e10vk
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year
ended: December 31, 2006
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- or -
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Commission File Number:
000-51003
Calamos
Asset Management, Inc.
(Exact
name of Registrant as specified in its charter)
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Delaware
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32-0122554
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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2020 Calamos Court,
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60563
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Naperville, Illinois
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(Zip Code)
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(Address of principal executive
offices)
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Registrants telephone number, including area code:
630-245-7200
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each
class
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Name of each exchange on
which registered
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Class A Common Stock,
$0.01 par value
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The NASDAQ Stock Market LLC
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large
accelerated filer in
Rule 12b-2
of the Exchange Act. (Check one)
Large accelerated
filer o Accelerated
filer þ Non-accelerated
filer o
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No þ
The aggregate market value of common stock held by
non-affiliates (assuming that all directors and executive
officers are affiliates) on June 30, 2006, the last
business day of the registrants most recently completed
second fiscal quarter, was $669.1 million.
At March 2, 2007, there were 23,324,082 shares of
Class A common stock and 100 shares of Class B
common stock outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Part III Portions of the definitive proxy
statement for our Annual Meeting of Shareholders on May 25,
2007, as specifically described herein.
PART I
In this report, unless the context otherwise requires,
references to we, us, our
and our company refer to (1) Calamos
Asset Management, Inc., a Delaware corporation incorporated on
July 23, 2004, and its consolidated subsidiaries, including
Calamos Holdings LLC and the operating company subsidiaries of
Calamos Holdings LLC, after consummation of the reorganization
undertaken in connection with our initial public offering, and
(2) Calamos Family Partners, Inc., its subsidiaries and
their predecessor companies before consummation of this
reorganization.
Unless the context otherwise requires:
Calamos Advisors refers to Calamos Advisors
LLC, a Delaware limited liability company, investment advisor
registered with the U.S. Securities and Exchange Commission
(SEC) and wholly owned subsidiary of Calamos Holdings LLC.
Calamos Advisors acts as an investment advisor in managing our
open-end and closed-end mutual funds; and
Calamos Family Partners refers to Calamos
Family Partners, Inc., a Delaware corporation, and our
predecessor holding company. Calamos Family Partners is a
private firm owned by members of the Calamos family and owns all
the outstanding shares of our Class B common stock; and
Calamos Interests refers to Calamos Family
Partners and John P. Calamos, Sr., the Chairman of the
Board, Chief Executive Officer and Co-Chief Investment Officer
of the Corporation. Mr. Calamos also holds the controlling
interest in Calamos Family Partners; and
Calamos Financial Services refers to Calamos
Financial Services LLC, a Delaware limited liability company and
broker-dealer registered under the Securities Exchange Act of
1934, as amended, and a wholly owned subsidiary of Calamos
Holdings LLC. Calamos Financial Services acts as the sole
distributor of our family of open-end mutual funds.
The other operating company subsidiaries of Calamos Holdings LLC
are Calamos Property Management LLC, a provider of real estate
investment services, and Calamos Partners LLC, a registered
investment advisor that provides investment management services
primarily related to alternative investment products.
The assets under management and other financial data presented
in this report with respect to the mutual funds that we manage
include the Calamos Growth and Income Portfolio, which is a
portfolio of the Calamos Advisors Trust, a registered open-end
investment company. However, references to the terms
mutual funds and open-end
funds in this report do not otherwise include this
portfolio.
Overview
For 30 years, we have provided investment advisory services
to institutions and individuals, managing $44.7 billion in
client assets at December 31, 2006. We have consistently
applied an investment philosophy and proprietary process
centered on risk management across an expanding range of
investment strategies, including equity, balanced, high yield,
convertible and alternative investments. We believe this
disciplined adherence to our investment philosophy and process
has enabled us to deliver superior risk-adjusted returns over
the long term, which we define as investment returns that are
superior to performance benchmarks with an equal or lower level
of assumed risk.
We seek institutional and individual clients with long-term
investment horizons. We make our range of investment strategies
and services available to these clients, directly and through
intermediaries, by offering an array of investment products
designed to suit their investment needs, such as open-end funds,
closed-end funds and separate accounts, including alternative
investments. We plan to introduce new investment strategies and
supporting services that will provide the opportunity for
attractive risk-adjusted returns.
We believe our investment performance, broad range of investment
strategies, diverse product offerings, emphasis on client
service and sales efforts have allowed us to grow our assets
under management and revenues and have positioned us for
continued growth. Our assets under management increased from
$9.3 billion at December 31,
2
2001 to $44.7 billion at December 31, 2006. We manage
our company, including staffing levels and the commitment of
resources, to accommodate both current activities and expected
future growth in various areas, including investment management,
sales and client servicing.
The Class A common stock of Calamos Asset Management, Inc.
trades on the NASDAQ Stock Market LLC under the symbol CLMS. We
have paid a quarterly dividend each quarter and have increased
our quarterly dividend 22% to 11 cents per share in 2007.
Business
Strategy
We are first and foremost an investment firm that strives to
deliver superior risk-adjusted returns over the long term. Our
business strategy is designed to ensure we maintain and build
upon our investment focus. We apply a team approach to
investment research and portfolio management, which allows us to
leverage significantly our investment talent. Our franchise is
built upon a consistent investment philosophy and process that
has produced strong risk-adjusted investment performance over
the long term and driven significant growth in assets under
management.
Indeed, our goal is to continue to grow our business by
diversifying the assets we manage by investment strategy,
product, service and type of client. We have selectively created
investment products over the years in order to take advantage of
market opportunities for attractive risk-adjusted returns. Key
to executing this strategy is our emphasis on building our
capabilities in order to support growth, improving client
responsiveness and positioning our business for expansion. In
2006, we continued to improve the caliber and scope of our
capabilities in portfolio management, sales, client services,
marketing and other functions.
In executing our business strategy, managing historical growth
and planning for future growth, we have been, and will continue
to be, guided by the following principles:
Maintain
Superior Investment Performance
We have developed proprietary research capabilities, including
an expertise in valuing companies, taking into consideration
their total capital structure. We have a resulting record of
achieving high, risk-adjusted returns over the long term for the
mutual funds and separate accounts that we manage. As of
December 31, 2006, Lipper ranked our Growth Fund as the
number 2 multi-cap growth fund for 10 years, our Market
Neutral Income Fund as the number 1 equity market-neutral
fund for 10 years, and our Global Growth and Income Fund as
the number 2 global multi-cap core fund for
10 years.(1)
Our strategy is to maintain our performance by consistently
applying our investment philosophy and process while actively
managing our strategies to maintain a stable balance of risk and
reward over the full course of a market cycle. We are equally
mindful of protecting our clients assets during changing
market conditions. Accordingly, we have chosen to expand our
product offerings selectively and have closed, and expect to
continue to close, products to new investments during periods
when we do not believe satisfactory risk-adjusted returns can be
achieved with additional client funds.
Focus
on Clients, With an Emphasis on Serving Long-Term
Investors
A guiding principle is to have our clients best interests
in mind and to work hard to outperform client expectations in
performance and service. We strongly believe that the success of
our company is a byproduct of our
(1) Source:
Lipper: As of
12/31/06:
Growth Fund: #447 for 1 year, #25 for
5 years among 492 and 310 multi-cap growth funds,
respectively; Market Neutral Income Fund: #3 for
1 year and #5 for 5 years among 32 and 14 equity
market-neutral funds, respectively; Global Growth and Income
Fund: #61 for 1 year, and #22 for 5 years
among 96 and 56 global multi-cap core funds, respectively.
Lipper rankings of funds are based on net total return
performance with dividends reinvested and do not take into
account or reflect sales charges; if the rankings did reflect
sales charges, the results might be less favorable. Each fund is
ranked within a universe of funds similar in investment
objective as determined by Lipper. All Lipper rankings of the
open-end funds managed by Calamos Advisors cited in this report
are for Class A shares of those funds. The other classes of
shares of those funds may have different performance
characteristics. The ratings and rankings included in this
report are subject to change without notice and are based on
past performance, which may not be predictive of future results.
3
success in helping clients achieve their investment objectives.
In particular, we seek to attract, develop and maintain
long-term client relationships by providing excellent client
service, including educating investors about our investment
philosophy and process. As one measure of the value we place on
serving our clients well, many of our departments have received
or are in the process of earning ISO 9001:2000
certification from the International Organization of
Standardization (ISO). We continue to pursue ISO certification
firm-wide because it provides a rigorous framework for
documenting and continually improving our business practices for
the benefit of our clients.
Selectively
Expand Our Investment Strategies
Since the introduction of our first convertible strategy in
1977, we have expanded our product offerings. In 1990, we
introduced our first equity strategy and in subsequent years
broadened our investment offerings to include high yield, large
cap, total return, international and equity-oriented alternative
investment strategies. Each expansion has been based on our core
competency in investment research and portfolio management,
which generally is based on internal expertise, but may from
time to time require us to recruit investment talent in other
areas, such as fixed income. In early 2007, we introduced a
global equity fund and a market neutral opportunities fund. In
addition, we filed a registration statement for a government
money market fund to be launched later in 2007. We will continue
to expand our investment strategies selectively in areas where
we judge we can produce attractive risk-adjusted returns over
the long term, including alternative investment offerings. We
believe that by doing so, we can enhance our ability to increase
assets under management and revenues.
To ensure we are aligned with our clients, our policy has been
to invest with our clients. At December 31, 2006, we, along
with Calamos Family Partners, had a total of $326 million
invested in our investment strategies. In addition, in early
2007, we seeded the new global equity fund with $30 million
and the new market neutral opportunities fund with
$50 million. We also view managing our corporate cash,
which is part of our broader strategy to expand and diversify
our business, as a way to produce a stable stream of revenue
that in turn allows us to invest in and expand our company.
Expand
Our Distribution Relationships
Our first institutional account mandate was initiated in 1981
for a pension fund account that remains a client today. In the
late 1980s, we became one of the first participants in the
broker-sponsored managed account business. In 2002, we launched
the first of our four closed-end funds. As we have done in the
past, we strive to expand our presence in distribution channels
that best deliver our strategies to long-term investors in order
to grow our client base, assets under management and revenues.
In recent years, we have placed greater emphasis on
a) institutional investors, including private pension
funds, public funds, endowment funds, banks and insurance
companies; b) family offices, private foundations and high
net worth investors; and c) 401(k) platforms, broker
consultants, broker-dealers, financial planners and other
channels for mutual funds and managed account products. In 2007,
as part of our ongoing efforts to expand our distribution
opportunities and client base, we plan to focus on the
institutional market, retirement platforms and wealth management
opportunities, and selectively increase the number of
intermediaries that distribute Calamos products.
Expand
and Diversify Our Client Base
We are working to expand and diversify our client base, both
inside and outside the United States. In the U.S., in addition
to expanding our distribution relationships as described above,
we see opportunities to expand our wealth management business,
which dates back to 1977. In 2007, we expect to form a wealth
management subsidiary and develop a wealth management platform
that, over time, will offer an array of investment products and
value-added services. Outside the U.S., we see growth
opportunities by expanding fund offerings, including funds
domiciled outside the United States, growing our managed account
relationships, and adding global sales and investment expertise.
Capitalize
on Our Recognized and Respected Brand
We believe that brand awareness can lead to asset growth and
help expand our client base. Over the years, we have been
recognized for producing superior long-term investment
performance across a range of investment
4
strategies. For example, Consumer Reports named the
Calamos Global Growth and Income Fund one of its nine top global
funds in January 2007. The Calamos Growth and Income Fund was
featured in Andrew Leckeys nationally syndicated column in
August 2006 and in both Smart Money and the Wall
Street Journal in October 2006. The Calamos Growth Fund was
named a
10-year top
performer in Kiplingers Personal Finance in August
2006. The Calamos Market Neutral Income Fund was profiled on
BusinessWeek.com in August 2006. Our chief investment
officers, John P. Calamos, Sr. and Nick P. Calamos, have
written books on investments in convertible securities and are
recognized experts on investing. During 2006, they discussed
their investment insights on CNBC, Bloomberg TV and
Pensions and Investments, among others. We believe that
as a public company, we have been able to strengthen the Calamos
brand and awareness of our investment philosophy.
Investment
Philosophy, Management and Process
Investment
Philosophy
We believe that a successful investment philosophy must be
consistent and long-term oriented. Our investment philosophy is
based on our views about the longer-term trends and economic
conditions that affect financial markets. We assume there will
always be unforeseen events that will continually test the
conventional wisdom. We believe we can achieve favorable
investment results based on our experience in many market
environments, our continued study of economics and financial
markets, and our application of a sound investment process that
can cope with volatility and risky markets. Because of this
philosophy, our investment process is focused on risk
management. The creation of wealth for our clients over the long
term is not solely about producing returns, but about managing
risk, which we define as the potential for loss and the
variability of returns.
We seek to provide our clients with superior risk-adjusted
returns over the long term. While seeking to achieve strong
returns, we focus first on managing risk. We offer a variety of
investment strategies that represent distinct balances, or
profiles, of risk and reward. We believe that diversification is
critical to managing risk and moderating the impact of volatile
markets. Our objective is to maintain the consistency of each
strategys risk and reward profile, whether managing a
conservative or an aggressive strategy.
We make decisions on individual securities in the context of our
perspective on macroeconomic themes in the U.S. and the world.
While the market may not always follow the same pattern every
economic cycle, history provides a valuable context for
evaluating the risks and opportunities of the current
environment. Our investment decision-makers have years of
experience managing through many market cycles.
Investment
Management
We employ a team approach to portfolio management. Our various
investment teams are led by our chief investment officers, John
P. Calamos, Sr. and Nick P. Calamos, and are generally
comprised of senior strategy analysts, intermediate analysts and
junior analysts. Portfolio holdings are reviewed and trading
activity is regularly discussed by team members. While
day-to-day
management of the portfolios is a team effort, the senior
strategy analysts, along with our co-chief investment officers,
have primary and supervisory responsibility for the portfolios
and work with team members to develop and execute the
portfolios investment program. This team approach allows
for valuable contributions from numerous analysts within our
company and creates a synergy of expertise that can be applied
across many different investment strategies. We also believe
that pooling the expertise of our analysts provides for more
consistent investment performance over the long term and
provides for significant leverage of our investment talent.
Members of our investment team participate in a career track
system that helps institutionalize our investment process by
immersing many analysts and other team members in our system
from early in their careers. Additionally, key members of the
investment team participate in our incentive compensation plan.
Through this plan, investment team members can share in the
overall success of our company. As of year-end 2006, our
investment management team included 75 members focused on
portfolio management and research, trading, portfolio
administration and developing analytical models. To accommodate
the diversification and growth of our investment strategies, we
intend to continue hiring investment professionals who can
complement and add to our core competencies.
5
Investment
Process
We believe that the financial markets operate in a manner that
precludes using a single method of analysis, and that market
fluctuations call for a more flexible approach. Our long-term
investment strategy is based on an investment process that
relies on qualitative research and analysis to determine a
companys economic enterprise value. Using this process,
our investment management team is able to value all securities
within a corporate capital structure.
The key steps in the qualitative component of our investment
process are:
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Assess Business Value. We analyze businesses
as would a buyer of the entire company, analyzing financial
statements to determine an economic enterprise value.
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Assess Security Value. Once we understand the
value of a business, our investment team focuses on individual
security values within its capital structure.
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Assess Investment Opportunities. By
understanding all aspects of a companys capital structure,
we seek to identify opportunities across asset classes (where
applicable), as well as investment strategies.
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Assess the Opportunitys Role in the
Portfolio. Using risk management and portfolio
construction techniques, we determine whether an individual
security has a place in our investment portfolios and strategies.
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We also employ a variety of quantitative tools as part of our
investment process to construct portfolios.
Moreover, in addition to our sizable allocation of staff and
resources to technology, a separate research development team is
dedicated solely to investment team needs and projects,
reporting directly to our chief investment officers. We have
consistently sought technological advantages to improve the
investment process and continue to devote significant resources
in this area.
Investment
Strategies
The following table describes our investment strategies within
the equity, balanced, convertible, high yield and alternative
asset classes.
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Assets Under
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Management at
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December 31, 2006
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Asset Strategies
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(in billions)
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Description
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Equity
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$
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22.8
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Invests in a range of U.S. and
global companies of various market capitalization under both
growth and value disciplines
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Balanced
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12.9
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Invests in dynamic blend of
convertible securities, equities and high yield securities, both
in the U.S. and globally
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Convertible
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5.0
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Invests primarily in convertible
securities
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High Yield
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3.0
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Invests in high yield securities
or junk bonds, as well as higher-yielding
convertible securities
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Alternative
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1.0
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Invests in non-traditional
strategies, including market neutral, convertible arbitrage and
leveraged equity, among others
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Total
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$
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44.7
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Investment
Products
We market our investment strategies to our clients through a
variety of products designed to suit their individual investment
needs. We currently offer five types of investment products that
fall into the categories of mutual funds and separate accounts.
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Mutual
Funds
Mutual funds include open-end funds and closed-end funds
registered under the Investment Company Act of 1940, as amended.
Open-End
Funds
At December 31, 2006, we had $27.3 billion of assets
under management in open-end funds, representing approximately
61% of our total assets under management. Open-end funds are
continually offered and are not listed on an exchange. Open-end
funds issue new shares for purchase, unless they are closed to
new investors, and redeem shares from those shareholders who
sell. The share price for purchases and redemptions of open-end
funds is determined by each funds net asset value, which
is calculated at the end of each business day.
We introduced our first open-end fund, the Calamos Convertible
Fund, in 1985. We have since expanded our open-end fund products
and services to invest in securities worldwide and to include
equity, balanced, high yield, convertible and alternative
strategies that we believe offer attractive risk-adjusted return
potential. As of year-end 2006, we acted as the investment
advisor to 10 open-end funds offered to customers primarily
through financial intermediaries. In early 2007, we introduced a
global equity fund and filed a registration statement for a
government money market fund to be introduced later in the year.
We expect to continue to seek opportunities to expand and
develop the investment strategies offered in our open-end fund
products as market conditions change.
Calamos Advisors manages the strategies of each of the open-end
funds with the goal of achieving higher returns than their
respective benchmarks over the long term, but with less risk
than that of the broad market. To do so, our investment team
focuses on maintaining each strategys distinct balance
between risk and return throughout
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the full course of the market cycle. The following table
provides the assets under management for each open-end fund
managed as of December 31, 2006:
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Assets Under
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Fund and
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Management at
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Ticker Symbol
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December 31, 2006
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Year of
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(A Shares)
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(in billions)
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Inception
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Description
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Growth
CVGRX
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$
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17.1
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1990
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Seeks long-term capital growth by
investing in domestic equities identifying companies with higher
growth relative to peers
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Blue Chip
CBCAX
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0.2
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2003
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Seeks long-term capital growth by
investing in equities of larger, established U.S. companies
with balance sheet strength, which can help mitigate downside
risk
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Value
CVAAX
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0.1
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2002
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Seeks long-term capital growth by
investing in the equities of domestic companies that are trading
well below their intrinsic values but possess identifiable
potential catalysts that can spur them to normal levels
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International Growth
CIGRX
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0.3
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2005
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Seeks long-term capital growth by
targeting securities of
non-U.S. companies
that demonstrate acceleration in revenue growth, earnings growth
and return on capital
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Global Growth and Income
CVLOX
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0.9
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1996
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Seeks high long-term total return
through capital appreciation and current income, while offering
a defensive approach to equity exposure by strategically
allocating stocks, convertible and fixed-income securities among
countries and security types
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Multi-Fund Blend
CMQAX
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n/a
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2006
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As a fund of three Calamos funds,
seeks long-term capital growth and, secondarily, current income
by investing in the I shares of the Growth Fund, Global Growth
and Income Fund, and Value Fund
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Growth and Income
CVTRX
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6.7
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1988
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Seeks high long-term total return
through growth and current income by allocating investments
among equity, convertible and fixed-income securities
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High Yield
CHYDX
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0.2
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1999
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Seeks the highest level of current
income obtainable with reasonable risk, with a secondary
objective of capital appreciation, by combining higher-yielding
fixed income and convertible securities to achieve greater
equity sensitivity than a traditional non-convertible fixed
income allocation
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Convertible (1)
CCVIX
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0.8
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1985
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Seeks current income, with a
secondary objective of capital growth, by investing in
convertible securities issued by both U.S. and foreign companies
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Market Neutral Income
CVSIX
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1.0
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1990
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Seeks high current income
consistent with stability of principal by dynamically combining
complementary income-producing strategies such as convertible
arbitrage and covered call writing
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Total
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$
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27.3
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(1) |
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Closed to new investments, effective April 30, 2003. |
At December 31, 2006, 82% of the $26.5 billion of
open-end fund assets we manage that have an overall Morningstar
rating were rated four stars or five
stars by Morningstar. These ratings are based on past
performance, which may not be predictive of future
results.(2)
(2) Overall
Morningstar ratings of mutual funds reflect historical
risk-adjusted performance as of a particular date and are
subject to change every month and are calculated from a
funds three-, five- and
10-year
average annual returns, as available, in excess of
90-day
T-bill returns with appropriate fee adjustments and a risk
factor that reflects fund performance below
90-day
T-bill returns. The top 10% of the funds in an investment
category receive five stars, the next 22.5% receive four stars,
the next 35% receive three stars, the next 22.5% receive two
stars and the last 10% receive one star. Each share class of a
fund is counted as a fraction of one fund within this scale and
rated separately, which may cause slight variations in the
distribution percentages. All overall Morningstar ratings of the
open-end funds managed by Calamos Advisors cited in this report
are for Class A shares of those funds. The other classes of
shares of those funds may have different performance
characteristics. The ratings and rankings included in this
report are subject to change without notice and are based on
past performance, which may not be predictive of future results.
8
Closed-End
Funds
At December 31, 2006, we had $6.4 billion of assets
under management in closed-end funds, representing approximately
14% of our total assets under management. Closed-end funds
typically sell a finite number of shares to investors through
underwritten public offerings, unlike open-end funds, which
continually offer new shares to investors. After the public
offerings, investors buy and sell those shares to other
investors through an exchange or broker-dealer market.
We introduced our first closed-end fund, the Convertible
Opportunities and Income Fund (NYSE: CHI), in 2002. With this
fund, we were among the first managers to combine different
asset classes in a single closed-end offering, seeking to
enhance returns and limit risk. We have since expanded our
closed-end fund products and currently act as the investment
advisor to four closed-end funds, each of which trades on the
New York Stock Exchange. The Calamos Strategic Total Return Fund
also is listed on NASDAQ.
In 2006, we completed a secondary public offering of the Calamos
Convertible and High Income Fund (NYSE:CHY). As market
conditions warrant, we expect to expand our existing closed-end
funds through secondary or rights offerings, or both, and to
introduce new closed-end funds that we believe will offer
attractive risk-adjusted return potential.
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Assets Under
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Management at
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December 31, 2006
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Year of
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Fund and Ticker
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(in billions)
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Inception
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Description
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Convertible Opportunities and
Income
CHI
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$
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1.1
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2002
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Seeks total return through a
combination of capital appreciation and current income by
investing in convertible and non-convertible fixed income
securities
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Convertible and High
Income
CHY
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1.5
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2003
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Seeks total return through a
combination of capital appreciation and current income by
investing in convertible and high yield fixed income securities
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Strategic Total Return
CSQ
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3.6
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2004
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Seeks total return through a
combination of capital appreciation and current income by
investing in equity, convertible and high yield fixed income
securities
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Global Total Return
CGO
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0.2
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2005
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Seeks total return through a
combination of capital appreciation and current income by
investing in a globally diversified portfolio of equity,
convertible and high yield fixed income securities
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Total
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$
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6.4
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Each of our closed-end funds currently employs leverage in its
capital structure by issuing preferred shares. With leverage, we
seek to generate additional dividend potential for the common
shareholders based on historical differences between short-term
and long-term taxable interest rates. The dividends paid to
preferred shareholders are based on short-term interest rates,
while the proceeds from issuing preferred shares are invested by
the funds in longer-term taxable securities.
We distribute the Calamos open-end funds, closed-end funds and
managed accounts (see below) primarily through financial
intermediaries. We have developed an extensive network of
third-party financial intermediaries, and our products are
structured to meet their needs and those of their clients. Our
sales professionals are located across the United States, and
they act in a consultative role to provide our clients with
value-added services. In
9
recent years, they have focused on 401(k) platforms, broker
consultants, broker-dealers, financial planners and other
channels for mutual funds and managed account products. We
intend to grow our intermediary business through selective
intermediary relationships, and we opportunistically seek to
introduce new products that best deliver our investment
strategies to investors through these distribution channels.
Client accounts held at our top five financial intermediaries
represented approximately 44% of our assets under management as
of December 31, 2006.
Separate
Accounts
Separate accounts include institutional accounts, managed
accounts and alternative investments.
Institutional
Accounts
At December 31, 2006, we had $5.2 billion of assets
under management in institutional accounts, representing
approximately 12% of our total assets under management.
Institutional accounts are separately managed accounts for
certain investors, such as private pension funds, public funds
and endowment funds, offered through consultants, broker-dealer
intermediaries and directly by us. We have more than 400
institutional accounts, including commingled funds and
sub-advised
relationships.
Our first institutional account mandate was initiated in 1981
for a pension fund account that remains a client today. Since
initially offering convertible investment strategies to
institutions, we have broadened our mandates to include a
variety of investment strategies in other asset classes, such as
equity and high yield. Currently, our convertible strategies
remain closed to new accounts. In recent years, our consultant
calling team and business development officers have targeted
private pension funds, public funds, endowment funds, banks and
insurance companies and focused on educating institutional
prospects about our performance. Our institutional marketing
efforts center on identifying potential new investors,
developing relationships with institutional consultants and
providing ongoing client service to existing institutional
accounts. We focus on growing our institutional business through
equity and high yield mandates, managed under both domestic and
global objectives.
Managed
Accounts
At December 31, 2006, we had $5.7 billion of assets
under management in managed accounts, representing approximately
13% of our total assets under management. Our more than 22,000
managed accounts are individual portfolios of securities offered
primarily through 19 national and regional broker-dealer
platforms.
We first introduced a managed account through a broker-dealer
sponsored platform in 1989. Since initially offering convertible
investment strategies to our managed account customers, we have
broadened our mandates to include balanced, equity and high
yield investment strategies. Currently, our convertible
strategies remain closed to new accounts.
Alternative
Investments
At December 31, 2006, we had $95 million of assets
under management in alternative investment products,
representing less than 1% of our total assets under management.
Alternative investment products include private investment
vehicles, primarily hedge funds, offered directly by us to
qualified individual and institutional investors.
Building upon our expertise in risk management, we introduced
our first alternative investment product in 1988. In early 2007,
we launched a market neutral opportunities fund for qualified
investors; we also offer an equity-oriented alternative
investment product. We believe that the combination of our
investment team approach and analytical resources give us the
ability to excel further in this arena, particularly in
specialized and underserved market segments. Based on the
investment opportunities we see, we expect to develop other
alternative investment products under a variety of strategies.
10
Other
Advisory Services
Wealth
Management
We provide wealth management services, including asset
allocation, to high net worth individuals, family offices and
foundations. Our wealth management group offers customized asset
allocation advice under the guidance of our investment
management team. Our individualized services include offering
managed portfolios of mutual funds and separate accounts in both
taxable and tax-deferred accounts; developing and executing
multi-generational investment policies, asset management and
income distribution plans; managing retirement, profit sharing
and deferred compensation plans; providing asset allocation and
investment management for foundations and endowments; and
integrating alternative investments into a comprehensive
financial plan.
As part of our annual strategic review process, our view of how
best to position and grow our wealth management capabilities
evolved in 2006, and as a result, we have reclassified at
December 31, 2006 our more than 470 wealth management
clients representing more than $660 million of assets under
management into their respective underlying investment products.
We support our wealth management clients with a dedicated team
of relationship managers and client servicing staff. In
addition, we have dedicated business development officers
engaged in cultivating new business opportunities through a
national network of high net worth professional advisors, family
offices, private foundations and select referral platforms.
Investor
Services
Calamos Financial Services offers investment guidance and
account support to self-directed investors who hold
approximately $210 million of Calamos open-end funds. In
2006, we established an investor services center in our
headquarters to assist investors in answering questions about
their accounts and Calamos investment products.
Other
Considerations
Technology
and Intellectual Property
We consider technology to be a competitive advantage both in the
investment process and elsewhere in the company. Our investment
approach demands specific requirements for all aspects of the
investment process, including risk management, security analysis
and trade processing. As a result, our use of in-house developed
and third-party technology and software enables customization of
systems across our company. Our quantitative investment tools,
including our proprietary Calamos Corporate System, or CCS,
continue to be enhanced by our separate research development
team, which reports to our chief investment officers. Our
internal investment-related systems are geared to the principles
that guide our investment process, allowing for a more seamless
integration of security analysis, trade processing, accounting
and portfolio administration of our more than 22,000 accounts.
In mid-2005, we relocated our company to a new headquarters in
Naperville, Illinois. Our infrastructure investment provides for
significant redundancies in systems and includes a world-class
data center to support our trading floor, investment analysis
and other business-critical functions. This new technology is
designed to accommodate growth in the number and complexity of
applications.
Trademarks, service marks and brand name recognition are
important to our business. We have rights to the trade and
service marks under which our products are offered in connection
with financial analysis and consultation, financial portfolio
management and financial investment. We have registered certain
marks in the United States, France, Germany, Ireland,
Switzerland and the United Kingdom, and will continue to do so
as new marks are developed or acquired. We have taken, and will
continue to take, action to protect our interest in these marks.
Competition
We compete in all aspects of our business with a large number of
investment management firms, commercial banks, broker-dealers
and insurance companies. We compete principally on the basis of
investment performance; quality of client service; brand
recognition and business reputation; continuity of client
relationships and assets under management; continuity of our
selling arrangements with financial intermediaries; the range of
products
11
offered; the level of fees and commissions charged for services;
the level of expenses paid to financial intermediaries for
administration and distribution; and financial strength.
The following factors, among others, serve to increase our
competitive risks: the financial strength and more comprehensive
line of products and services provided by our competitors;
consolidation within the investment management industry, which
is increasing the size and strength of certain competitors;
relatively few barriers to entry, which may increase the number
of competitors; and the recruiting of our investment
professionals and other employees from us.
These and other factors could reduce our earnings and revenues
and materially adversely affect our business.
Regulatory
Environment
Virtually all aspects of our businesses are subject to extensive
regulation in the United States at both the federal and state
level, as well as by self-regulatory organizations. These laws
and regulations are primarily intended to protect investment
advisory clients and shareholders of registered investment
companies. Under these laws and regulations, agencies that
regulate investment advisors, such as Calamos Advisors, have
broad administrative powers, including the power to limit,
restrict or prohibit an investment advisor from carrying on its
business in the event that it fails to comply with such laws and
regulations. Possible sanctions that may be imposed include the
suspension of individual employees, limitations on engaging in
certain lines of business for specified periods of time,
revocation of investment advisor and other registrations,
censures and fines.
Calamos Advisors and Calamos Partners are registered as
investment advisors with the SEC. As registered advisors, they
are subject to the requirements of the Investment Advisers Act,
and the SECs regulations thereunder, as well as to
examination by the SECs staff. The Investment Advisers Act
imposes substantive regulation on virtually all aspects of their
business and its relationship with its clients. Applicable
requirements relate to, among other things, fiduciary duties to
clients, engaging in transactions with clients, maintaining an
effective compliance program, performance fees, solicitation
arrangements, conflicts of interest, advertising, and
recordkeeping, reporting and disclosure requirements. The mutual
funds Calamos Advisors manages are registered with the SEC under
the Investment Company Act. The Investment Company Act imposes
additional obligations, including detailed operational
requirements for both the funds and their advisor. Moreover, an
investment advisors contract with a registered fund may be
terminated by the fund on not more than 60 days
notice, and is subject to annual renewal by the funds
board after an initial two-year term. As discussed below, both
the Investment Advisers Act and the Investment Company Act
regulate the assignment of advisory contracts by the
advisor. The SEC is authorized to institute proceedings and
impose sanctions for violations of the Investment Advisers Act
and the Investment Company Act, ranging from fines and censures
to termination of an investment advisors registration. The
failure of Calamos Advisors or Calamos Partners or the
registered funds advised by Calamos Advisors to comply with the
requirements of the SEC could have a material adverse effect on
us.
We are also subject to the federal and state laws affecting
corporate governance, including the Sarbanes-Oxley Act of 2002
and rules promulgated by the SEC. In addition, because our
Class A Common Stock is listed on the NASDAQ Stock Market,
we are subject to the rules of NASDAQ, including the corporate
governance listing standards approved by the SEC.
In its capacity as a broker-dealer, Calamos Financial Services
is subject to regulations that cover all aspects of its
business, including sales practices, use and safekeeping of a
clients funds and securities, the capital structure of
securities firms, recordkeeping and the conduct of directors,
officers and employees. Violation of applicable regulations can
result in the revocation of broker-dealer licenses, the
imposition of censure or fines and the suspension or expulsion
of a firm, its officers or employers. Calamos Financial Services
also is required to maintain certain minimum net capital and
cash reserves for the benefit of its customers.
Under the rules and regulations of the SEC promulgated pursuant
to the federal securities laws, Calamos Advisors, Calamos
Partners and Calamos Financial Services are subject to periodic
examination by the SEC. Calamos Financial Services also is
subject to periodic examination by the NASD.
Calamos Advisors is subject to the Employee Retirement Income
Security Act of 1974, as amended, or ERISA, and to regulations
promulgated thereunder, insofar as it is a fiduciary
under ERISA with respect to benefit
12
plan clients. ERISA and applicable provisions of the Internal
Revenue Code of 1986, as amended, impose certain duties on
persons who are fiduciaries under ERISA, prohibit certain
transactions involving ERISA plan clients and provide monetary
penalties for violations of these prohibitions. Our failure to
comply with these requirements could have a material adverse
effect on our business.
Employees
At December 31, 2006, we had approximately
380 full-time employees.
SEC
Filings
Through our Internet website, we make available our annual
report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and any amendments to those reports filed or furnished pursuant
to Section 13(a) or 15(d) of the Exchange Act as soon as
reasonably practicable after we electronically file such
material with, or furnish it to, the Securities and Exchange
Commission. To retrieve any of this information, visit the
Investor Relations section of our website at
www.calamos.com.
Business
Risks
We caution the reader that the following business risks and
those risks described elsewhere in this report and our other
Securities and Exchange Commission, or SEC, filings, could cause
our actual results to differ materially from expectations stated
in our forward-looking statements.
Risks
Related to Our Industry
Changes
in laws or regulations or in governmental policies could limit
the sources and amounts of our revenues, increase our costs of
doing business, decrease our profitability and materially and
adversely affect our business.
Our business is subject to extensive regulation in the United
States, primarily at the federal level, including regulation by
the SEC under the Investment Company Act of 1940, as amended,
and the Investment Advisers Act of 1940, as amended, by the
Department of Labor under the Employee Retirement Income
Security Act of 1974, as amended, or ERISA, as well as
regulation by the National Association of Securities Dealers,
Inc., or NASD, and state regulators. The mutual funds managed by
Calamos Advisors are registered with the SEC as investment
companies under the Investment Company Act. The Investment
Advisers Act imposes numerous obligations on investment
advisors, including record-keeping, advertising and operating
requirements, disclosure obligations and prohibitions on
fraudulent activities. The Investment Company Act imposes
similar obligations, as well as additional detailed operational
requirements, on registered investment companies and investment
advisors. Industry regulations are designed to protect our
clients and investors in our funds and other third parties who
deal with us and to ensure the integrity of the financial
markets. They are not designed to protect our stockholders.
Changes in laws or regulations or in governmental policies could
limit the sources and amounts of our revenues, increase our
costs of doing business, decrease our profitability and
materially and adversely affect our business. Further, our
failure to comply with applicable laws or regulations could
result in fines, censure, suspensions of personnel or other
sanctions, including revocation of our registration as an
investment advisor or broker-dealer.
To the
extent we are forced to compete on the basis of price, we may
not be able to maintain our current fee structure.
The investment management business is highly competitive and has
relatively low barriers to entry. To the extent we are forced to
compete on the basis of price, we may not be able to maintain
our current fee structure. Although our investment management
fees vary from product to product, historically we have competed
primarily on the performance of our products and service, and
not on the level of our investment management fees relative to
those of our competitors. In recent years, however, there has
been a trend toward lower fees in the investment management
industry. In order to maintain our fee structure in a
competitive environment, we must be able to
13
continue to provide clients with investment returns and service
that make investors willing to pay our fees. In addition, the
board of trustees of each mutual fund managed by Calamos
Advisors must make certain findings as to the reasonableness of
its fees. We cannot be assured that we will succeed in providing
investment returns and services that will allow us to maintain
our current fee structure. Fee reductions on existing or future
new business could have an adverse effect on our profit margins
and results of operations.
We
derive a substantial portion of our revenues from contracts that
may be terminated on short notice.
We derive a substantial portion of our revenues from investment
management agreements with mutual funds that, as required by
law, are generally terminable by the funds board of
trustees or a vote of the majority of the funds
outstanding voting securities on not more than
60 days written notice. After an initial term, each
funds investment management agreement must be approved and
renewed annually by the independent members of such funds
board of trustees and, in certain cases, by its stockholders, as
required by law. These investment management agreements may be
terminated for any number of reasons, including investment
performance, advisory fee rates and financial market
performance, or may not be renewed. If any of these agreements
are terminated, we may not be able to replace these agreements
on favorable terms. The decrease in revenues that could result
from any such termination could have a material adverse effect
on our business.
Investors
in the open-end funds can redeem their investments in these
funds at any time without prior notice, which could adversely
affect our earnings.
Open-end fund investors may redeem their investments in those
funds at any time without prior notice. In a declining stock
market, the pace of mutual fund redemptions could accelerate.
Poor performance relative to other asset management firms tends
to result in decreased purchases of mutual fund shares and
increased redemptions of mutual fund shares. The redemption of
investments in mutual funds managed by Calamos Advisors would
adversely affect our revenues, which are substantially dependent
upon the assets under management in our funds. If redemptions of
investments in mutual funds caused our revenues to decline, it
could have a material adverse effect on our earnings.
A
decline in the prices of securities would lead to a decline in
our assets under management, revenues and
earnings.
Substantially all of our revenues are determined by the amount
of our assets under management. Under our investment advisory
contracts with our clients, the investment management fee we
receive is typically based on the market value of assets under
management. In addition, we receive asset-based distribution
and/or
service fees with respect to the open-end funds managed by
Calamos Advisors over time pursuant to distribution plans
adopted under provisions of
Rule 12b-1
under the Investment Company Act.
Rule 12b-1
fees typically are based on the market value of assets under
management and represented approximately 28% of our revenues for
each year ended December 31, 2006 and 2005 and 27% of our
revenues for the year ended December 31, 2004. Accordingly,
a decline in the prices of securities generally may cause our
revenues and net income to decline by either causing the value
of our assets under management to decrease, which would result
in lower investment advisory and
Rule 12b-1
fees, or causing our clients to withdraw funds in favor of
investments they perceive to offer greater opportunity or lower
risk, which would also result in lower fees. The securities
markets are highly volatile and securities prices may increase
or decrease for many reasons beyond our control, including
economic and political events and acts of terrorism. If a
decline in securities prices caused our revenues to decline, it
could have a material adverse effect on our earnings.
Catastrophic
and unpredictable events could have a material adverse effect on
our business.
A terrorist attack, war, power failure, cyber-attack, natural
disaster or other catastrophic or unpredictable event could
adversely affect our future revenues, expenses and earnings by:
interrupting our normal business operations; sustaining employee
casualties, including loss of our key executives; requiring
substantial expenditures and expenses to repair, replace and
restore normal business operations; and reducing investor
confidence.
14
We have a disaster recovery plan to address catastrophic and
unpredictable events but we cannot be assured that this plan
will be sufficient in responding or ameliorating the effects of
all disaster scenarios. If our employees or vendors we rely upon
for support in a catastrophic event are unable to respond
adequately or in a timely manner, we may lose clients resulting
in a decrease in assets under management with a material adverse
effect on revenues and net income.
Risks
Related to Our Business
Control
by Calamos family members of a majority of the combined voting
power of our common stock may give rise to conflicts of
interests.
As of December 31, 2006, the Calamos Interests owned
approximately 77% of the membership units in Calamos Holdings
LLC and all of our Class B common stock, representing more
than 97% of the combined voting power of all classes of our
voting stock. Pursuant to the terms of our amended and restated
certificate of incorporation, Calamos Family Partners, Inc.
retains a majority of the combined voting power of our common
stock until the number of outstanding shares of our Class B
common stock, plus the number of membership units in Calamos
Holdings LLC and shares of our Class A common stock held by
holders of our Class B common stock, falls below 15% of the
total number of outstanding membership units in Calamos Holdings
LLC, at which time all outstanding shares of our Class B
common stock automatically will convert into shares of our
Class A common stock. Accordingly, as long as Calamos
Family Partners, Inc. maintains the requisite ownership
interests in our Class B common stock and our Class A
common stock and in membership units of Calamos Holdings LLC,
will continue to have the ability to elect all of the members of
our board of directors and thereby control our management and
affairs, including determinations with respect to acquisitions,
dispositions, borrowings, issuances of common stock or other
securities, and the declaration and payment of dividends on our
common stock. In addition, they will continue to be able to
determine the outcome of all matters requiring stockholder
approval and will continue to be able to cause or prevent a
change of control of our company or a change in the composition
of our board of directors and could preclude any unsolicited
acquisition of our company. The concentration of ownership could
deprive our Class A stockholders of an opportunity to
receive a premium for their common stock as part of a sale of
our company and might ultimately negatively affect the market
price of our Class A common stock. As a result of the
control exercised by Calamos Family Partners, Inc., none of our
agreements with them and other companies controlled by them are
deemed to be negotiated on arms length terms.
However, any such agreements since our initial public offering
have been approved in accordance with the Conflict of Interests
Policy contained in our Amended and Restated Certificate of
Incorporation.
The
loss of key executives could have a material adverse affect on
our business.
We are dependent on the efforts of John P. Calamos, Sr.,
our Chairman, Chief Executive Officer and Co-Chief Investment
Officer, and Nick P. Calamos, our Senior Executive Vice
President and Co-Chief Investment Officer, and other key
executives. These executives have been responsible for
determining the strategic direction of our business, are
integral to our brand and the positive business reputation we
enjoy and, having overseen the management of all of our
investment portfolios and the research teams responsible for
each of our portfolio strategies, have been responsible for the
historically strong investment performance that allows us to
compete successfully. Although we have employment agreements
with John P. Calamos, Sr. and Nick P. Calamos, we cannot
assure you that they will continue to act in their positions
with us. If we lose the services of any of these key executives,
it may have a material adverse effect on our business.
We
depend on third-party distribution channels to market our
investment products and access our client base.
The potential investor base for mutual funds and separate
accounts is limited, and our ability to distribute mutual funds
and access clients for separate accounts is highly dependent on
access to the retail distribution systems and client bases of
national and regional securities firms, banks, insurance
companies, defined contribution plan administrators and other
intermediaries, which generally offer competing internally and
externally managed investment products. For open-end funds, such
intermediaries are paid for their services to fund shareholders,
in
15
part, through
Rule 12b-1
fees and/or
upfront commission payments by us, for which we receive
Rule 12b-1
payments in the future. Those future payments allow us to pay or
help us recover payments to selling firms. Access to such
distribution systems and client bases is substantially dependent
upon our ability to charge
Rule 12b-1
fees to our funds. Our institutional separate account business
depends on referrals from financial planners and other
professional advisors, as well as from our existing clients. We
cannot assure you that these channels and client bases will
continue to be accessible to us. The inability to have such
access could have a material adverse effect on our earnings.
While we continue to diversify and add new distribution channels
for mutual funds and managed accounts, a significant portion of
the growth in our assets under management in recent years has
been accessed through intermediaries. As of December 31,
2006, substantially all of our assets under management were
attributable to accounts that we accessed through third-party
intermediaries. These intermediaries generally may terminate
their relationships with us on short notice. Loss of any of the
distribution channels afforded by these intermediaries, and the
inability to access clients through new distribution channels,
could decrease our assets under management and adversely affect
our results of operations and growth. In addition, in the case
of managed accounts offered through intermediaries to their
customers, such intermediaries may reduce the fees that they
remit to us as part of the arrangements they have with us. For
the years ended December 31, 2006, 2005 and 2004, the fees
we received from managed accounts through intermediaries were
$31.0 million, $30.5 million and $28.5 million,
respectively. A substantial reduction in fees received from
third-party intermediaries could have a material adverse affect
on our business.
Our
ability to operate our company effectively could be impaired if
we are unable to attract and retain qualified
personnel.
Our investment management business depends on the expertise of
our personnel and their ability to work together as an effective
team. Our future success depends to a substantial degree on our
ability to attract and retain qualified personnel. In
particular, we anticipate that it will be necessary for us to
add investment professionals as we further diversify our
investment products and strategies. Competition for employees
with the necessary qualifications is intense and we may not be
successful in our efforts to recruit and retain the required
personnel.
We cannot guarantee that our compensation methods will allow us
to recruit and retain the required personnel we need. In
particular, the use of equity compensation may be ineffective if
the market price of our Class A common stock declines. The
inability to recruit and retain qualified personnel could affect
our ability to provide an acceptable level of service to our
clients and funds and our ability to attract new clients and
investors in our funds, each of which could have a material
adverse effect on our business.
We
derive a substantial portion of our revenues from a limited
number of our products.
As of December 31, 2006, 38% of our assets under management
were concentrated in the Calamos Growth Fund, and 44% of our
investment management fees were attributable to that fund. As a
result, our operating results are particularly exposed to the
performance of that fund and our ability to minimize redemptions
from and maintain assets under management in that fund. Further,
given the size and prominence of the Growth Fund within our
company, the performance of the Growth Fund may also indirectly
affect the net purchases and redemptions in our other products,
which in turn may negatively affect our operating results. In
addition, if our investment management agreement with the Growth
Fund were terminated for any reason, the decrease in revenues
that would result from any such termination would materially
impact our earnings. We cannot assure you that investors will
continue to maintain their investments in, and that we will be
able to maintain our investment management agreement with, our
Growth Fund.
We also may close funds and investment strategies to new
investors, which could inhibit our growth and could lead to
redemptions by existing investors, and could thereby cause a
decrease in our revenues.
16
We are
dependent on Calamos Holdings LLC to distribute cash to us in
amounts sufficient to pay our tax liabilities and other
expenses.
We are a holding company, and our membership units in Calamos
Holdings LLC are our primary asset. We have no significant
independent means of generating revenues. Calamos Holdings LLC
is treated as a partnership for U.S. federal income tax
purposes and, as such, is not itself subject to
U.S. federal income tax. Instead, its taxable income is
allocated on a pro rata basis to Calamos Asset Management, Inc.,
and the Calamos Interests. Accordingly, we incur income taxes on
our proportionate share of any net taxable income of Calamos
Holdings LLC, and also incur expenses related to our operations.
As the sole manager, we caused and in the future intend to cause
Calamos Holdings LLC to distribute cash to its members to the
extent necessary to cover their tax liabilities, if any. To the
extent we need funds to pay such taxes, or for any other
purpose, and Calamos Holdings LLC is unable to provide such
funds, it could have a material adverse effect on our business,
financial condition or results of operations.
We
intend to pay regular dividends to our stockholders, but our
ability to do so is subject to the discretion of our board of
directors and may be limited by our holding company structure
and applicable provisions of Delaware law.
To date, we have paid a cash dividend each quarter and intend to
continue to pay dividends on a quarterly basis. Our board of
directors may, in its discretion, decrease the level of
dividends or discontinue the payment of dividends entirely. The
ability of Calamos Holdings LLC to make distributions is subject
to its operating results, cash requirements and financial
condition, the applicable laws of the State of Delaware (which
may limit the amount of funds available for distribution to its
members), its compliance with covenants and financial ratios
related to existing or future indebtedness, including its
existing senior unsecured notes, and its other agreements with
third parties. If, as a consequence of these various limitations
and restrictions, we are unable to generate sufficient
distributions from our business, we may not be able to make or
may have to reduce or eliminate the payment of dividends on our
shares.
A
change of control of our company would automatically terminate
our investment management agreements with our clients, unless
our separate account clients consent and, in the case of fund
clients, the funds boards of trustees and shareholders
voted to continue the agreements, and could prevent us for a
two-year period from increasing the investment advisory fees we
are able to charge our mutual fund clients.
Under the Investment Company Act, an investment management
agreement with a fund must provide for its automatic termination
in the event of its assignment. The funds board and
shareholders must vote to continue the agreement following its
assignment, the cost of which ordinarily would be borne by us.
Under the Investment Advisers Act, a clients investment
management agreement may not be assigned by the
investment advisor without the clients consent. An
investment management agreement is considered under both acts to
be assigned to another party when a controlling block of the
advisors securities is transferred. In our case, an
assignment of our investment management agreements may occur if,
among other things, we sell or issue a certain number of
additional common shares in the future. We cannot be certain
that our clients will consent to assignments of our investment
management agreements or approve new agreements with us if a
change of control occurs. Under the Investment Company Act, if a
funds investment advisor engages in a transaction that
results in the assignment of its investment management agreement
with the fund, the advisor may not impose an unfair
burden on that fund as a result of the transaction for a
two-year period after the transaction is completed. The term
unfair burden has been interpreted to include
certain increases in investment advisory fees. This restriction
may discourage potential purchasers from acquiring a controlling
interest in our company.
Failure
to improve or protect our intellectual property rights may have
a material adverse effect on our business.
We depend upon in-house technology and software across the
company. If we fail to improve, protect or enforce our
intellectual property rights or if our Calamos Corporate System
software or our software systems do not
17
function properly, we could suffer business disruptions,
financial losses, liability to clients and damage to our
reputation or be subject to regulatory intervention.
Damage
to our reputation could adversely affect our
business.
We have developed our reputation through excellent client
services, outstanding long-term risk-adjusted investment
performance, comprehensive product offerings, superior
distribution and a strong brand image. The Calamos name and
brand are valuable assets and any damage to either could hamper
our ability to attract and retain clients and employees, thereby
having a material adverse effect on our revenues and net income.
Risks to our reputation may range from regulatory issues to
unsubstantiated accusations and managing such matters may be
expensive, time-consuming and difficult.
Risks
Related to the Company
The
disparity in the voting rights among the classes of shares may
have a potential adverse effect on the price of our Class A
common stock.
Shares of our Class A common stock and Class B common
stock entitle the respective holders to identical rights, except
that each share of our Class A common stock entitles its
holder to one vote on all matters to be voted on by stockholders
generally while each share of Class B common stock entitles
its holder to a greater number of votes. The difference in
voting rights could adversely affect the value of our
Class A common stock to the extent that investors view, or
any potential future purchaser of our company views, the
superior voting rights of the Class B common stock to be
detrimental to the value of the Class A common stock.
Future
sales of our Class A common stock in the public market
could lower our stock price, and any additional capital raised
by us through the sale of equity or convertible securities may
dilute our stockholders ownership in us.
We may sell additional shares of Class A common stock in
subsequent public offerings. We also may issue additional shares
of Class A common stock or convertible debt securities. As
of December 31, 2006, we had 23,161,898 outstanding shares
of Class A common stock.
In addition, members of the Calamos family and trusts for their
benefit own, individually
and/or
through their combined ownership of Calamos Family Partners,
Inc., 77,000,000 membership units in Calamos Holdings LLC. Our
amended and restated certificate of incorporation provides for
the exchange of membership units in Calamos Holdings LLC (other
than those held by us) for shares of our Class A common
stock. Subject to certain selling restrictions, Calamos family
members and their trusts could from time to time and for any
reason exchange their membership units in Calamos Holdings LLC
for shares of our Class A common stock and sell any or all
of those shares.
The Calamos Interests are party to a registration rights
agreement with us. Under that agreement, the Calamos Interests
have the right to require us to effect the registration of
shares of our Class A common stock that the Calamos
Interests could acquire upon conversion of their Class B
common shares or exchange of their membership units in Calamos
Holdings LLC.
We cannot predict the size of future issuances of our
Class A common stock or the effect, if any, that future
issuances and sales of shares of our Class A common stock,
including by Calamos family members and their trusts, may have
on the market price of our Class A common stock. Sales or
distributions of substantial amounts of our Class A common
stock (including shares issued in connection with an
acquisition), or the perception that such sales could occur, may
cause the market price of our Class A common stock to
decline.
The
Calamos familys beneficial ownership of our Class B
common stock, as well as anti-takeover provisions in our amended
and restated certificate of incorporation and bylaws, could
discourage a change of control that our stockholders may favor,
which could negatively affect our stock price.
Members of the Calamos family and trusts for their benefit
beneficially own all outstanding shares of our Class B
common stock. As a result, Calamos family members are able to
exercise control over all matters requiring
18
the approval of our stockholders and would be able to prevent a
change in control of our company. In addition, provisions in our
amended and restated certificate of incorporation and bylaws may
make it more difficult and expensive for a third party to
acquire control of us even if a change of control would be
beneficial to the interests of our stockholders. For example,
our amended and restated certificate of incorporation authorizes
the issuance of preferred stock that could be issued by our
board of directors to thwart a takeover attempt. The market
price of our Class A common stock could be adversely
affected to the extent that the Calamos familys control
over us, as well as provisions of our amended and restated
certificate of incorporation and bylaws, discourage potential
takeover attempts that our stockholders may favor.
If the
Internal Revenue Service disallows all or any portion of the tax
amortization deduction allocated to the company in association
with the section 754 election made by Calamos Holdings LLC,
such action could have a material adverse effect on our
business.
Calamos Holdings LLC made an election under section 754 of
the Internal Revenue Code of 1986, as amended (a
section 754 election). As a result of the
section 754 election, Calamos Holdings LLC increased the
companys proportionate share of the tax basis of the
assets of Calamos Holdings LLC to reflect the purchase price
paid by the company for its interest in Calamos Holdings LLC.
For federal income tax purposes, Calamos Holdings LLC is treated
as a partnership and, based upon a third party valuation, its
primary intangible assets include investment management
contracts and distribution agreements. Based on an opinion of
counsel, these types of customer-based intangibles should be
amortizable intangibles for federal income tax purposes.
Therefore, Calamos Holdings LLC allocated increased tax
amortization deductions to the company, which reduced the
companys share of taxable income. However, if the Internal
Revenue Service were to disallow all or any portion of the tax
amortization deductions allocated to the company, based on the
valuation or allocation or purchase price related to the
section 754 election, such action could have a material
adverse effect on our business.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None
Our principal executive offices are located at 2020 Calamos
Court, Naperville, Illinois 60563, where we occupy approximately
149,000 square feet of space under lease agreements with
subsidiaries of Calamos Property Holdings LLC, which is owned by
the stockholders of Calamos Family Partners, Inc. We have
approximately 27,000 square feet of additional office space
at a different location in Naperville, Illinois under a separate
lease agreement with a subsidiary of Calamos Property Holdings
LLC.
|
|
Item 3.
|
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 4.
|
Submission
of Matters to a Vote of Security Holders
|
No matters were submitted to a vote of security holders, through
the solicitation of proxies or otherwise, during the fourth
quarter of the year ended December 31, 2006.
19
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
|
Our Class A common stock ($0.01 par value) trades on
the NASDAQ Stock Market LLC under the symbol CLMS.
There is no public market for our Class B common stock
($0.01 par value).
The high and low trade price information for Class A common
stock and dividends per share for each class of common stock
were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Price Range
|
|
|
Cash Dividends
|
|
|
|
2006
|
|
|
2005
|
|
|
per Share
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
2006
|
|
|
2005
|
|
|
First Quarter
|
|
$
|
39.43
|
|
|
$
|
30.72
|
|
|
$
|
31.40
|
|
|
$
|
23.01
|
|
|
$
|
0.09
|
|
|
$
|
0.07
|
|
Second Quarter
|
|
$
|
44.10
|
|
|
$
|
26.14
|
|
|
$
|
28.74
|
|
|
$
|
20.55
|
|
|
$
|
0.09
|
|
|
$
|
0.07
|
|
Third Quarter
|
|
$
|
30.40
|
|
|
$
|
24.23
|
|
|
$
|
29.97
|
|
|
$
|
23.23
|
|
|
$
|
0.09
|
|
|
$
|
0.07
|
|
Fourth Quarter
|
|
$
|
31.85
|
|
|
$
|
26.42
|
|
|
$
|
32.81
|
|
|
$
|
23.42
|
|
|
$
|
0.09
|
|
|
$
|
0.07
|
|
On February 21, 2007, there were approximately 62 holders
of record of our outstanding Class A common stock and one
holder of record of our outstanding Class B common stock.
Shares of our Class A common stock are primarily held in
street name through various brokers.
Calamos Asset Management, Inc. expects to declare and pay
quarterly cash dividends during 2007.
Equity
Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available
|
|
|
|
|
|
|
|
|
|
for Future Issuance
|
|
|
|
Number of Securities
|
|
|
Weighted-Average
|
|
|
Under Equity
|
|
|
|
to be Issued upon
|
|
|
Exercise Price of
|
|
|
Compensation Plans
|
|
|
|
Exercise of
|
|
|
Outstanding
|
|
|
(Excluding
|
|
|
|
Outstanding Options,
|
|
|
Options, Warrants
|
|
|
Securities Reflected
|
|
|
|
Warrants and Rights
|
|
|
and Rights
|
|
|
in Column (a))
|
|
Plan Category
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved
by security holders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
1,335,098
|
|
|
$
|
25.30
|
|
|
|
(1
|
)
|
Restricted stock units
|
|
|
1,288,440
|
|
|
|
|
|
|
|
(1
|
)
|
Equity compensation plans not
approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,623,538
|
|
|
$
|
12.87
|
|
|
|
7,142,863
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
A combined total of 10,000,000 shares of Calamos Asset
Management, Inc.s common stock may be issued under the
stock option and restricted stock unit plans. During the twelve
months ended December 31, 2006, 233,599 shares were
exercised under the restricted stock unit plan. |
20
The following table summarizes information with respect to
purchases made by or on behalf of the company of shares of its
common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
(d)
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
Maximum Number
|
|
|
|
|
|
|
|
|
|
Shares Purchased as
|
|
|
of Shares that may
|
|
|
|
(a)
|
|
|
(b)
|
|
|
Part of Publicly
|
|
|
be Purchased
|
|
|
|
Total Number of
|
|
|
Average Price Paid
|
|
|
Announced Plans or
|
|
|
Under the Plans or
|
|
|
|
Shares Purchased
|
|
|
per Share
|
|
|
Programs
|
|
|
Programs
|
|
|
October 19
October 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000,000
|
|
November 1
November 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000,000
|
|
December 1
December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On October 19, 2006, the Board of Directors authorized the
company to purchase up to 2.0 million shares of
Class A common stock. No shares have been purchased under
this program as of December 31, 2006.
21
The following graph compares the percentage change in cumulative
shareholder return on the companys common stock with the
Standard & Poors 500 Index and SNL Asset Manager
Index since October 28, 2004 (assuming a $100 investment on
October 28, 2004, and the reinvestment of any dividends).
Performance
Graph
Total
Return Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period Ended
|
|
Index
|
|
10/28/04
|
|
|
12/31/04
|
|
|
03/31/05
|
|
|
06/30/05
|
|
|
09/30/05
|
|
|
12/31/05
|
|
|
03/31/06
|
|
|
06/30/06
|
|
|
09/30/06
|
|
|
12/31/06
|
|
Calamos Asset Management,
Inc.
|
|
|
100.00
|
|
|
|
135.34
|
|
|
|
135.50
|
|
|
|
137.53
|
|
|
|
124.91
|
|
|
|
159.57
|
|
|
|
190.29
|
|
|
|
147.85
|
|
|
|
150.05
|
|
|
|
137.76
|
|
S&P 500 Index
|
|
|
100.00
|
|
|
|
107.83
|
|
|
|
105.51
|
|
|
|
106.95
|
|
|
|
110.81
|
|
|
|
113.12
|
|
|
|
117.34
|
|
|
|
115.10
|
|
|
|
121.05
|
|
|
|
128.52
|
|
SNL Asset Manager Index
|
|
|
100.00
|
|
|
|
114.57
|
|
|
|
111.74
|
|
|
|
124.09
|
|
|
|
130.81
|
|
|
|
145.71
|
|
|
|
157.33
|
|
|
|
141.63
|
|
|
|
163.57
|
|
|
|
168.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
Item 6.
|
Selected
Financial Data
|
The following tables set forth our selected historical
consolidated financial and other data, as well as financial and
other data for our predecessor, Calamos Family Partners, Inc. as
of the dates and for the periods indicated. The selected
historical consolidated income statement data for the period
January 1, 2004 to November 1, 2004 and for each of
the years in the two-year period ended December 31, 2003
and the selected historical consolidated balance sheet data as
of December 31, 2003, and 2002 have been derived from the
audited consolidated financial statements of Calamos Family
Partners, Inc. (formerly known as Calamos Holdings, Inc.).
For all periods presented through November 1, 2004, Calamos
Family Partners, Inc. operated as an S corporation and was
not subject to U.S. federal and certain state income taxes.
Beginning November 2, 2004, we have been subject to
U.S. federal and certain state and local income taxes
applicable to C corporations.
You should read the following selected historical consolidated
financial and other data in conjunction with
Managements Discussion and Analysis of Financial
Condition and Results of Operations, the historical
consolidated financial statements and related notes, all
included elsewhere in this Annual Report on
Form 10-K.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Nov. 2 to
|
|
|
Jan. 1 to
|
|
|
Year Ended
|
|
|
Year Ended December 31,
|
|
(in thousands, except share data)
|
|
2006
|
|
|
2005
|
|
|
Dec. 31, 2004
|
|
|
Nov. 1, 2004
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
|
|
|
|
|
|
|
|
|
(Predecessor)
|
|
|
|
|
|
(Predecessor)
|
|
|
(Predecessor)
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management fees
|
|
$
|
329,383
|
|
|
$
|
284,951
|
|
|
$
|
41,787
|
|
|
$
|
168,938
|
|
|
$
|
210,725
|
|
|
$
|
109,052
|
|
|
$
|
62,594
|
|
Distribution and underwriting fees
|
|
|
151,760
|
|
|
|
129,250
|
|
|
|
19,350
|
|
|
|
79,578
|
|
|
|
98,928
|
|
|
|
53,005
|
|
|
|
24,883
|
|
Other revenue
|
|
|
4,029
|
|
|
|
3,366
|
|
|
|
633
|
|
|
|
1,861
|
|
|
|
2,494
|
|
|
|
328
|
|
|
|
363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
485,172
|
|
|
|
417,567
|
|
|
|
61,770
|
|
|
|
250,377
|
|
|
|
312,147
|
|
|
|
162,385
|
|
|
|
87,840
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits
|
|
|
73,382
|
|
|
|
61,029
|
|
|
|
12,537
|
|
|
|
53,170
|
|
|
|
65,707
|
|
|
|
33,657
|
|
|
|
28,317
|
|
Distribution expenses
|
|
|
100,935
|
|
|
|
79,446
|
|
|
|
11,040
|
|
|
|
39,517
|
|
|
|
50,557
|
|
|
|
22,576
|
|
|
|
7,982
|
|
Amortization of deferred sales
commissions
|
|
|
32,924
|
|
|
|
31,431
|
|
|
|
5,109
|
|
|
|
24,315
|
|
|
|
29,424
|
|
|
|
19,879
|
|
|
|
11,677
|
|
Marketing and sales promotion
|
|
|
15,631
|
|
|
|
14,738
|
|
|
|
2,263
|
|
|
|
16,881
|
|
|
|
19,144
|
|
|
|
9,184
|
|
|
|
6,988
|
|
General and administrative
|
|
|
31,272
|
|
|
|
24,829
|
|
|
|
2,587
|
|
|
|
11,258
|
|
|
|
13,845
|
|
|
|
8,671
|
|
|
|
6,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
254,144
|
|
|
|
211,473
|
|
|
|
33,536
|
|
|
|
145,141
|
|
|
|
178,677
|
|
|
|
93,967
|
|
|
|
61,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
231,028
|
|
|
|
206,094
|
|
|
|
28,234
|
|
|
|
105,236
|
|
|
|
133,470
|
|
|
|
68,418
|
|
|
|
26,013
|
|
Other income (expense), net
|
|
|
12,381
|
|
|
|
5,761
|
|
|
|
1,016
|
|
|
|
(1,487
|
)
|
|
|
(471
|
)
|
|
|
25
|
|
|
|
(899
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest in
Calamos Holdings LLC and income taxes
|
|
|
243,409
|
|
|
|
211,855
|
|
|
|
29,250
|
|
|
|
103,749
|
|
|
|
132,999
|
|
|
|
68,443
|
|
|
|
25,114
|
|
Minority interest in Calamos
Holdings LLC
|
|
|
186,631
|
|
|
|
163,009
|
|
|
|
22,609
|
|
|
|
|
|
|
|
22,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax
|
|
|
56,778
|
|
|
|
48,846
|
|
|
|
6,641
|
|
|
|
103,749
|
|
|
|
110,390
|
|
|
|
68,443
|
|
|
|
25,114
|
|
Income taxes
|
|
|
22,770
|
|
|
|
19,624
|
|
|
|
2,649
|
|
|
|
1,567
|
|
|
|
4,216
|
|
|
|
1,117
|
|
|
|
383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
34,008
|
|
|
$
|
29,222
|
|
|
$
|
3,992
|
|
|
$
|
102,182
|
|
|
$
|
106,174
|
|
|
$
|
67,326
|
|
|
$
|
24,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.47
|
|
|
$
|
1.27
|
|
|
$
|
0.18
|
|
|
$
|
1.06
|
|
|
|
|
|
|
$
|
0.70
|
|
|
$
|
0.26
|
|
Diluted(1)
|
|
$
|
1.45
|
|
|
$
|
1.26
|
|
|
$
|
0.17
|
|
|
$
|
1.06
|
|
|
|
|
|
|
$
|
0.70
|
|
|
$
|
0.26
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic(2)
|
|
|
23,161,998
|
|
|
|
23,000,100
|
|
|
|
22,700,100
|
|
|
|
96,800,000
|
|
|
|
|
|
|
|
96,800,000
|
|
|
|
96,800,000
|
|
Diluted(1)
|
|
|
100,805,030
|
|
|
|
100,625,824
|
|
|
|
100,491,409
|
|
|
|
96,800,000
|
|
|
|
|
|
|
|
96,800,000
|
|
|
|
96,800,000
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
|
|
|
|
|
|
|
|
|
(Predecessor)
|
|
|
(Predecessor)
|
|
|
Balance Sheet Data (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
328,841
|
|
|
$
|
210,469
|
|
|
$
|
149,768
|
|
|
$
|
5,073
|
|
|
$
|
2,648
|
|
Investment securities
|
|
|
142,862
|
|
|
|
128,265
|
|
|
|
90,444
|
|
|
|
9,296
|
|
|
|
6,025
|
|
Partnership investments
|
|
|
90,528
|
|
|
|
79,956
|
|
|
|
60,150
|
|
|
|
2,806
|
|
|
|
2,307
|
|
Total assets
|
|
|
795,840
|
|
|
|
665,477
|
|
|
|
516,452
|
|
|
|
104,531
|
|
|
|
57,272
|
|
Long-term debt
|
|
|
150,000
|
|
|
|
150,000
|
|
|
|
150,000
|
|
|
|
23,008
|
|
|
|
10,945
|
|
Total liabilities
|
|
|
212,900
|
|
|
|
205,460
|
|
|
|
191,342
|
|
|
|
58,107
|
|
|
|
32,246
|
|
Minority interests
|
|
|
368,363
|
|
|
|
273,883
|
|
|
|
166,616
|
|
|
|
11
|
|
|
|
10
|
|
Total stockholders equity
|
|
|
214,577
|
|
|
|
186,134
|
|
|
|
158,494
|
|
|
|
46,413
|
|
|
|
25,016
|
|
Assets Under Management (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds
|
|
|
33,704
|
|
|
|
32,244
|
|
|
|
27,275
|
|
|
|
14,831
|
|
|
|
5,799
|
|
Separate accounts
|
|
|
11,021
|
|
|
|
11,561
|
|
|
|
10,700
|
|
|
|
9,009
|
|
|
|
7,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets under management
|
|
$
|
44,725
|
|
|
$
|
43,805
|
|
|
$
|
37,975
|
|
|
$
|
23,840
|
|
|
$
|
12,892
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In calculating diluted earnings per share for 2006, 2005 and for
the period November 2, 2004 to December 31, 2004, the
effective tax rates of 40.1%, 40.2% and 39.9%, respectively,
were applied to income before minority interest in Calamos
Holdings LLC and income taxes. Diluted shares outstanding for
2006, 2005 and for the period November 2, 2004 to
December 31, 2004 are calculated (a) assuming the
Calamos Interests exchanged all of their membership units in
Calamos Holdings LLC for shares of the Companys
Class A common stock on a
one-for-one
basis and (b) including the effect of outstanding
restricted stock unit and option awards. |
|
(2) |
|
Basic shares for the periods to November 2, 2004 reflect
the 96,800,000 existing after giving effect to the formation
transaction, whereby on October 15, 2004, Calamos Family
Partners, Inc. contributed all of its assets and liabilities,
including all equity interest in its wholly owned subsidiaries,
to Calamos Holdings LLC in exchange for 96,800,000 of the
membership units of Calamos Holdings LLC. |
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operation
|
We provide investment advisory services to institutions and
individuals, managing $44.7 billion in client assets at
December 31, 2006. We offer our clients a variety of
investment products designed to suit their individual investment
needs. As described in the Business section within Part I,
the way that we view our business has evolved, and as a result
we have revised the way that we categorize certain accounts,
assets under management and the respective investment management
fees. Prior period amounts have been reclassified to conform
with the current years presentation.
24
Assets
Under Management
Our operating results fluctuate primarily due to changes in the
total value and composition of our assets under management. The
following table details our assets under management, based on
the five types of investment product types we offer in the
mutual fund and separate account categories, at
December 31, 2006, 2005 and 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Mutual Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
Open-end funds
|
|
$
|
27,303
|
|
|
$
|
26,303
|
|
|
$
|
21,245
|
|
Closed-end funds
|
|
|
6,401
|
|
|
|
5,941
|
|
|
|
6,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total mutual funds
|
|
|
33,704
|
|
|
|
32,244
|
|
|
|
27,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
Institutional accounts
|
|
|
5,203
|
|
|
|
5,130
|
|
|
|
4,099
|
|
Managed accounts
|
|
|
5,723
|
|
|
|
6,340
|
|
|
|
6,527
|
|
Alternative investments
|
|
|
95
|
|
|
|
91
|
|
|
|
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total separate accounts
|
|
|
11,021
|
|
|
|
11,561
|
|
|
|
10,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets under
management
|
|
$
|
44,725
|
|
|
$
|
43,805
|
|
|
$
|
37,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In order to increase our assets under management and expand our
business, we must develop and market investment products that
suit the individual investment needs of our target
clients investors seeking superior risk-adjusted
returns over the long term. The value and composition of our
assets under management and our ability to continue to attract
clients will depend on a variety of factors, including, among
other things:
|
|
|
|
|
purchases and redemptions of shares of the open-end funds and
other investment products;
|
|
|
|
fluctuations in the financial markets around the world that
result in appreciation or depreciation of assets under
management;
|
|
|
|
our ability to educate our target clients about our investment
philosophy and provide them with
best-in-class
service;
|
|
|
|
the relative investment performance of our investment 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; and
|
|
|
|
our introduction of new investment strategies and products and
our decision to close strategies when deemed in the best
interests of our clients.
|
Investment
Products
Mutual
Funds
Mutual funds include registered open-end funds and registered
closed-end funds.
Open-End Funds. Open-end funds are continually
offered and are not listed on an exchange. Open-end funds issue
new shares for purchase and redeem shares from those
shareholders who sell. The share price for purchases and
redemptions of open-end funds is determined by each funds
net asset value, which is calculated at the end of each business
day. Assets under management in open-end funds vary as a result
of both market appreciation and depreciation and the level of
new purchases or redemptions of shares of a fund. Investment
management fees are our principal source of revenue from
open-end mutual funds and are derived from assets under
management. We offer several share classes in each open-end fund
to provide investors with alternatives to pay for commissions,
distribution and service fees.
25
Closed-End Funds. Closed-end funds typically
sell a finite number of shares to investors through underwritten
public offerings, unlike open-end funds, which continually offer
new shares to investors. After the public offerings, investors
buy closed-end fund shares from, and sell those shares to, other
investors through an exchange or broker-dealer market. All four
of the closed-end funds that we manage currently use leverage by
issuing preferred securities, which increase their total assets.
Assets under management in closed-end funds vary due to the
amount of assets raised in underwritten public offerings, the
amount of leverage utilized and market appreciation or
depreciation. Our revenues from closed-end funds are derived
from the investment management fees on the assets that we
manage. In addition, in a typical underwritten public offering,
investors are charged a 4.5% commission by the selling firms. We
do not receive or pay commissions in connection with sales of
closed-end fund shares, although we may pay asset-based
distribution and service fees, as well as one-time distribution
and service fees to underwriters for underwriting public
offerings of closed-end funds.
Separate
Accounts
Separate accounts include institutional accounts, managed
accounts for high net worth investors and alternative
investments. Fund flows into and out of such accounts, which we
refer to as purchases and redemptions, affect our level of
assets under management. Assets under management from these
accounts also vary as a result of market appreciation and
depreciation. Our revenues from separate accounts are derived
from investment management fees that we charge, including
performance fees in some cases. Provided below is a brief
differentiation of these accounts:
|
|
|
|
|
Institutional accounts are separately managed accounts
for institutional investors, such as public and private pension
funds, public funds and endowment funds, and are offered
directly by us through institutional consultants and through
national and regional broker-dealers.
|
|
|
|
Managed accounts are separately managed accounts for high
net worth investors offered primarily through national and
regional broker-dealers.
|
|
|
|
Alternative investments include private investment
vehicles, primarily hedge funds, offered directly by us to
qualified individual and institutional investors.
|
Revenues
Our revenues are substantially comprised of investment
management fees earned under contracts with the mutual funds and
separate accounts managed by us. The distribution of assets
under management among our investment products also will have an
impact on our investment management fees, as some products carry
different fees than others. Investment management fees may
fluctuate based on a number of factors, including the following:
|
|
|
|
|
total value and composition of our assets under management;
|
|
|
|
market appreciation or depreciation;
|
|
|
|
investment performance relative to benchmarks and competitors;
|
|
|
|
level of net purchases and redemptions, which represent the sum
of new client assets, additional funding from existing clients,
withdrawals of assets from and termination of client accounts,
and purchases and redemptions of mutual fund shares;
|
|
|
|
a determination by the independent trustees of the mutual funds
to terminate or significantly alter the funds investment
management agreements with us; and
|
|
|
|
increased competition.
|
Our revenues also are comprised of distribution and underwriting
fees. Asset-based distribution
and/or
service fees received pursuant to
Rule 12b-1
plans, discussed below, are a significant component of
distribution and underwriting fees. Distribution and
underwriting fees may fluctuate based on a number of factors,
including the following:
|
|
|
|
|
total value and composition of our assets under management
generally and by share class;
|
|
|
|
market appreciation or depreciation; and
|
|
|
|
the level of purchases and redemptions.
|
26
Investment
Management Fees
Investment management fees that we receive from mutual funds for
which we act as investment advisor are computed monthly on an
average daily net asset basis. Investment management fees that
we earn on separate accounts for which we act as investment
advisor are computed quarterly, either in advance or in arrears,
based on the assets under management balance at the beginning or
end of the quarterly period. We recognize the revenues derived
from these fees over the period during which we render
investment advisory services.
We may earn performance fees in addition to investment
management fees. A performance fee structure would include both
an asset-based fee and a fee based upon the performance of the
portfolio. Historically, performance fees have not been a
material source of revenues for us. However, in the future, as
we offer products that have performance-based fees, including
alternative products, we expect performance fees to become a
more significant source of revenues.
Distribution
and Underwriting Fees
Distribution and underwriting fees include (1) asset-based
distribution
and/or
service fees received pursuant to
Rule 12b-1
plans, (2) front-end sales charges and (3) contingent
deferred sales charges.
Rule 12b-1
distribution
and/or
service fees are asset-based fees that the open-end funds pay us
over time pursuant to distribution plans adopted under
provisions of
Rule 12b-1
of the Investment Company Act. These fees are typically
calculated as a percentage of average daily net assets under
management in specific share classes of the open-end funds.
These fees fluctuate with both the level of average daily net
assets under management and the relative mix of assets among
share classes.
Rule 12b-1
fees are generally offset by distribution and service expenses
paid during the period, as well as the amortization of deferred
sales commissions that were previously paid by us to third
parties.
We earn front-end sales charges on the sale of Class A
shares of open-end funds, which provide for a sales charge at
the time of investment. We retain a portion of the applicable
sales charge and, if Calamos Financial Services acts as the
broker-dealer for the account, we retain the entire sales
charge. Sales charges are waived on sales to shareholders or
intermediaries that exceed specified minimum dollar amounts and
other specified conditions. Sales charges fluctuate with both
the level of Class A share sales and the mix of
Class A shares offered with and without a sales charge.
Contingent deferred sales charges are earned on redemptions of
Class B shares within six years of purchase and on
redemptions of Class C shares within one year of purchase.
Contingent deferred sales charges fluctuate primarily based on
the length of the investment in Class B and Class C
shares. Waivers of contingent deferred sales charges apply under
certain circumstances.
Other
Revenues
Other revenues consist primarily of portfolio accounting fees,
which are contractual payments calculated as a percentage of
combined assets of the mutual funds for financial accounting
services, such as expense accrual and tax calculations. For the
year ended December 31, 2006, we received $3.9 million
in portfolio accounting fees. The fees were calculated based on
the average daily assets of the open-end and closed-end funds.
Operating
Expenses
Our operating expenses, which consist of employee compensation
and benefits, distribution and underwriting expenses,
amortization of deferred sales commissions, marketing and sales
promotion expenses, and general and administrative expenses, may
fluctuate due to a number of factors, including the following:
|
|
|
|
|
variations in the level of total compensation expense due to,
among other things, bonuses, changes in our employee count and
mix, and competitive factors;
|
|
|
|
changes in distribution and underwriting expense as a result of
fluctuations in mutual fund sales, level of redemptions and
market appreciation or depreciation of assets under management;
|
27
|
|
|
|
|
the amount of
Rule 12b-1
distribution
and/or
service fees that we receive, as well as our continued ability
to receive those fees in the future, which would affect the
amortization expenses associated with the receipt of these fees;
|
|
|
|
changes in the level of our marketing and promotion expenses in
response to market conditions, including our efforts to further
penetrate our existing distribution channels; and
|
|
|
|
expenses and capital costs, such as technology assets,
depreciation, amortization, and research and development,
incurred to maintain and enhance our administrative and
operating services infrastructure.
|
Employee
Compensation and Benefits
Our largest operating expense is employee compensation and
benefits expense, which includes salaries, deferred and
incentive compensation and related benefits costs. Employee
compensation and benefits are benchmarked against industry
compensation standards. In order to attract and retain qualified
personnel, we must maintain competitive employee compensation
and benefits. We expect to experience a general rise in employee
compensation and benefits expenses over time.
We use a fair value method in recording compensation expense for
restricted stock units and stock options granted under our
incentive stock plans. Under the fair value method, compensation
expense is measured at the grant date based on the estimated
fair value of the award and is recognized as an expense over the
vesting period. Fair value is determined on the date granted
using the Black-Scholes option pricing model for the stock
options and is determined by the market value of the underlying
stock for restricted stock units.
Distribution
and Underwriting Expense
Distribution and underwriting expense includes payments that we
make to broker-dealers and other intermediaries for selling,
underwriting, servicing and administering mutual funds. This
expense is influenced by new mutual funds sales, levels of
redemptions and market appreciation or depreciation of assets
under management in these products. With respect to open-end
funds, this expense is comprised of
Rule 12b-1
distribution
and/or
service fee payments to the selling firms.
Amortization
of Deferred Sales Commissions
As discussed above, we pay commissions to selling firms upon the
sale of Class B and C shares of open-end funds. As we pay
these commissions, we create a deferred sales commission asset
on our balance sheet. We amortize this asset over the period in
which we receive related asset-based distribution
and/or
service fees pursuant to
Rule 12b-1
plans. Amortization expenses generally offset the
Rule 12b-1
fees we receive from the funds shareholders over this same
period. In addition, because
Rule 12b-1
fees cease upon the redemption of open-end fund shares,
amortization expenses are accelerated when shares are redeemed,
resulting in a reduction of the deferred sales commission asset.
Other
Operating Expenses
Other operating expenses include marketing and sales promotion
expenses, and general and administrative expenses. Marketing and
sales promotion expenses generally vary based on the type and
level of marketing, educational, sales or other programs in
operation and include closed-end fund marketing costs and
ongoing and one-time payments to broker-dealers. In addition, as
the open-end mutual funds that we manage have grown in size and
recognition, we have become subject to supplemental compensation
payments to third-party selling agents, which are a component of
marketing and sales promotion expense. We expect supplemental
compensation payments to continue to increase to the extent our
funds gain assets and further recognition. In connection with
closed-end funds, we make fee payments to certain underwriters
for distribution, consulting
and/or
support services rendered during or after the offering period of
each closed-end fund. These fees are based on contractual
agreements with underwriting firms and are either paid over time
based on the average daily net assets of such funds or are paid
at the close of the offering period based on the amount of
assets raised during the offering. General and administrative
expenses primarily include occupancy-related costs,
28
depreciation and professional and business services and
generally increase and decrease in relative proportion to the
number of employees retained by us and the overall size and
scale of our business operations.
Impact of
Distribution and Underwriting Activities
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 deferred sales
commissions as expenses in the consolidated statements of
operations. However, when analyzing our business, we net the
result of these distribution activities 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 years ended December 31,
2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
Distribution and underwriting fees
|
|
$
|
151,760
|
|
|
$
|
129,250
|
|
Distribution and underwriting
expense
|
|
|
(100,935
|
)
|
|
|
(79,446
|
)
|
Amortization of deferred sales
commissions
|
|
|
(32,924
|
)
|
|
|
(31,431
|
)
|
|
|
|
|
|
|
|
|
|
Net distribution fees
|
|
$
|
17,901
|
|
|
$
|
18,373
|
|
Net distribution fee margin
|
|
|
12
|
%
|
|
|
14
|
%
|
Net distribution fee margin varies by share class because each
share class has different distribution and underwriting
activities, which are described below.
Class A shares represented $17.6 billion of our
assets under management as of December 31, 2006. These
shares provide for a front-end sales charge at the time of
investment. The sales charge is equal to a maximum of 4.75% of
the amount invested. We retain an underwriting fee representing
a portion of this sales charge and pay any remaining amounts to
the selling firm. We retained underwriting fees of
$6.1 million for the year ended December 31, 2006. We
receive
Rule 12b-1
distribution and service fees on Class A shares at a rate
of 0.25% of Class A share assets under management and
record these fees as distribution and underwriting fee revenue.
These fees are generally offset by a 0.25% fee paid to
third-party selling agents that is recorded as a distribution
expense. For the year ended December 31, 2006, we received
Class A share
Rule 12b-1
fees of $45.4 million. For the same period, we made
Class A share
Rule 12b-1
payments to selling firms of $41.6 million.
The distribution fee margin that we earn on Class A shares
is largely driven by the distribution fees that we retain as
broker of record and by the front-end sales charges, which
fluctuate with both the total Class A share sales and the
mix of Class A share sales with and without a sales charge.
Recently, the percentage of Class A share sales made
without a sales charge has been increasing. If this trend
continues, we expect that our Class A share net
distribution fee margin will decrease.
Class B shares represented $2.3 billion of our
assets under management as of December 31, 2006. Investors
in Class B shares do not pay a sales charge at the time of
investment; instead, we pay an upfront commission equal to 4.0%
of the amount invested directly to the selling firm when the
investment is made. This advance payment is capitalized when
paid as a deferred sales commission asset and is amortized
straight-line over eight years. For the year ended
December 31, 2006, we made Class B share commission
payments to selling firms of $9.0 million. If the investor
redeems shares within the first six years of investment, we
receive a contingent deferred sales charge, often referred to as
a CDSC, of between 5.0% (during the first year) declining to
1.0% (during the sixth year) of the lesser of the redemption
price or purchase price. For the year ended December 31,
2006, we received Class B share CDSC payments of
$6.2 million.
We receive
Rule 12b-1
fees on Class B shares at the rate of 1.0% of Class B
share assets under management (consisting of a 0.75%
distribution fee and a 0.25% service fee) and record these fees
as distribution and underwriting fee revenue. We make
Rule 12b-1
service fee payments to the selling firm at a rate of 0.25% of
Class B share assets under management and record these
payments as a distribution expense. We retain a 0.75%
29
distribution fee to help us recover the upfront commissions that
we paid to the selling firm.
Rule 12b-1
payments continue for eight years, at which point Class B
shares automatically convert into Class A shares. For the
year ended December 31, 2006, we received Class B
share
Rule 12b-1
fees of $23.8 million. For the same period, we made
Class B share
Rule 12b-1
payments to selling firms of $5.9 million.
The net distribution fee margin that we earn on Class B
shares is primarily the result of the difference between the
annual 0.75% distribution fee revenue that we receive on the
average Class B share assets under management and the
amortization of the 4.0% upfront commission over the eight-year
life of the asset. This differential creates a component of net
distribution fee margin unique to Class B shares that will
remain constant before giving consideration to market
appreciation or depreciation. Further, the net distribution fee
margin on Class B shares fluctuates due to the appreciation
or depreciation of the underlying assets. Appreciation or
depreciation of the assets from the time of sale will result in
a corresponding increase or decrease in the distribution fee
revenues. We expect our distribution fee margin to increase as
the underlying Class B share assets appreciate and to
decrease as these assets depreciate.
Class C shares represented $6.9 billion of our
assets under management as of December 31, 2006. Investors
in Class C shares do not pay a sales charge at the time of
investment; instead, we pay an upfront commission equal to 1.0%
of the amount invested directly to the selling firm when the
investment is made. This advance payment is capitalized when
paid as a deferred sales commission asset and is amortized
straight-line over 12 months. For the year ended
December 31, 2006, we made commission payments to selling
firms of $15.4 million. If the investor redeems
Class C shares within one year of investment, we receive
from the proceeds of the sale a CDSC equal to 1.0% of the lesser
of the redemption price or purchase price. For the year ended
December 31, 2006, we received Class C share CDSC
payments of $1.0 million.
We receive
Rule 12b-1
fees on Class C shares at the rate of 1.0% of Class C
share assets under management (consisting of a 0.75%
distribution fee and a 0.25% service fee) and record these fees
as distribution and underwriting fee revenue. We make
Class C share
Rule 12b-1
distribution and service fee payments to the selling firm
beginning in the second year following the sale at the rate of
1.0% of Class C share assets under management and record
these payments as a distribution expense. For the year ended
December 31, 2006, we received Class C share
12b-1 fees
of $69.0 million. For the same period, we made Class C
share
Rule 12b-1
payments to selling firms of $52.7 million.
The first years
Rule 12b-1
fee helps us to recoup the upfront commission we paid to the
selling firm, resulting in a net distribution fee margin on
Class C shares that is generally zero, before giving
consideration to market appreciation or depreciation. However,
during the first 12 months following the sale of
Class C shares, this margin will fluctuate due to the
appreciation or depreciation of Class C share assets.
Appreciation or depreciation of the assets from the time of sale
will result in a corresponding increase or decrease in the
distribution fee revenues. We expect our distribution fee margin
to increase as the underlying Class C share assets
appreciate and to decrease as these assets depreciate.
Class I shares represented $0.5 billion of our
assets under management as of December 31, 2006. These
shares do not provide for a front-end sales charge or
Rule 12b-1
fees and are generally offered to individual and institutional
investors making initial investments of $5 million or more;
therefore, no distribution fee margin exists for this share
class.
Class R shares were added in March 2007. Investors
do not pay a front-end sales charge at the time of investment.
We receive
Rule 12b-1
fees on Class R shares at a rate of 0.50% of Class R
share assets under management and record these fees as
distribution and underwriting fee revenue. We make Class R
share
Rule 12b-1
distribution and service fee payments to selling firms equal to
the distribution and service fee revenue that we receive and
record these payments as distribution expense. Because the
distribution revenue and distribution expense on Class R
shares generally offset, the net distribution fee margin is zero
for this share class, and as a result negatively impacts the
overall net distribution margin.
Because the net distribution fee margin varies by share class,
the mix of Class A, Class B and Class C share
sales and assets affects the net overall distribution fee
margin, because the Class A share margin is significantly
greater than the Class B and Class C margins. Finally,
we expect that our net distribution fee margin will continue to
negatively impact our operating margins.
30
Other
Income (Expense), Net
Other income (expense), net represents net investment gains or
losses from a portion of our investment portfolio and from the
limited partnerships that we consolidate, net of minority
interest in those partnerships, as well as dividends and net
interest income or expense. Historically, other income
(expense), net has not been a material portion of our pre-tax
earnings. However, as we continue to invest a significant
portion of our operating cash inflow into income generating
securities, we expect that the impact of other income (expense),
net will continue to be more significant in future periods. For
more information on our liquidity and capital resources, see
Liquidity and Capital Resources.
Minority
Interest
As sole manager of Calamos Holdings LLC, we consolidate the
financial results of Calamos Holdings LLC with ours. In light of
Calamos Family Partners, Inc. and John P.
Calamos, Sr.s collective ownership of approximately
77% in Calamos Holdings LLC as of December 31, 2006 and
2005, respectively, we reflect their ownership as a minority
interest in our consolidated statements of financial condition
and consolidated statements of operations. Our historical
results are those of Calamos Family Partners, Inc., as our
predecessor company. As a result, our income before income
taxes, excluding Calamos Family Partners, Inc. and John P.
Calamos, Sr.s minority interest, represent
approximately 23% of Calamos Holdings LLCs net income for
the years ended December 31, 2006 and 2005, and similarly,
outstanding shares of our Class A common stock represent
approximately 23% of the outstanding membership units of Calamos
Holdings LLC for the years ended December 31, 2006 and
2005. Beginning in 2005, income before minority interest in
Calamos Holdings LLC and income taxes includes investment income
earned on cash and cash equivalents held solely by Calamos Asset
Management, Inc. (CAM) during the same period. This investment
income is not reduced by any minority interest; therefore, the
resulting minority interest is less than 77% for the years ended
December 31, 2006 and 2005. We expect that as we continue
to generate and invest cash held solely by CAM the minority
interest will continue to decline as a percentage of income
before minority interest in Calamos Holdings LLC and income
taxes.
Calamos Partners LLC is the general partner of Calamos Equity
Opportunities Fund LP, a private investment partnership,
and at December 31, 2006, we and our affiliates had 41% and
54% interests in this partnership, respectively (95% combined).
As of December 31, 2005, we and our affiliates had 42% and
52% interests in this partnership, respectively (94% combined).
During 2006 and 2005, we consolidated the financial results of
this partnership into our results. The combined interests of the
investments in the partnership not owned by us are presented as
minority interest in partnership investments in our financial
statements. As partnerships are created to launch new products,
we as well as our affiliates may invest in these entities, and
these partnerships may be required to be consolidated into our
results as well.
Income
Taxes
Calamos Family Partners, Inc., as predecessor, was taxed as an
S corporation under the Internal Revenue Code; therefore,
the income and expenses of Calamos Family Partners, Inc. were
included in the income tax returns of its stockholders. Calamos
Family Partners, Inc. was subject only to Illinois replacement
tax and other state taxes, resulting in an effective tax rate of
1.5%. Beginning November 2, 2004, we have been subject to
income taxes applicable to C corporations. We have determined
our effective tax rate to be 40.1% and 40.2% for the years ended
December 31, 2006 and 2005, respectively, and 39.9% for the
period November 2, 2004 through December 31, 2004.
Dilutive
Effect of Issuance of New Shares of Class A Common
Stock
When we issue new shares of Class A common stock, including
upon the exercise or conversion of options or restricted stock
units granted pursuant to our incentive compensation plan, our
existing Class A common stockholders will experience
dilution with regard to their indirect ownership interest in the
equity of Calamos Holdings LLC.
In accordance with our amended and restated certificate of
incorporation and the amended and restated limited liability
company agreement pursuant to which Calamos Holdings LLC is
governed, the net cash proceeds received by us from any future
issuance of shares of Class A common stock, including upon
the exercise or conversion of options or restricted stock units
granted under our incentive compensation plan, will be
concurrently transferred to Calamos Holdings LLC in exchange for
newly issued membership units equal in number to such number of
shares
31
of Class A common stock issued by us. The number of
outstanding membership units owned by us will, therefore, equal
the number of outstanding shares of our Class A common
stock at all times. As a result, the amount of dilution that
existing Class A common stockholders will experience with
regard to their equity interest in Calamos Holdings LLC
resulting from the issuance of additional shares of our
Class A common stock will not be adversely affected by our
holding company structure.
Operating
Results
Year
Ended December 31, 2006 Compared to Year Ended
December 31, 2005
Assets
Under Management
Assets under management increased by $920 million, or 2%,
to $44.7 billion at December 31, 2006 from
$43.8 billion at December 31, 2005. The average assets
under management reached $46.6 billion for the six months
ended June 30, 2006 and fell to $44.8 billion for the
six months ended December 31, 2006. At December 31,
2006, our assets under management consisted of 75% mutual funds
and 25% separate accounts, as compared to 74% mutual funds and
26% separate accounts at December 31, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
Change
|
|
(in millions)
|
|
2006
|
|
|
2005
|
|
|
Amount
|
|
|
Percent
|
|
|
Mutual Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
$
|
32,244
|
|
|
$
|
27,275
|
|
|
$
|
4,969
|
|
|
|
18
|
%
|
Net purchases
|
|
|
288
|
|
|
|
3,421
|
|
|
|
(3,133
|
)
|
|
|
92
|
|
Market appreciation
|
|
|
1,172
|
|
|
|
1,548
|
|
|
|
(376
|
)
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management
|
|
|
33,704
|
|
|
|
32,244
|
|
|
|
1,460
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
|
34,075
|
|
|
|
29,084
|
|
|
|
4,991
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
|
11,561
|
|
|
|
10,700
|
|
|
|
861
|
|
|
|
8
|
|
Net purchases (redemptions)
|
|
|
(1,107
|
)
|
|
|
212
|
|
|
|
(1,319
|
)
|
|
|
622
|
|
Market appreciation
|
|
|
567
|
|
|
|
649
|
|
|
|
(82
|
)
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management
|
|
|
11,021
|
|
|
|
11,561
|
|
|
|
(540
|
)
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
|
11,605
|
|
|
|
10,889
|
|
|
|
716
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets Under
Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
|
43,805
|
|
|
|
37,975
|
|
|
|
5,830
|
|
|
|
15
|
|
Net purchases (redemptions)
|
|
|
(819
|
)
|
|
|
3,633
|
|
|
|
(4,452
|
)
|
|
|
123
|
|
Market appreciation
|
|
|
1,739
|
|
|
|
2,197
|
|
|
|
(458
|
)
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under
management
|
|
|
44,725
|
|
|
|
43,805
|
|
|
|
920
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
$
|
45,680
|
|
|
$
|
39,973
|
|
|
$
|
5,707
|
|
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual fund net purchases were $288 million in 2006, a
decrease of $3.1 billion from $3.4 billion in the
prior year. Mutual fund net purchases were $2.0 billion for
the six months ended June 30, 2006. During the six months
ended December 31, 2006, we experienced net redemptions of
approximately $1.7 billion. The outflows during the last
half of 2006 were primarily due to lower purchases and higher
redemptions of our Growth Fund, which comprises a significant
percentage of our total assets under management. As is
consistent with the broad market, growth equities were largely
out of favor with investors during 2006, which along with the
short-term underperformance of our Growth Fund, negatively
affected both market appreciation and net purchases/redemptions.
However, during 2006, we experienced net purchases in a number
of our mutual funds, primarily our Market Neutral Income Fund,
Growth and Income Fund, Global Growth and Income Fund and
International Growth Fund.
32
Separate accounts had net redemptions of $1.1 billion in
2006 compared to net purchases of $212 million in 2005,
mainly due to separate account outflows in our convertible
strategies, which remain closed to new investors. Separate
account net purchases were relatively flat for the six months
ended June 30, 2006, while during the six months ended
December 31, 2006, we experienced net redemptions of
approximately $1.0 billion.
Revenues
Total revenues increased by $67.6 million, or 16%, to
$485.2 million for the year ended December 31, 2006
from $417.6 million for the prior year. The increase was
primarily due to higher investment management fees and
distribution and underwriting fees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
(in thousands)
|
|
2006
|
|
|
2005
|
|
|
Amount
|
|
|
Percent
|
|
|
Investment management fees
|
|
$
|
329,383
|
|
|
$
|
284,951
|
|
|
$
|
44,432
|
|
|
|
16
|
%
|
Distribution and underwriting fees
|
|
|
151,760
|
|
|
|
129,250
|
|
|
|
22,510
|
|
|
|
17
|
|
Other
|
|
|
4,029
|
|
|
|
3,366
|
|
|
|
663
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
485,172
|
|
|
$
|
417,567
|
|
|
$
|
67,605
|
|
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compared to the prior year, investment management fees increased
16% in 2006 primarily due to a $5.7 billion increase in
average assets under management. The overall growth in
investment management fees was due primarily to an increase in
fees from mutual funds, which increased to $265.2 million
in 2006 from $226.9 million in the prior year. Open-end
fund investment management fees increased to $212.7 million
for the year ended December 31, 2006 from
$176.8 million for the prior year, primarily due to
increases in open-end fund average assets under management of
$4.7 billion for 2006 compared to the prior year.
Investment management fees from our separately managed accounts
increased to $64.2 million from $58.1 million
primarily due to an approximate $700 million increase in
average assets under management. Investment management fees, in
total, as a percentage of assets under management were 0.72% and
0.71% for the years ended December 31, 2006 and 2005,
respectively.
Distribution and underwriting fees increased to
$151.8 million for the year ended December 31, 2006
from $129.3 million in the prior year, primarily due to
increases in open-end fund average assets under management of
$4.7 billion for 2006 compared to the prior year.
Operating
Expenses
Operating expenses increased to $254.1 million for the year
ended December 31, 2006 from $211.5 million for the
prior year. This increase was mostly due to higher distribution
and underwriting, employee compensation and benefits, and
general and administrative expenses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
(in thousands)
|
|
2006
|
|
|
2005
|
|
|
Amount
|
|
|
Percent
|
|
|
Employee compensation and benefits
|
|
$
|
73,382
|
|
|
$
|
61,029
|
|
|
$
|
12,353
|
|
|
|
20
|
%
|
Distribution and underwriting
expense
|
|
|
100,935
|
|
|
|
79,446
|
|
|
|
21,489
|
|
|
|
27
|
|
Amortization of deferred sales
commissions
|
|
|
32,924
|
|
|
|
31,431
|
|
|
|
1,493
|
|
|
|
5
|
|
Marketing and sales promotion
|
|
|
15,631
|
|
|
|
14,738
|
|
|
|
893
|
|
|
|
6
|
|
General and administrative
|
|
|
31,272
|
|
|
|
24,829
|
|
|
|
6,443
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
254,144
|
|
|
$
|
211,473
|
|
|
$
|
42,671
|
|
|
|
20
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits expense increased by
$12.4 million for the year ended December 31, 2006
when compared to the prior year. The increase largely reflects
the impact of expanding our institutional sales force,
internalizing our mutual fund client services function and
growing our information technology and administrative staff to
support our growth. We expect that the level of overall employee
compensation and benefits expense will increase in future
periods due to changes in staffing levels to support the growth
and expansion of our business, including adding staff to
properly support our current client base. Current compensation
expense levels
33
are also expected to increase due to merit increases for our
existing staff but may vary due to compensation based on our
performance.
Distribution and underwriting expense increased by
$21.5 million for 2006 when compared to the prior year,
primarily due to an increase of $13.7 million resulting
from the growth in the Class C share assets older than one
year and to an increase of $7.7 million resulting from the
growth of Class A and Class B open-end fund average
assets under management. Class C share assets do not
generate distribution expense in the first year following their
sale because we retain the
Rule 12b-1
fees during that first year to offset the upfront commissions
that we pay. However, Class C share assets do generate a
distribution expense in subsequent years, as we pay the
Rule 12b-1
fees to the selling firms. Although the
Rule 12b-1
fee rates we paid to broker-dealers and other intermediaries in
2006 did not change from the rates paid in the prior year, we
expect distribution expense to vary with the change in open-end
mutual fund assets under management.
Marketing and sales promotion expense increased to
$15.6 million for the year ended December 31, 2006
from $14.7 million in the prior-year period. These expenses
increased by $0.9 million in 2006, when compared to 2005,
generally due to an increase in supplemental compensation
payments. The increase in supplemental compensation payments is
largely attributable to the $5.0 billion increase in
average mutual fund assets under management. We expect that
supplemental compensation payments will fluctuate with changes
in mutual fund purchases and assets under management.
General and administrative expense increased by
$6.4 million for the year ended December 31, 2006,
when compared to the prior-year period primarily due to
increases of $2.4 million in depreciation expense,
$2.2 million in occupancy-related costs and
$1.5 million in travel and entertainment costs for those
same periods. The increases in depreciation expense and
occupancy costs were primarily due to the full year impact of
occupying our new headquarters and depreciating new assets
placed in service in our facilities. The increases in travel and
entertainment expenses were primarily due to our expanded sales
efforts.
Income
Taxes
Our effective tax rate was 40.1% and 40.2% for the years ended
December 31, 2006 and 2005.
Other
Income (Expense), Net
Other income (expense), net was a net income of
$12.4 million for the year ended December 31, 2006 as
compared to a net income of $5.8 million for the prior year.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2006
|
|
|
2005
|
|
|
Change
|
|
|
Net interest income (expense)
|
|
$
|
5,004
|
|
|
$
|
(3,075
|
)
|
|
$
|
8,079
|
|
Investment and other income
|
|
|
7,403
|
|
|
|
13,997
|
|
|
|
(6,594
|
)
|
Minority interest in partnership
investments
|
|
|
(26
|
)
|
|
|
(5,161
|
)
|
|
|
5,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense), net
|
|
$
|
12,381
|
|
|
$
|
5,761
|
|
|
$
|
6,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The change in net interest income (expense) of $8.1 million
for the year ended December 31, 2006 was due to an increase
in interest income on cash and cash equivalents, as interest
expense was $8.1 million for both the twelve-month periods
ended December 31, 2006 and 2005, respectively.
The decrease in investment and other income of $6.6 million
for the year ended December 31, 2006 was primarily due to a
$7.3 million decrease in market appreciation resulting
principally from market fluctuations of our consolidated
partnerships. Minority interest in partnership investments
represents the minority interests portion of the market
appreciation from our consolidated partnerships while the
year-over-year
change corresponds with the decrease in market appreciation of
the consolidated partnership investments.
The unrealized gains and losses on a significant portion of our
investment securities are not recorded as changes in net income;
rather, these unrealized gains and losses are recognized as
changes to accumulated other comprehensive income, a component
of stockholders equity. These unrealized gains and losses
are only recognized in our consolidated statements of operations
when they are realized, which occurs upon the sale of the
securities and
34
upon the receipt of capital gains distributions, which typically
occur during the fourth quarter of the calendar year. For the
years ended December 31, 2006 and 2005, net unrealized
gains were generated by our investment securities of
$10.1 million and $8.6 million, respectively, of which
$1.4 million and $1.2 million, net of minority
interest and taxes, respectively, were recognized as increases
to accumulated other comprehensive income.
Net
Income
Our net income increased by $4.8 million to
$34.0 million for the year ended December 31, 2006
when compared to the previous year.
Year
Ended December 31, 2005 Compared to Year Ended
December 31, 2004
Prior to our initial public offering of Class A common
stock, our business was conducted by Calamos Family Partners,
Inc., wholly owned by members of the Calamos family and Calamos
family trusts. In October 2004, Calamos Family Partners, Inc.
established Calamos Holdings LLC to be the direct owner and
operator of its business. On November 2, 2004, we closed
our initial public offering of Class A common stock and
used some of the proceeds to acquire membership units in Calamos
Holdings LLC. In connection with our initial acquisition of
membership units, we became the sole manager of Calamos Holdings
LLC and began conducting the business previously conducted by
Calamos Family Partners, Inc.
Accordingly, the results for the periods from January 1,
2004 through November 1, 2004 presented below reflect the
operations for Calamos Family Partners, Inc. and its
subsidiaries (Predecessor). Results for the periods from
November 2, 2004 through December 31, 2005 reflect the
results of operations for Calamos Asset Management, Inc. We
believe that the pro forma combined results for the twelve
months ending December 31,
35
2004 provide a more meaningful basis for
period-to-period
comparisons of our results. Therefore, we have combined the
periods in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 2 to
|
|
|
January 1 to
|
|
|
Pro Forma
|
|
|
|
|
|
|
December 31,
|
|
|
November 1,
|
|
|
Combined
|
|
(in thousands, except share data)
|
|
2005
|
|
|
2004
|
|
|
2004
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
(Predecessor)
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management fees
|
|
$
|
284,951
|
|
|
$
|
41,787
|
|
|
$
|
168,938
|
|
|
$
|
210,725
|
|
Distribution and underwriting fees
|
|
|
129,250
|
|
|
|
19,350
|
|
|
|
79,578
|
|
|
|
98,928
|
|
Other
|
|
|
3,366
|
|
|
|
633
|
|
|
|
1,861
|
|
|
|
2,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
417,567
|
|
|
|
61,770
|
|
|
|
250,377
|
|
|
|
312,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits
|
|
|
61,029
|
|
|
|
12,537
|
|
|
|
53,170
|
|
|
|
65,707
|
|
Distribution and underwriting
expenses
|
|
|
79,446
|
|
|
|
11,040
|
|
|
|
39,517
|
|
|
|
50,557
|
|
Amortization of deferred sales
commissions
|
|
|
31,431
|
|
|
|
5,109
|
|
|
|
24,315
|
|
|
|
29,424
|
|
Marketing and sales promotion
|
|
|
14,738
|
|
|
|
2,263
|
|
|
|
16,881
|
|
|
|
19,144
|
|
General and administrative
|
|
|
24,829
|
|
|
|
2,587
|
|
|
|
11,258
|
|
|
|
13,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
211,473
|
|
|
|
33,536
|
|
|
|
145,141
|
|
|
|
178,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
206,094
|
|
|
|
28,234
|
|
|
|
105,236
|
|
|
|
133,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (expense)
|
|
|
(3,075
|
)
|
|
|
(882
|
)
|
|
|
(3,813
|
)
|
|
|
(4,695
|
)
|
Investment income and other income
|
|
|
13,997
|
|
|
|
3,220
|
|
|
|
2,326
|
|
|
|
5,546
|
|
Minority interest in partnership
investments
|
|
|
(5,161
|
)
|
|
|
(1,322
|
)
|
|
|
|
|
|
|
(1,322
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense), net
|
|
|
5,761
|
|
|
|
1,016
|
|
|
|
(1,487
|
)
|
|
|
(471
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest in
Calamos Holdings LLC and income taxes
|
|
|
211,855
|
|
|
|
29,250
|
|
|
|
103,749
|
|
|
|
132,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in Calamos
Holdings LLC
|
|
|
163,009
|
|
|
|
22,609
|
|
|
|
|
|
|
|
22,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
48,846
|
|
|
|
6,641
|
|
|
|
103,749
|
|
|
|
110,390
|
|
Income taxes
|
|
|
19,624
|
|
|
|
2,649
|
|
|
|
1,567
|
|
|
|
4,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
29,222
|
|
|
$
|
3,992
|
|
|
$
|
102,182
|
|
|
$
|
106,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.27
|
|
|
$
|
0.18
|
|
|
$
|
1.06
|
|
|
|
|
|
Diluted
|
|
$
|
1.26
|
|
|
$
|
0.17
|
|
|
$
|
1.06
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
23,000,100
|
|
|
|
22,700,100
|
|
|
|
96,800,000
|
|
|
|
|
|
Diluted
|
|
|
100,625,824
|
|
|
|
100,491,409
|
|
|
|
96,800,000
|
|
|
|
|
|
Assets
Under Management
Assets under management increased by $5.8 billion, or 15%,
to $43.8 billion at December 31, 2005 from
$38.0 billion at December 31, 2004. At
December 31, 2005, our assets under management consisted of
74% mutual funds and 26% separate accounts, as compared to 72%
mutual funds and 28% separate accounts at December 31, 2004.
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
|
December 31,
|
|
|
Change
|
|
(in millions)
|
|
2005
|
|
|
2004
|
|
|
Amount
|
|
|
Percent
|
|
|
Mutual
Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
$
|
27,275
|
|
|
$
|
14,831
|
|
|
$
|
12,444
|
|
|
|
84
|
%
|
Net purchases
|
|
|
3,421
|
|
|
|
9,899
|
|
|
|
(6,478
|
)
|
|
|
65
|
|
Market appreciation
|
|
|
1,548
|
|
|
|
2,545
|
|
|
|
(997
|
)
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management
|
|
|
32,244
|
|
|
|
27,275
|
|
|
|
4,969
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
|
29,084
|
|
|
|
21,166
|
|
|
|
7,918
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate
Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
|
10,700
|
|
|
|
9,009
|
|
|
|
1,691
|
|
|
|
19
|
|
Net purchases
|
|
|
212
|
|
|
|
681
|
|
|
|
(469
|
)
|
|
|
69
|
|
Market appreciation
|
|
|
649
|
|
|
|
1,010
|
|
|
|
(361
|
)
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management
|
|
|
11,561
|
|
|
|
10,700
|
|
|
|
861
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
|
10,889
|
|
|
|
9,541
|
|
|
|
1,348
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets Under
Management
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management
|
|
|
37,975
|
|
|
|
23,840
|
|
|
|
14,135
|
|
|
|
59
|
|
Net purchases
|
|
|
3,633
|
|
|
|
10,580
|
|
|
|
(6,947
|
)
|
|
|
66
|
|
Market appreciation
|
|
|
2,197
|
|
|
|
3,555
|
|
|
|
(1,358
|
)
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under
management
|
|
|
43,805
|
|
|
|
37,975
|
|
|
|
5,830
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management
|
|
$
|
39,973
|
|
|
$
|
30,707
|
|
|
$
|
9,266
|
|
|
|
30
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual fund net purchases were $3.4 billion in 2005
compared to $9.9 billion in the prior year. The decrease in
mutual fund net purchases was primarily attributable to a
$3.3 billion closed-end fund offering during 2004 that did
not recur and to a $1.9 billion increase in redemptions,
which have increased with the growth in assets under management.
Because closed-end funds do not continually offer new shares to
investors, net purchases of closed-end funds are entirely
dependent on our ability to consummate closed-end fund
offerings. Market demand for closed-end fund offerings is
difficult to predict. We intend to monitor the market and pursue
opportunities as they present themselves and when doing so would
be consistent with our business strategy. For example, we
launched the Calamos Global Total Return Fund in the fourth
quarter of 2005 and raised approximately $115 million in
assets under management. Separate accounts net purchases
decreased by $469 million in 2005 from $681 million in
2004, largely driven by managed account outflows in our
convertible strategies, which remain closed to new investors.
Revenues
Total revenues increased by $105.4 million, or 34%, to
$417.6 million for the year ended December 31, 2005
from $312.1 million for the prior year. The increase was
primarily due to higher investment management fees and
distribution and underwriting fees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
(in thousands)
|
|
2005
|
|
|
2004
|
|
|
Amount
|
|
|
Percent
|
|
|
Investment management fees
|
|
$
|
284,951
|
|
|
$
|
210,725
|
|
|
$
|
74,226
|
|
|
|
35
|
%
|
Distribution and underwriting fees
|
|
|
129,250
|
|
|
|
98,928
|
|
|
|
30,322
|
|
|
|
31
|
|
Other
|
|
|
3,366
|
|
|
|
2,494
|
|
|
|
872
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
417,567
|
|
|
$
|
312,147
|
|
|
$
|
105,420
|
|
|
|
34
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compared to the prior year, investment management fees increased
35% in 2005 primarily due to a $9.3 billion increase in
average assets under management. The overall growth in
investment management fees was due
37
primarily to an increase in fees from mutual funds, which
increased to $226.9 million in 2005 from
$164.6 million in the prior year. Open-end fund investment
management fees increased to $176.8 million for the year
ended December 31, 2005 from $125.2 million for the
prior year, primarily due to increases in open-end fund average
assets under management of $6.9 billion for 2005 compared
to the prior year. Closed-end fund investment management fees
increased to $50.0 million for the year ended
December 31, 2005 from $39.4 million in the prior year
as a result of increases in closed-end fund average assets under
management of $1.1 billion in 2005 when compared to the
prior year. Investment management fees from our separately
managed accounts increased to $58.1 million from
$46.1 million, driven by the shift to equity strategies
within these accounts and by the increase in average assets
under management. Investment management fees, in total, as a
percentage of assets under management were 0.71% and 0.69% for
the years ended December 31, 2005 and 2004, respectively,
representing the continued shift of assets from our convertible
strategies to our equity strategies, which generally carry
higher fees.
Distribution and underwriting fees increased to
$129.3 million for the year ended December 31, 2005
from $98.9 million in the prior year, primarily due to
increases in open-end fund average assets under management of
$6.9 billion for 2005 compared to the prior year.
Operating
Expenses
Operating expenses increased to $211.5 million for the year
ended December 31, 2005 from $178.7 million for the
prior year. This increase was mostly due to higher distribution
and underwriting expense.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
|
(in thousands)
|
|
2005
|
|
|
2004
|
|
|
Amount
|
|
|
Percent
|
|
|
Employee compensation and benefits
|
|
$
|
61,029
|
|
|
$
|
65,707
|
|
|
$
|
(4,678
|
)
|
|
|
7
|
%
|
Distribution and underwriting
expense
|
|
|
79,446
|
|
|
|
50,557
|
|
|
|
28,889
|
|
|
|
57
|
|
Amortization of deferred sales
commissions
|
|
|
31,431
|
|
|
|
29,424
|
|
|
|
2,007
|
|
|
|
7
|
|
Marketing and sales promotion
|
|
|
14,738
|
|
|
|
19,144
|
|
|
|
(4,406
|
)
|
|
|
23
|
|
General and administrative
|
|
|
24,829
|
|
|
|
13,845
|
|
|
|
10,984
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
$
|
211,473
|
|
|
$
|
178,677
|
|
|
$
|
32,796
|
|
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits expense decreased by
$4.7 million for the year ended December 31, 2005 when
compared to the prior year, largely resulting from the decrease
of $5.7 million in expense attributable to our equity
compensation. The decrease in equity compensation expense was
primarily driven by the conversion of liability-based
compensation programs that fluctuated with the enterprise value
to our equity-based programs that are accounted for using fair
value provisions that are fixed at the date of grant. This
decrease was partially offset by an increase in incentive-based
compensation as a result of our performance. We do not
anticipate large fluctuations in our equity compensation expense
in the future, except as it relates to new award issuances;
however, we expect the level of overall employee compensation
and benefits expense will increase in future periods due to
changes in staffing levels to support the growth and expansion
of our business. Current compensation expense levels are also
expected to increase due to merit increases for our existing
staff but may vary due to compensation based on our performance.
Distribution and underwriting expense increased by
$28.9 million to $79.4 million for 2005 when compared
to the prior year, primarily due to an increase of
$16.4 million resulting from the growth in the Class C
share assets older than one year and due to an increase of
$12.9 million resulting from the growth of average open-end
fund assets under management. Class C share assets do not
generate distribution expense in the first year following their
sale because we retain the
Rule 12b-1
fees during that first year to offset the upfront commissions
that we pay, but they do generate a distribution expense in
subsequent years as we pay the
Rule 12b-1
fees to the selling firms. Although the
Rule 12b-1
fee rates that we paid to broker-dealers and other
intermediaries in 2005 did not change from the rates paid in the
prior year, we expect distribution expense to increase to the
extent our open-end mutual fund assets under management continue
to grow.
38
Marketing and sales promotion expense decreased to
$14.7 million for the year ended December 31, 2005
from $19.1 million in the prior year, primarily due to a
$6.0 million one-time fee paid to underwriters of a
closed-end fund offering that we incurred during 2004, partially
offset by increases in supplemental compensation payments to
third party selling agents. As open-end mutual funds that we
manage have grown in size and recognition, we have become
subject to supplemental compensation payments to third-party
selling agents. We expect supplemental compensation payments to
continue to increase to the extent our funds gain assets and
further recognition.
General and administrative expense increased by
$11.0 million for the year ended December 31, 2005
from $13.8 million in the prior year. We began making lease
payments on our new headquarters in April 2005 in addition to
making lease payments and other occupancy-related payments on
our two other office facilities, which increased occupancy costs
by $3.6 million for the year ended December 31, 2005.
Maintaining two headquarters for the second and third quarters
resulted in duplicative rent and non-recurring expenses of
approximately $1.7 million. Additionally, for the year
ended December 31, 2005, professional services expense
increased $3.1 million and depreciation expense increased
$3.2 million, respectively. The increases in professional
services expense were primarily due to incremental costs
incurred as a public company, including Sarbanes-Oxley
compliance costs and higher fees related to legal and
compliance, audit services and tax preparation. The increases in
depreciation expense were primarily due to the depreciation of
new leasehold improvements in connection with the move to our
new headquarters, while $0.4 million of the increase in
depreciation expense for 2005 was due to the shortening of
depreciable lives of leasehold improvements in our previous
headquarters caused by the move into our new headquarters.
Because our move occurred in the last half of the year, we
expect that our depreciation expense in the future will increase
to reflect the full-year benefit provided by our new
improvements.
Income
Taxes
During the period from January 1, 2004 to November 1,
2004, our business was operated as an S corporation under
the Internal Revenue Code. As a result, our effective tax rate
for this period was 1.5%, while our effective tax rate for the
period from November 2, 2004 to December 31, 2004 and
for the year ended December 31, 2005 was 39.9% and 40.2%,
respectively.
Other
Income (Expense), Net
Other income (expense), net was a net income of
$5.8 million for the year ended December 31, 2005 as
compared to a net expense of approximately $471,000 for the
prior year.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2005
|
|
|
2004
|
|
|
Change
|
|
|
Net interest income (expense)
|
|
$
|
(3,075
|
)
|
|
$
|
(4,695
|
)
|
|
$
|
1,620
|
|
Investment and other income
|
|
|
13,997
|
|
|
|
5,546
|
|
|
|
8,451
|
|
Minority interest in partnership
investments
|
|
|
(5,161
|
)
|
|
|
(1,322
|
)
|
|
|
(3,839
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense), net
|
|
$
|
5,761
|
|
|
$
|
(471
|
)
|
|
$
|
6,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The change in net interest income (expense) of $1.6 million
is due to an increase of $3.8 million in interest income,
partially offset by a $2.2 million increase in interest
expense for the year ended December 31, 2005 compared to
the prior year. The increase in interest expense was primarily
due to a full twelve months of interest expense on the
$150.0 million aggregate principal senior unsecured notes,
which were issued in April 2004. Investment and other income
increased by $8.5 million primarily due to
$7.7 million market appreciation and $0.8 million of
dividend income. The increase in minority interest in
partnership investments corresponds with the increase in market
appreciation of the consolidated partnership investments.
Net
Income
We believe that the pro forma results provide a more meaningful
basis for
period-to-period
comparisons of our results for the year ended December 31,
2005 and 2004. The pro forma results for the year ended
December 31, 2004 below give effect to the Real Estate
Distribution, the Formation Transaction and the consummation of
our initial public offering, as described in the Notes to Pro
Forma Adjustments.
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
Nov. 2 to
|
|
|
Jan. 1 to
|
|
|
Combined
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
(in thousands, except share data)
|
|
2005
|
|
|
Dec. 31, 2004
|
|
|
Nov. 1, 2004
|
|
|
2004
|
|
|
Adjustments
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
(Predecessor)
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
417,567
|
|
|
$
|
61,770
|
|
|
$
|
250,377
|
|
|
$
|
312,147
|
|
|
$
|
(157
|
)(1)
|
|
$
|
311,990
|
|
Expenses
|
|
|
211,473
|
|
|
|
33,536
|
|
|
|
145,141
|
|
|
|
178,677
|
|
|
|
(8
|
)(1)
|
|
|
178,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
206,094
|
|
|
|
28,234
|
|
|
|
105,236
|
|
|
|
133,470
|
|
|
|
(149
|
)
|
|
|
133,321
|
|
Total other income (expense), net
|
|
|
5,761
|
|
|
|
1,016
|
|
|
|
(1,487
|
)
|
|
|
(471
|
)
|
|
|
(1,808
|
)(1)
|
|
|
(2,279
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest in
Calamos Holdings LLC and income taxes
|
|
|
211,855
|
|
|
|
29,250
|
|
|
|
103,749
|
|
|
|
132,999
|
|
|
|
(1,957
|
)
|
|
|
131,042
|
|
Minority interest in Calamos
Holdings LLC
|
|
|
163,009
|
|
|
|
22,609
|
|
|
|
|
|
|
|
22,609
|
|
|
|
78,293
|
(2)
|
|
|
100,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
48,846
|
|
|
|
6,641
|
|
|
|
103,749
|
|
|
|
110,390
|
|
|
|
(80,250
|
)
|
|
|
30,140
|
|
Income taxes
|
|
|
19,624
|
|
|
|
2,649
|
|
|
|
1,567
|
|
|
|
4,216
|
|
|
|
7,805
|
(3)
|
|
|
12,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
29,222
|
|
|
$
|
3,992
|
|
|
$
|
102,182
|
|
|
$
|
106,174
|
|
|
$
|
(88,055
|
)
|
|
$
|
18,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share, basic
|
|
$
|
1.27
|
|
|
$
|
0.18
|
|
|
$
|
1.06
|
|
|
|
|
|
|
|
|
|
|
$
|
0.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding, basic
|
|
|
23,000,100
|
|
|
|
22,700,100
|
|
|
|
96,800,000
|
(4)
|
|
|
|
|
|
|
|
|
|
|
23,000,100
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calculation of earnings per share,
diluted, assuming exchange of membership units:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest and
income taxes
|
|
|
211,855
|
|
|
|
29,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
131,042
|
|
Impact of income taxes(6)
|
|
|
85,102
|
|
|
|
11,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings available to common
shareholders
|
|
|
126,753
|
|
|
|
17,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share, diluted
|
|
$
|
1.26
|
|
|
$
|
0.17
|
|
|
$
|
1.06
|
|
|
|
|
|
|
|
|
|
|
$
|
0.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding, diluted(7)
|
|
|
100,625,824
|
|
|
|
100,491,409
|
|
|
|
96,800,000
|
|
|
|
|
|
|
|
|
|
|
|
100,080,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to Pro
Forma Adjustments:
|
|
|
(1) |
|
Represents the adjustment related to the Real Estate
Distribution, whereby Calamos Family Partners, Inc. (formerly
known as Calamos Holdings Inc.), distributed its interest in all
of its owned real estate assets to its stockholders, who
contributed those assets to a new limited liability company.
This adjustment is presented based on actual amounts recorded
during the periods presented. |
|
(2) |
|
Represents an adjustment to increase Calamos Asset Management,
Inc.s minority interest allocation in Calamos Holdings LLC
to 77.0%. Minority interest was determined by multiplying the
income before minority interest in Calamos Holdings LLC and
income taxes by Calamos Family Partners, Inc. and John P.
Calamos, Sr.s 77.0% aggregate ownership. The minority
interest adjustment is presented based on the income for the
periods presented. |
|
(3) |
|
Reflects the impact of federal and state income taxes on the
income allocated from Calamos Holdings LLC to Calamos Asset
Management, Inc. Historically, Calamos Family Partners, Inc.
operated as an S corporation and was not subject to
U.S. federal and certain state income taxes, but was
subject to Illinois replacement taxes. The amount of pro forma
adjustment was determined by eliminating the Illinois
replacement tax and applying the combined projected federal
corporate income tax rate and applicable state tax rates to
income before income taxes. |
|
(4) |
|
Represents the adjustment related to the Formation Transaction,
whereby on October 15, 2004, Calamos Family Partners, Inc.
contributed all of its assets and liabilities, including, among
other things, all equity |
40
|
|
|
|
|
interests in its wholly owned subsidiaries, to Calamos Holdings
LLC in exchange for 96.8 million membership units of
Calamos Holdings LLC. |
|
|
|
(5) |
|
Reflects 23.0 million shares of Class A common stock,
which represents 23.0% of the outstanding shares after the
offering. In addition to shares of Class A common stock,
there are 100 shares of Class B common stock
outstanding. |
|
(6) |
|
In calculating diluted earnings per share, the effective tax
rates for the years ended December 31, 2005 and 2004 of
40.2% and 39.9%, respectively, were applied to income before
minority interest and income taxes. |
|
(7) |
|
Diluted shares outstanding for each period presented represent
the weighted average Class A common stock after giving
effect to the offering as of the beginning of 2004. The diluted
shares outstanding are calculated: (a) including the effect
of outstanding restricted stock unit and option awards and
(b) assuming Calamos Family Partners, Inc. and John P.
Calamos, Sr. exchanged all of their membership units in
Calamos Holdings LLC for, and converted all outstanding shares
of our Class B common stock into, shares of our
Class A common stock, in each case on a
one-for-one
basis. |
Net income totaled $29.2 million for the year ended
December 31, 2005 compared to pro forma net income of
$18.1 million for the prior year, an increase of 61%.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
Change
|
|
|
|
2005
|
|
|
2004
|
|
|
Amount
|
|
|
Percent
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
417,567
|
|
|
$
|
311,990
|
|
|
$
|
105,577
|
|
|
|
34
|
%
|
Total operating expenses
|
|
|
211,473
|
|
|
|
178,669
|
|
|
|
32,804
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
206,094
|
|
|
|
133,321
|
|
|
|
72,773
|
|
|
|
55
|
|
Other income (expense), net
|
|
|
5,761
|
|
|
|
(2,279
|
)
|
|
|
8,040
|
|
|
|
*
|
|
Minority interest
|
|
|
163,009
|
|
|
|
100,902
|
|
|
|
62,107
|
|
|
|
62
|
|
Income taxes
|
|
|
19,624
|
|
|
|
12,021
|
|
|
|
7,603
|
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
29,222
|
|
|
$
|
18,119
|
|
|
$
|
11,103
|
|
|
|
61
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterly
Results of Operations
Unaudited quarterly results of operations for the years ended
December 31, 2006 and 2005 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At or for the Quarter Ended
|
|
(in thousands, except
|
|
2005
|
|
|
2006
|
|
share data)
|
|
March 31
|
|
|
June 30
|
|
|
Sept. 30
|
|
|
Dec. 31
|
|
|
March 31
|
|
|
June 30
|
|
|
Sept. 30
|
|
|
Dec. 31
|
|
|
Assets under management (in
millions)
|
|
$
|
38,246
|
|
|
$
|
39,512
|
|
|
$
|
42,169
|
|
|
$
|
43,805
|
|
|
$
|
47,601
|
|
|
$
|
45,812
|
|
|
$
|
44,809
|
|
|
$
|
44,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
97,321
|
|
|
|
99,072
|
|
|
|
107,686
|
|
|
|
113,488
|
|
|
|
120,618
|
|
|
|
124,353
|
|
|
|
118,547
|
|
|
|
121,654
|
|
Total operating expenses
|
|
|
48,332
|
|
|
|
50,325
|
|
|
|
54,354
|
|
|
|
58,462
|
|
|
|
61,993
|
|
|
|
64,406
|
|
|
|
61,909
|
|
|
|
65,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
48,989
|
|
|
|
48,747
|
|
|
|
53,332
|
|
|
|
55,026
|
|
|
|
58,625
|
|
|
|
59,947
|
|
|
|
56,638
|
|
|
|
55,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,371
|
|
|
$
|
7,002
|
|
|
$
|
7,639
|
|
|
$
|
8,210
|
|
|
$
|
9,005
|
|
|
$
|
8,101
|
|
|
$
|
8,041
|
|
|
$
|
8,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.28
|
|
|
$
|
0.30
|
|
|
$
|
0.33
|
|
|
$
|
0.35
|
|
|
$
|
0.38
|
|
|
$
|
0.34
|
|
|
$
|
0.34
|
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares outstanding(1)
|
|
|
100,598,485
|
|
|
|
100,557,047
|
|
|
|
100,667,805
|
|
|
|
100,699,343
|
|
|
|
100,973,155
|
|
|
|
100,845,107
|
|
|
|
100,757,758
|
|
|
|
100,817,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The diluted shares outstanding are calculated:
(a) including the effect of outstanding restricted stock
unit and option awards and (b) assuming Calamos Family
Partners, Inc. and John P. Calamos, Sr. exchanged all of
their membership units in Calamos Holdings LLC for, and
converted all outstanding shares of our Class B common
stock into, shares of our Class A common stock, in each
case on a
one-for-one
basis. |
41
In calculating 2006 diluted earnings per share, the effective
tax rates for the quarters ended March 31, 2006,
June 30, 2006, September 30, 2006 and
December 31, 2006 of 40.1%, 40.1%, 40.0% and 40.2%,
respectively, were applied to income before minority interest
and income taxes. In calculating 2005 diluted earnings per
share, the effective tax rates for the quarters ended
March 31, 2005, June 30, 2005, September 30, 2005
and December 31, 2005 of 40.0%, 40.0%, 39.7% and 40.9%,
respectively, were applied to income before minority interest
and income taxes.
Liquidity
and Capital Resources
Our current financial condition is highly liquid, with the
majority of our assets representing our corporate investment
portfolio, which is comprised of cash and cash equivalents,
investment securities and partnership investments. We anticipate
utilizing our cash and cash equivalent balances to make
investments in our products as opportunities arise, to invest in
property and equipment for our facility, to support our
operations and to acquire shares under our share repurchase
program. Investment securities are principally comprised of
company-sponsored mutual funds. In addition, the underlying
partnership investments are typically comprised of highly liquid
exchange-traded securities. Our working capital requirements
historically have been met through cash generated by our
operations and long-term debt.
The following tables summarize key statements of financial
condition data relating to our liquidity and capital resources
at December 31, 2006 and 2005.
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2006
|
|
|
2005
|
|
|
Statements of financial
condition data:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
328,841
|
|
|
$
|
210,469
|
|
Receivables
|
|
|
36,649
|
|
|
|
34,476
|
|
Investment securities
|
|
|
142,862
|
|
|
|
128,265
|
|
Partnership investments
|
|
|
90,528
|
|
|
|
79,956
|
|
Deferred tax assets, net
|
|
|
99,240
|
|
|
|
109,126
|
|
Deferred sales commissions
|
|
|
49,891
|
|
|
|
58,390
|
|
Long-term debt
|
|
|
150,000
|
|
|
|
150,000
|
|
The deferred tax assets above include an annual reduction of
approximately $8.3 million in future taxes owed by Calamos
Asset Management, Inc. through 2019. This reduction results from
our election under Section 754 of the Internal Revenue
Code, whereby we stepped up the tax basis in certain intangible
assets to their fair market value. The
step-up in
basis is amortized over fifteen years on Calamos Asset
Management, Inc.s tax return. As a result, this cash
savings can be utilized solely for the benefit of the
shareholders of our common stock.
Cash flows for the years ended December 31, 2006, 2005 and
2004 are shown below. Cash flows for the year ended
December 31, 2004 are shown as combined, as we believe this
is most appropriate for comparison purposes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nov. 2
|
|
|
Jan. 1
|
|
|
|
|
|
|
|
|
|
|
|
|
through
|
|
|
through
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
Dec. 31,
|
|
|
Nov. 1,
|
|
|
Combined
|
|
(in thousands)
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2004
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
(Predecessor)
|
|
|
|
|
|
Cash flow data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
|
$
|
253,455
|
|
|
$
|
223,592
|
|
|
$
|
21,335
|
|
|
$
|
112,032
|
|
|
$
|
133,367
|
|
Net cash used in investing
activities
|
|
|
(20,137
|
)
|
|
|
(72,564
|
)
|
|
|
(49,851
|
)
|
|
|
(57,499
|
)
|
|
|
(107,350
|
)
|
Net cash provided by (used in)
financing activities
|
|
|
(114,946
|
)
|
|
|
(90,327
|
)
|
|
|
45,308
|
|
|
|
73,370
|
|
|
|
118,678
|
|
Net cash provided by operating activities was
$253.5 million for the year ended December 31, 2006
and was primarily comprised of income before minority interest
and income taxes of $243.4 million and net changes in
working capital. For the year ended December 31, 2005, net
cash provided by operating activities was $223.6 million
and was primarily comprised of income before minority interest
and income taxes of $211.9 million, a $5.6 million
allowance received from our landlord to fund tenant improvements
in our new headquarters and net changes in working capital. Net
cash provided by operating activities was $133.4 million
for the combined year
42
ended December 31, 2004 and was primarily comprised of
income before minority interest and income taxes of
$133.0 million and net changes in working capital.
The payment of deferred sales commissions by us to financial
intermediaries who sell Class B and C shares of our
open-end funds is a significant use of our operating cash flows.
Use of cash for deferred sales commissions was
$24.4 million, $28.4 million and $41.6 million
for the years ended December 31, 2006 and 2005, and the
combined year ended December 31, 2004, respectively. We
expect that the payment of deferred sales commissions will vary
in proportion to future sales of Class B and C shares of
open-end funds and that these commissions will continue to be
funded by cash flows from operations.
Net cash used in investing activities was $20.1 million for
the year ended December 31, 2006 and was primarily
comprised of our $10.1 million investment in property and
equipment as we continue our initial build-out of our new office
facility and investments of $10.1 million in products
managed by us. For the year ended December 31, 2005, net
cash used in investing activities was $72.6 million and was
primarily comprised of our $38.6 million investment in
property and equipment for our new facility, of which
$5.6 million was received from our landlord as an allowance
for tenant improvements, and $25 million in cash used to
seed our International Growth Fund during the first quarter of
2005. Net cash used in investing activities was
$107.4 million for the combined year ended
December 31, 2004 and was primarily comprised of our
investments in products managed by us of $96.0 million and
construction payments on our new headquarters facility, which
were distributed to the stockholders of Calamos Family Partners,
Inc. in June 2004 in connection with the Real Estate
Distribution.
Net cash used in financing activities was $114.9 million
for the year ended December 31, 2006 and was primarily
comprised of distributions to minority shareholders of
$106.3 million, including distributions for their tax
liabilities of $78.6 million, as well as the dividends paid
to common shareholders of $8.3 million. We anticipate that
distributions for income taxes will continue to change as net
income changes. Net cash used in financing activities was
$90.3 million for the year ended December 31, 2005 and
was comprised of distributions to minority shareholders of
$83.9 million, including distributions for their tax
liabilities of $62.3 million, as well as the dividends paid
to common shareholders of $6.4 million. Net cash provided
by financing activities was $118.7 million for the combined
year ended December 31, 2004 and was principally comprised
of the issuance of $150 million aggregate principal amount
of senior unsecured notes in April 2004, partially offset by
cash used to repay and terminate a credit facility of
approximately $30 million in 2004 and further offset by
$52.1 million in distributions to minority shareholders.
We expect our cash and liquidity requirements will be met with
the cash on hand and through cash generated by operations. We
intend to satisfy our capital requirements over the next
12 months through these sources of liquidity.
Contractual
Obligations
The following table contains supplemental information regarding
our total contractual cash obligations as of December 31,
2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less than
|
|
|
|
|
|
|
|
|
More than
|
|
(in thousands)
|
|
Total
|
|
|
1 Year
|
|
|
1-3 Years
|
|
|
3-5 Years
|
|
|
5 Years
|
|
|
Long-term debt obligations,
including interest(1)
|
|
$
|
185,370
|
|
|
$
|
7,860
|
|
|
$
|
15,720
|
|
|
$
|
161,790
|
|
|
$
|
|
|
Operating lease obligations(2)
|
|
|
80,686
|
|
|
|
3,439
|
|
|
|
6,977
|
|
|
|
7,320
|
|
|
|
62,950
|
|
Other long-term obligations(3)
|
|
|
1,085
|
|
|
|
295
|
|
|
|
610
|
|
|
|
180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
267,141
|
|
|
$
|
11,594
|
|
|
$
|
23,307
|
|
|
$
|
169,290
|
|
|
$
|
62,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The Companys $150.0 million of 5.24% senior
unsecured notes are due in April 2011. |
|
(2) |
|
In accordance with generally accepted accounting principles in
the United States, these obligations are not reflected in the
accompanying consolidated statements of financial condition. |
|
(3) |
|
Other long-term obligations principally represent commitments
under equity compensation agreements. These obligations are
included in other long-term liabilities in the accompanying
consolidated statements of financial condition. |
43
Critical
Accounting Policies and Estimates
The preparation of our consolidated financial statements in
accordance with accounting principles generally accepted in the
United States requires management to make estimates and
judgments that affect the reported amounts of assets,
liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities. We base our estimates on
historical experience and on various other assumptions that are
believed to be reasonable under current circumstances, the
results of which form the basis for making judgments about the
carrying value of assets and liabilities that are not readily
available from other sources. We evaluate our estimates on an
ongoing basis. Actual results may differ from these estimates
under different assumptions or conditions.
Accounting policies are an integral part of our consolidated
financial statements. A thorough understanding of these
accounting policies is essential when reviewing our reported
results of operations and our financial position. Management
believes that the critical accounting policies and estimates
discussed below involve additional management judgment due to
the sensitivity of the methods and assumptions used.
Deferred
Sales Commissions
Deferred sales commissions are commissions advanced by us on our
sale of Class B and Class C shares of open-end funds.
Deferred sales commissions are amortized on a straight-line
basis over the period in which
12b-1 fees
are received. Because
12b-1 fees
cease upon redemption of shares, amortization expense is
accelerated when shares are redeemed, resulting in the reduction
of the deferred sales commission asset. These redemptions result
in an amortization period not to exceed 12 months for
Class C shares and 96 months (eight years) for
Class B shares.
We evaluate the carrying value of our deferred sales commissions
for impairment purposes on a quarterly basis. Significant
assumptions utilized by us to estimate future average assets
under management include expected future market performance and
redemption rates. Estimates of undiscounted future cash flows
and the remaining life of the deferred sales commission asset
are made from these assumptions. Market performance assumptions
are selected using expected average market returns based on
long-term market index benchmarks for each asset class held
within the fund. At December 31, 2006, we used average
market return assumptions ranging from 8% to 12% based on asset
class. Higher actual average market returns would increase
undiscounted cash flows, while lower actual average market
returns would decrease undiscounted future cash flows. Future
redemption assumptions were determined by using the actual
redemption rates that each fund experienced over the prior
24-month
period. For Class B shares and Class C shares, we used
average historical redemption rates of between 11% and 17%,
respectively, at December 31, 2006. An increase in the
actual rate of redemptions would decrease the undiscounted
future cash flows, while a decrease in the actual rate of
redemptions would increase undiscounted cash flows. These
assumptions are reviewed and updated quarterly, or monthly when
events or changes in circumstances occur that could
significantly increase the risk of impairment of the asset.
If we determine that the deferred sales commission asset is not
recoverable, an impairment condition would exist and a loss
would be measured as the amount by which the recorded amount of
the asset exceeds its estimated fair value. If the carrying
value of the deferred sales commission asset exceeds the
undiscounted cash flow, the asset is written down to fair value
based on discounted cash flows. Impairment adjustments are
recognized in the statement of operations as a component of
amortization of deferred sales commissions. As of each reporting
period presented, we determined that no impairment of the
deferred commission asset existed, but due to the volatility of
the capital markets and the changes in redemption rates, we are
unable to predict whether or when future impairment of the
deferred sales commission asset might occur.
Compensation
Plans
On January 1, 2006, we adopted Financial Accounting
Standards Boards (FASB) Statement of Financial Accounting
Standard (SFAS) No. 123(R), Share-Based Payment
(SFAS 123(R)), which requires us to recognize the cost of
stock-based compensation based on the grant-date fair value of
the award. We adopted the fair value recognition provisions of
SFAS 123 effective January 1, 2004 and elected to
recognize compensation expense based upon the grant-date fair
value. The provisions of SFAS 123(R) are similar, but not
identical, to the fair value recognition that we have used since
the beginning of 2004. The effects of this change do not have a
material impact on our financial statements.
44
During 2004, we established an incentive stock plan that
provides for grants of restricted stock unit awards, or RSUs,
and stock option awards for certain employees. RSUs are
convertible on a
one-for-one
basis into shares of our common stock. Stock option awards are
based on shares of our common stock. We estimate the fair value
of the options as of the grant date using the Black-Scholes
option-pricing model. Further, we estimate the number of
forfeited awards at the grant date. Actual forfeitures may vary
from our assumptions, which will result in modifications to
future expenses.
The EAU plan was terminated in October 2004 in connection with
our initial public offering. Prior to its termination,
compensation expense was accrued over the periods in which
employees performed services. As such, changes in the aggregate
unit value, multiplied by the ratio of actual to total number of
service periods in the vesting period, were recorded as an
increase or decrease to expense in the current period.
The value of the EAU at the valuation date was derived from an
equally weighted calculation based on multiples of assets under
management, revenue and EBITDA, defined as net income plus
interest expense, income taxes and fixed asset depreciation,
excluding amortization of deferred sales commissions. We used
industry multiples provided by independent third party sources
in computing the values, until the termination of the plan at
which time we used our initial public offering price.
Income
Taxes
Management judgment is required in developing our provision for
income taxes, including the determination of deferred tax assets
and liabilities and any valuation allowances that might be
required against deferred tax assets. As of December 31,
2006 and 2005, we have not recorded a valuation allowance on
deferred tax assets relating principally to our
step-up in
tax basis to fair market value for our intangible assets under
our election to be made under Section 754 of the Internal
Revenue Code. In the event that sufficient taxable income does
not result in future years, among other things, a valuation
allowance for some or all of our deferred tax assets would be
required.
Recently
Issued Accounting Pronouncements
In June 2006, the FASB issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes an
interpretation of FASB Statement No. 109 (FIN 48),
which seeks to reduce diversity in practice that is associated
with certain aspects of measurement and recognition when
accounting for uncertain tax positions and clarifies the
accounting and disclosure for uncertainty in tax positions.
FIN 48 is effective for us beginning January 1, 2007.
We have evaluated the impact that the adoption of FIN 48
will have on our financial statements and do not expect it to be
material.
In September 2006, the FASB issued SFAS 157, Fair Value
Measurements, which defines fair value, establishes a
framework for measuring fair value and requires additional
disclosure regarding fair value measurements. SFAS 157 is
effective for us beginning January 1, 2008. We are
currently evaluating the impact, if any, that the adoption of
SFAS 157 will have on our financial statements.
Forward-Looking
Information
From time to time, information or statements provided by us or
on our behalf, including those within this Annual Report on
Form 10-K,
may contain certain forward-looking statements relating to
future events, future financial performance, strategies,
expectations and competitive environment, and regulations. These
forward-looking statements 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; and managements
goals and objectives and other similar expressions concerning
matters that are not historical facts.
Words such as may, will,
should, could, would,
predicts, potential,
continue, expects,
anticipates, future,
intends, plans, believes,
estimates, 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.
45
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: adverse
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; our ownership structure;
general declines in the prices of securities; catastrophic or
unpredictable events; the loss of key executives; the
unavailability of third-party retail distribution channels;
increased costs of distribution; failure to recruit and retain
qualified personnel; a loss of assets, and thus revenues;
fluctuation in the level of our expenses; if our largest funds
perform poorly; damage to our reputation; the extent and timing
of any share repurchases; and our holding company structure.
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; fluctuations in the financial markets around the world
that result in appreciation or depreciation of assets under
management; our introduction of new investment strategies and
products; our ability to educate our clients about our
investment philosophy and provide them with
best-in-class
service; the relative investment performance of our investment
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; and our decision to open or close products and
strategies when deemed to be in the best interests of our
clients. Item 1A of this report 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 7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
Our exposure to market risk is directly related to our role as
investment advisors for the mutual funds and separate accounts
we manage. A significant majority of our operating revenue,
approximately 97.2% for the year ended December 31, 2006,
is derived from investment advisory, distribution and portfolio
accounting agreements with the mutual funds and separate
accounts. Under these agreements, the fees we receive are
typically based on the market value of the assets under
management. Accordingly, a decline in the prices of securities
generally may cause our revenue and income to decline by causing
the value of the assets we manage to decrease or by causing our
clients to withdraw funds in favor of investments that they
perceive as offering greater opportunity or lower risk.
In addition, a decline in the prices of securities may present
market conditions that could preclude us from increasing assets
under management and prevent us from realizing higher fee
revenue associated with such growth.
We are also subject to market risk due to a decline in the
prices of investment securities. We own investment securities
primarily comprised of mutual funds we manage. At
December 31, 2006, the fair value of these investment
securities was $142.9 million. Assuming a 10% increase or
decrease in the value of these investments, the fair value would
increase or decrease by $14.3 million at December 31,
2006.
Additionally, we are subject to market risk due to a decline in
the value of our partnership investments, which consist
primarily of marketable securities. As a result, the market
values of these partnerships are subject to the same
fluctuations as our investment securities. At December 31,
2006, the fair value of these partnerships was
$90.5 million. Assuming a 10% increase or decrease in the
value of these partnerships, the fair value would increase or
decrease by $9.1 million at December 31, 2006.
On April 29, 2004, we issued $150 million of senior
unsecured notes due April 29, 2011 to various note
purchasers in a private placement. These notes have a fixed
interest rate of 5.24%, and consequently, we do not believe that
these notes have any interest rate risk. Due to the nature of
our business, we believe that we do not face any material credit
risk, inflation, interest rate or foreign currency rate risk.
46
|
|
Item 8.
|
Financial
Statements and Supplementary Data
|
|
|
|
|
|
|
|
|
F-1
|
|
|
|
|
F-2
|
|
|
|
|
F-3
|
|
|
|
|
F-5
|
|
|
|
|
F-6
|
|
|
|
|
F-7
|
|
|
|
|
F-8
|
|
|
|
|
F-9
|
|
47
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Calamos Asset Management, Inc.:
We have audited the accompanying consolidated statements of
financial position of Calamos Asset Management, Inc. as of
December 31, 2006 and 2005, and the related consolidated
statements of operations, stockholders equity and cash
flows for the years ended December 31, 2006 and 2005, and
for the period November 2, 2004 to December 31, 2004
(the Successor Periods, as Calamos Asset Management, Inc.), and
for the period January 1, 2004 to November 1, 2004
(the Predecessor Period, as Calamos Holdings, Inc.). These
consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Calamos Asset Management, Inc. as of
December 31, 2006 and 2005, and the results of their
operations and their cash flows for the years ended
December 31, 2006 and 2005, and for the period
November 2, 2004 to December 31, 2004 (the Successor
Periods, as Calamos Asset Management, Inc.), and for the period
January 1, 2004 to November 1, 2004 (the Predecessor
Period, as Calamos Holdings, Inc.), in conformity with
U.S. generally accepted accounting principles.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of the Companys internal control over
financial reporting as of December 31, 2006, based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO), and our report dated
March 6, 2007, expressed an unqualified opinion on
managements assessment of, and the effective operation of,
internal control over financial reporting.
Chicago, Illinois
March 6, 2007
F-1
MANAGEMENTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of Calamos Asset Management, Inc. and its
subsidiaries (the Company) is responsible for establishing and
maintaining adequate internal control over financial reporting,
as defined in
Rule 13a-15(f)
and
15d-15(f) of
the Securities Exchange Act of 1934, as amended. The
Companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of its
consolidated financial statements for external purposes in
accordance with U.S. generally accepted accounting
principles.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of the Chief
Executive Officer and the Chief Financial Officer, management
assessed the effectiveness of the Companys internal
control over financial reporting as of December 31, 2006
based on criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on this
assessment, management concluded that the Companys
internal control over financial reporting was effective as of
December 31, 2006.
Managements assessment of the effectiveness of the
Companys internal control over financial reporting as of
December 31, 2006 has been audited by KPMG LLP, an
independent registered public accounting firm, as stated in
their report which is included herein.
|
|
|
/s/ John
P.
Calamos, Sr. John
P. Calamos, Sr.
Chairman, Chief Executive Officer
and Co-Chief Investment Officer
|
|
/s/ Patrick
H.
Dudasik Patrick
H. Dudasik
Executive Vice President, Chief Operating
Officer, Chief Financial Officer and Treasurer
|
March 6, 2007
F-2
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The Board of Directors and Stockholders
Calamos Asset Management, Inc.:
We have audited managements assessment, included in the
accompanying Managements Report on Internal Control over
Financial Reporting, that Calamos Asset Management, Inc. (the
Company) maintained effective internal control over financial
reporting as of December 31, 2006, based on criteria
established in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). The Companys management is
responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness
of internal control over financial reporting. Our responsibility
is to express an opinion on managements assessment and an
opinion on the effectiveness of the Companys internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
managements assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, managements assessment that the Company
maintained effective internal control over financial reporting
as of December 31, 2006, is fairly stated, in all material
respects, based on criteria established in Internal
Control Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
Also, in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as
of December 31, 2006, based on criteria established in
Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
F-3
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated statements of financial position of Calamos Asset
Management, Inc. as of December 31, 2006 and 2005, and the
related consolidated statements of operations,
stockholders equity and cash flows for the years ended
December 31, 2006 and 2005, and for the period
November 2, 2004 to December 31, 2004 (the Successor
Periods, as Calamos Asset Management, Inc.), and for the period
January 1, 2004 to November 1, 2004 (the
Predecessor Period, as Calamos Holdings, Inc.), and our report
dated March 6, 2007, expressed an unqualified opinion on
those consolidated financial statements.
Chicago, Illinois
March 6, 2007
F-4
CALAMOS
ASSET MANAGEMENT, INC.
CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(in thousands, except share data)
|
|
2006
|
|
|
2005
|
|
|
ASSETS:
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
328,841
|
|
|
$
|
210,469
|
|
Receivables:
|
|
|
|
|
|
|
|
|
Affiliates and affiliated funds
|
|
|
26,431
|
|
|
|
24,670
|
|
Customers
|
|
|
10,218
|
|
|
|
9,806
|
|
Investment securities
|
|
|
142,862
|
|
|
|
128,265
|
|
Partnership investments
|
|
|
90,528
|
|
|
|
79,956
|
|
Prepaid expenses
|
|
|
2,383
|
|
|
|
2,342
|
|
Deferred tax assets, net
|
|
|
7,375
|
|
|
|
7,846
|
|
Other assets
|
|
|
138
|
|
|
|
195
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
608,776
|
|
|
|
463,549
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Deferred tax assets, net
|
|
|
91,865
|
|
|
|
101,280
|
|
Deferred sales commissions
|
|
|
49,891
|
|
|
|
58,390
|
|
Property and equipment, net
|
|
|
43,615
|
|
|
|
40,547
|
|
Other non-current assets
|
|
|
1,693
|
|
|
|
1,711
|
|
|
|
|
|
|
|
|
|
|
Total non-current assets
|
|
|
187,064
|
|
|
|
201,928
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
795,840
|
|
|
|
665,477
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY:
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable:
|
|
|
|
|
|
|
|
|
Brokers
|
|
|
20,969
|
|
|
|
18,485
|
|
Affiliates and affiliated funds
|
|
|
264
|
|
|
|
93
|
|
Accrued compensation and benefits
|
|
|
22,722
|
|
|
|
19,131
|
|
Accrued expenses and other current
liabilities
|
|
|
10,942
|
|
|
|
11,025
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
54,897
|
|
|
|
48,734
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
150,000
|
|
|
|
150,000
|
|
Other long-term liabilities
|
|
|
8,003
|
|
|
|
6,726
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
158,003
|
|
|
|
156,726
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
212,900
|
|
|
|
205,460
|
|
|
|
|
|
|
|
|
|
|
Minority interest in partnership
investments
|
|
|
48,850
|
|
|
|
44,453
|
|
Minority interest in Calamos
Holdings LLC
|
|
|
319,513
|
|
|
|
229,430
|
|
Stockholders equity
|
|
|
|
|
|
|
|
|
Class A Common Stock,
$0.01 par value; authorized 600,000,000 shares; issued
and outstanding 23,161,898 shares at December 31, 2006
and 23,000,000 shares at December 31, 2005
|
|
|
232
|
|
|
|
230
|
|
Class B Common Stock,
$0.01 par value; authorized 1,000 shares; issued and
outstanding 100 shares
|
|
|
0
|
|
|
|
0
|
|
Additional paid-in capital
|
|
|
157,724
|
|
|
|
156,274
|
|
Retained earnings
|
|
|
52,261
|
|
|
|
26,698
|
|
Accumulated other comprehensive
income
|
|
|
4,360
|
|
|
|
2,932
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
214,577
|
|
|
|
186,134
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, minority
interest and stockholders equity
|
|
$
|
795,840
|
|
|
$
|
665,477
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-5
CALAMOS
ASSET MANAGEMENT, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
November 2 to
|
|
|
January 1 to
|
|
(in thousands, except share data)
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
November 1,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
(Predecessor)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management fees
|
|
$
|
329,383
|
|
|
$
|
284,951
|
|
|
$
|
41,787
|
|
|
$
|
168,938
|
|
Distribution and underwriting fees
|
|
|
151,760
|
|
|
|
129,250
|
|
|
|
19,350
|
|
|
|
79,578
|
|
Other
|
|
|
4,029
|
|
|
|
3,366
|
|
|
|
633
|
|
|
|
1,861
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
485,172
|
|
|
|
417,567
|
|
|
|
61,770
|
|
|
|
250,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits
|
|
|
73,382
|
|
|
|
61,029
|
|
|
|
12,537
|
|
|
|
53,170
|
|
Distribution and underwriting
expense
|
|
|
100,935
|
|
|
|
79,446
|
|
|
|
11,040
|
|
|
|
39,517
|
|
Amortization of deferred sales
commissions
|
|
|
32,924
|
|
|
|
31,431
|
|
|
|
5,109
|
|
|
|
24,315
|
|
Marketing and sales promotion
|
|
|
15,631
|
|
|
|
14,738
|
|
|
|
2,263
|
|
|
|
16,881
|
|
General and administrative
|
|
|
31,272
|
|
|
|
24,829
|
|
|
|
2,587
|
|
|
|
11,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
254,144
|
|
|
|
211,473
|
|
|
|
33,536
|
|
|
|
145,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
231,028
|
|
|
|
206,094
|
|
|
|
28,234
|
|
|
|
105,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (expense)
|
|
|
5,004
|
|
|
|
(3,075
|
)
|
|
|
(882
|
)
|
|
|
(3,813
|
)
|
Investment and other income
|
|
|
7,403
|
|
|
|
13,997
|
|
|
|
3,220
|
|
|
|
2,326
|
|
Minority interest in partnership
investments
|
|
|
(26
|
)
|
|
|
(5,161
|
)
|
|
|
(1,322
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense), net
|
|
|
12,381
|
|
|
|
5,761
|
|
|
|
1,016
|
|
|
|
(1,487
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest in
Calamos Holdings LLC and income taxes
|
|
|
243,409
|
|
|
|
211,855
|
|
|
|
29,250
|
|
|
|
103,749
|
|
Minority interest in Calamos
Holdings LLC
|
|
|
186,631
|
|
|
|
163,009
|
|
|
|
22,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
56,778
|
|
|
|
48,846
|
|
|
|
6,641
|
|
|
|
103,749
|
|
Income taxes
|
|
|
22,770
|
|
|
|
19,624
|
|
|
|
2,649
|
|
|
|
1,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
34,008
|
|
|
$
|
29,222
|
|
|
$
|
3,992
|
|
|
$
|
102,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.47
|
|
|
$
|
1.27
|
|
|
$
|
0.18
|
|
|
$
|
1.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
1.45
|
|
|
$
|
1.26
|
|
|
$
|
0.17
|
|
|
$
|
1.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
23,161,998
|
|
|
|
23,000,100
|
|
|
|
22,700,100
|
|
|
|
96,800,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
100,805,030
|
|
|
|
100,625,824
|
|
|
|
100,491,409
|
|
|
|
96,800,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share
|
|
$
|
0.36
|
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-6
CALAMOS
ASSET MANAGEMENT, INC.
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Common
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
|
|
(in thousands)
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income
|
|
|
Total
|
|
|
Balance at December 31, 2003
|
|
$
|
|
|
|
$
|
2,274
|
|
|
$
|
42,094
|
|
|
$
|
2,045
|
|
|
$
|
46,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
102,182
|
|
|
|
|
|
|
|
102,182
|
|
Changes in unrealized gains on
available-for-sale
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,854
|
|
|
|
1,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,036
|
|
Additional capital contributions,
in cash
|
|
|
|
|
|
|
3,300
|
|
|
|
|
|
|
|
|
|
|
|
3,300
|
|
Classification of EAU liability to
additional paid-in capital
|
|
|
|
|
|
|
6,679
|
|
|
|
|
|
|
|
|
|
|
|
6,679
|
|
Compensation expense recognized
under stock incentive plans
|
|
|
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
33
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
(57,581
|
)
|
|
|
|
|
|
|
(57,581
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at November 1, 2004
|
|
|
|
|
|
|
12,286
|
|
|
|
86,695
|
|
|
|
3,899
|
|
|
|
102,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassify historical retained
earnings to additional paid-in capital
|
|
|
|
|
|
|
86,695
|
|
|
|
(86,695
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at November 2, 2004
after reclassification
|
|
|
|
|
|
|
98,981
|
|
|
|
|
|
|
|
3,899
|
|
|
|
102,880
|
|
Allocation of 77% to minority
interest
|
|
|
|
|
|
|
(76,215
|
)
|
|
|
|
|
|
|
(3,002
|
)
|
|
|
(79,217
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at November 2, 2004
before proceeds of IPO
|
|
|
|
|
|
|
22,766
|
|
|
|
|
|
|
|
897
|
|
|
|
23,663
|
|
23% of net proceeds from IPO
|
|
|
230
|
|
|
|
11,231
|
|
|
|
|
|
|
|
|
|
|
|
11,461
|
|
Impact of overallotment option on
allocated income
|
|
|
|
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
|
88
|
|
Initial deferred tax asset
|
|
|
|
|
|
|
119,934
|
|
|
|
|
|
|
|
|
|
|
|
119,934
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
3,992
|
|
|
|
|
|
|
|
3,992
|
|
Changes in unrealized gains on
available-for-sale
securities, net of minority interest and income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
847
|
|
|
|
847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,839
|
|
Compensation expense recognized
under stock incentive plans, net of minority interest
|
|
|
|
|
|
|
137
|
|
|
|
|
|
|
|
|
|
|
|
137
|
|
Dividend equivalent accrued under
stock incentive plans, net of minority interest
|
|
|
|
|
|
|
|
|
|
|
(18
|
)
|
|
|
|
|
|
|
(18
|
)
|
Dividends declared
|
|
|
|
|
|
|
|
|
|
|
(1,610
|
)
|
|
|
|
|
|
|
(1,610
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2004
|
|
|
230
|
|
|
|
154,156
|
|
|
|
2,364
|
|
|
|
1,744
|
|
|
|
158,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
29,222
|
|
|
|
|
|
|
|
29,222
|
|
Changes in unrealized gains on
available-for-sale
securities, net of minority interest and income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,188
|
|
|
|
1,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,410
|
|
Compensation expense recognized
under stock incentive plans, net of minority interest
|
|
|
|
|
|
|
946
|
|
|
|
|
|
|
|
|
|
|
|
946
|
|
Dividend equivalent accrued under
stock incentive plans, net of minority interest
|
|
|
|
|
|
|
|
|
|
|
(58
|
)
|
|
|
|
|
|
|
(58
|
)
|
Dividends declared
|
|
|
|
|
|
|
|
|
|
|
(4,830
|
)
|
|
|
|
|
|
|
(4,830
|
)
|
Net effect of corrections on
initial deferred tax asset
|
|
|
|
|
|
|
1,172
|
|
|
|
|
|
|
|
|
|
|
|
1,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
|
230
|
|
|
|
156,274
|
|
|
|
26,698
|
|
|
|
2,932
|
|
|
|
186,134
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
34,008
|
|
|
|
|
|
|
|
34,008
|
|
Changes in unrealized gains on
available-for-sale
securities, net of minority interest and income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,405
|
|
|
|
1,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,413
|
|
Issuance of common stock under
stock incentive plans (161,898 Class A common shares)
|
|
|
2
|
|
|
|
113
|
|
|
|
|
|
|
|
23
|
|
|
|
138
|
|
Compensation expense recognized
under stock incentive plans, net of minority interest
|
|
|
|
|
|
|
1,337
|
|
|
|
|
|
|
|
|
|
|
|
1,337
|
|
Dividend equivalent accrued under
stock incentive plans, net of minority interest
|
|
|
|
|
|
|
|
|
|
|
(107
|
)
|
|
|
|
|
|
|
(107
|
)
|
Dividends declared
|
|
|
|
|
|
|
|
|
|
|
(8,338
|
)
|
|
|
|
|
|
|
(8,338
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2006
|
|
$
|
232
|
|
|
$
|
157,724
|
|
|
$
|
52,261
|
|
|
$
|
4,360
|
|
|
$
|
214,577
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-7
CALAMOS
ASSET MANAGEMENT, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
November 2 to
|
|
|
January 1 to
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
November 1,
|
|
(in thousands)
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
(Predecessor)
|
|
|
Cash and cash equivalents at
beginning of period
|
|
$
|
210,469
|
|
|
$
|
149,768
|
|
|
$
|
132,976
|
|
|
$
|
5,073
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
34,008
|
|
|
|
29,222
|
|
|
|
3,992
|
|
|
|
102,182
|
|
Adjustments to reconcile income to
net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in partnership
investments
|
|
|
26
|
|
|
|
5,161
|
|
|
|
1,322
|
|
|
|
|
|
Minority interest in Calamos
Holdings LLC
|
|
|
186,631
|
|
|
|
163,009
|
|
|
|
22,609
|
|
|
|
|
|
Amortization of deferred sales
commissions
|
|
|
32,924
|
|
|
|
31,431
|
|
|
|
5,109
|
|
|
|
24,315
|
|
Other depreciation and amortization
|
|
|
7,179
|
|
|
|
4,772
|
|
|
|
295
|
|
|
|
1,220
|
|
Unrealized appreciation on CFS
securities and partnership investments
|
|
|
(489
|
)
|
|
|
(8,983
|
)
|
|
|
(2,812
|
)
|
|
|
(201
|
)
|
Management fees received in
partnership units
|
|
|
(131
|
)
|
|
|
(151
|
)
|
|
|
(27
|
)
|
|
|
(134
|
)
|
Deferred taxes
|
|
|
9,320
|
|
|
|
9,326
|
|
|
|
1,297
|
|
|
|
|
|
Stock-based compensation
|
|
|
5,780
|
|
|
|
4,114
|
|
|
|
595
|
|
|
|
32
|
|
Employee taxes paid on vesting
under stock incentive plans
|
|
|
(2,255
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) loss on disposal of property
|
|
|
120
|
|
|
|
408
|
|
|
|
|
|
|
|
(1,989
|
)
|
Non-cash donation of equipment
|
|
|
|
|
|
|
139
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliates and affiliated mutual
funds
|
|
|
(1,761
|
)
|
|
|
(3,448
|
)
|
|
|
(8,466
|
)
|
|
|
6,395
|
|
Customers
|
|
|
(412
|
)
|
|
|
(3,794
|
)
|
|
|
6,663
|
|
|
|
(8,733
|
)
|
Deferred sales commissions
|
|
|
(24,425
|
)
|
|
|
(28,404
|
)
|
|
|
(7,164
|
)
|
|
|
(34,441
|
)
|
Other assets
|
|
|
(637
|
)
|
|
|
(74
|
)
|
|
|
549
|
|
|
|
(865
|
)
|
Increase (decrease) in liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
2,655
|
|
|
|
5,251
|
|
|
|
(16
|
)
|
|
|
7,229
|
|
Accrued compensation and benefits
and deferred compensation
|
|
|
3,591
|
|
|
|
9,146
|
|
|
|
5,017
|
|
|
|
1,212
|
|
Other liabilities and accrued
expenses
|
|
|
1,331
|
|
|
|
6,467
|
|
|
|
(7,628
|
)
|
|
|
15,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
|
|
253,455
|
|
|
|
223,592
|
|
|
|
21,335
|
|
|
|
112,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net additions to property and
equipment
|
|
|
(10,082
|
)
|
|
|
(40,679
|
)
|
|
|
(909
|
)
|
|
|
(9,090
|
)
|
Net purchases of securities and
partnership investments
|
|
|
(10,055
|
)
|
|
|
(31,885
|
)
|
|
|
(48,942
|
)
|
|
|
(48,409
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
|
(20,137
|
)
|
|
|
(72,564
|
)
|
|
|
(49,851
|
)
|
|
|
(57,499
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by (used in)
financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net payments on bank debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30,199
|
)
|
Net payments on mortgage payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(152
|
)
|
Net borrowings on debt offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
148,003
|
|
Capital contributions received
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,300
|
|
Net proceeds from issuance of
common stock
|
|
|
|
|
|
|
|
|
|
|
382,131
|
|
|
|
|
|
Proceeds from issuances of common
stock used to purchase membership units in Calamos Holdings LLC
|
|
|
|
|
|
|
|
|
|
|
(332,300
|
)
|
|
|
|
|
Deferred tax benefit on vesting
under stock incentive plans
|
|
|
(289
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends paid to minority
shareholders
|
|
|
(106,319
|
)
|
|
|
(83,887
|
)
|
|
|
(4,523
|
)
|
|
|
(47,582
|
)
|
Cash dividends paid to common
shareholders
|
|
|
(8,338
|
)
|
|
|
(6,440
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
|
|
(114,946
|
)
|
|
|
(90,327
|
)
|
|
|
45,308
|
|
|
|
73,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash
|
|
|
118,372
|
|
|
|
60,701
|
|
|
|
16,792
|
|
|
|
127,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of
period
|
|
$
|
328,841
|
|
|
$
|
210,469
|
|
|
$
|
149,768
|
|
|
$
|
132,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash
flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
14,950
|
|
|
$
|
10,960
|
|
|
$
|
1,356
|
|
|
$
|
1,161
|
|
Interest
|
|
$
|
7,860
|
|
|
$
|
7,860
|
|
|
$
|
|
|
|
$
|
4,432
|
|
Supplement schedule of noncash
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of fixed assets and
other assets distributed to stockholders
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(18,354
|
)
|
Fair value of mortgage payable and
other liabilities assumed by stockholders
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
8,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of distribution to
stockholders
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(9,999
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-8
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
|
|
(1)
|
Organization
and Description of Business
|
Calamos Asset Management, Inc. (CAM), together with its
subsidiaries (the Company), primarily provides investment
advisory services to individuals, to institutional investors and
to a family of open-end and closed-end funds (the Funds and the
Closed-End Funds, respectively).
CAL refers to Calamos Advisors LLC, a Delaware
limited liability company, registered investment advisor and
wholly owned subsidiary of Calamos Holdings LLC;
CFS refers to Calamos Financial Services LLC, a
Delaware limited liability company, registered broker-dealer and
wholly owned subsidiary of Calamos Holdings LLC;
CPL refers to Calamos Partners LLC, a Delaware
limited liability company, registered investment advisor and
wholly owned subsidiary of Calamos Holdings LLC;
CPM refers to Calamos Property Management LLC, a
Delaware limited liability company and wholly owned subsidiary
of Calamos Holdings LLC;
CFP refers to Calamos Family Partners,
Inc., a Delaware corporation, and our predecessor. CFP and its
subsidiaries conducted our business; and
The Calamos Interests refers to CFP
and John P. Calamos, Sr., the Chairman, Chief Executive
Officer and Co-Chief Investment Officer of the Corporation.
Mr. Calamos also holds the controlling interest in CFP.
|
|
(2)
|
Reorganization
and Formation
|
The Company completed an initial public offering (Offering) of
its Class A common stock on November 2, 2004. Prior to
the offering, on October 15, 2004, CFP contributed all of
its assets and liabilities, including all equity interests in
its wholly owned subsidiaries, to Calamos Holdings LLC
(Holdings) in exchange for 96,800,000 of the membership units of
Holdings. In October 2004, Holdings issued 200,000 new
membership units for cash to John Calamos, Sr. In November
2004, CAM applied the net proceeds of the Offering to acquire
3,000,000 newly issued membership units directly from Holdings
and 20,000,000 membership units from CFP to become the sole
manager of Holdings. As the sole manager, CAM operates and
controls all of the business and affairs of Holdings, and as a
result of this control, CAM consolidates the financial results
of Holdings with its own financial results. CAM is now
conducting the business previously conducted by CFP.
Accordingly, reported results for the periods prior to
November 2, 2004 reflect the operations for CFP and its
subsidiaries (Predecessor). Reported results for the period from
November 2, 2004 through December 31, 2004 and for the
years ended December 31, 2006 and 2005 reflect the results
of operations for the Company.
|
|
(3)
|
Summary
of Significant Accounting Policies
|
Principles
of Consolidation and Use of Estimates
The consolidated financial statements include the financial
statements of the Company, its wholly owned subsidiaries and its
interests in Calamos Equity Opportunities Fund LP. All
significant intercompany balances and transactions have been
eliminated. Certain amounts for prior periods have been
reclassified to conform to the current years presentation.
In November 2004, the Company sold 23,000,000 shares of
Class A Common Stock in its Offering. The Company used net
proceeds of $382.1 million from the Offering to acquire its
interest in Holdings. The acquisition of the ownership interest
in Holdings was treated as a reorganization of entities under
common control in a manner similar to a pooling of interests,
analogous to the type of transaction described in the Financial
Accounting Standards Boards (FASB) Emerging Issues Task
Force Issue (EITF)
94-2,
Treatment of Minority Interest in Certain Real Estate
Investment Trusts. Accordingly, the net assets of Holdings
purchased by the Company were reported in the consolidated
financial statements at Holdings historical cost, and the
minority interests in the Company are
F-9
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
based on the net book equity of Holdings (after contribution of
the proceeds from the Offering) multiplied by the ownership
percentages of the Calamos Interests.
The historical financial information of Holdings business,
which previously was conducted by CFP, is included in the
accompanying financial statements as predecessor information.
The Calamos Interests combined 76.9% and 77% interest in
Holdings at December 31, 2006 and 2005, respectively, is
represented as a minority interest in the Companys
financial statements.
CPL is the general partner of Calamos Equity Opportunities
Fund LP, a private investment partnership, which is
primarily comprised of highly liquid marketable securities.
Because substantially all the activities of this partnership are
conducted on behalf of the Company and its related parties, the
Company consolidates the financial results of this partnership
into its results. The investment securities of this partnership
are presented as partnership investments in the consolidated
statements of financial position, and the income is presented as
investment and other income in the consolidated statements of
operations. The Company carries its investment at fair value.
The Company had a 29.6% and 23.5% interest in Calamos
Multi-Strategy, L.P. as of December 31, 2006 and 2005,
respectively. This investment is accounted for using the equity
method and is carried at the net asset value of the partnership
units held by the Company, which approximates fair value.
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 those estimates.
Financial
Instruments
All highly liquid financial instruments with maturities of three
months or less from date of purchase, consisting primarily of
investments in money market funds, commercial paper and
U.S. government securities, are considered to be cash
equivalents.
The carrying value of cash and cash equivalents and receivables
approximate fair value due to the short maturities of these
financial instruments.
The fair value of long-term debt, which has a carrying value of
$150.0 million, was approximately $150.7 million at
December 31, 2006. 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. All methods of assessing
fair value result in an estimate of value that may never be
realized.
Receivables
from Customers
Receivables from customers represent balances arising from
contractual investment advisory services provided to separate
account customers. During each of the periods presented, bad
debt expense and allowance for doubtful accounts were not
material.
Investment
Securities
The Company carries its investment securities at fair value,
which are determined based upon market prices. For a substantial
majority of the Companys investments, fair values are
determined based upon market prices. If quoted market prices are
not available, the Company uses matrix, model or other similar
pricing methods to determine fair value. For the periods
presented, non-readily marketable securities represent less than
1% of all investment securities. The Company records investment
securities on a trade date basis.
F-10
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company records all securities owned by Holdings, CAL and
CPM as
available-for-sale
under the FASBs Statement of Financial Accounting Standard
(SFAS) No. 115, Accounting for Certain Investments in
Debt and Equity Securities, as the Company does not intend
to sell these securities in the near term. Unrealized gains and
losses on
available-for-sale
securities are excluded from earnings and are reported, net of
minority interest and income tax, as a separate component of
stockholders equity until realized. Realized gains and
losses from the sale of
available-for-sale
securities are determined on a specific identification basis.
As a registered broker-dealer, CFS is required to mark to market
all investment securities it owns and record all market
fluctuations through current earnings. As such, unrealized gains
and losses on these securities are included in investment and
other income in the consolidated statements of operations.
On a quarterly basis, the Company conducts reviews to assess
whether
other-than-temporary
impairment exists on its investment securities. Changing
economic conditions, global, regional, or changes related to
specific issuers or industries could adversely affect these
values. Impairment adjustments are recognized in the statement
of operations as a realized loss within investment and other
income and as a reduction of accumulated other comprehensive
income, as applicable.
Property
and Equipment
Property and equipment are recorded at cost less accumulated
depreciation. Depreciation is provided on a straight-line basis
over the estimated useful lives of the assets, ranging from
three years to twenty years. Leasehold improvements are
amortized over the shorter of their estimated useful lives or
the remaining term of the lease.
Internally
Developed Software
In accordance with AICPA Statement of Position
98-1,
Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use
(SOP 98-1),
certain internal and external development costs incurred in
connection with developing or obtaining software for internal
use are capitalized. These capitalized costs are included in
property and equipment, net on the consolidated statement of
financial condition and are amortized using the straight-line
method over their estimated useful life. On a quarterly basis,
the Company conducts reviews to assess whether an impairment of
these assets exists. Impairments of these assets, if any, are
charged against net income in the period in which the impairment
occurs.
Compensation
Plans
On January 1, 2006, the Company adopted
SFAS No. 123(R), Share-Based Payment
(SFAS 123(R)), which requires public registrants to
recognize the cost of stock-based compensation based on the
grant-date fair value of the award. The Company adopted the fair
value recognition provisions of SFAS 123 effective
January 1, 2004 and elected to recognize compensation
expense based upon the grant-date fair value. The provisions of
SFAS 123(R) are similar, but not identical, to the fair
value recognition that the Company has used since the beginning
of 2004. The effects of this change do not have a material
impact on the Companys financial statements.
During 2004, the Company established an incentive stock plan
that provides for grants of restricted stock unit (RSU) awards
and stock option awards for certain employees of the Company.
RSUs are convertible on a
one-for-one
basis into shares of the Companys common stock. Stock
option awards are based on shares of the Companys common
stock. The Company estimates the fair value of the options as of
the grant date using the Black-Scholes option-pricing model. The
Company records compensation expense on a straight-line basis
over the service period.
Prior to establishing the incentive stock plans, the Company had
a long-term Equity Appreciation Unit plan (EAU Plan) for certain
individuals of the Company. The EAU plan was terminated in
October 2004 in connection with the Offering.
F-11
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Revenue
Recognition
The Company earns revenue by providing investment management
services to the Funds, the Closed-End Funds and to separate
accounts. This revenue is earned pursuant to the terms of the
underlying advisory contract and is based on a contractual
investment advisory fee applied to the assets in each portfolio.
Any fees collected in advance are deferred and recognized over
the period earned. Performance-based advisory fees from certain
separate accounts are recognized annually upon completion of the
contract year and based upon either (1) the positive
difference between the investment returns on a clients
portfolio compared to a benchmark index or (2) the absolute
percentage of gain in the clients account.
Distribution and underwriting fees consist primarily of
Rule 12b-1
distribution
and/or
service fees from the Funds, contingent deferred sales charges
(CDSC) on the redemption of Fund shares and sales charges that
are primarily earned on the distribution of mutual fund shares.
12b-1 fees
are accrued monthly as services are performed and are based on
the average daily assets of the Funds. CDSC fees are recorded on
a trade date basis when earned, and sales charges are recorded
on the settlement date. The use of settlement date rather than
trade date does not have a material effect on the Companys
financial statements.
Net
Interest Income (Expense)
Net interest income (expense) represents interest income from
cash and cash equivalents and interest expense incurred on debt.
Interest income is recognized when earned, and interest expense
is recorded when incurred.
Investment
and Other Income
Investment and other income includes (1) gains (losses) on
investment securities, (2) gains (losses) on partnership
investments, net of minority interest, (3) dividend income,
(4) gains (losses) on sales of real estate and fixed assets
and (5) other income earned on related-party transactions
as described in Footnote 4, Related-Party Transactions.
Dividend income is recognized when earned.
Deferred
Sales Commissions
Deferred sales commissions are commissions advanced by the
Company on the sale of Class B and Class C shares of
the Funds. Deferred sales commissions are amortized on a
straight-line basis over the period in which
12b-1 fees
are received. Because
12b-1 fees
cease upon redemption of shares, amortization expense is
accelerated when shares are redeemed, resulting in the reduction
of the deferred sales commission asset. These redemptions result
in an amortization period up to 12 months for Class C
shares and 96 months (eight years) for Class B shares.
The Company evaluates the carrying value of its deferred sales
commissions on a quarterly basis. In its impairment analysis,
the Company compares the carrying value of the deferred sales
commission asset to the undiscounted cash flow expected to be
generated by the asset over its remaining useful life to
determine whether impairment has occurred. If the carrying value
of the asset exceeds the undiscounted cash flow, the asset is
written down to fair value based on discounted cash flows.
Impairment adjustments are recognized in the statement of
operations as a component of amortization of deferred sales
commissions. As of each reporting period presented, the Company
determined that no impairment of the deferred commission asset
existed.
Income
Taxes
CFP, as predecessor, was taxed as an S corporation under
the Internal Revenue Code. Therefore, the income and expenses of
CFP were included in the income tax returns of its stockholders.
CFP was subject to only Illinois replacement tax and other state
taxes of $1.6 million for the period ended November 1,
2004. Replacement taxes are recorded as income taxes in the
consolidated statements of operations.
F-12
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Effective with the Offering, the Company accounts for income
taxes under the liability method prescribed by
SFAS No. 109, Accounting for Income Taxes.
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to the temporary
differences between the financial statement carrying amount of
existing assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered
or settled. Although valuation allowances may be established,
when necessary, to reduce the amounts expected to be realized,
there were no deferred tax asset valuation allowances at
December 31, 2006 or 2005.
Earnings
Per Share
Earnings per share is calculated in accordance with
SFAS No. 128, Earnings per Share, which
requires that both basic and diluted earnings per share be
presented. Basic earnings per share is computed by dividing net
income available to common stockholders by the weighted average
number of shares of Class A and Class B common stock
outstanding during each year. Shares issued during the year are
weighted for the portion of the year that they were outstanding.
Diluted earnings per share reflects the potential dilution that
would occur if securities, stock options and membership units
held by CFP were exercised or converted into common stock.
|
|
(4)
|
Related-Party
Transactions
|
CAL provides investment management and portfolio accounting
services to the Funds and the Closed-End Funds. CFS acts as the
sole distributor of the Funds. The Company earns management,
distribution and portfolio accounting fees for these services
that are accrued and settled monthly. Subsidiaries of the
Company receive fees for their management services to private
investment pools, which are paid on a monthly basis in the form
of additional investment units in the pools. The table below
summarizes the total fees earned from affiliates identified
above during the years ended December 31, 2006, 2005 and
2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Investment management fees from:
|
|
|
|
|
|
|
|
|
|
|
|
|
The Funds
|
|
$
|
209,799
|
|
|
$
|
174,374
|
|
|
$
|
123,264
|
|
The Closed-End Funds
|
|
|
52,462
|
|
|
|
50,022
|
|
|
|
39,439
|
|
Private investment pools
|
|
|
279
|
|
|
|
149
|
|
|
|
162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
262,540
|
|
|
$
|
224,545
|
|
|
$
|
162,865
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution and underwriting fees
from the Funds
|
|
$
|
138,185
|
|
|
$
|
115,790
|
|
|
$
|
84,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio accounting fees from:
|
|
|
|
|
|
|
|
|
|
|
|
|
The Funds
|
|
$
|
3,154
|
|
|
$
|
2,628
|
|
|
$
|
1,478
|
|
The Closed-End Funds
|
|
|
700
|
|
|
|
675
|
|
|
|
410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
3,854
|
|
|
$
|
3,303
|
|
|
$
|
1,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dragon Leasing Corporation (Dragon) is an affiliated company
controlled by an executive officer of the Company and CFPs
largest shareholder. CAL is party to a non-exclusive aircraft
lease agreement with Dragon whereby CAL has use of an airplane
for business travel. Under this agreement CAL agrees to pay for
maintenance and transportation services which are reflected in
general and administrative expense. The table below summarizes
total service fees incurred during the years ended
December 31, 2006, 2005 and 2004 and the net payable
balance as of December 31, 2006, 2005 and 2004.
F-13
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
General and administrative
|
|
$
|
934
|
|
|
$
|
777
|
|
|
$
|
459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net payable to Dragon
|
|
$
|
(32
|
)
|
|
$
|
(30
|
)
|
|
$
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning in November 2004, CAL has been party to a joint use
and management agreement with Aspen Executive Air, LLC (AEA), a
company in which an executive officer of the company and
CFPs largest shareholder maintains an indirect beneficial
interest. Under this agreement, CAL has agreed to pay for
aircraft management services from AEA as well as other aircraft
related expenses. These expenses are included in general and
administrative expense in the consolidated statement of
operations. Effective in January 2006, this agreement was
amended to provide for the Companys delivery of pilot
services to AEA at an established rate per flight hour. These
services are classified as other income and included in other
income (expense) in the consolidated statement of operations.
The table below summarizes total fees paid to AEA and income
earned from AEA during the twelve months ended December 31,
2006, 2005 and 2004 and the net payable balance as of
December 31, 2006, 2005 and 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
General and administrative
|
|
$
|
386
|
|
|
$
|
672
|
|
|
$
|
1,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
$
|
354
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net payable to AEA
|
|
$
|
(11
|
)
|
|
$
|
(7
|
)
|
|
$
|
(50
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Since January 2005, Holdings has been party to a six-year lease
with 1111 Warrenville Road LLC, a subsidiary of Calamos Property
Holdings LLC (CPH). Under this lease and as of August 2005,
Holdings is obligated to pay monthly base rents and operating
expenses of approximately $38,000, which will increase 3%
annually beginning January 1, 2006. Effective May 2006,
this lease was amended to increase the square footage leased as
part of the Companys disaster recovery efforts. The base
rent and operating expenses increased to approximately $58,000
to reflect the increased square footage. Due to the
Companys move to its new headquarters during 2005 and the
resulting decrease in required square footage, this agreement
replaced a previous
month-by-month
agreement under which CAL was obligated to pay monthly base
rents and operating expenses of approximately $84,000 that was
terminable by either party with 30 days notice.
In October 2004, Holdings entered into a
20-year
lease with 2020 Calamos Court LLC, a subsidiary of CPH, with
respect to the new corporate headquarters constructed for the
Companys occupancy. Rent under the lease commenced in
April 2005 and will end on May 31, 2025. Initial monthly
base rent payments are approximately $237,000 through
May 1, 2006 and will increase 3% annually, beginning
June 1, 2006 for the remaining term of the lease. Holdings
may not terminate the lease unless a casualty, condemnation or
material temporary taking affects all or a substantial portion
of the leased premises. 2020 Calamos Court LLC may only
terminate the lease upon specified events of default, which are
subject to applicable grace periods.
In July 2005, Holdings entered into an agreement with Primacy
Business Center LLC (Primacy), a subsidiary of CFP, where office
space is subleased to Primacy. During 2006, Holdings recognized
sublease rental income of $833,000 which is classified as other
income and included in other income (expense) in the
consolidated statement of operations.
In August 2005, Holdings entered into a
20-year
lease with 2020 Calamos Court Annex LLC, a subsidiary of
CPH, with respect to the cafeteria in the new corporate
headquarters. Rent under the lease commenced in December 2005
and will end on May 31, 2025. Initial monthly base rent and
operating expenses are approximately $21,000 and will increase
3% annually beginning in December 2006.
In February 2006, Holdings entered into an agreement with CF
Restaurant Enterprises LLC (CFR), a subsidiary of CFP, where CFR
provides lunch and food services through an independent manager
to Holdings.
F-14
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Holdings guarantees minimum daily revenues and CFR agrees that
certain quantities and combinations of food and beverage will be
available at the predetermined price threshold. During 2006,
Holdings incurred expense of $758,000 related to this agreement
which is included in general and administrative expense in the
consolidated statement of operations.
CFP, CPH and Dragon have each entered into a separate Management
Services Agreement with CAM. Pursuant to these agreements, as
amended, the Company provides certain services, including
furnishing office space and equipment, providing insurance
coverage, overseeing the administration of their businesses and
providing personnel to perform certain management and
administrative services. The agreements each have a term of one
year and are renewable annually. The agreements are terminable
on 30 days notice by either party. In accordance with the
terms of the agreements, CFP, CPH and Dragon have each agreed to
pay the Company an amount equal to Direct Cost (as defined
below) plus an expense allocation component. Direct
Cost means, with respect to each service provided, the
direct
out-of-pocket
expenses paid or incurred to third parties in connection with
providing such service, including, without limitation, shipping,
handling, travel expenses, payments to third parties (including,
without limitation, all professional fees), printing and postage.
In April 2005, the Company entered into a Management Services
Agreement with CPH. Under this service agreement, CPH provides
property, facilities and development management services to the
Company. The Company pays CPH an amount equal to Direct Cost and
an expense allocation component.
The following table summarizes total management service fees
incurred, as expense allocations, during the twelve months ended
December 31, 2006, 2005 and 2004 and the net receivable
(payable) balance as of December 31, 2006, 2005 and 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Expense allocated from the Company
to Dragon
|
|
$
|
73
|
|
|
$
|
139
|
|
|
$
|
48
|
|
Expense allocated from the Company
to CFP
|
|
|
1,394
|
|
|
|
479
|
|
|
|
30
|
|
Expense allocated from the Company
to CPH
|
|
|
229
|
|
|
|
712
|
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses allocated from the
Company to affiliates
|
|
|
1,696
|
|
|
|
1,330
|
|
|
|
202
|
|
Expense allocated from CPH to the
Company
|
|
|
1,210
|
|
|
|
561
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net expense allocated from the
Company to affiliates
|
|
$
|
486
|
|
|
$
|
769
|
|
|
$
|
137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net receivable for management
services from Dragon
|
|
$
|
4
|
|
|
$
|
14
|
|
|
$
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net receivable for management
services from CFP
|
|
$
|
155
|
|
|
$
|
65
|
|
|
$
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net receivable (payable) for
management services from CPH
|
|
$
|
(154
|
)
|
|
$
|
28
|
|
|
$
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As a result of the control exercised by CFP, none of our
agreements with them and other companies controlled by them are
deemed to be negotiated on arms length terms.
However, any such agreements since our initial public offering
have been approved in accordance with the Conflict of Interests
Policy contained in our Amended and Restated Certificate of
Incorporation.
F-15
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(5)
|
Investment
Securities
|
The following table provides a summary of investment securities
owned as of December 31, 2006 and 2005. Other investment
securities consist primarily of common stock.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
Available-
|
|
|
CFS
|
|
|
Total
|
|
(in thousands)
|
|
for-Sale
|
|
|
Securities
|
|
|
Securities
|
|
|
Affiliated Mutual Funds
|
|
$
|
138,375
|
|
|
$
|
3,750
|
|
|
$
|
142,125
|
|
Other investment securities
|
|
|
574
|
|
|
|
163
|
|
|
|
737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
138,949
|
|
|
$
|
3,913
|
|
|
$
|
142,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
Available-
|
|
|
CFS
|
|
|
Total
|
|
|
|
for-Sale
|
|
|
Securities
|
|
|
Securities
|
|
|
Affiliated Mutual Funds
|
|
$
|
123,976
|
|
|
$
|
3,634
|
|
|
$
|
127,610
|
|
Other investment securities
|
|
|
479
|
|
|
|
176
|
|
|
|
655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
124,455
|
|
|
$
|
3,810
|
|
|
$
|
128,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below summarizes the proceeds from the sale of
available-for-sale
securities, unrealized and realized gains (losses) on
available-for-sale
securities, and unrealized gains (losses) on CFS securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
|
|
|
Twelve Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
November 2 to
|
|
|
January 1 to
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
November 1,
|
|
(in thousands)
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2004
|
|
|
Available-for-sale
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sale
|
|
$
|
18
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gains (losses)
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains
|
|
|
10,112
|
|
|
|
8,638
|
|
|
|
6,113
|
|
|
|
1,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CFS securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses)
|
|
|
(63
|
)
|
|
|
231
|
|
|
|
297
|
|
|
|
124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-16
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The cumulative net unrealized gains (losses) on
available-for-sale
securities consisted of the following as of December 31,
2006 and 2005:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2006
|
|
|
2005
|
|
|
Total cumulative unrealized gains
on
available-for-sale
securities with net gains:
|
|
|
|
|
|
|
|
|
Affiliated Mutual Funds
|
|
$
|
28,644
|
|
|
$
|
18,609
|
|
Other investment securities
|
|
|
205
|
|
|
|
190
|
|
|
|
|
|
|
|
|
|
|
Total gains
|
|
|
28,849
|
|
|
|
18,799
|
|
Total cumulative unrealized losses
on
available-for-sale
securities with net losses:
|
|
|
|
|
|
|
|
|
Affiliated Mutual Funds
|
|
|
(64
|
)
|
|
|
(149
|
)
|
Other investment securities
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total losses
|
|
|
(76
|
)
|
|
|
(149
|
)
|
|
|
|
|
|
|
|
|
|
Total cumulative net unrealized
gains (losses) on
available-for-sale
securities
|
|
$
|
28,773
|
|
|
$
|
18,650
|
|
|
|
|
|
|
|
|
|
|
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 in accumulated other comprehensive
income is realized as a charge to net income in the period in
which the
other-than-temporary
decline in value occurs. At December 31, 2006, for those
investments that have unrealized losses, the Company believes
that all of these unrealized losses are only temporary and are
due to temporary market conditions.
|
|
(6)
|
Partnership
Investments
|
Partnership investments as of December 31, 2006 and 2005
consisted of the following:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2006
|
|
|
2005
|
|
|
Calamos Equity Opportunities
Fund LP:
|
|
|
|
|
|
|
|
|
Securities owned
|
|
$
|
110,956
|
|
|
$
|
76,835
|
|
Securities sold but not yet
purchased
|
|
|
(24,104
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calamos Equity Opportunities
Fund LP securities, net
|
|
|
86,852
|
|
|
|
76,835
|
|
Investment in Calamos
Multi-Strategy, L.P.
|
|
|
3,676
|
|
|
|
3,121
|
|
|
|
|
|
|
|
|
|
|
Partnership investments
|
|
$
|
90,528
|
|
|
$
|
79,956
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2006 and 2005, the Company had a net
interest of $33.9 million (41.0%) and $32.1 million (41.9%)
in Calamos Equity Opportunities Fund LP, respectively. The
combined minority interests totaled 59.0% and 58.1% of the
Calamos Equity Opportunities Fund LP at December 31, 2006
and 2005, respectively, and are presented in the consolidated
statement of financial condition as minority interest in
partnership investments.
The Company had a $3.7 million and $3.1 million
interest in Calamos Multi-Strategy, L.P. as of December 31,
2006 and 2005, respectively.
In 2004, the Company liquidated its interest in Calamos Hedge
Fund, L.P., which resulted in a realized gain of approximately
$109,000 as well as the elimination of the minority interest
related to this investment.
F-17
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(7)
|
Property
and Equipment
|
At December 31, 2006 and 2005, property and equipment and
related accumulated depreciation were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
(in thousands)
|
|
Cost
|
|
|
Depreciation
|
|
|
Net
|
|
|
Furniture, fixtures, and equipment
|
|
$
|
56,848
|
|
|
$
|
13,233
|
|
|
$
|
43,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Cost
|
|
|
Depreciation
|
|
|
Net
|
|
|
Furniture, fixtures, and equipment
|
|
$
|
46,904
|
|
|
$
|
6,357
|
|
|
$
|
40,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On June 30, 2004, Calamos Property Holdings, Inc., the
predecessor of CPM, distributed equity in all of its owned real
estate assets to its stockholders at that time. Land, building
and furniture, fixtures and equipment with a book value, net of
depreciation, of $16.0 million and a fair value of
$18.0 million as of June 30, 2004 were distributed,
resulting in a gain of $2.0 million, which was recorded as
other income on the Companys consolidated statement of
operations.
On April 29, 2004, the Company refinanced its bank debt
with the issuance of $150 million aggregate principal
amount of 5.24% senior unsecured notes due April 29,
2011 to various note purchasers in a private placement. As of
December 31, 2006 and 2005, $150 million aggregate
principal senior unsecured notes were outstanding. These notes
are set to mature on April 29, 2011. As a result of the
$150 million debt offering, the Company incurred
approximately $2.0 million in debt issuance costs. The
deferred costs are recorded as a noncurrent asset, and the
amortization of the deferred costs is included in interest
expense and is recorded on a straight-line basis over the term
of the loan.
Under the note purchase agreement governing the terms of the
senior unsecured notes, the Company must maintain certain
consolidated net worth, leverage and interest coverage ratios.
The note purchase agreement also contains other covenants that,
among other things, restrict the ability of the Companys
subsidiaries to incur debt and restrict the Companys
ability and the ability of the Companys subsidiaries to
create liens and to merge or consolidate, or sell or convey all
or substantially all of the Companys assets. As of
December 31, 2006, the Company was in compliance with all
covenants.
The table below summarizes the outstanding debt balance at
December 31, 2006 and 2005.
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2006
|
|
|
2005
|
|
|
Senior unsecured notes
|
|
$
|
150,000
|
|
|
$
|
150,000
|
|
Less current portion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
150,000
|
|
|
$
|
150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
(9)
|
Minority
Interest in Calamos Holdings LLC
|
Minority interest represents the Calamos Interests
aggregate ownership interest of 76.9% and 77.0% in Holdings at
December 31, 2006 and 2005, respectively, and is derived by
multiplying the respective balances of Holdings by their
aggregate ownership percentage, except where described below.
Income before minority interest in Calamos Holdings LLC and
income taxes, which was $243.4 million and
$211.9 million for the years ended December 31, 2006
and 2005, respectively, included approximately $0.6 million
and $0.2 million, respectively, of
F-18
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
investment income earned on cash and cash equivalents held
solely by CAM during the same periods. This investment income is
not reduced by any minority interest; therefore, the resulting
minority interest is less than 76.9% and 77.0% for the years
ended December 31, 2006 and 2005, respectively.
|
|
|
|
|
(in thousands)
|
|
|
|
|
Minority interest at
November 1, 2004
|
|
$
|
|
|
Historical shareholders
equity as of November 1, 2004:
|
|
|
79,217
|
|
Net proceeds retained from the
Offering
|
|
|
38,370
|
|
Income allocated to minority
interests from November 2 to December 31, 2004(1)
|
|
|
22,604
|
|
Impact of overallotment option on
allocated income(2)
|
|
|
(88
|
)
|
Compensation expense recognized
under stock incentive plans
|
|
|
458
|
|
Changes in unrealized gains on
available-for-sale
securities
|
|
|
4,707
|
|
Dividend equivalent accrued under
stock incentive plans
|
|
|
(61
|
)
|
Dividends declared
|
|
|
(9,913
|
)
|
|
|
|
|
|
Minority interest at
December 31, 2004
|
|
|
135,294
|
|
|
|
|
|
|
Income allocated to minority
interests
|
|
|
163,009
|
|
Compensation expense recognized
under stock incentive plans
|
|
|
3,168
|
|
Changes in unrealized gains on
available-for-sale
securities
|
|
|
6,651
|
|
Dividend equivalent accrued under
stock incentive plans
|
|
|
(196
|
)
|
Dividends declared
|
|
|
(78,496
|
)
|
|
|
|
|
|
Minority interest at
December 31, 2005
|
|
|
229,430
|
|
|
|
|
|
|
Issuance of common stock under
stock incentive plans
|
|
|
(369
|
)
|
Income allocated to minority
interests
|
|
|
186,631
|
|
Compensation expense recognized
under stock incentive plans
|
|
|
4,444
|
|
Shares withheld for taxes paid on
vesting under stock incentive plans
|
|
|
(1,734
|
)
|
Changes in unrealized gains on
available-for-sale
securities
|
|
|
7,782
|
|
Dividend equivalent accrued under
stock incentive plans
|
|
|
(352
|
)
|
Dividends declared
|
|
|
(106,319
|
)
|
|
|
|
|
|
Minority interest at
December 31, 2006
|
|
$
|
319,513
|
|
|
|
|
|
|
|
|
|
(1) |
|
Because CAM owned 20% of Holdings from November 2, 2004
through November 7, 2004 and 23% from November 8, 2004
through December 31, 2004, the net income allocation of
77.3% is a result of the weighted average based upon the actual
number of days. |
|
(2) |
|
The subsequent purchase of 3,000,000 units on
November 8, 2004, resulting from the underwriters
exercise of the overallotment option, increased CAMs
ownership in Holdings by 3% to 23%. As a result, the 3% of
income from November 2, 2004 through November 7, 2004
is not allocated to CAM in the statement of operations. However,
CAM purchased 3% of the total equity of Holdings, including 3%
of income from November 2, 2004 through November 7,
2004, which is reflected as an increase in equity and as a
decrease to minority interest. |
All shares of Class A Common Stock and Class B Common
Stock are identical and entitle the holders to the same rights
and privileges, except that the holders of Class B Voting
Common Stock possess super-voting rights in the Company, except
as otherwise required by law.
F-19
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(11)
|
Effect of
Initial Public Offering to Stockholders Equity
|
The table below summarizes the net proceeds retained by the
Company from the Offering on November 2, 2004 as presented
in the consolidated statements of changes in stockholders
equity.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Paid-in
|
|
|
|
|
(in thousands)
|
|
Common
|
|
|
Capital
|
|
|
Total
|
|
|
Net proceeds from issuance of
common stock
|
|
$
|
230
|
|
|
$
|
381,901
|
|
|
$
|
382,131
|
|
Use of proceeds to purchase
membership units from CFP
|
|
|
|
|
|
|
(332,300
|
)
|
|
|
(332,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds retained by the
Company
|
|
|
230
|
|
|
|
49,601
|
|
|
|
49,831
|
|
Allocation of 77% to minority
interest
|
|
|
|
|
|
|
(38,370
|
)
|
|
|
(38,370
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23% of net proceeds from the
Offering
|
|
$
|
230
|
|
|
$
|
11,231
|
|
|
$
|
11,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company contributes to a defined contribution profit sharing
plan (the PSP Plan) covering substantially all employees.
Contributions to the PSP Plan are at the discretion of the
Company. For the years ended December 31, 2006, 2005 and
2004, the Company recorded expense for the contributions to the
PSP Plan in the amounts of $2.2 million, $1.9 million
and $1.4 million, respectively. This expense is included in
employee compensation and benefits on the consolidated
statements of operations.
The company accounts for the following compensation plans:
Incentive Stock Plans, which are comprised of restricted stock
units (RSUs) and stock options and, prior to November 2004, the
Equity Appreciation Units (EAUs).
Incentive
Stock Plans
Certain employees of the Company participate in equity
compensation plans, which are comprised of restricted stock
units and stock options and are designed to retain key
employees. A total of 10,000,000 shares of CAMs
common stock may be granted under the plans. The Company may
issue new shares or may purchase shares of CAMs
Class A common stock as part of its share repurchase
program upon the exercise of stock options and upon conversion
of RSUs.
RSUs entitle each recipient to receive a share of Class A
common stock and a dividend equivalent to the actual dividends
declared on CAMs Class A common stock. RSUs are
granted with no strike price and, therefore, the Company
receives no proceeds when the RSUs vest. These awards, including
accrued dividends, vest at the end of the restriction period,
generally between four and six years after the grant date, and
are expensed on a straight line basis over the vesting period.
During 2006 and 2005, 134,117 and 103,656 restricted stock units
with an estimated
F-20
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
fair value of $4.7 million and $3.0 million,
respectively, were awarded to employees of the Company in
accordance with the provisions of the plan. A summary of the RSU
activity follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
Number
|
|
|
Fair Value of
|
|
|
|
of
|
|
|
RSUs
|
|
|
|
Shares
|
|
|
Granted
|
|
|
Outstanding at October 26,
2004
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,350,212
|
|
|
|
18.00
|
|
Forfeited
|
|
|
(4,276
|
)
|
|
|
18.00
|
|
Exercised upon vesting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31,
2004
|
|
|
1,345,936
|
|
|
|
18.00
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
103,656
|
|
|
|
28.78
|
|
Forfeited
|
|
|
(34,730
|
)
|
|
|
18.00
|
|
Exercised upon vesting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31,
2005
|
|
|
1,414,862
|
|
|
|
18.79
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
134,117
|
|
|
|
35.08
|
|
Forfeited
|
|
|
(26,940
|
)
|
|
|
24.33
|
|
Exercised upon vesting
|
|
|
(233,599
|
)
|
|
|
18.00
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31,
2006
|
|
|
1,288,440
|
|
|
|
20.51
|
|
|
|
|
|
|
|
|
|
|
Converted during the year ended
December 31:
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
2006
|
|
|
161,898
|
|
|
|
18.00
|
|
At December 31, 2006, the Company had 1,288,440 RSUs
outstanding with a weighted average remaining contractual life
of 3.7 years and an aggregate intrinsic value of
$34.6 million. The weighted average fair value of RSUs at
the date of grant for the years ended December 31, 2006 and
2005 was $35.08 and $28.78, respectively. The aggregate
intrinsic value and the fair value of RSUs exercised and vested
during 2006 was $7.3 million.
In connection with the 233,599 shares exercised upon
vesting during the first quarter of 2006, 161,898 RSUs were
converted, on a
one-for-one
basis, into shares of CAMs Class A common stock,
while the remaining 71,701 RSUs were withheld to meet employee
withholding tax obligations of $2.3 million. The total
intrinsic value and the fair value of the converted shares was
$5.1 million. This conversion changed CAMs ownership
in Holdings to 23.1%. RSUs are granted with no strike price and,
therefore, the Company receives no proceeds when the RSUs are
exercised. 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 purchase stock through its
share repurchase program to settle future awards. The total tax
benefit realized by CAM in connection with the exercise of the
RSUs during 2006 was $676,000. No RSUs were exercised and vested
during the year ended December 31, 2005.
Stock options entitle each recipient to purchase a share of
Class A common stock in exchange for the stated exercise
price upon vesting of each award. Under the plan, the exercise
price of each option, which has a
10-year
life, equals the market price of the companys stock on the
date of grant. The weighted average fair value of options at the
date of grant for the years ended December 31, 2006 and
2005 was $14.19 and $11.27 per option, respectively. These
awards, including accrued dividends, vest at the end of the
restriction period, generally between four and six years after
the grant date. The fair value of the award is expensed on a
straight line basis over the vesting period. The
F-21
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following assumptions:
|
|
|
|
|
|
|
|
|
2006
|
|
2005
|
|
2004
|
|
Dividend yield
|
|
1.02%-1.42%
|
|
0.96%-0.97%
|
|
1.56%
|
Expected volatility
|
|
33%-35%
|
|
33%
|
|
33%
|
Risk-free interest rate
|
|
4.6%-5.0%
|
|
3.9%-4.2%
|
|
3.7%
|
Expected life
|
|
7.5 years
|
|
7.5 years
|
|
7.5 years
|
During 2006 and 2005, 402,349 and 313,467 stock options with an
estimated fair value of $5.7 million and $3.5 million,
respectively, were awarded to employees of the Company in
accordance with the provisions of the plan. Summarized
information on the Companys outstanding stock options at
December 31, 2006 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Average
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
Range of
|
|
|
|
|
Remaining
|
|
|
Average
|
|
|
Number
|
|
|
Average
|
|
Exercise
|
|
Number of
|
|
|
Contractual
|
|
|
Option
|
|
|
of
|
|
|
Option
|
|
Prices
|
|
Shares
|
|
|
Life
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
$18.00
|
|
|
663,318
|
|
|
|
7.8 years
|
|
|
$
|
18.00
|
|
|
|
|
|
|
|
|
|
$25.74-$29.11
|
|
|
289,301
|
|
|
|
8.2 years
|
|
|
|
28.62
|
|
|
|
|
|
|
|
|
|
$35.43
|
|
|
382,479
|
|
|
|
9.1 years
|
|
|
|
35.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,335,098
|
|
|
|
8.5 years
|
|
|
|
25.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of the stock option activity follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Number
|
|
|
Average
|
|
|
|
of
|
|
|
Exercise
|
|
|
|
Shares
|
|
|
Price
|
|
|
Outstanding at October 26,
2004
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
727,727
|
|
|
|
18.00
|
|
Forfeited
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31,
2004
|
|
|
727,727
|
|
|
|
18.00
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
313,467
|
|
|
|
28.78
|
|
Forfeited
|
|
|
(31,227
|
)
|
|
|
18.00
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31,
2005
|
|
|
1,009,967
|
|
|
|
21.35
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
402,349
|
|
|
|
35.08
|
|
Forfeited
|
|
|
(77,218
|
)
|
|
|
24.63
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31,
2006
|
|
|
1,335,098
|
|
|
|
25.30
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31:
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
F-22
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
At December 31, 2006, the Company had 1,335,098 stock
options outstanding with a weighted average remaining
contractual life of 8.5 years and an aggregate intrinsic
value of $5.9 million. No stock options granted under this
plan have become exercisable as of December 31, 2006.
Expense recorded in connection with the RSUs and stock options
was $5.8 million during the year ended December 31,
2006 of which $1.3 million, net of minority interest, was
credited as additional paid-in capital. Expense recorded in
connection with the RSUs and stock options was $4.1 million
during the year ended December 31, 2005 of which $946,000,
net of minority interest, was credited as additional paid-in
capital. During the period from October 27, 2004 to
November 1, 2004 and from November 2, 2004 to
December 31, 2004, $32,400 and $594,800 was expensed in
connection with the RSUs and stock options of which $136,800,
net of minority interest, was credited as additional paid-in
capital. The amount of deferred tax asset created was $535,000
and $379,000 during the years ended December 31, 2006 and
2005, respectively. At December 31, 2006, approximately
$19.3 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 4.0 years.
Equity
Appreciation Units
EAUs were a form of cash based compensation that were awarded in
accordance with the provisions of the EAU Plan. The EAU plan was
terminated in November 2004 in connection with the Offering.
Upon termination of these plans one-half of each EAU
participants earned balance was paid in cash to the
participants. The remainder of each participants earned
balance was converted into RSUs and the corresponding liability
of $6.7 million was recorded to additional paid-in capital.
Compensation expense of $9.1 million was recognized for the
period ended November 1, 2004. No liability was recorded at
December 31, 2006 and 2005.
The provision for income taxes for the years ended
December 31, 2006, 2005 and 2004 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 2 to
|
|
|
January 1 to
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
November 1,
|
|
(in thousands)
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2004
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
10,860
|
|
|
$
|
8,309
|
|
|
$
|
1,104
|
|
|
$
|
|
|
State
|
|
|
2,590
|
|
|
|
1,989
|
|
|
|
248
|
|
|
|
1,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current income taxes
|
|
|
13,450
|
|
|
|
10,298
|
|
|
|
1,352
|
|
|
|
1,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
7,531
|
|
|
|
7,537
|
|
|
|
1,059
|
|
|
|
|
|
State
|
|
|
1,789
|
|
|
|
1,789
|
|
|
|
238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred income taxes
|
|
|
9,320
|
|
|
|
9,326
|
|
|
|
1,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income taxes
|
|
$
|
22,770
|
|
|
$
|
19,624
|
|
|
$
|
2,649
|
|
|
$
|
1,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-23
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Deferred income taxes reflect the expected future tax
consequences of temporary differences between carrying amounts
and tax bases of the Companys assets and liabilities. The
significant components of deferred income taxes at
December 31, 2006 and 2005 are as follows:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2006
|
|
|
2005
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
$
|
105,700
|
|
|
$
|
114,575
|
|
Other
|
|
|
1,537
|
|
|
|
1,520
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
107,237
|
|
|
|
116,095
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Unrealized net holding gains on
investments on
available-for-sale
securities
|
|
|
2,294
|
|
|
|
1,357
|
|
Deferred sales commission
|
|
|
4,098
|
|
|
|
4,699
|
|
Other
|
|
|
1,605
|
|
|
|
913
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
7,997
|
|
|
|
6,969
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
99,240
|
|
|
$
|
109,126
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets and liabilities are reflected on the
Companys consolidated statements of financial condition as
a net deferred tax asset. The current and non-current portions
of the net deferred tax asset were $7.4 million and
$91.9 million, respectively, at December 31, 2006 and
$7.8 million and $101.3 million at December 31,
2005.
In November 2004, the Company recorded a net deferred income tax
asset of $119.9 million as a result of the purchase of
20,000,000 membership units from CFP, whereby the Company made
an election under Section 754 of the Internal Revenue Code
to mark to current market value all assets that it purchased.
However, the assets acquired in connection with purchase of the
3,000,000 membership units directly from Holdings do not qualify
for
mark-to-market
treatment under Section 754. Most of the assets receiving
the
stepped-up
basis for tax purposes are in the form of intangible assets,
such as management contracts, distribution contracts and
intellectual property. These intangible assets will generally be
amortized over 15 years, and this amortization will create
a future tax benefit of approximately $8.3 million per
year, expiring in fiscal year 2019. The Company believes that
all deferred income tax assets will be realized; therefore, no
valuation allowances have been established.
In 2005, the Company recorded an adjustment to correct the
income tax rate that was initially used in 2004 to establish the
net deferred tax asset, which resulted in a $0.8 million
increase in the net deferred tax asset as of December 31,
2005. In 2005, the Company established a deferred tax asset
related to certain offering costs, which resulted in a
$0.4 million increase to the net deferred tax asset as of
December 31, 2005. These corrections were recorded as an
increase in additional paid-in capital and did not have any
effect on net income.
F-24
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table reconciles the statutory federal income tax
rate to the effective income tax rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
|
|
|
Twelve Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
November 2 to
|
|
|
January 1 to
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
November 1,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2004
|
|
|
Statutory U.S. federal income
tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Income passed through to
stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(35.0
|
)%
|
State income taxes, net of federal
tax benefits
|
|
|
5.0
|
%
|
|
|
5.0
|
%
|
|
|
4.8
|
%
|
|
|
1.5
|
%
|
Other non-deductible items
|
|
|
0.1
|
%
|
|
|
0.2
|
%
|
|
|
0.1
|
%
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
40.1
|
%
|
|
|
40.2
|
%
|
|
|
39.9
|
%
|
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the periods ended prior to November 2, 2004, CFP
elected to be taxed as an S corporation under the Internal
Revenue Code. Therefore, the income and expenses of CFP were
included in the income tax returns of its stockholders. CFP was
subject to only Illinois replacement tax and certain other state
taxes.
The following table reflects the calculation of basic and
diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 2 to
|
|
|
January 1 to
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
November 1,
|
|
(in thousands, except per share amounts)
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2004
|
|
|
Earnings per share
basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings available to common
shareholders
|
|
$
|
34,008
|
|
|
$
|
29,222
|
|
|
$
|
3,992
|
|
|
$
|
102,182
|
|
Weighted average shares outstanding
|
|
|
23,162
|
|
|
|
23,000
|
|
|
|
22,700
|
|
|
|
96,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share basic
|
|
$
|
1.47
|
|
|
$
|
1.27
|
|
|
$
|
0.18
|
|
|
$
|
1.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest in
Calamos Holdings LLC and income taxes
|
|
$
|
243,409
|
|
|
$
|
211,855
|
|
|
$
|
29,250
|
|
|
|
|
|
Less: Impact of income taxes
|
|
|
97,607
|
|
|
|
85,102
|
|
|
|
11,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings available to common
shareholders
|
|
$
|
145,802
|
|
|
$
|
126,753
|
|
|
$
|
17,582
|
|
|
$
|
102,182
|
|
Weighted average shares outstanding
|
|
|
23,162
|
|
|
|
23,000
|
|
|
|
22,700
|
|
|
|
96,800
|
|
Conversion of membership units for
common stock
|
|
|
77,000
|
|
|
|
77,000
|
|
|
|
77,300
|
|
|
|
|
|
Dilutive impact of RSUs
|
|
|
523
|
|
|
|
577
|
|
|
|
491
|
|
|
|
|
|
Dilutive impact of stock options
|
|
|
120
|
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares and
potential dilutive shares outstanding
|
|
|
100,805
|
|
|
|
100,626
|
|
|
|
100,491
|
|
|
|
96,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share
dilutive
|
|
$
|
1.45
|
|
|
$
|
1.26
|
|
|
$
|
0.17
|
|
|
$
|
1.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares outstanding for 2006, 2005 and for the period of
November 2, 2004 to December 31, 2004 are calculated
(a) assuming the Calamos Interests exchanged all of its
membership units in Calamos Holdings LLC for shares of the
Companys Class A common stock on a
one-for-one
basis and (b) including the effect of outstanding
restricted stock unit and option awards. In calculating diluted
earnings per share for 2006, 2005 and for the period
November 2, 2004 to December 31, 2004, the effective
tax rates of 40.1%, 40.2% and 39.9%, respectively, were applied
to income before minority interest in Calamos Holdings LLC and
income taxes.
F-25
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company uses the treasury stock method to reflect the
dilutive effect of unvested restricted stock units and
unexercised stock options in diluted earnings per share. As
such, the dilutive effect of such options and RSUs would result
in the addition of a net number of shares to the
weighted-average number of shares used in the calculation of
diluted earnings per share. Under the treasury stock method, if
the average market price of common stock increases above the
exercise price, the proceeds that would be assumed to be
realized would be assumed to be used to acquire outstanding
shares of common stock. However, pursuant to SFAS 123(R),
the awards may be anti-dilutive even when the market price of
the underlying stock exceeds the related 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. Stock options for
671,780 shares and RSUs for 127,493 shares were
excluded from the computation of diluted earnings per share for
the year ended December 31, 2006 as they were
anti-dilutive. Stock options for 313,467 shares and RSUs
for 6,656 shares were excluded from the computation of
diluted earnings per share for the year ended December 31,
2005 as they were anti-dilutive. Stock options for
727,727 shares were excluded from the computation of
diluted earnings per share for the year ended December 31,
2004 as they were anti-dilutive. No RSUs were anti-dilutive in
2004.
|
|
(16)
|
Commitments
and Contingencies
|
In the normal course of business, the Company enters into
agreements that include indemnities in favor of third parties,
such as engagement letters with advisors and consultants,
distribution agreements and service agreements. In accordance
with the Companys by-laws, the Company has also agreed to
indemnify its directors, officers, employees and agents in
certain cases. Certain agreements do not contain any limits on
the Companys liability and, therefore, it is not possible
to estimate the Companys potential liability under these
indemnities. In certain cases, the Company may have recourse
against third parties with respect to these indemnities.
Further, the Company maintains insurance policies that may
provide coverage against certain claims under these indemnities.
In the normal course of business, the Company may be subject to
various legal proceedings from time to time. Currently, there
are no legal proceedings pending against the Company or the
Companys subsidiaries.
The Company leases office space and computer equipment under
long-term operating leases expiring at various dates throughout
fiscal year 2025. Lease expenses for years ended
December 31, 2006, 2005 and 2004 were $4.5 million,
$3.8 million and $1.7 million, respectively. At
December 31, 2006, the Companys aggregate future
minimum payments for operating leases having initial or
non-cancelable terms greater than one year were payable as
follows:
|
|
|
|
|
|
|
Minimum
|
|
(in thousands)
|
|
Payments
|
|
|
Year ended December 31:
|
|
|
|
|
2007
|
|
$
|
3,439
|
|
2008
|
|
|
3,468
|
|
2009
|
|
|
3,509
|
|
2010
|
|
|
3,607
|
|
2011
|
|
|
3,713
|
|
Thereafter
|
|
|
62,950
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
80,686
|
|
|
|
|
|
|
|
|
(17)
|
Regulatory
and Net Capital Requirements
|
As a broker-dealer, CFS is subject to the Securities and
Exchange Commissions Uniform Net Capital Rule
(Rule 15c3-1),
which requires the maintenance of minimum net capital, as
defined, and requires that the ratio of
F-26
CALAMOS
ASSET MANAGEMENT, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
aggregate indebtedness to net capital (net capital ratio), as
defined, shall not exceed 15 to 1. As of December 31, 2006
and 2005, the net capital, the excess of the required net
capital and the net capital ratio were as follows:
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
2006
|
|
|
2005
|
|
|
Net capital
|
|
$
|
5,330
|
|
|
$
|
6,574
|
|
Excess of required net capital
|
|
$
|
3,647
|
|
|
$
|
5,239
|
|
Net capital ratio
|
|
|
4.74
|
|
|
|
3.05
|
|
CFS is not required to compute the Reserve Requirements under
Exhibit A of
Rule 15c3-3(k)(2)(i)
or to include Information Relating to the Possession or Control
Requirements under
Rule 15c3-3,
because the Registrant operates primarily with the purpose of
distributing mutual fund shares and does not hold customer funds
or safekeep customer securities.
For the years ended December 31, 2006, 2005 and 2004, total
revenues derived from services provided to two Company-sponsored
mutual funds, the Calamos Growth Fund and the Calamos Growth and
Income fund were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Calamos Growth Fund
|
|
|
48
|
%
|
|
|
47
|
%
|
|
|
40
|
%
|
Calamos Growth and Income Fund
|
|
|
16
|
%
|
|
|
16
|
%
|
|
|
16
|
%
|
|
|
(19)
|
Recently
Issued Accounting Pronouncements
|
In June 2006, the FASB issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes an
interpretation of FASB Statement No. 109 (FIN 48),
which seeks to reduce diversity in practice that is associated
with certain aspects of measurement and recognition when
accounting for uncertain tax positions and clarifies the
accounting and disclosure for uncertainty in tax positions.
FIN 48 is effective for the Company beginning
January 1, 2007. The Company has evaluated the impact that
the adoption of FIN 48 will have on its financial
statements and does not expect it to be material.
In September 2006, the FASB issued SFAS 157, Fair Value
Measurements, which defines fair value, establishes a
framework for measuring fair value and requires additional
disclosure regarding fair value measurements. SFAS 157 is
effective for the Company beginning January 1, 2008. We are
currently evaluating the impact, if any, that the adoption of
SFAS 157 will have on our financial statements.
F-27
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
None
|
|
Item 9A.
|
Controls
and Procedures
|
As of the end of the period covered by this Annual Report on
Form 10-K,
an evaluation was carried out under the supervision and with the
participation of our management, including our chief executive
officer and chief financial officer, of the effectiveness of the
design and operation of our disclosure controls and procedures
(as defined in
Rule 13a-15(e)
and
15d-15(e)
under the Securities Exchange Act of 1934) (the Exchange Act).
Based upon that evaluation, the chief executive officer and
chief accounting officer concluded that the design and operation
of these disclosure controls and procedures were effective to
ensure that information required to be disclosed by the Company
in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange
Commissions rules and forms.
No significant changes were made in our internal control over
financial reporting during the Companys fourth quarter
that have materially affected, or are reasonably likely to
materially affect, the Companys internal control over
financial reporting.
Managements Report on Internal Control Over Financial
Reporting and KPMG LLPs Report of Independent Registered
Public Accounting Firm on Internal Control Over Financial
Reporting are included in Item 8 of Part II, Financial
Statements and Supplementary Data, of this Annual Report on
Form 10-K.
|
|
Item 9B.
|
Other
Information
|
None
PART III
|
|
Item 10.
|
Directors
and Executive Officers of the Registrant
|
|
|
|
|
|
Management
|
|
|
|
Directors
|
|
John P. Calamos, Sr.
Chairman, Chief
Executive
Officer and Co-Chief
Investment Officer
|
|
James F. Baka
Senior Vice President
and
National Sales
Manager-Institutional
Services
|
|
John P. Calamos, Sr.
Chairman, Chief
Executive Officer and
Co-Chief
Investment Officer
|
|
|
|
|
|
Nick P. Calamos
Senior Executive Vice
President and
Co-Chief Investment Officer
|
|
Nimish S. Bhatt
Senior Vice President
and
Director of Operations
|
|
Nick P. Calamos
Senior Executive Vice
President and
Co-Chief Investment Officer
|
|
|
|
|
|
Patrick H. Dudasik
Executive Vice
President,
Chief Financial Officer and Treasurer
|
|
Robert M. Kunimura
Senior Vice President
and
Chief Technology Officer
|
|
G. Bradford Bulkley
Founder
Bulkley Capital, L.P.
|
|
|
|
|
|
James S. Hamman, Jr.
Executive Vice
President,
General Counsel and Secretary
|
|
Philip (Phipps) E. Moriarty
Senior Vice President
and
National Sales
Manager-Intermediary Channels
|
|
Richard W. Gilbert
President
Gilbert Communications, Inc.
|
Scott Craven Jones
Executive Vice
President and
Chief Administrative Officer
|
|
|
|
Arthur L. Knight
Private Investor and
Business Consultant
Former President and Chief Executive Officer
Morgan Products, Ltd.
|
II-1
Additional information regarding the Directors and Executive
Officers of the Company and compliance with Section 16(a)
of the Securities Exchange Act of 1934 is incorporated herein by
reference from our definitive proxy statement for our 2007
Annual Meeting of Stockholders (the Proxy Statement).
The company has adopted a Code of Business Conduct and Ethics
(the Code of Conduct) that applies to our principal executive
officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions.
The Code of Conduct is posted on the Investor Relations section
of our website (www.calamos.com) and available in print free of
charge to any shareholder who requests a copy. Interested
parties may address a written request for a printed copy of the
Code of Conduct to: Secretary, Calamos Asset Management, Inc.,
2020 Calamos Court, Naperville, IL 60563. We intend to satisfy
the disclosure requirement regarding any amendment to, or a
waiver of, a provision of the Code of Conduct by posting such
information on our website.
|
|
Item 11.
|
Executive
Compensation
|
Information required for this Item is incorporated herein by
reference to the registrants proxy statement for its
annual meeting of shareholders on May 25, 2007.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
Information required for this Item is incorporated herein by
reference to the registrants proxy statement for its
annual meeting of shareholders on May 25, 2007.
|
|
Item 13.
|
Certain
Relationships and Related Transactions
|
Information required for this Item is incorporated herein by
reference to the registrants proxy statement for its
annual meeting of shareholders on May 25, 2007.
|
|
Item 14.
|
Principal
Accounting Fees and Services
|
Information required for this Item is incorporated herein by
reference to the registrants proxy statement for its
annual meeting of shareholders on May 25, 2007.
II-2
PART IV
|
|
Item 15.
|
Exhibits and
Financial Statement Schedules
|
(a) The following documents are filed as part of this
report.
1. Financial Statements: See Item 8 of Part II.
2. Financial Statement Schedules: None.
3. List of Exhibits:
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description of Exhibit
|
|
|
3(i)
|
|
|
Amended and Restated Certificate
of Incorporation of the Registrant (incorporated by reference to
Exhibit 3.1 to the Registrants Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
November 2, 2004).
|
|
3(ii)
|
|
|
Amended and Restated By-Laws of
the Registrant (incorporated by reference to Exhibit 3.2 to
the Registrants Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
April 26, 2005).
|
|
3(iii)
|
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Amended and Restated By-Laws of
the Registrant (incorporated by reference to Exhibit 3.2 to
the Registrants Current Report on
Form 8-K
filed with the Securities and Exchange Commission on
January 23, 2007).
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4.1
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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).
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4.2
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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).
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10.1
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Employment Agreement between the
Registrant and John P. Calamos, Sr. (incorporated by
reference to Exhibit 10.1 to the Registrants
Quarterly Report on
Form 10-Q
filed with the Securities and Exchange Commission on
December 3, 2004).
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10.2
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Employment Agreement between the
Registrant and Nick P. Calamos (incorporated by reference to
Exhibit 10.2 to the Registrants Quarterly Report on
Form 10-Q
filed with the Securities and Exchange Commission on
December 3, 2004).
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10.3
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Employment Agreement between the
Registrant and James S. Hamman, Jr. (incorporated by
reference to Exhibit 10.3 to the Registrants
Quarterly Report on
Form 10-Q
filed with the Securities an Exchange Commission on
December 3, 2004).
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10.4
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Employment Agreement between the
Registrant and Patrick H. Dudasik (incorporated by reference to
Exhibit 10.4 to the Registrants Quarterly Report on
Form 10-Q
filed with the Securities and Exchange Commission on
December 3, 2004).
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10.5
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Calamos Asset Management, Inc.
Incentive Compensation Plan (incorporated by reference to
Exhibit 10.5 to the Registrants Quarterly Report on
Form 10-Q
filed with the Securities and Exchange Commission on
December 3, 2004).
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10.6
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Form of EAU-Based RSU Award
Statement (incorporated by reference to Exhibit 10.6 to the
Registrants Quarterly Report on
Form 10-Q
filed with the Securities and Exchange Commission on
December 3, 2004).
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10.7
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Form of IPO Equity Award Statement
(incorporated by reference to Exhibit 10.7 to the
Registrants Quarterly Report on
Form 10-Q
filed with the Securities and Exchange Commission on
December 3, 2004).
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10.8
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Form of Services-Based RSU Award
Statement (incorporated by reference to Exhibit 10.8 to the
Registrants Quarterly Report on
Form 10-Q
filed with the Securities and Exchange Commission on
December 3, 2004).
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II-3
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Exhibit
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Number
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Description of Exhibit
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10.9
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Contribution Agreement between the
Registrant and Calamos Holdings LLC (incorporated by reference
to Exhibit 10.9 to the Registrants Quarterly Report
on
Form 10-Q
filed with the Securities and Exchange Commission on
December 3, 2004).
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10.10
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Tax Indemnity Agreement among the
Registrant, Calamos Family Partners, Inc. and Calamos Holdings
LLC (incorporated by reference to Exhibit 10.10 to the
Registrants Quarterly Report on
Form 10-Q
filed with the Securities and Exchange Commission on
December 3, 2004).
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10.11
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Second Amended and Restated
Limited Liability Company Agreement of Calamos Holdings LLC
effective as of November 2, 2004, by and among Calamos
Family Partners, Inc., John P. Calamos, Sr. and the
Registrant (incorporated by reference to Exhibit 10.11 to
the Registrants Quarterly Report on
Form 10-Q
filed with the Securities and Exchange Commission on
December 3, 2004).
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10.12
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Amendment No. 1 to the Second
Amended and Restated Limited Liability Company Agreement of
Calamos Holdings LLC (incorporated by reference to
Exhibit 10.12 to the Registrants Annual Report on
Form 10-K
filed with the Securities and Exchange Commission on
March 13, 2006).
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10.13
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Amendment No. 2 to the Second
Amended and Restated Limited Liability Company Agreement of
Calamos Holdings LLC (incorporated by reference to
Exhibit 10 to the Registrants Quarterly Report on
Form 10-Q
filed with the Securities and Exchange Commission on
August 9, 2006).
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10.14
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Amendment Number 1 to
Management Services Agreement between the Registrant and Calamos
Family Partners, Inc. (incorporated by reference to
Exhibit 10 to the Registrants Quarterly Report on
Form 10-Q
filed with the Securities and Exchange Commission on
August 12, 2005).
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10.15
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Lease Between 2020 Calamos Court
LLC and Calamos Holdings LLC (formerly with Calamos Holdings,
Inc. (incorporated by reference to Exhibit 10 to the
Registrants Quarterly Report on
Form 10-Q
filed with the Securities and Exchange Commission on
November 10, 2005).
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21.1
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Subsidiaries of the Company
(incorporated by reference to Exhibit 21.1 to the
Registrants Annual Report on
Form 10-K
filed with the Securities and Exchange Commission on
March 31, 2005).
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23.1
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Consent of Independent Registered
Public Accounting Firm, KPMG LLP.
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31.1
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Certification of Principal
Executive Officer pursuant to
Rule 13a-14(a).
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31.2
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Certification of Principal
Financial Officer pursuant to
Rule 13a-14(a).
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32.1
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Certification of Principal
Executive Officer pursuant to 18 U.S.C. Section 1350.
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32.2
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Certification of Principal
Financial Officer pursuant to 18 U.S.C. Section 1350.
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Upon written request by a stockholder to our Secretary, James S.
Hamman, Jr., at 2020 Calamos Court, Naperville, Illinois
60563, any exhibit shall be available at a reasonable charge
(which will be limited to our reasonable expenses in furnishing
such exhibits).
II-4
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on March 6, 2007.
CALAMOS ASSET MANAGEMENT, INC.
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By:
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/s/ Patrick
H. Dudasik
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Name: Patrick H. Dudasik
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Title:
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Executive Vice President,
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Chief Operating Officer, Chief
Financial Officer and Treasurer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons in
the capacities and on the dates indicated.
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Signature
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Title
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Date
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/s/ John
P.
Calamos, Sr.
John
P. Calamos, Sr.
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Chairman of the Board, Chief
Executive Officer and Co-Chief Investment Officer (Principal
Executive Officer)
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March 5, 2007
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/s/ Patrick
H. Dudasik
Patrick
H. Dudasik
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Executive Vice President, Chief
Operating Officer, Chief Financial Officer and Treasurer
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March 5, 2007
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/s/ Nick
P. Calamos
Nick
P. Calamos
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Senior Executive Vice President,
Co-Chief Investment Officer and Director
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March 5, 2007
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/s/ G.
Bradford Bulkley
G.
Bradford Bulkley
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Director
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March 5, 2007
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/s/ Mitchell
S. Feiger
Mitchell
S. Feiger
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Director
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March 5, 2007
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/s/ Richard
W. Gilbert
Richard
W. Gilbert
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Director
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March 5, 2007
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/s/ Arthur
L. Knight
Arthur
L. Knight
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Director
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March 5, 2007
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II-5