income
63

 
43

 
20

Investment and other income
1,583

 
3,219

 
(1,636
)
Non-operating income, GAAP basis
118

 
1,800

 
(1,682
)
Net income attributable to redeemable non-controlling
 interest in partnership investments
(63
)
 
(708
)
 
645

Non-operating income, net of redeemable non-controlling
  interest in partnership investments, non-GAAP basis (1)                                                           
$
55

 
$
1,092

 
$
(1,037
)
 
(1)
Non-operating income, net of redeemable non-controlling interest in partnership investments is a non-GAAP financial measure. Management believes this measure provides comparability of this information among reporting periods and is an effective measure for reviewing the Company’s non-operating contribution to its results.
The following table provides a summary of the returns that we generated from our corporate investment portfolio. This table combines the investment and dividend income as reported in our consolidated statement of operations with the change in fair value of our investment securities that are recorded in accumulated other comprehensive income, a component of equity, for the first quarter ended March 31, 2014:
 
Three Months Ended 
 March 31, 2014
 
 
 
(in thousands)
Non-Operating Income, net
 
Change in Accumulated Other Comprehensive Income
 
Total
Funds and common stock                                                       
$
581

 
$
1,702

 
$
2,283

Partnership investments
276

 

 
276

Investment income                                                     
857

 
1,702

 
2,559

Dividend income
663

 
 

 
663

Redeemable non-controlling interest in partnership investments
(63
)
 
 

 
(63
)
Investment portfolio results                                                     
$
1,457

 
 

 
$
3,159

Less: Non-controlling interest in Calamos Investments LLC
 

 
(976
)
 
 

Deferred income taxes                                                     
 

 
(269
)
 
 

Change in accumulated other comprehensive income                                                  
 

 
$
457

 
 


22


Our investment portfolio returned $3.2 million, or 0.8%, in the first quarter of 2014. These results primarily reflect realized and unrealized gains from investment securities in the corporate investment portfolio.
Income Tax Provision
Calamos Investments LLC (“Calamos Investments”) is subject to certain income-based state taxes; therefore, income taxes reflect not only the portion attributed to us but also income taxes attributable to non-controlling interests. CAM's effective income tax rate for the first quarter of 2014 was approximately 38.1%, compared with 37.6% for the first quarter of 2013.
As of March 31, 2014, the net deferred tax asset related to the capital loss carryforwards that expire in 2014 was $2.1 million and the Company's valuation allowance on this deferred tax asset was $2.1 million.
Net income
Net income attributable to CAM was $2.1 million for the first quarter of 2014, compared with $3.2 million for the first quarter of 2013. Non-GAAP net income attributable to CAM was $3.9 million for the first quarter of 2014, compared with $5.1 million for the first quarter of 2013. See "Supplemental Non-GAAP Financial Measures" below for descriptions of non-GAAP financial measures and a reconciliation of non-GAAP financial measure to GAAP financial measures.
Supplemental Non-GAAP Financial Measures
We provide investors with certain adjusted, non-GAAP financial measures including non-GAAP net income attributable to CAM and non-GAAP diluted earnings per share. These non-GAAP financial measures are provided to supplement the consolidated financial statements presented on a GAAP basis. These non-GAAP financial measures adjust GAAP financial measures to include the tax benefit from the amortization of deferred taxes on intangible assets, and to exclude CAM’s non-operating income, net of taxes. We believe these adjustments are appropriate to enhance an overall understanding of our operating financial performance, as well as to facilitate comparisons with our historical earnings results. These adjustments to our GAAP results are made with the intent of providing investors a more complete understanding of our underlying earnings results and trends and our marketplace performance. In addition, these non-GAAP financial measures are among the primary indicators management uses as a basis of managing our business.
The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. Investors should review the reconciliations of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in the table below:
 
Three Months Ended 
 March 31,
 
2014
 
2013
(in thousands, except per share data)
 
 
 
GAAP net income attributable to CAM                                                                            
$
2,139

 
$
3,234

Adjustments:
 
 
 
Deferred tax amortization on intangible assets
1,979

 
1,979

Non-operating income, net of taxes                                                                       
(205
)
 
(152
)
Non-GAAP net income attributable to CAM                                                                            
$
3,913

 
$
5,061

Diluted - Weighted average shares outstanding                                                                            
19,805,828

 
20,836,996

Diluted earnings per share                                                                            
$
0.11

 
$
0.16

Non-GAAP diluted earnings per share                                                                            
$
0.20

 
$
0.24

Non-GAAP net income attributable to CAM is calculated by adjusting the following items from GAAP net income attributable to CAM:
(i)
amortization of deferred taxes on intangible assets associated with the election under section 754 of the Internal Revenue Code of 1986, as amended (Section 754 election); and
(ii)
CAM’s non-operating income, net of taxes.


23


Non-GAAP diluted earnings per share is calculated by dividing Non-GAAP net income attributable to CAM by diluted weighted average shares outstanding.
The deferred tax assets from the Section 754 election allows for a quarterly reduction of $2.0 million in future income taxes owed by us through 2019, to the extent that a tax payable exists during the quarter. As a result, this cash savings will accrue solely for the benefit of the shareholders of CAM’s common stock. We believe that adjusting this item from the calculation of the above non-GAAP items can be a useful measure in allowing investors to see our performance. Non-operating income is excluded from the above non-GAAP items as it can distort comparisons between periods. As noted above, we believe that measures excluding these items are useful in analyzing operating trends and allows for more comparability between periods, which may be useful to investors.
We believe that non-GAAP net income attributable to CAM and non-GAAP diluted earnings per share are useful measures of performance and may be useful to investors, because they provide measures of our core business activities adjusting for items that are non-cash and costs that may distort comparisons between periods. These measures are provided in addition to our net income attributable to CAM and diluted earnings per share calculated under GAAP, but are not substitutes for those calculations.
Liquidity and Capital Resources
We manage our liquidity position to ensure adequate resources are available to fund ongoing operations of the business, provide seed capital for new funds, maintain a strong investment-grade credit rating, provide conservative levels of capital for the Company’s regulated subsidiaries, fund our stock repurchase program and invest in other corporate strategic initiatives. Our principal sources of liquidity are cash flows from operating activities and our corporate investment portfolio, which is comprised of cash and cash equivalents, investment securities, derivatives and partnership investments. Investment securities are principally comprised of Company-sponsored funds. In addition, the individual securities held within our partnership investments are typically highly liquid.
Our working capital requirements historically have been met through cash generated by operations. We believe cash generated from operations will be sufficient over the foreseeable future to meet our working capital requirements with respect to the foregoing activities, as well as to support future growth. Further, we expect that cash on hand and through cash generated by operations will be sufficient to meet our liquidity needs.
The following table summarizes our principal sources of liquidity as of March 31, 2014 and December 31, 2013:
 (in thousands)
March 31, 2014
 
December 31, 2013
 
Increase
(Decrease)
Cash and cash equivalents
$
81,335

 
$
39,078

 
$
42,257

Investment securities
360,256

 
472,241

 
(111,985
)
Partnership investments, net of redeemable non-controlling interests
31,709

 
26,496

 
5,213

Total corporate investment portfolio
$
473,300

 
$
537,815

 
$
(64,515
)
Calamos Investments is the borrower of our $92.1 million in outstanding debt, including both current and long-term portions. Calamos Investments was in compliance with all financial covenants as of March 31, 2014 and December 31, 2013. Calamos Investments currently has an investment-grade BBB+ rating from Standard & Poor’s.
The following is a summary of covenant compliance as of March 31, 2014 with the terms and covenants having the same meanings set forth under our amended note purchase agreements:
Covenant
 
March 31, 2014
EBITDA/interest expense - not less than 3.0
 
13.33

Debt/EBITDA - not more than 2.75
 
1.15

Investment coverage ratio - not less than 1.175
 
4.14

Net worth - not less than $160 million
 
$302.3 million





24


The following table summarizes key data relating to our liquidity and capital resources:
(in thousands)
March 31, 2014
 
December 31, 2013
Statements of financial condition data:
 
 
 
Cash and cash equivalents
$
81,335

 
$
39,078

Receivables
21,264

 
22,112

Investment securities
360,256

 
472,241

Partnership investments, net of redeemable non-controlling interests
31,709

 
26,496

Deferred tax assets, net
44,458

 
46,740

Long-term debt, including current portion
92,115

 
92,115

The deferred tax assets above include an annual reduction of $7.9 million in future income taxes owed by us through 2019. This reduction results from our election under Section 754 of the Internal Revenue Code, whereby we stepped up the tax basis in certain intangible assets to their fair market value. These assets are amortized over fifteen years on CAM’s tax return. As a result, this cash savings will accrue solely for the benefit of the shareholders of our common stock.
Cash flows for the first quarter ended March 31, 2014 and 2013 are shown below.
 
March 31,
(in thousands)
2014
 
2013
Cash flow data:
 
 
 
Net cash (used in) provided by operating activities
$
(1,015
)
 
$
7,923

Net cash provided by investing activities
108,949

 
16,342

Net cash used in financing activities
(65,677
)
 
(25,672
)
Net cash used in operating activities totaled $1.0 million for the first quarter ended March 31, 2014. These net cash outflows are primarily attributable to staff, distribution, and other operating expenses, partially offset by investment management and distribution and underwriting fees generated by core business activities.
Net cash provided by investing activities totaled $108.9 million for the first quarter ended March 31, 2014. The net cash provided by investing activities primarily represents net cash inflows as a result of proceeds from sales of investments of $119.9 million partially offset by cash outflows of $10.0 million of seed capital to help expand our product offering.
Net cash used in financing activities totaled $65.7 million for the first quarter ended March 31, 2014, largely represents pro rata equity and income tax distributions paid by Calamos Investments to our non-controlling interests of $51.0 million. Net cash used in financing activities was also due to Calamos Investments' repurchase of $12.2 million in Class A common stock as a result of our stock repurchase program, and cash dividends paid to common stockholders of $2.4 million. Finally, we expect cash flows from financing activities to change with tax distributions based on the levels of income that we generate.
Critical Accounting Policies and Estimates
Our significant accounting policies are summarized in note 2 of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2013. A complete discussion of critical accounting policies is included in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2013. There were no significant changes in our significant accounting policies or critical accounting policies during the three months ended March 31, 2014.

25


Other Information - Market Capitalization
Calamos Investments LLC (“Calamos Investments”) is owned (a) 22.2% by Calamos Asset Management, Inc. (“CAM”), and (b) 77.8% by Calamos Family Partners, Inc. and John P. Calamos, Sr. (the “Calamos Interests”). As of March 31, 2014, CAM holds two groups of assets: (1) CAM’s 22.2% ownership interest in Calamos Investments and (2) primarily cash and cash equivalents, investment securities, income tax receivables, and net deferred tax assets. CAM presents the entire operations of Calamos Investments with its own in the consolidated financial statements. Calamos Interests’ 77.8% ownership in Calamos Investments is presented as a non-controlling interest in the consolidated financial statements. Prior to March 1, 2009, we added approximately 77 million shares to the Class A common shares outstanding so our number of fully diluted shares would reflect Calamos Interests’ ownership in Calamos Investments. The resulting share count of approximately 97 million provided a reasonable proxy for the number of shares used in determining the market capitalization of the fully consolidated company.
During 2009, CAM’s certificate of incorporation was amended to provide that ownership in Calamos Investments is exchangeable into Class A shares of CAM on a fair value basis rather than a one-to-one basis, as previously structured. As a result, the reported market capitalization of CAM only reflects CAM’s 22.2% interest in Calamos Investments, rather than the full value of Calamos Investments.
Forward-Looking Information
This report and other documents or statements made or filed by us contain certain 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. These forward-looking statements may include, without limitation: statements regarding proposed new products; results of operations or liquidity; projections, predictions, expectations, estimates or forecasts of our business; financial and operating results and future economic performance; market capitalization; management's goals and objectives; payment of dividends; and other similar expressions concerning matters that are not historical facts.
Forward-looking statements may sometimes be identified by words such as “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “opportunity,” “potential,” “predict,” “seek,” “should,” “trend,” “will,” “would,” and similar expressions.
Forward-looking statements are not a guarantee of future performance or results, or of the date of such performance or results, if achieved. Forward-looking statements are based on information available and known at the time those statements are made as well as management's good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements, including risks not otherwise listed or described in this report.
Important factors that could cause such differences include, but are not limited to: changes in applicable laws, rules or regulations; downward fee pressures and increased industry competition; risks inherent to the investment management business; the loss of revenues due to contract terminations and redemptions; unsatisfactory service levels by third-party vendors; the inability to maintain compliance with financial covenants; the performance of our investment strategies and corporate investment portfolio; our ownership and organizational structure; general and prolonged declines in the prices of securities; realization of deferred income tax assets; significant changes in market conditions and the economy that require a modification to our business plan; catastrophic or unpredictable events; the loss of key executives; the unavailability, consolidation and elimination of third-party retail distribution channels; increased costs of and timing of payments related to distribution; failure to recruit and retain qualified personnel; a loss of assets, and thus revenues; fluctuation in the level of our expenses; fluctuation in foreign currency exchange rates with respect to our global operations and business; changes in accounting estimates; poor performance of our largest funds; damage to our reputation; the extent and timing of any share repurchases; and the variability of any exchanges of interests in Calamos Investments into Class A common stock.
Further, the value and composition of our assets under management are, and will continue to be, influenced by a variety of factors including, among other things: purchases and redemptions of shares of the open-end funds and other investment products; fluctuation in both the underlying value and liquidity of the financial markets around the world that result in appreciation or depreciation of assets under management; open-end fund capital gain distributions; our ability to access capital markets; our introduction of new investment strategies, products and programs; our ability to educate our clients about our investment philosophy and provide them with best-in-class service; the relative investment performance of our products as compared to competing offerings and market indices; competitive conditions in the pooled fund, asset management and broader financial services sectors; investor sentiment and confidence; our decision to open or close products and strategies; and our ability to execute on our strategic plan to expand the business. Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2013 discusses some of these and other important factors in detail under the caption “Risk Factors.”

26


Forward-looking statements speak only as of the date the statements are made. Readers should not place undue reliance on any forward-looking statements when deciding whether to buy, sell or hold our securities. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
An analysis of our market risk was included in our Annual Report on Form 10-K for the year ended December 31, 2013. There were no material changes to the Company’s market risk during the three months ended March 31, 2014.
Item 4. Controls and Procedures
Our management, including our principal executive and principal financial officers, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of March 31, 2014, and has concluded that such disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
There were no changes in the Company’s internal control over financial reporting that occurred during the first quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
In the normal course of business, we may be party to various legal proceedings from time to time. Currently, there are no legal proceedings that management believes may have a material effect on our consolidated financial position or results of operations.
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

ISSUER PURCHASES OF EQUITY SECURITIES
 
(a)
Total Number of Shares Purchased
 
(b)
Average Price Paid Per Share
 
(c)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
(d)
Maximum Number of Shares that May be Purchased Under the Plans or Programs
January 1 – January 31, 2014
95,720

 
$
11.65

 
95,720

 
1,683,950

February 1 – February 28, 2014
671,925

 
$
11.46

 
671,925

 
1,012,025

March 1 – March 31, 2014
268,970

 
$
12.61

 
268,970

 
743,055

Total
1,036,615

 
$
11.77

 
1,036,615

 


On February 4, 2013, the Company announced a repurchase program of up to 3 million shares of the Company’s outstanding Class A Common Stock by Calamos Investments LLC. Common stock purchased under the share repurchase program are by Calamos Investments LLC and not directly for the individual, personal accounts of John P. Calamos, Sr.

27



Item 6. Exhibits
Exhibit
Number
 
Description of Exhibit
 
 
 
3(i)

 
Second Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3(i) to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 13, 2009).
 
 
 
3(ii)

 
Second Amended and Restated By-laws of the Registrant (incorporated by reference to Exhibit 3(ii) to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 13, 2009).
 
 
 
4.1

 
Stockholders’ Agreement among John P. Calamos, Sr., Nick P. Calamos and John P. Calamos, Jr., certain trusts controlled by them, Calamos Family Partners, Inc. and the Registrant (incorporated by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 3, 2004 File No. 000-51003).
 
 
 
4.2

 
Registration Rights Agreement between Calamos Family Partners, Inc., John P. Calamos, Sr. and the Registrant (incorporated by reference to Exhibit 4.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 3, 2004 File No. 000-51003).
 
4.3

 
Note Purchase Agreement, dated as of July 13, 2007, by and among Calamos Investments LLC and various institutional investors (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 18, 2007).
 
 
 
4.4

 
Waiver and First Amendment to 2007 Note Purchase Agreement, dated as of December 22, 2008, between Calamos Investments LLC and various institutional investors (incorporated by reference to Exhibit 4.5 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 29, 2008).
 
 
 
31.1

 
Certification of Principal Executive Officer pursuant to Rule 13a-14(a).
 
 
 
31.2

 
Certification of Principal Financial Officer pursuant to Rule 13a-14(a).
 
 
 
32.1

 
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.
 
 
 
32.2

 
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.
 
 
 
101.INS

 
XBRL Instance Document
 
 
 
101.SCH

 
XBRL Taxonomy Extension Schema Document
 
 
 
101.CAL

 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
101.LAB

 
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
101.PRE

 
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
101.DEF

 
XBRL Taxonomy Extension Definition Linkbase Document

28


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CALAMOS ASSET MANAGEMENT, INC.
(Registrant)


Date:  
May 6, 2014
By: /s/ Nimish S. Bhatt
 
 
Name: Nimish S. Bhatt
 
 
Title: Senior Vice President and Chief Financial Officer


29