e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED: |
March 31, 2010
or
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o |
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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)
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Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
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32-0122554
(I.R.S. Employer
Identification No.) |
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2020 Calamos Court, Naperville, Illinois
(Address of Principal Executive Offices)
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60563
(Zip Code) |
(630) 245-7200
(Registrants 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 o 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).
o
Yes o 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.
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
(do not check if a smaller reporting company)
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). o Yes þ No
At April 28, 2010, the company had 19,893,630 shares of Class A common stock and 100 shares of
Class B common stock outstanding.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except share data)
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March 31, |
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December 31, |
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2010 |
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2009 |
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(unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
|
$ |
115,002 |
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$ |
145,431 |
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Receivables: |
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|
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Affiliates and affiliated funds |
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18,419 |
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17,174 |
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Customers |
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9,898 |
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|
9,315 |
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Investment securities |
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241,168 |
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207,886 |
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Derivative assets |
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1,276 |
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|
1,720 |
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Partnership investments |
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38,313 |
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|
37,549 |
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Prepaid expenses |
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3,641 |
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|
2,741 |
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Deferred tax assets, net |
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9,816 |
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9,610 |
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Other current assets |
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1,589 |
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|
2,133 |
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Total current assets |
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439,122 |
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433,559 |
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Non-current assets: |
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Deferred tax assets, net |
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74,695 |
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76,646 |
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Deferred sales commissions |
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11,941 |
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12,705 |
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Property and equipment, net of accumulated depreciation ($42,524 at March 31,
2010 and $40,174 at December 31, 2009) |
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30,747 |
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32,912 |
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Other non-current assets |
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1,174 |
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|
1,256 |
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Total non-current assets |
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118,557 |
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123,519 |
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Total assets |
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$ |
557,679 |
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$ |
557,078 |
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LIABILITIES |
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Current liabilities: |
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Payables to brokers |
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$ |
16,960 |
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$ |
16,102 |
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Accrued compensation and benefits |
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6,628 |
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15,768 |
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Interest payable |
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1,968 |
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|
3,026 |
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Derivative liabilities |
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2,682 |
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3,450 |
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Accrued expenses and other current liabilities |
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3,337 |
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3,711 |
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Total current liabilities |
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31,575 |
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42,057 |
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Long-term liabilities: |
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Long-term debt |
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125,000 |
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125,000 |
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Deferred rent |
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9,452 |
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9,419 |
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Other long-term liabilities |
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576 |
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776 |
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Total long-term liabilities |
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135,028 |
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135,195 |
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Total liabilities |
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166,603 |
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177,252 |
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STOCKHOLDERS EQUITY |
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Class A Common Stock, $0.01 par value; authorized 600,000,000 shares; 23,893,630
shares issued and 19,893,630 shares outstanding at March 31, 2010; 23,668,583
shares issued and 19,668,583 shares outstanding at December 31, 2009 |
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239 |
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237 |
|
Class B Common Stock, $0.01 par value; authorized 1,000 shares; 100 shares issued
and outstanding at March 31, 2010 and December 31, 2009 |
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0 |
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0 |
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Additional paid-in capital |
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210,687 |
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209,895 |
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Retained earnings |
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49,334 |
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46,035 |
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Accumulated other comprehensive income |
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4,411 |
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4,362 |
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Treasury stock at cost; 4,000,000 shares at March 31, 2010 and December 31, 2009 |
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(95,215 |
) |
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(95,215 |
) |
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Calamos Asset Management, Inc. stockholders equity |
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169,456 |
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165,314 |
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Non-controlling interest in Calamos Holdings LLC |
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219,988 |
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212,887 |
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Non-controlling interest in partnership investments |
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1,632 |
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1,625 |
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Total non-controlling interest |
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221,620 |
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214,512 |
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Total stockholders equity |
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391,076 |
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379,826 |
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Total liabilities and stockholders equity |
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$ |
557,679 |
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$ |
557,078 |
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See accompanying notes to consolidated financial statements.
-2-
CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2010 and 2009
(in thousands, except share data)
(unaudited)
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2010 |
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2009 |
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REVENUES |
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Investment management fees |
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$ |
58,570 |
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$ |
42,001 |
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Distribution and underwriting fees |
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21,835 |
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17,028 |
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Other |
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725 |
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540 |
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Total revenues |
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81,130 |
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59,569 |
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EXPENSES |
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Employee compensation and benefits |
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20,132 |
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18,091 |
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Distribution expenses |
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16,790 |
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12,478 |
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Amortization of deferred sales commissions |
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2,566 |
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4,654 |
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Marketing and sales promotion |
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2,732 |
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2,522 |
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General and administrative |
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8,392 |
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8,634 |
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Total operating expenses |
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50,612 |
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46,379 |
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Operating income |
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30,518 |
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|
13,190 |
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NON-OPERATING INCOME |
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Net interest expense |
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(1,844 |
) |
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(1,786 |
) |
Investment and other income |
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8,753 |
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14,071 |
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Total non-operating income |
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6,909 |
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|
12,285 |
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Income before income tax provision |
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37,427 |
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25,475 |
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Income tax provision |
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3,222 |
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|
2,417 |
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Net income |
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34,205 |
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|
23,058 |
|
Net income attributable to non-controlling interest in Calamos Holdings LLC |
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(29,387 |
) |
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(19,675 |
) |
Net income attributable to non-controlling interest in partnership investments |
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(7 |
) |
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(31 |
) |
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Net income attributable to Calamos Asset Management, Inc. |
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$ |
4,811 |
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$ |
3,352 |
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Earnings per share: |
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Basic |
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$ |
0.24 |
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$ |
0.17 |
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Diluted |
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$ |
0.24 |
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$ |
0.17 |
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Weighted average shares outstanding: |
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Basic |
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19,820,744 |
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19,606,936 |
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Diluted |
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20,122,940 |
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19,751,288 |
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Cash dividends per share |
|
$ |
0.075 |
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$ |
0.055 |
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|
See accompanying notes to consolidated financial statements.
-3-
CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
Three Months Ended March 31, 2010
(in thousands)
(unaudited)
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CALAMOS ASSET MANAGEMENT, INC. STOCKHOLDERS |
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Non-controlling |
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Additional |
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Accumulated Other |
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interest in |
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Non-controlling |
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Common |
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Paid-in |
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Retained |
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Comprehensive |
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Treasury |
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partnership |
|
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interest in Calamos |
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Stock |
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Capital |
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Earnings |
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Income |
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Stock |
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|
investments |
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|
Holdings LLC |
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Total |
|
Balance at Dec. 31, 2009 |
|
$ |
237 |
|
|
$ |
209,895 |
|
|
$ |
46,035 |
|
|
$ |
4,362 |
|
|
$ |
(95,215 |
) |
|
$ |
1,625 |
|
|
$ |
212,887 |
|
|
$ |
379,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Net income |
|
|
|
|
|
|
|
|
|
|
4,811 |
|
|
|
|
|
|
|
|
|
|
|
7 |
|
|
|
29,387 |
|
|
|
34,205 |
|
|
Changes in unrealized
gains on available-for-
sale securities, net of
income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
717 |
|
|
|
|
|
|
|
|
|
|
|
4,156 |
|
|
|
4,873 |
|
Reclassification
adjustment for realized
gains on available-for-sale
securities included in
income, net of income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(732 |
) |
|
|
|
|
|
|
|
|
|
|
(7,164 |
) |
|
|
(7,896 |
) |
|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
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|
Total comprehensive
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
31,182 |
|
Issuance of common stock
(225,047 Class A common
shares) |
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|
2 |
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|
(2 |
) |
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|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative impact of
changes in ownership of
Calamos Holdings LLC |
|
|
|
|
|
|
279 |
|
|
|
(3 |
) |
|
|
64 |
|
|
|
|
|
|
|
|
|
|
|
(1,413 |
) |
|
|
(1,073 |
) |
Compensation expense
recognized under stock
incentive plans |
|
|
|
|
|
|
515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,866 |
|
|
|
2,381 |
|
Dividend equivalent accrued
under stock incentive plans. |
|
|
|
|
|
|
|
|
|
|
(28 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(98 |
) |
|
|
(126 |
) |
Distribution to
non-controlling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,633 |
) |
|
|
(19,633 |
) |
Dividends declared |
|
|
|
|
|
|
|
|
|
|
(1,481 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,481 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2010 |
|
$ |
239 |
|
|
$ |
210,687 |
|
|
$ |
49,334 |
|
|
$ |
4,411 |
|
|
$ |
(95,215 |
) |
|
$ |
1,632 |
|
|
$ |
219,988 |
|
|
$ |
391,076 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
-4-
CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2010 and 2009
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
Cash and cash equivalents at beginning of period |
|
$ |
145,431 |
|
|
$ |
59,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
|
34,205 |
|
|
|
23,058 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
Amortization of deferred sales commissions |
|
|
2,566 |
|
|
|
4,654 |
|
Other depreciation and amortization |
|
|
2,457 |
|
|
|
2,468 |
|
Change in unrealized depreciation (appreciation) on
trading securities, derivative assets, derivative
liabilities and partnership investments, net |
|
|
(601 |
) |
|
|
7,789 |
|
Net realized gain on sale of investment securities,
derivative assets and derivative liabilities |
|
|
(7,104 |
) |
|
|
(20,788 |
) |
Deferred taxes |
|
|
1,995 |
|
|
|
2,426 |
|
Stock based compensation |
|
|
2,381 |
|
|
|
1,959 |
|
Employee taxes paid on vesting under stock incentive plans |
|
|
(1,017 |
) |
|
|
(175 |
) |
(Increase) decrease in assets: |
|
|
|
|
|
|
|
|
Receivables: |
|
|
|
|
|
|
|
|
Affiliates and affiliated funds, net |
|
|
(1,245 |
) |
|
|
255 |
|
Customers |
|
|
(583 |
) |
|
|
24 |
|
Deferred sales commissions |
|
|
(1,802 |
) |
|
|
(1,333 |
) |
Other assets |
|
|
(687 |
) |
|
|
7,999 |
|
Increase (decrease) in liabilities: |
|
|
|
|
|
|
|
|
Payables to brokers |
|
|
858 |
|
|
|
(609 |
) |
Accrued compensation and benefits |
|
|
(9,140 |
) |
|
|
(4,972 |
) |
Accrued expenses and other liabilities |
|
|
(1,400 |
) |
|
|
(1,058 |
) |
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
20,883 |
|
|
|
21,697 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by (used in) investing activities: |
|
|
|
|
|
|
|
|
Net additions to property and equipment |
|
|
(261 |
) |
|
|
(136 |
) |
Purchase of investment securities |
|
|
(119,657 |
) |
|
|
(768 |
) |
Proceeds from sale of investment securities |
|
|
93,855 |
|
|
|
|
|
Net (purchases) sales of derivatives |
|
|
(4,097 |
) |
|
|
22,741 |
|
Net changes in partnership investments |
|
|
(95 |
) |
|
|
(118 |
) |
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
(30,255 |
) |
|
|
21,719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in financing activities: |
|
|
|
|
|
|
|
|
Deferred tax benefit on vesting under stock incentive plans |
|
|
57 |
|
|
|
136 |
|
Distributions paid to non-controlling interests |
|
|
(19,633 |
) |
|
|
(4,081 |
) |
Dividends paid to common stockholders |
|
|
(1,481 |
) |
|
|
(1,078 |
) |
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(21,057 |
) |
|
|
(5,023 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
|
(30,429 |
) |
|
|
38,393 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
115,002 |
|
|
$ |
97,818 |
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
-5-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) Organization and Description of Business
Calamos Asset Management, Inc. (CAM), together with its subsidiaries (the Company), primarily
provides investment advisory services to individuals and institutional investors through open-end
funds, closed-end funds, separate accounts, offshore funds and partnerships. CAM operates and
controls all of the business and affairs of Calamos Holdings LLC (Holdings) and, as a result of
this control, consolidates the financial results of Holdings with its own financial results.
(2) Basis of Presentation
The consolidated financial statements as of March 31, 2010 and for the three months ended March 31,
2010 and 2009 have not been audited by the Companys 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 ended March 31 are not necessarily indicative of
the results to be obtained for a full fiscal year. Certain amounts for the prior year have been
reclassified to conform to the current years presentation. This Form 10-Q filing should be read in
conjunction with the Companys Annual Report on Form 10-K for the year ended December 31, 2009.
Calamos Family Partners, Inc.s (CFP) and John P. Calamos, Sr.s (collectively, the Calamos
Interests) combined 78.3% and 78.6% interest in Holdings at March 31, 2010 and 2009, respectively,
is represented as non-controlling interest in Calamos Holdings LLC in the Companys financial
statements. Non-controlling interest in Calamos Holdings LLC is derived by multiplying the
historical equity of Holdings by the Calamos Interests aggregate ownership percentage for the
periods presented. Issuances and repurchases of CAMs common stock may result in changes to CAMs
ownership percentage and to the non-controlling interests ownership percentage of Holdings. The
Companys corresponding changes to stockholders equity are reflected in the consolidated statement
of changes in stockholders equity. Income is allocated to non-controlling interests based on the
average ownership interest during the period in which the income is earned.
Calamos Partners LLC, a subsidiary of Holdings, is the general partner of Calamos Market Neutral
Opportunities Fund LP (the Partnership) a private investment partnership that is primarily
comprised of highly liquid marketable securities. Substantially all the activities of the
Partnership are conducted on behalf of the Company and its related parties; therefore, the Company
consolidates the financial results of the Partnership into its results.
The assets and liabilities of the Partnership are presented on a net basis as partnership
investments in the consolidated statements of financial condition, the net income 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 Partnership is 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. The non-controlling interests of the
Partnership are presented as non-controlling interests in partnership investments in the respective
financial statements.
Management of the Company has made a number of estimates and assumptions relating to the reporting
of assets, liabilities, revenues and expenses and the disclosure of contingent assets and
liabilities to prepare these consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America. Actual results could differ from
these estimates.
-6-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(3) Investment Securities
The following table provides a summary of investment securities owned as of March 31, 2010 and
December 31, 2009. As a registered broker-dealer, Calamos Financial Services LLC is required to
carry all investment securities it owns (CFS Securities) at fair value and record all changes in
fair value in current earnings. As such, unrealized gains and losses on CFS Securities are included
in investment and other income together with realized gains and losses on all investment securities
in the consolidated statements of operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010 |
|
|
|
Available-for- |
|
|
CFS |
|
|
Total Investment |
|
(in thousands) |
|
Sale |
|
|
Securities |
|
|
Securities |
|
Mutual Funds |
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
$ |
96,831 |
|
|
$ |
28,513 |
|
|
$ |
125,344 |
|
Fixed income |
|
|
85,001 |
|
|
|
|
|
|
|
85,001 |
|
Defensive equity |
|
|
29,426 |
|
|
|
|
|
|
|
29,426 |
|
Other |
|
|
1,285 |
|
|
|
|
|
|
|
1,285 |
|
|
|
|
|
|
|
|
|
|
|
Total mutual funds |
|
|
212,543 |
|
|
|
28,513 |
|
|
|
241,056 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
112 |
|
|
|
112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
212,543 |
|
|
$ |
28,625 |
|
|
$ |
241,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
|
Available-for- |
|
|
CFS |
|
|
Total Investment |
|
(in thousands) |
|
Sale |
|
|
Securities |
|
|
Securities |
|
Mutual Funds |
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
$ |
67,981 |
|
|
$ |
27,938 |
|
|
$ |
95,919 |
|
Fixed income |
|
|
81,908 |
|
|
|
|
|
|
|
81,908 |
|
Defensive equity |
|
|
28,736 |
|
|
|
|
|
|
|
28,736 |
|
Other |
|
|
1,218 |
|
|
|
|
|
|
|
1,218 |
|
|
|
|
|
|
|
|
|
|
|
Total mutual funds |
|
|
179,843 |
|
|
|
27,938 |
|
|
|
207,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
105 |
|
|
|
105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
179,843 |
|
|
$ |
28,043 |
|
|
$ |
207,886 |
|
|
|
|
|
|
|
|
|
|
|
Of the $241.1 million and $207.8 million investments in mutual funds at March 31, 2010 and December
31, 2009, respectively, $200.3 million and $169.5 million was invested in affiliated mutual funds.
The table below summarizes information on available-for-sale securities as well as unrealized gains
(losses) on CFS Securities for the three months ended March 31, 2010 and 2009. No losses were
realized on available-for-sale securities for the three months ended March 31, 2010.
-7-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
Proceeds from sale |
|
$ |
93,855 |
|
|
$ |
|
|
|
|
|
|
|
|
|
Gross realized gains on sales |
|
|
10,229 |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) |
|
|
5,308 |
|
|
|
(2,109 |
) |
|
|
|
|
|
|
|
Net gains reclassified out of
accumulated other comprehensive
income to earnings |
|
|
8,638 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CFS securities: |
|
|
|
|
|
|
|
|
Unrealized gains (losses) |
|
|
581 |
|
|
|
(1,640 |
) |
|
|
|
|
|
|
|
The cumulative net unrealized gains (losses) on available-for-sale securities consisted of the
following as of March 31, 2010 and December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
Total cumulative unrealized gains on available-for-sale
securities with net gains: |
|
|
|
|
|
|
|
|
Equity |
|
$ |
21,942 |
|
|
$ |
21,965 |
|
Defensive equity |
|
|
8,353 |
|
|
|
7,669 |
|
Fixed income |
|
|
2,561 |
|
|
|
6,581 |
|
Other |
|
|
43 |
|
|
|
32 |
|
|
|
|
|
|
|
|
Total gains |
|
|
32,899 |
|
|
|
36,247 |
|
|
|
|
|
|
|
|
|
|
Total cumulative unrealized losses on available-for-sale
securities with net losses: |
|
|
|
|
|
|
|
|
Equity |
|
|
(39 |
) |
|
|
(26 |
) |
Defensive equity |
|
|
(19 |
) |
|
|
(24 |
) |
Fixed income |
|
|
(26 |
) |
|
|
(16 |
) |
Other |
|
|
(265 |
) |
|
|
(300 |
) |
|
|
|
|
|
|
|
Total losses |
|
|
(349 |
) |
|
|
(366 |
) |
|
|
|
|
|
|
|
Total cumulative net unrealized gains on
available-for-sale securities |
|
$ |
32,550 |
|
|
$ |
35,881 |
|
|
|
|
|
|
|
|
The aggregate fair value of available-for-sale investment securities that were in an unrealized
loss position at March 31, 2010 and December 31, 2009 was $16.6 million and $1.5 million,
respectively. The cumulative losses on securities that had been in a continuous loss position for
12 months or longer were immaterial as of the end of each reporting period.
The Company periodically evaluates its available-for-sale investments for other-than-temporary
declines in value. Other-than-temporary declines in value may exist when the fair value of an
investment security has been below the carrying value for an extended period of time. If an
other-than-temporary decline in value is determined to exist, the unrealized investment loss, net
of tax is recognized as a charge to net income in the period in which the other-than-temporary
decline in value occurs, as well as an accompanying permanent adjustment to accumulated other
comprehensive income. At March 31, 2010, the Company believes all unrealized losses to be only
temporary and has the intent and ability to hold these securities for a period of time sufficient
to allow for recovery in market value.
-8-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(4) Derivative Assets and Liabilities
In order to reduce the volatility in fair value of the Calamos corporate investment portfolio, the
Company uses exchange traded equity option contracts as an economic hedge against price changes in
its investment securities portfolio. The Companys investment securities, totaling $241.2 million
at March 31, 2010, consists primarily of positions in several Calamos equity, fixed income and
defensive equity mutual funds. The equity price risk in the investment portfolio is hedged using
exchange-traded put and call option contracts on several major equity market indices that correlate
most closely with the change in value of the portfolio being hedged. The use of both purchased put
and sold call options is part of a single strategy to minimize downside risk in the hedged
portfolio, while participating in a portion of the upside of a market rally. 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 fair value of purchased puts and sold call contracts are reported in derivative assets and
derivative liabilities, respectively, 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 with net losses of $3.8 million and net gains of $14.5 million for the
three months ended March 31, 2010 and 2009, respectively. The Company is using these derivatives
for risk management purposes but has not designated the contracts as hedges for accounting
purposes.
(5) Partnership Investments
Presented below are the underlying assets and liabilities of the partnerships that the Company
reports on a net basis and the investments accounted for under the equity method. These investments
are presented as partnership investments in its consolidated statements of financial condition as
of March 31, 2010 and December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
Calamos Market Neutral Opportunities Fund LP: |
|
|
|
|
|
|
|
|
Securities owned |
|
$ |
21,139 |
|
|
$ |
21,976 |
|
Securities sold but not yet purchased |
|
|
(10,675 |
) |
|
|
(10,934 |
) |
Accrued expenses and other current liabilities |
|
|
(76 |
) |
|
|
(112 |
) |
Other current assets |
|
|
8,897 |
|
|
|
8,222 |
|
|
|
|
|
|
|
|
Calamos Market Neutral Opportunities Fund LP, net |
|
|
19,285 |
|
|
|
19,152 |
|
|
|
|
|
|
|
|
|
|
Investment in other partnerships |
|
|
19,028 |
|
|
|
18,397 |
|
|
|
|
|
|
|
|
Partnership investments |
|
$ |
38,313 |
|
|
$ |
37,549 |
|
|
|
|
|
|
|
|
As of March 31, 2010 and December 31, 2009, the Company held a controlling net interest of $17.7
million (91.5%) and $17.5 million (91.5%), respectively, in Calamos Market Neutral Opportunities
Fund LP. The non-controlling interests totaled 8.5% of Calamos Market Neutral Opportunities Fund LP
at March 31, 2010 and December 31, 2009, and are presented in the consolidated statements of
financial condition as non-controlling interest in partnership investments.
As of March 31, 2010 and December 31, 2009, the Company held a non-controlling interest in certain
other partnership investments and accounted for these investments using the equity method. These
investments are presented collectively as investments in other partnerships in the table above.
(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 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
-9-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
risk, 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 positions in Level 3 securities.
The following tables provide the hierarchy of inputs used to derive the fair value of the Companys
investment securities, derivative assets and liabilities, securities and derivatives owned and
securities sold but not yet purchased by the Partnership and derivative liabilities of the
Partnership as of March 31, 2010 and December 31, 2009, respectively. Foreign currency contracts
are presented on a net basis where the right of offset exists, and no impact of these positions
exists for either period presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using |
|
|
|
|
|
|
|
Quoted Prices in |
|
|
|
|
|
|
|
|
|
|
Active Markets for |
|
|
Significant Other |
|
(in thousands) |
|
|
|
|
|
Identical Assets |
|
|
Observable Inputs |
|
Description |
|
March 31, 2010 |
|
|
(Level 1) |
|
|
(Level 2) |
|
Investment securities (Note 3) |
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds |
|
$ |
241,056 |
|
|
$ |
241,056 |
|
|
$ |
|
|
|
Common stocks |
|
|
112 |
|
|
|
112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
241,168 |
|
|
|
241,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets (Note 4) |
|
|
|
|
|
|
|
|
|
|
|
|
Exchange-traded put option contracts |
|
|
1,276 |
|
|
|
1,276 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities (Note 4) |
|
|
|
|
|
|
|
|
|
|
|
|
Exchange-traded call option contracts |
|
|
(2,682 |
) |
|
|
(2,682 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities and derivatives owned by the
Partnership (Note 5) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stocks |
|
|
530 |
|
|
|
530 |
|
|
|
|
|
Convertible preferred stocks |
|
|
1,111 |
|
|
|
635 |
|
|
|
476 |
|
Purchased options |
|
|
138 |
|
|
|
138 |
|
|
|
|
|
Convertible bonds |
|
|
18,664 |
|
|
|
|
|
|
|
18,664 |
|
Corporate bonds |
|
|
696 |
|
|
|
|
|
|
|
696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,139 |
|
|
|
1,303 |
|
|
|
19,836 |
|
Securities sold but not yet purchased by the
Partnership and derivative liabilities
(Note 5) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stocks |
|
|
(10,668 |
) |
|
|
(10,668 |
) |
|
|
|
|
Exchange-traded call option contracts |
|
|
(7 |
) |
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,675 |
) |
|
|
(10,675 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
250,226 |
|
|
$ |
230,390 |
|
|
$ |
19,836 |
|
|
|
|
|
|
|
|
|
|
|
-10-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using |
|
|
|
|
|
|
|
Quoted Prices in |
|
|
|
|
|
|
|
|
|
|
Active Markets for |
|
|
Significant Other |
|
(in thousands) |
|
|
|
|
|
Identical Assets |
|
|
Observable Inputs |
|
Description |
|
December 31, 2009 |
|
|
(Level 1) |
|
|
(Level 2) |
|
Investment securities (Note 3) |
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds |
|
$ |
207,781 |
|
|
$ |
207,781 |
|
|
$ |
|
|
|
Common stocks |
|
|
105 |
|
|
|
105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
207,886 |
|
|
|
207,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets (Note 4) |
|
|
|
|
|
|
|
|
|
|
|
|
Exchange-traded put option contracts |
|
|
1,720 |
|
|
|
1,720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities (Note 4) |
|
|
|
|
|
|
|
|
|
|
|
|
Exchange-traded call option contracts |
|
|
(3,450 |
) |
|
|
(3,450 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities and derivatives owned by the
Partnership (Note 5) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stocks |
|
|
532 |
|
|
|
532 |
|
|
|
|
|
Convertible preferred stocks |
|
|
1,767 |
|
|
|
660 |
|
|
|
1,107 |
|
Purchased options |
|
|
179 |
|
|
|
179 |
|
|
|
|
|
Convertible bonds |
|
|
18,798 |
|
|
|
|
|
|
|
18,798 |
|
Corporate bonds |
|
|
700 |
|
|
|
|
|
|
|
700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,976 |
|
|
|
1,371 |
|
|
|
20,605 |
|
Securities sold but not yet purchased by the
Partnership and derivative liabilities (Note 5) |
|
|
|
|
|
|
|
|
|
|
|
|
Common stocks |
|
|
(10,893 |
) |
|
|
(10,893 |
) |
|
|
|
|
Exchange-traded call option contracts |
|
|
(41 |
) |
|
|
(41 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,934 |
) |
|
|
(10,934 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
217,198 |
|
|
$ |
196,593 |
|
|
$ |
20,605 |
|
|
|
|
|
|
|
|
|
|
|
(7) Fair Value of Financial Instruments
The fair value of long-term debt, which has a carrying value of $125 million, was approximately
$137.2 million at March 31, 2010. Fair value estimates are calculated using discounted cash flows
based on the Companys incremental borrowing rates for the debt and market prices for similar bonds
at the measurement date. This method of assessing fair value may differ from the actual amount
realized.
The carrying value of all other financial instruments approximates fair value due to the short
maturities of these financial instruments.
-11-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(8) 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 data) |
|
2010 |
|
|
2009 |
|
Earnings per share basic |
|
|
|
|
|
|
|
|
Earnings available to common shareholders |
|
$ |
4,811 |
|
|
$ |
3,352 |
|
Weighted average shares outstanding |
|
|
19,821 |
|
|
|
19,607 |
|
|
|
|
|
|
|
|
Earnings per share basic |
|
$ |
0.24 |
|
|
$ |
0.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share diluted |
|
|
|
|
|
|
|
|
Earnings available to common shareholders |
|
$ |
4,811 |
|
|
$ |
3,352 |
|
Weighted average shares outstanding |
|
|
19,821 |
|
|
|
19,607 |
|
Dilutive impact of restricted stock units |
|
|
302 |
|
|
|
144 |
|
|
|
|
|
|
|
|
Weighted average diluted shares outstanding |
|
|
20,123 |
|
|
|
19,751 |
|
|
|
|
|
|
|
|
Earnings per share diluted |
|
$ |
0.24 |
|
|
$ |
0.17 |
|
|
|
|
|
|
|
|
Diluted earnings per share is calculated (a) assuming the Calamos Interests exchanged all of their
ownership interest in Holdings and their CAM Class B common stock for shares of CAMs Class A
common stock (collectively, the Exchange) and (b) including the effect of outstanding dilutive
equity incentive compensation awards.
Effective March 1, 2009, 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 Companys
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 issued at the time of the
Exchange. The effects of the Exchange are anti-dilutive and are therefore excluded from the
calculation of diluted earnings per share for the three months ended March 31, 2010 and 2009.
The Company uses the treasury stock method to reflect the dilutive effect of unvested restricted
stock units (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 options 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 options 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 following table shows the number of shares which were excluded from the computation of diluted
earnings per share as they were anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2010 |
|
|
2009 |
|
Exchange of Calamos Interests ownership
interest in Holdings for shares of Class A
common stock |
|
|
52,506,228 |
|
|
|
20,005,231 |
|
Restricted stock units |
|
|
44,083 |
|
|
|
1,051,049 |
|
Stock options |
|
|
2,452,653 |
|
|
|
2,580,625 |
|
|
|
|
|
|
|
|
Total |
|
|
55,002,964 |
|
|
|
23,636,905 |
|
|
|
|
|
|
|
|
-12-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Assuming an Exchange at March 31, 2010, 52.5 million shares would be issued to the Calamos
Interests. The formula for exchanging ownership interest in Holdings for shares of CAMs Class A
common stock is set forth in the Companys Second Amended and Restated Certificate of Incorporation
(filed as Exhibit 3(i) to the 2008 Annual Report on Form 10-K). For illustrative purposes the
Exchange is based in part on the NASDAQ Global Select Market closing price of CAMs Class A common
stock on March 31, 2010 and on managements estimation of the fair market value of CAMs net assets
other than its ownership interest in Holdings. In the event of an actual Exchange, the majority of
the Companys independent directors may determine the fair market value of a share of CAMs Class A
common stock to be other than the closing price and will determine the fair market value of CAMs
net assets other than its ownership in Holdings.
(9) Stock Based Compensation
Under the Companys incentive compensation plan, certain employees of the Company receive stock
based compensation comprised of stock options and 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 or issue new shares upon the exercise of stock options and upon
conversion of RSUs. The Companys Annual Report on Form 10-K for the year ended December 31, 2009
provides details of this plan and its provisions.
During the three months ended March 31, 2010, the Company granted 523,826 RSUs. There were
forfeitures of 17,628 stock options and 11,760 RSUs during the quarter.
During the three months ended March 31, 2010, 309,263 RSUs vested with 84,216 units withheld for
taxes and 225,047 RSUs converted into an equal number of shares of CAMs Class A common stock. The
total intrinsic value and the fair value of the converted shares was $2.7 million. The total tax
benefit realized in connection with the vesting of the RSUs during the three months ended March 31,
2010 was $325,000, as the Company receives tax benefits based upon the portion of Holdings income
that it recognizes.
During the three months ended March 31, 2010, compensation expense recorded in connection with the
RSUs and stock options was $2.4 million of which $515,000, after giving effect to the
non-controlling interests, was credited as additional paid-in capital. During the three months
ended March 31, 2009, expense recorded in connection with the RSUs and stock options was $2.0
million of which $419,000, after giving effect to the non-controlling interests, was credited as
additional paid-in capital. The amount of deferred tax asset created was $191,000 and $155,000
during the three months ended March 31, 2010 and 2009, respectively. At March 31, 2010,
approximately $22.6 million of total unrecognized compensation expense related to nonvested stock
option and RSU awards is expected to be recognized over a weighted-average period of 3.7 years.
(10) Income Taxes
Holdings 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. CAMs effective income tax rate for the three months ended March 31,
2010 and March 31, 2009 was approximately 37.6% and 38.5%, respectively.
-13-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(11) Non-operating Income, Net of Non-controlling Interest in Partnership Investments
Non-operating income, net of non-controlling interest in partnership investments, was comprised of
the following components for the three months ended March 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
Interest income |
|
$ |
106 |
|
|
$ |
164 |
|
Interest expense |
|
|
(1,950 |
) |
|
|
(1,950 |
) |
|
|
|
|
|
|
|
Net interest expense |
|
|
(1,844 |
) |
|
|
(1,786 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income |
|
|
8,602 |
|
|
|
13,880 |
|
Miscellaneous other income |
|
|
151 |
|
|
|
191 |
|
|
|
|
|
|
|
|
Investment and other income |
|
|
8,753 |
|
|
|
14,071 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income |
|
|
6,909 |
|
|
|
12,285 |
|
Net income attributable to non-controlling
interest in partnership investments |
|
|
(7 |
) |
|
|
(31 |
) |
|
|
|
|
|
|
|
|
Non-operating income, net of non-
controlling interest in partnership investments |
|
$ |
6,902 |
|
|
$ |
12,254 |
|
|
|
|
|
|
|
|
(12) Capital Stock Activities
During the first quarter 2010, Holdings made tax and equity distributions to CAM and the Calamos
Interests in the following amounts:
|
|
|
|
|
(in thousands) |
|
|
|
|
Calamos Interests |
|
$ |
19,633 |
|
Calamos Asset Management, Inc. |
|
|
5,521 |
|
|
|
|
|
Total |
|
$ |
25,154 |
|
|
|
|
|
The distribution to the Calamos Interests is reflected in the consolidated statement of changes in
stockholders equity as a distribution to non-controlling interests. Distributions to CAM are
eliminated in consolidation and are not reflected in the consolidated statement of changes in
stockholders equity.
Subsequent to the quarter ended March 31, 2010, Holdings made a special equity distribution to the
owners in proportion to its respective ownership percentages in the following amounts:
|
|
|
|
|
(in thousands) |
|
|
|
|
Calamos Interests |
|
$ |
15,692 |
|
Calamos Asset Management, Inc. |
|
|
4,340 |
|
|
|
|
|
Total |
|
$ |
20,032 |
|
|
|
|
|
(13) Recently Issued Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (FASB) issued a new statement which modifies
the analysis required to determine whether a companys variable interest(s) give it a controlling
financial interest in a variable interest entity (VIE). This analysis identifies the primary
beneficiary of a VIE as the enterprise that has both the power to direct the
-14-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
activities
of a VIE and the obligation to absorb significant losses or the right to receive significant benefits of the
VIE. This statement was subsequently codified in December 2009 under Accounting Standards Update
(ASU) No. 2009-17 and is effective for fiscal years beginning after November 15, 2009. In February
2010, the FASB issued ASU No. 2010-10, Consolidation, Amendments for Certain Investment Funds, that
defers the implementation of ASU 2009-17 for a reporting entitys interest in an entity (1) that
has all the attributes of an investment company or (2) for which it is industry practice to apply
measurement principles for financial reporting purposes that are consistent with those followed by
investment companies. The Company analyzed the entities in which it holds an investment interest
and determined that the entities meet the criteria for deferral under ASU No. 2010-10. As such, the
Company opted to defer ASU No. 2009-17 and adopted ASU No. 2010-10 during the first quarter 2010,
which had no impact on the Companys financial statements.
In February 2010, the FASB issued ASU No. 2010-09, Subsequent Events, Amendments to Certain
Recognition and Disclosure Requirements, which allows Securities and Exchange Commission (SEC)
filers to evaluate events that occur after the balance sheet date through the date the financial
statements are issued, however, SEC filers are no longer required to disclose the date through
which subsequent events have been evaluated. The update was effective upon issuance and,
accordingly, the Company adopted the update during the first quarter 2010.
In February 2010, the FASB issued ASU No. 2010-08, Technical Corrections to Various Topics, which
eliminate the various inconsistencies and outdated provisions within Generally Accepted Accounting
Principles. The update is primarily effective for the first reporting period (including interim
periods) beginning after the issuance of the update. The Company adopted the update, which had no
impact on the Companys financial statements.
In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures, which
requires additional disclosures related to (1) transfers in and out of Levels 1 and 2 and the
reasons for the transfers, and (2) the Level 3 reconciliation, specifically separately presenting
purchases, sales, issuances and settlements. The update is effective for interim and annual
reporting periods beginning after December 15, 2009, except for the disclosures about purchases,
sales, issuances, and settlements in the roll forward of activity in Level 3 fair value
measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010.
Early adoption is permitted. The Company adopted the update, which had no impact on the Companys
disclosures within the financial statements.
-15-
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
We are a firm of 326 full-time associates that provides investment advisory services to
institutions and individuals, managing $33.0 billion in assets at March 31, 2010. 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 mutual funds
and additional funding 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 manage four types of mutual fund and separate account
investment products. The following table details our assets under management at March 31, 2010 and
2009.
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
(in millions) |
|
2010 |
|
|
2009 |
|
Mutual Funds |
|
|
|
|
|
|
|
|
Open-end funds |
|
$ |
19,959 |
|
|
$ |
13,330 |
|
Closed-end funds |
|
|
5,081 |
|
|
|
3,759 |
|
|
|
|
|
|
|
|
Total mutual funds |
|
|
25,040 |
|
|
|
17,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate Accounts |
|
|
|
|
|
|
|
|
Institutional accounts |
|
|
5,047 |
|
|
|
3,573 |
|
Managed accounts |
|
|
2,876 |
|
|
|
2,807 |
|
|
|
|
|
|
|
|
Total separate accounts |
|
|
7,923 |
|
|
|
6,380 |
|
|
|
|
|
|
|
|
Total Assets Under Management |
|
$ |
32,963 |
|
|
$ |
23,469 |
|
|
|
|
|
|
|
|
Our revenues are substantially comprised of investment management fees earned under contracts with
the mutual funds and separate accounts that we manage. Our revenues are also comprised of
distribution and underwriting fees, including asset-based distributions 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 or depreciation and the level of net purchases and
redemptions, which represent the sum of new client investments, additional funding from existing
clients, withdrawals of assets from and termination of client accounts, and purchases and
redemptions of mutual fund shares. The mix of assets under management among our investment products
also has an impact on our revenues as our fee schedules vary by product.
Our largest operating expenses are typically related to the distribution of mutual funds, including
Rule 12b-1 payments, employee compensation and benefits expense, which includes salaries, incentive
compensation and related benefits costs, marketing and sales promotion expenses and the
amortization of deferred sales commissions for open-end mutual funds. Operating expenses may
fluctuate due to a number of factors, including changes in distribution expense as a result of
fluctuations in mutual fund net sales and market appreciation or depreciation, variations in
staffing and compensation, and marketing-related expenses that include supplemental distribution
payments.
-16-
Operating Results
Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009
Assets Under Management
Assets under management increased by $9.5 billion, or 40%, to $33.0 billion at March 31, 2010 from
$23.5 billion at March 31, 2009. Our assets under management consisted of 73% mutual funds and 27%
separate accounts at March 31, 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
Change |
|
( in millions) |
|
2010 |
|
|
2009 |
|
|
Amount |
|
|
Percent |
|
Total Mutual Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management |
|
$ |
24,480 |
|
|
$ |
17,498 |
|
|
$ |
6,982 |
|
|
|
40 |
% |
Net redemptions |
|
|
(32 |
) |
|
|
(190 |
) |
|
|
158 |
|
|
|
83 |
|
Market appreciation (depreciation) |
|
|
592 |
|
|
|
(219 |
) |
|
|
811 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management |
|
|
25,040 |
|
|
|
17,089 |
|
|
|
7,951 |
|
|
|
47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management |
|
|
24,347 |
|
|
|
16,810 |
|
|
|
7,537 |
|
|
|
45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutional |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management |
|
|
4,619 |
|
|
|
3,498 |
|
|
|
1,121 |
|
|
|
32 |
% |
Net purchases |
|
|
259 |
|
|
|
38 |
|
|
|
221 |
|
|
|
582 |
|
Market appreciation |
|
|
169 |
|
|
|
37 |
|
|
|
132 |
|
|
|
357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management |
|
|
5,047 |
|
|
|
3,573 |
|
|
|
1,474 |
|
|
|
41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management |
|
|
4,722 |
|
|
|
3,434 |
|
|
|
1,288 |
|
|
|
38 |
|
Managed Accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management |
|
|
3,615 |
|
|
|
3,044 |
|
|
|
571 |
|
|
|
19 |
% |
Net redemptions |
|
|
(774 |
) |
|
|
(279 |
) |
|
|
(495 |
) |
|
|
(177 |
) |
Market appreciation |
|
|
35 |
|
|
|
42 |
|
|
|
(7 |
) |
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management |
|
|
2,876 |
|
|
|
2,807 |
|
|
|
69 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management |
|
|
3,279 |
|
|
|
2,861 |
|
|
|
418 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets Under Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management |
|
|
32,714 |
|
|
|
24,040 |
|
|
|
8,674 |
|
|
|
36 |
% |
Net redemptions |
|
|
(547 |
) |
|
|
(431 |
) |
|
|
(116 |
) |
|
|
27 |
|
Market appreciation (depreciation) |
|
|
796 |
|
|
|
(140 |
) |
|
|
936 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management |
|
|
32,963 |
|
|
|
23,469 |
|
|
|
9,494 |
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management |
|
$ |
32,348 |
|
|
$ |
23,105 |
|
|
$ |
9,243 |
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the first quarter of 2010, net redemptions in our mutual funds were $32 million and
represent a favorable change of $158 million from net redemptions of $190 million in the first
quarter of 2009. The improvement in net flows was primarily due to increased net purchases within
our defensive equity, alternative and global mutual funds. Also during the most recent quarter, we
generated positive net flows in ten of our mutual funds, including our International Growth Fund,
which recently reached its five-year anniversary. These improved net flows were tempered by net
outflows in our large-cap equity funds that remain largely out of favor. Mutual funds were
positively impacted by market appreciation of $592 million during the three months ended March 31,
2010 compared to market depreciation of $219 million during the three months ended March 31, 2009.
Separate accounts, which represent institutional and managed accounts, had net redemptions of $515
million during the first quarter of 2010 compared to net redemptions of $241 million for the
comparable prior-year period mainly due to outflows in our managed accounts of $774 million for the
first quarter 2010 versus $279 million of outflows in the comparable prior-year period. The net
outflows for the quarter were the result of our decision to increase the account minimums for our
convertible-based strategies on separately-managed account platforms. In our view, new trading and
market dynamics in the convertible securities markets have changed in a way that limits our ability
to effectively manage lower-dollar convertible managed accounts in a manner consistent with our
investment philosophy and process. As a result, we made
-17-
the decision to raise the account minimums for these accounts. This decision to increase the
investment minimums resulted in the closure or transfer of approximately $785 million
convertible-based managed accounts during the first quarter of 2010 with the remaining affected
accounts closing or transferring early in the second quarter 2010. The managed account outflows
were partially offset by net inflows of $259 million within our institutional accounts for the
three months ended March 31, 2010 compared to $38 million in the comparable prior-year period.
Separate accounts were positively impacted by market appreciation of $204 million during the three
months ended March 31, 2010 compared to market appreciation of $79 million during the three months
ended March 31, 2009.
Financial Overview
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
Change |
|
(in thousands, except margin) |
|
2010 |
|
|
2009 |
|
|
Amount |
|
|
Percent |
|
Operating income |
|
$ |
30,518 |
|
|
$ |
13,190 |
|
|
$ |
17,328 |
|
|
|
131 |
% |
Operating margin |
|
|
37.6 |
% |
|
|
22.1 |
% |
|
|
15.5 |
% |
|
|
70 |
% |
|
Net income attributable to Calamos
Asset Management, Inc. |
|
$ |
4,811 |
|
|
$ |
3,352 |
|
|
$ |
1,459 |
|
|
|
44 |
% |
Our first quarter operating results were strong and reflect the continued improvement in
security valuations from the end of the first quarter 2009. The growth in our average assets under
management was 40% from first quarter 2009 to 2010 contributing to higher operating income,
operating margin and net income. The significant improvement in our operating margin also reflects
our continued efforts to contain costs and make our cost structure more variable.
In order to gather assets under management, we engage in distribution and underwriting activities,
principally with respect to our family of open-end mutual funds. Generally accepted accounting
principles require that we present distribution fees earned by us as revenues and distribution fees
paid to selling firms and the amortization of our deferred sales commissions as expenses in the
consolidated statements of operations. However, when analyzing our business, we consider the result
of these distribution activities as a net amount of revenue as they are typically a result of a
single open-end mutual fund share purchase. Hence, the result of presenting this information in
accordance with generally accepted accounting principles is a reduction to our overall operating
margin, as the margin on distribution activities is generally lower than the margins on the
remainder of our business. The following table summarizes the net distribution fee margin for the
three months ended March 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
Distribution and underwriting fees |
|
$ |
21,835 |
|
|
$ |
17,028 |
|
Distribution
expenses |
|
|
(16,790 |
) |
|
|
(12,478 |
) |
Amortization of deferred sales commissions |
|
|
(2,566 |
) |
|
|
(4,654 |
) |
|
|
|
|
|
|
|
Net distribution fees |
|
$ |
2,479 |
|
|
$ |
(104 |
) |
|
|
|
|
|
|
|
|
|
Net distribution fee margin |
|
|
11 |
% |
|
|
(1 |
)% |
Net distribution fee margin varies by share class because each share class has different
distribution and underwriting activities, which are described in our 2009 Annual Report on Form
10-K. Distribution fee revenues and expenses vary with our average assets under management while
deferred sales commissions are typically amortized on a straight-line basis with adjustments made
upon redemption of existing assets. As a result, in periods of declining assets under management,
our distribution margin will be more severely impacted by amortization expense.
-18-
Non-operating income, net of non-controlling interests in partnership investments increased income
by $6.9 million for the first quarter 2010 and by $12.3 million for the first quarter of 2009. The
change in non-operating income is mostly attributable to a decrease in investment income generated
by our corporate investment portfolio.
Revenues
Total revenues increased by $21.6 million, or 36%, to $81.1 million for the three months ended
March 31, 2010 from $59.6 million for the comparable prior-year period. The increase was primarily
due to higher investment management fees and distribution and underwriting fees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
Change |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
|
Amount |
|
|
Percent |
|
Investment management fees |
|
$ |
58,570 |
|
|
$ |
42,001 |
|
|
$ |
16,569 |
|
|
|
39 |
% |
Distribution and underwriting fees |
|
|
21,835 |
|
|
|
17,028 |
|
|
|
4,807 |
|
|
|
28 |
|
Other |
|
|
725 |
|
|
|
540 |
|
|
|
185 |
|
|
|
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
81,130 |
|
|
$ |
59,569 |
|
|
$ |
21,561 |
|
|
|
36 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management fees increased 39% in the first quarter of 2010 primarily due to a $9.2
billion, or 40%, increase in average assets under management across all products for the first
quarter 2010 versus 2009. Investment management fees from open-end funds increased to $36.5 million
for the three months ended March 31, 2010 from $25.0 million for the prior-year period, a result of
a $6.4 billion increase in open-end fund average assets under management. Investment management
fees from our closed-end funds increased to $11.0 million for the first quarter of 2010 from $8.3
million for the prior-year quarter, due to a $1.2 billion increase in closed-end fund average
assets under management. Investment management fees from our separately managed accounts increased
to $10.8 million for the three months ended March 31, 2010 from $8.6 million in the prior year
again due to a $1.7 billion increase in average assets under management. Investment management fees
as a percentage of average assets under management was 0.73% and 0.74% for the three months ended
March 31, 2010 and 2009, respectively.
Distribution and underwriting fees increased by $4.8 million, or 28%, to $21.8 million for the
three months ended March 31, 2010 from $17.0 million for the first quarter 2009. The increase was
primarily due to a $5.1 million increase in distribution fees as a result of a 49% increase in
open-end fund average assets under management.
Operating Expenses
Operating expenses increased by $4.2 million, to $50.6 million, for the three months ended March
31, 2010 from $46.4 million in the prior-year period reflecting increased employee compensation and
distribution expenses and reduced amortization of deferred sales commissions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
Change |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
|
Amount |
|
|
Percent |
|
Employee compensation and benefits |
|
$ |
20,132 |
|
|
$ |
18,091 |
|
|
$ |
2,041 |
|
|
|
11 |
% |
Distribution expenses |
|
|
16,790 |
|
|
|
12,478 |
|
|
|
4,312 |
|
|
|
35 |
|
Amortization of deferred sales
commissions |
|
|
2,566 |
|
|
|
4,654 |
|
|
|
(2,088 |
) |
|
|
(45 |
) |
Marketing and sales promotion |
|
|
2,732 |
|
|
|
2,522 |
|
|
|
210 |
|
|
|
8 |
|
General and administrative |
|
|
8,392 |
|
|
|
8,634 |
|
|
|
(242 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
$ |
50,612 |
|
|
$ |
46,379 |
|
|
$ |
4,233 |
|
|
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-19-
Employee compensation and benefits expense increased by $2.0 million, or 11%, to $20.1 million for
first quarter 2010 when compared to the same period a year ago. Performance-related incentive
compensation accruals were the primary cause to the increase in expenses which were partially
offset by a reduction in severance related expenses.
Distribution expenses increased by $4.3 million, or 35%, for the first quarter of 2010 when
compared to the prior-year period due to an increase in Rule 12b-1 expenses, which are directly
related to changes in average open-end fund assets under management and to the proportion of Class
C share assets less than one year old. Although the Rule 12b-1 fee rates we paid to broker-dealers
and other intermediaries in the three months ended March 31, 2010 did not change from the rates
paid in the prior year, we expect distribution expense to vary with the change in open-end mutual
funds assets under management and to increase with the age of the Class C share assets.
Amortization of deferred sales commissions decreased $2.1 million for the three months ended March
31, 2010, when compared to the first quarter of 2009 mainly due to our decision to discontinue
Class B share mutual fund sales. As a result of our decision to discontinue the sales of Class B
mutual fund shares during the second quarter of 2009, the deferred sales commission assets will no
longer be replenished by new sales, and as a result, we re-evaluated the estimated remaining useful
life of the Class B deferred sales commission assets. Based on this analysis, we increased the
lives of these assets thus extending the period over which the remaining amortization expense will
be recorded and reducing the periodic amortization expense recognized prospectively.
Marketing and sales promotion increased $0.2 million for the three months ended March 31, 2010 when
compared to the prior-year period primarily due to increased supplemental distribution payments to
intermediaries of $0.9 million mostly offset by decreases in discretionary spending. Intermediary
fees are directly influenced by changes in assets under management and average assets under
management are significantly greater for the current quarter when compared to 2009.
Non-operating Activities, Net of Non-controlling Interest in Partnership Investments
The following table summarizes our non-operating activities, net of non-controlling interest in
partnership investments for the three months ended March 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
(in thousands) |
|
2010 |
|
|
2009 |
|
|
Change |
|
Interest income |
|
$ |
106 |
|
|
$ |
164 |
|
|
$ |
(58 |
) |
Interest expense |
|
|
(1,950 |
) |
|
|
(1,950 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest expense |
|
|
(1,844 |
) |
|
|
(1,786 |
) |
|
|
(58 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income |
|
|
8,602 |
|
|
|
13,880 |
|
|
|
(5,278 |
) |
Miscellaneous other income |
|
|
151 |
|
|
|
191 |
|
|
|
(40 |
) |
|
|
|
|
|
|
|
|
|
|
Investment and other income |
|
|
8,753 |
|
|
|
14,071 |
|
|
|
(5,318 |
) |
|
|
|
|
|
|
|
|
|
|
Non-operating income |
|
|
6,909 |
|
|
|
12,285 |
|
|
|
(5,376 |
) |
Net income attributable to non-controlling
interest in partnership investments |
|
|
(7 |
) |
|
|
(31 |
) |
|
|
24 |
|
|
|
|
|
|
|
|
|
|
|
Non-operating income, net of non-
controlling interest in partnerships |
|
$ |
6,902 |
|
|
$ |
12,254 |
|
|
$ |
(5,352 |
) |
|
|
|
|
|
|
|
|
|
|
Non-operating activities increased income by $6.9 million for the three months ended March 31, 2010
and by $12.3 million for the prior-year quarter. Interest expense remained flat year over year as
our debt level remained constant. Investment and other income for the period ending March 31, 2010
was $8.8 million compared to $14.1 for the prior-year quarter. Investment income for the three
months ended March 31, 2010 was mostly comprised of $10.2 million in realized gains from the sale
of securities from our corporate investment portfolio while investment income for the prior years
quarter was mostly comprised of net gains of $14.5 million from equity option contracts.
The following table provides a summary of the total returns generated on our investment portfolio
by combining investment income, a portion of our non-operating income, with the changes in fair
value of certain investment securities that are recorded in accumulated other comprehensive income,
a component of stockholders equity, for the three months ended March 31, 2010:
-20-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2010 |
|
|
|
|
|
|
|
Change in |
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Non-Operating |
|
|
Comprehensive |
|
|
|
|
(in thousands) |
|
Income |
|
|
Income |
|
|
Total |
|
Mutual funds and common stock |
|
$ |
11,612 |
|
|
$ |
(3,330 |
) |
|
$ |
8,282 |
|
Partnership investments |
|
|
764 |
|
|
|
|
|
|
|
764 |
|
Equity option contracts |
|
|
(3,774 |
) |
|
|
|
|
|
|
(3,774 |
) |
|
|
|
|
|
|
|
|
|
|
Investment income |
|
|
8,602 |
|
|
|
(3,330 |
) |
|
|
5,272 |
|
Non-controlling interest in
partnership investments |
|
|
(7 |
) |
|
|
|
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
Investment portfolio results. |
|
$ |
8,595 |
|
|
|
|
|
|
$ |
5,265 |
|
|
|
|
|
|
|
|
|
|
|
|
Less: Non-controlling interest in |
|
|
|
|
|
|
|
|
|
|
|
|
Calamos Holdings LLC |
|
|
|
|
|
|
3,008 |
|
|
|
|
|
Deferred income taxes |
|
|
|
|
|
|
307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in accumulated other
comprehensive income |
|
|
|
|
|
$ |
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our investment portfolio returned $5.3 million, or 2.0%, in the first quarter of 2010. These
results primarily reflect realized gains in the investment portfolio, partially offset by net
realized and unrealized gains and losses on equity option contracts used to hedge market value
fluctuations in the corporate investment portfolio. During the most recent quarter, we implemented
a long-term trading effort to harvest capital gains to ensure realization of certain deferred tax
assets.
Income Taxes
Holdings 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. Our
effective income tax rate for the three month period ended March 31, 2010 was approximately 37.6%
compared to 38.5% a year ago.
Net Income
Net income attributable to Calamos Asset Management, Inc. was $4.8 million for the three months
ended March 31, 2010, compared to $3.4 million for the same period in the prior year.
Liquidity and Capital Resource
We manage our liquidity position to ensure adequate resources are available to fund ongoing
operations of the business, provide seed money for new funds 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 mutual funds. In addition, the individual securities held within our
partnership investments are typically highly liquid.
-21-
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 and to support future
growth. The following table summarizes our principal sources of liquidity as of March 31, 2010 and
December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase |
|
(in thousands) |
|
March 31, 2010 |
|
|
December 31, 2009 |
|
|
(Decrease) |
|
Cash and cash equivalents |
|
$ |
115,002 |
|
|
$ |
145,431 |
|
|
$ |
(30,429 |
) |
Investment securities |
|
|
241,168 |
|
|
|
207,886 |
|
|
|
33,282 |
|
Derivatives, net |
|
|
(1,406 |
) |
|
|
(1,730 |
) |
|
|
324 |
|
Partnership investments, net of non-controlling
interests |
|
|
36,681 |
|
|
|
35,924 |
|
|
|
757 |
|
|
|
|
|
|
|
|
|
|
|
Total corporate investment portfolio |
|
$ |
391,445 |
|
|
$ |
387,511 |
|
|
$ |
3,934 |
|
|
|
|
|
|
|
|
|
|
|
The total corporate investment portfolio increased $3.9 million during the three month period of
2010. The following table summarizes the primary components of the change in our liquidity position
during the three months ending March 31, 2010:
|
|
|
|
|
|
|
Increase |
|
(in thousands) |
|
(Decrease) |
|
Net realized and unrealized gains (losses) on investment securities: |
|
|
|
|
Mutual funds |
|
$ |
7,481 |
|
Partnership investments |
|
|
661 |
|
Equity option contracts |
|
|
(3,774 |
) |
Other net cash generated by business activities |
|
|
(434 |
) |
|
|
|
|
|
|
$ |
3,934 |
|
|
|
|
|
To mitigate the impact of further declines in the valuation of our investment portfolio, we
continue to execute a hedge strategy, specifically an equity option collar that is comprised
primarily of selling index-based call options and purchasing index-based put options. This hedge
continued to provide the stability to our portfolio value as intended. We expect to continue to use
hedge strategies to protect our portfolio value as we believe appropriate.
Calamos Holdings LLC is the borrower of our $125 million in long-term debt. The following is a
summary of our covenant compliance as of March 31, 2010 with the defined terms and covenants having
the same meanings set forth under our amended note purchase agreements:
|
|
|
|
|
|
|
Results as of |
|
Covenant |
|
March 31, 2010 |
|
EBITDA/interest expense not less than 3.0 |
|
|
17.22 |
|
Debt/EBITDA not more than 3.0 |
|
|
0.93 |
|
Investment coverage ratio not less than 1.175 |
|
|
2.4 |
|
Net worth not less than $160 million |
|
$281 million |
The following tables summarize key statements of financial condition data relating to our liquidity
and capital resources:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
Statements of financial condition data: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
115,002 |
|
|
$ |
145,431 |
|
Receivables |
|
|
28,317 |
|
|
|
26,489 |
|
Investment securities and derivatives, net |
|
|
239,762 |
|
|
|
206,156 |
|
Partnership investments, net |
|
|
36,681 |
|
|
|
35,924 |
|
Deferred tax assets, net |
|
|
84,511 |
|
|
|
85,256 |
|
Deferred sales commissions |
|
|
11,941 |
|
|
|
12,705 |
|
Long-term debt |
|
|
125,000 |
|
|
|
125,000 |
|
-22-
Cash flows for the three months ended March 31, 2010 and 2009 are shown below:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
Cash flow data: |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
20,883 |
|
|
$ |
21,697 |
|
Net cash provided by (used in) investing
activities |
|
|
(30,255 |
) |
|
|
21,719 |
|
Net cash used in financing activities |
|
|
(21,057 |
) |
|
|
(5,023 |
) |
Net cash provided by operating activities totaled $20.9 million for the three months ended March
31, 2010. These net cash flows are primarily attributable to investment management and distribution
and underwriting fees generated by core business activities, partially offset by staff,
distribution and other operating expenses.
Investing activities for the three months ended March 31, 2010 used cash totaling $30.3 million.
The net outflow was comprised of additional investments in Company-sponsored mutual funds of $25
million coupled with purchases of derivatives of $4.1 million. Net cash used in financing
activities totaled $21.1 million for the first three months of 2010, largely due to distributions
paid to non-controlling interests and to dividends paid to common shareholders. We expect our cash
and liquidity requirements will be met with cash on hand and through cash generated by operations.
Recently Issued Accounting Pronouncements
In June 2009, the FASB issued a new statement which modifies the analysis required to determine
whether a companys variable interest(s) give it a controlling financial interest in a variable
interest entity (VIE). This analysis identifies the primary beneficiary of a VIE as the enterprise
that has both the power to direct the activities of a VIE and the obligation to absorb losses or
the right to receive benefits of the VIE. This statement was subsequently codified in December 2009
under Accounting Standards Update (ASU) No. 2009-17 and is effective for fiscal years beginning
after November 15, 2009. In February 2010, the FASB issued ASU No. 2010-10, Consolidation,
Amendments for Certain Investment Funds, that defers the implementation of ASU 2009-17 for a
reporting entitys interest in an entity (1) that has all the attributes of an investment company
or (2) for which it is industry practice to apply measurement principles for financial reporting
purposes that are consistent with those followed by investment companies. The Company analyzed the
entities in which it holds an investment interest and determined that the entities meet the
criteria for deferral under ASU No. 2010-10. As such, the Company opted to defer ASU No. 2009-17
and adopted ASU No. 2010-10 during the first quarter 2010, which had no impact on the Companys
financial statements.
Critical Accounting Policies
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,
2009. A discussion of critical accounting policies is included in Managements Discussion and
Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the
year ended December 31, 2009. There were no significant changes in our significant accounting
policies or critical accounting policies during the three months ended March 31, 2010.
Other Information
Our fully consolidated market capitalization is estimated to be $1.3 billion as of March 31, 2010.
This estimate assumes that the closing price of our stock of $14.34 did not recognize any value
associated with CAMs wholly-owned assets. Refer to Item 5 of our 2009 Annual Report on Form 10-K
for a comprehensive discussion of the details and assumptions used in estimating our market
capitalization.
Forward-Looking Information
From time to time, information or statements provided by us or on our behalf, including those
within this Quarterly Report, may contain certain forward-looking statements relating to
future events and financial performance, strategies, expectations and competitive environment, and
regulations. 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;
-23-
market capitalization; managements goals and objectives; and other similar expressions concerning
matters that are not historical facts.
Words such as anticipate, assume, believe, continue, could, estimate, expect,
future, intend, may, opportunity, potential, predict, seek, should, trend,
will, would, and similar expressions, as well as statements in future tense, identify
forward-looking statements.
Forward-looking statements should not be read as a guarantee of future performance or results, and
will not necessarily be accurate indications of the times at, or by, which such performance or
results will be achieved. Forward-looking statements are based on information available at the time
those statements are made and/or managements 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.
Important factors that could cause such differences include, but are not limited to: changes in
applicable laws 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 portfolio; our ownership and
organizational structure; general and prolonged declines in the prices of securities; 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; and the extent and
timing of any share repurchases.
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; mutual 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 mutual 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
our most recently filed Annual Report on Form 10-K discusses some of these and other important factors in detail under the caption Risk
Factors.
Forward-looking statements speak only as of the date the statements are made. Readers should not
place undue reliance on any forward-looking statements. 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, except to the extent required by applicable
securities laws.
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, 2009. There were no material changes to the Companys market risk during the three
months ended March 31, 2010.
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 of March 31, 2010, 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 SECs rules and forms.
There were no changes in the Companys internal control over financial reporting that occurred
during our first quarter that have materially affected, or are reasonably likely to materially
affect, the Companys internal control over financial reporting.
-24-
PART II OTHER INFORMATION
Item 1. Legal Proceedings
In the normal course of business, we may be subject to various legal proceedings from time to time.
Currently, there are no material legal proceedings pending against us.
Item 6. Exhibits
|
|
|
3(i)
|
|
Second Amended and Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 to the Registrants 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 3.2 to the Registrants 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
Registrants Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on December 3, 2004). |
|
|
|
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 Registrants Quarterly Report on Form 10-Q filed with the Securities and
Exchange Commission on December 3, 2004). |
|
|
|
10.1
|
|
Calamos Asset Management, Inc. Incentive Compensation Plan, as amended
effective May 22, 2009 (incorporated by reference to Exhibit 10.1 to the
Registrants Current Report on Form 8-K filed with the Securities and Exchange
Commission on May 27, 2009). |
|
|
|
31.1
|
|
Certification pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act. |
|
|
|
31.2
|
|
Certification pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act. |
|
|
|
32.1
|
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.2
|
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. |
-25-
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, 2010 |
By: |
/s/ Cristina Wasiak
|
|
|
|
Cristina Wasiak |
|
|
|
Chief Financial Officer |
|
|
-26-