e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED: June 30, 2007
- OR -
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934. |
Commission File Number: 000-51003
CALAMOS ASSET MANAGEMENT, INC.
(Exact Name of Registrant as Specified in its Charter)
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Delaware
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32-0122554 |
(State or Other Jurisdiction of
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(I.R.S. Employer |
Incorporation or Organization)
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Identification No.) |
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2020 Calamos Court, Naperville, Illinois
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60563 |
(Address of Principal Executive Offices)
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(Zip Code) |
(630) 245-7200
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days. þ Yes o No
Indicate by check mark whether the registrant 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 Exchange Act). o Yes þ No
At July 25, 2007, the company had 22,536,282 shares of Class A common stock and 100 shares of Class
B common stock outstanding.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except share data)
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June 30, |
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December 31, |
|
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2007 |
|
|
2006 |
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|
(unaudited) |
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|
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|
ASSETS: |
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|
|
|
|
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Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
147,604 |
|
|
$ |
328,841 |
|
Receivables: |
|
|
|
|
|
|
|
|
Affiliates and affiliated funds |
|
|
24,912 |
|
|
|
26,569 |
|
Customers |
|
|
9,132 |
|
|
|
10,218 |
|
Investment securities |
|
|
312,654 |
|
|
|
143,112 |
|
Partnership securities |
|
|
138,218 |
|
|
|
86,409 |
|
Prepaid expenses |
|
|
2,658 |
|
|
|
2,383 |
|
Deferred tax assets, net |
|
|
6,212 |
|
|
|
7,375 |
|
Other assets |
|
|
4,164 |
|
|
|
67 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
645,554 |
|
|
|
604,974 |
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
Deferred tax assets, net |
|
|
88,477 |
|
|
|
91,865 |
|
Deferred sales commissions |
|
|
40,207 |
|
|
|
49,891 |
|
Property and equipment, net of accumulated depreciation ($17,113
at 6/30/07 and $13,233 at 12/31/06) |
|
|
44,731 |
|
|
|
43,615 |
|
Other non-current assets |
|
|
1,418 |
|
|
|
1,443 |
|
|
|
|
|
|
|
|
Total non-current assets |
|
|
174,833 |
|
|
|
186,814 |
|
|
|
|
|
|
|
|
Total assets |
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|
820,387 |
|
|
|
791,788 |
|
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|
|
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|
|
|
|
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|
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LIABILITIES AND STOCKHOLDERS EQUITY: |
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Current liabilities |
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|
|
|
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Accounts payable: |
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|
|
|
|
|
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Brokers |
|
|
20,881 |
|
|
|
20,969 |
|
Affiliates and affiliated funds |
|
|
443 |
|
|
|
264 |
|
Accrued compensation and benefits |
|
|
12,654 |
|
|
|
22,722 |
|
Accrued expenses and other current liabilities |
|
|
33,923 |
|
|
|
6,890 |
|
|
|
|
|
|
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Total current liabilities |
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|
67,901 |
|
|
|
50,845 |
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|
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Long-term liabilities |
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Long-term debt |
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150,000 |
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150,000 |
|
Other long-term liabilities |
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|
8,332 |
|
|
|
8,003 |
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|
|
|
|
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Total long-term liabilities |
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158,332 |
|
|
|
158,003 |
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|
|
|
|
|
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Total liabilities |
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|
226,233 |
|
|
|
208,848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Minority interest in partnership investments |
|
|
50,549 |
|
|
|
48,850 |
|
Minority interest in Calamos Holdings LLC |
|
|
341,070 |
|
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|
319,513 |
|
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|
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Stockholders equity: |
|
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Class A Common Stock, $0.01 par value. Authorized 600,000,000 shares;
23,324,082 shares issued and 22,536,282 shares outstanding at
6/30/07; 23,161,898 shares issued and outstanding at 12/31/06 |
|
|
233 |
|
|
|
232 |
|
Class B Common Stock, $0.01 par value. Authorized 1,000 shares; issued
and outstanding 100 shares |
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|
0 |
|
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|
0 |
|
Additional paid-in capital |
|
|
156,292 |
|
|
|
157,724 |
|
Retained earnings |
|
|
58,457 |
|
|
|
52,261 |
|
Accumulated other comprehensive income |
|
|
6,393 |
|
|
|
4,360 |
|
Treasury stock, at cost; 787,800 shares |
|
|
(18,840 |
) |
|
|
|
|
|
|
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|
|
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|
Total stockholders equity |
|
|
202,535 |
|
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|
214,577 |
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|
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Total liabilities, minority interest and stockholders equity |
|
$ |
820,387 |
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|
$ |
791,788 |
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|
See accompanying notes to consolidated financial statements.
-2-
CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Six Months Ended June 30, 2007 and 2006
(in thousands, except share data)
(unaudited)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2007 |
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|
2006 |
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|
2007 |
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|
2006 |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Investment management fees |
|
$ |
78,313 |
|
|
$ |
84,328 |
|
|
$ |
156,788 |
|
|
$ |
165,807 |
|
Distribution and underwriting fees |
|
|
35,560 |
|
|
|
38,997 |
|
|
|
71,741 |
|
|
|
77,137 |
|
Other |
|
|
894 |
|
|
|
1,028 |
|
|
|
1,938 |
|
|
|
2,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
114,767 |
|
|
|
124,353 |
|
|
|
230,467 |
|
|
|
244,971 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits |
|
|
22,512 |
|
|
|
18,287 |
|
|
|
43,278 |
|
|
|
37,293 |
|
Distribution and underwriting expense |
|
|
25,196 |
|
|
|
25,864 |
|
|
|
50,223 |
|
|
|
50,829 |
|
Amortization of deferred sales commissions |
|
|
7,278 |
|
|
|
8,123 |
|
|
|
15,156 |
|
|
|
15,863 |
|
Marketing and sales promotion |
|
|
29,731 |
|
|
|
4,487 |
|
|
|
33,213 |
|
|
|
7,710 |
|
General and administrative |
|
|
9,118 |
|
|
|
7,645 |
|
|
|
17,510 |
|
|
|
14,704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
93,835 |
|
|
|
64,406 |
|
|
|
159,380 |
|
|
|
126,399 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
20,932 |
|
|
|
59,947 |
|
|
|
71,087 |
|
|
|
118,572 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (expense) |
|
|
1,495 |
|
|
|
820 |
|
|
|
3,489 |
|
|
|
1,182 |
|
Investment and other income |
|
|
7,378 |
|
|
|
(7,927 |
) |
|
|
7,770 |
|
|
|
4,004 |
|
Minority interest in partnership investments |
|
|
(3,020 |
) |
|
|
5,171 |
|
|
|
(2,269 |
) |
|
|
(1,091 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense), net |
|
|
5,853 |
|
|
|
(1,936 |
) |
|
|
8,990 |
|
|
|
4,095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest in Calamos
Holdings LLC and income taxes |
|
|
26,785 |
|
|
|
58,011 |
|
|
|
80,077 |
|
|
|
122,667 |
|
Minority interest in Calamos Holdings LLC |
|
|
20,367 |
|
|
|
44,486 |
|
|
|
61,075 |
|
|
|
94,109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
6,418 |
|
|
|
13,525 |
|
|
|
19,002 |
|
|
|
28,558 |
|
Income taxes |
|
|
2,613 |
|
|
|
5,424 |
|
|
|
7,663 |
|
|
|
11,452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
3,805 |
|
|
$ |
8,101 |
|
|
$ |
11,339 |
|
|
$ |
17,106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.17 |
|
|
$ |
0.35 |
|
|
$ |
0.49 |
|
|
$ |
0.74 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
Diluted |
|
$ |
0.16 |
|
|
$ |
0.34 |
|
|
$ |
0.48 |
|
|
$ |
0.73 |
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
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|
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|
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|
Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
22,846,901 |
|
|
|
23,161,998 |
|
|
|
23,084,223 |
|
|
|
23,161,998 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
100,289,411 |
|
|
|
100,845,107 |
|
|
|
100,525,789 |
|
|
|
100,823,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends per share |
|
$ |
0.11 |
|
|
$ |
0.09 |
|
|
$ |
0.22 |
|
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
-3-
CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
Six Months Ended June 30, 2007
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Common |
|
|
Paid-in |
|
|
Retained |
|
|
Comprehensive |
|
|
Treasury |
|
|
|
|
|
|
Stock |
|
|
Capital |
|
|
Earnings |
|
|
Income |
|
|
Stock |
|
|
Total |
|
Balance at December 31, 2006 |
|
$ |
232 |
|
|
$ |
157,724 |
|
|
$ |
52,261 |
|
|
$ |
4,360 |
|
|
$ |
|
|
|
$ |
214,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
11,339 |
|
|
|
|
|
|
|
|
|
|
|
11,339 |
|
Changes in unrealized gains on
available-for-sale securities,
net of
minority interest and income
taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,233 |
|
|
|
|
|
|
|
2,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock
(162,184 Class A common shares) |
|
|
1 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of common stock
(787,800 Class A common shares) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,840 |
) |
|
|
(18,840 |
) |
Cumulative impact of changes in
ownership of Calamos Holdings
LLC |
|
|
|
|
|
|
(2,231 |
) |
|
|
7 |
|
|
|
(200 |
) |
|
|
|
|
|
|
(2,424 |
) |
Compensation expense recognized
under stock incentive plans, net
of minority interest |
|
|
|
|
|
|
800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
800 |
|
Dividend equivalent accrued
under stock incentive plans, net
of minority interest |
|
|
|
|
|
|
|
|
|
|
(72 |
) |
|
|
|
|
|
|
|
|
|
|
(72 |
) |
Dividends declared |
|
|
|
|
|
|
|
|
|
|
(5,078 |
) |
|
|
|
|
|
|
|
|
|
|
(5,078 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2007 |
|
$ |
233 |
|
|
$ |
156,292 |
|
|
$ |
58,457 |
|
|
$ |
6,393 |
|
|
$ |
(18,840 |
) |
|
$ |
202,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
-4-
CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2007 and 2006
(in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
Cash and cash equivalents at beginning of year |
|
$ |
328,841 |
|
|
$ |
210,469 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
|
|
11,339 |
|
|
|
17,106 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
Minority interest in partnership investments |
|
|
2,269 |
|
|
|
1,091 |
|
Minority interest in Calamos Holdings LLC |
|
|
61,075 |
|
|
|
94,109 |
|
Amortization of deferred sales commissions |
|
|
15,156 |
|
|
|
15,863 |
|
Other depreciation and amortization |
|
|
4,024 |
|
|
|
3,424 |
|
Unrealized depreciation (appreciation) on CFS securities
and partnership securities |
|
|
(5,305 |
) |
|
|
(1,965 |
) |
Deferred taxes |
|
|
3,290 |
|
|
|
4,556 |
|
Stock-based compensation |
|
|
3,478 |
|
|
|
3,107 |
|
Employee taxes paid on vesting under stock incentive plans |
|
|
(1,853 |
) |
|
|
(2,255 |
) |
(Increase) decrease in assets: |
|
|
|
|
|
|
|
|
Accounts receivable: |
|
|
|
|
|
|
|
|
Affiliates and affiliated mutual funds |
|
|
1,600 |
|
|
|
(898 |
) |
Customers |
|
|
1,086 |
|
|
|
(911 |
) |
Deferred sales commissions |
|
|
(5,472 |
) |
|
|
(17,278 |
) |
Other assets |
|
|
(4,875 |
) |
|
|
(765 |
) |
Increase (decrease) in liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
91 |
|
|
|
2,241 |
|
Accrued compensation and benefits and deferred compensation |
|
|
(10,068 |
) |
|
|
(6,566 |
) |
Other liabilities and accrued expenses |
|
|
27,650 |
|
|
|
(4,254 |
) |
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
103,485 |
|
|
|
106,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in investing activities: |
|
|
|
|
|
|
|
|
Net additions to property and equipment |
|
|
(4,997 |
) |
|
|
(5,812 |
) |
Net purchases of investment securities |
|
|
(153,102 |
) |
|
|
(728 |
) |
Net changes in partnership securities |
|
|
(47,375 |
) |
|
|
(838 |
) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(205,474 |
) |
|
|
(7,378 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in financing activities: |
|
|
|
|
|
|
|
|
Deferred tax benefit on vesting under stock incentive plans |
|
|
(209 |
) |
|
|
(289 |
) |
Purchase of common stock |
|
|
(18,840 |
) |
|
|
|
|
Cash distributions paid to minority shareholders |
|
|
(55,121 |
) |
|
|
(50,577 |
) |
Cash dividends paid to common shareholders |
|
|
(5,078 |
) |
|
|
(4,169 |
) |
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(79,248 |
) |
|
|
(55,035 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash |
|
|
(181,237 |
) |
|
|
44,192 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
147,604 |
|
|
$ |
254,661 |
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
-5-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) Organization and Description of Business
Calamos Asset Management, Inc. (CAM), together with its subsidiaries (the Company), primarily
provides investment advisory services to individuals, to institutional investors and to a family of
open-end and closed-end funds. CAM operates and controls all of the business and affairs of Calamos
Holdings LLC (Holdings) and, as a result of this control, consolidates the financial results of
Holdings with its own financial results.
(2) Basis of Presentation
The consolidated financial statements as of June 30, 2007 and for the three and six months ended
June 30, 2007 and 2006 have not been audited by the Companys independent registered public
accounting firm. In the opinion of management, these statements contain all adjustments, including
those of a normal recurring nature, necessary for fair presentation of the financial condition and
results of operations. The results for the interim periods ended June 30 are not necessarily
indicative of the results to be obtained for a full fiscal year. Certain amounts for the prior year
have been reclassified to conform to the current years presentation.
Calamos Family Partners, Inc.s (CFP) and John P. Calamos, Sr.s combined 77.4% and 76.9% interest
in Holdings at June 30, 2007 and 2006, respectively, is represented as minority interest in the
Companys financial statements. Income before minority interest in Calamos Holdings LLC and income
taxes, which was $26.8 million and $80.1 million for the three and six months ended June 30, 2007,
respectively, included approximately $289,900 and $543,400 of investment income earned during the
same periods on cash and cash equivalents held solely by CAM. This portion of CAMs investment
income is not reduced by any minority interests.
During the first quarter of 2007, Calamos Market Neutral Opportunities Fund LP was established as a
private investment partnership that is primarily comprised of highly liquid marketable securities.
Calamos Partners LLC, a subsidiary of Holdings, is the general partner. As of June 30, 2007, the
Company had a net interest of $51.3 million (99.0%) in this partnership. Additionally, as of June
30, 2007 and December 31, 2006, the Company had a net interest of $36.4 million (42.1%) and $33.9
million (41.0%) in Calamos Equity Opportunities Fund LP, respectively.
Because substantially all the activities of these partnerships (collectively, the Partnerships) are
conducted on behalf of the Company and its related parties, the Company consolidates the financial
results of the Partnerships into its results. The assets and liabilities of the Partnerships are
presented as partnership securities in the consolidated statements of financial condition, and the
total income of the Partnerships is presented as investment and other income in the consolidated
statements of operations. The combined minority interests are presented as minority interest in
partnership investments in the respective financial statements. The Company carries these
investments at 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
these estimates.
-6-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(3) Partnership Securities
Partnership securities, as presented below, represent the net assets of the Partnerships, and while
these items are presented on a net basis in the Companys financial statements, they are presented
as assets and liabilities on the underlying financial statements of the Partnerships.
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
(in thousands) |
|
2007 |
|
|
2006 |
|
Calamos Equity Opportunities Fund LP: |
|
|
|
|
|
|
|
|
Securities owned |
|
$ |
112,737 |
|
|
$ |
110,956 |
|
Securities sold but not yet purchased |
|
|
(25,789 |
) |
|
|
(24,104 |
) |
Accrued expenses and other current liabilities |
|
|
(566 |
) |
|
|
(4,190 |
) |
Other current assets |
|
|
22 |
|
|
|
71 |
|
|
|
|
|
|
|
|
Calamos Equity Opportunities Fund LP securities, net |
|
|
86,404 |
|
|
|
82,733 |
|
|
|
|
|
|
|
|
|
|
Calamos Market Neutral Opportunities Fund LP: |
|
|
|
|
|
|
|
|
Securities owned |
|
|
73,519 |
|
|
|
|
|
Securities sold but not yet purchased |
|
|
(20,672 |
) |
|
|
|
|
Accrued expenses and other current liabilities |
|
|
(1,364 |
) |
|
|
|
|
Other current assets |
|
|
331 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calamos Market Neutral Opportunities Fund LP securities, net |
|
|
51,814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in Calamos Multi-Strategy, L.P. |
|
|
|
|
|
|
3,676 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partnership securities |
|
$ |
138,218 |
|
|
$ |
86,409 |
|
|
|
|
|
|
|
|
During the first quarter of 2007, the Company liquidated its investment in Calamos Multi-Strategy,
L.P.
-7-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(4) Earnings Per Share
The following table reflects the calculation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
(in thousands, except per share data) |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
Earnings per share basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings available to common shareholders |
|
$ |
3,805 |
|
|
$ |
8,101 |
|
|
$ |
11,339 |
|
|
$ |
17,106 |
|
Weighted average shares outstanding |
|
|
22,847 |
|
|
|
23,162 |
|
|
|
23,084 |
|
|
|
23,162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share basic |
|
$ |
0.17 |
|
|
$ |
0.35 |
|
|
$ |
0.49 |
|
|
$ |
0.74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before minority interest in Calamos |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Holdings LLC and income taxes |
|
$ |
26,785 |
|
|
$ |
58,011 |
|
|
$ |
80,077 |
|
|
$ |
122,667 |
|
Less: Impact of income taxes |
|
|
10,906 |
|
|
|
23,262 |
|
|
|
32,295 |
|
|
|
49,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings available to common shareholders |
|
$ |
15,879 |
|
|
$ |
34,749 |
|
|
$ |
47,782 |
|
|
$ |
73,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
22,847 |
|
|
|
23,162 |
|
|
|
23,084 |
|
|
|
23,162 |
|
Conversion of membership units for common
stock |
|
|
77,000 |
|
|
|
77,000 |
|
|
|
77,000 |
|
|
|
77,000 |
|
Dilutive impact of restricted stock units |
|
|
387 |
|
|
|
539 |
|
|
|
376 |
|
|
|
514 |
|
Dilutive impact of stock options |
|
|
55 |
|
|
|
144 |
|
|
|
66 |
|
|
|
147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average diluted shares outstanding |
|
|
100,289 |
|
|
|
100,845 |
|
|
|
100,526 |
|
|
|
100,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share diluted |
|
$ |
0.16 |
|
|
$ |
0.34 |
|
|
$ |
0.48 |
|
|
$ |
0.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares outstanding for the three and six months ended June 30, 2007 and 2006 are calculated
(a) assuming CFP and John P. Calamos, Sr. exchanged all of their membership units in Holdings 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 stock option awards. An effective tax rate of 40.7% and 40.3%
was applied to income before minority interest in Calamos Holdings LLC and income taxes in
calculating diluted earnings available to common shareholders for the three and six months ended
June 30, 2007, respectively. An effective tax rate of 40.1% was applied to income before minority
interest in Calamos Holdings LLC and income taxes in calculating diluted earnings available to
common shareholders for the periods ended June 30, 2006.
The Company uses the treasury stock method to reflect the dilutive effect of unvested restricted
stock units (RSUs) and unexercised stock options on diluted earnings per share. Under the treasury
stock method, if the average market price of common stock increases above the options exercise
price, the proceeds that would be assumed to be realized from the exercise of the option would be
assumed to be used to acquire outstanding shares of common stock. However, pursuant to the
Financial Accounting Standards Boards (FASB) Statement of Financial Accounting Standard (SFAS) No.
123(R), Share-Based Payment (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, not yet recognized is included as a component of
the assumed proceeds upon exercise. 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. For the three and six months ended June 30, 2007,
stock options for 1,434,011 shares and RSUs for 381,570 shares were excluded from the computation
of diluted earnings per share, as they were anti-dilutive. For the three and six months ended June
30, 2006, stock options for 663,328 shares were excluded from the computation of diluted earnings
per share, as they were anti-dilutive. No RSUs were anti-dilutive during the three and six months
ended June 30, 2006.
-8-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(5) Incentive Compensation Plan
Certain employees of the Company participate in an incentive compensation plan, which includes
stock options and RSUs. The Company may use treasury shares, issue new shares or 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. The Companys Annual Report on Form 10-K for the year ended
December 31, 2006 provides details of this plan and its provisions.
For the six months ended June 30, 2007, the Company granted 769,407 shares of stock options and
256,469 shares of RSUs. There were forfeitures of 17,812 shares of stock options and 17,557 shares
of RSUs during the six months ended June 30, 2007. The weighted average fair value of stock options
at the date of grant for the six months ended June 30, 2007 was $10.70, which was estimated on the
date of grant using the Black-Scholes option-pricing model. The assumptions used were a dividend
yield of 1.67%, expected volatility of 35%, a risk-free interest rate of 4.7% and an expected life
of 7.5 years.
During the first quarter of 2007, 231,249 shares of RSUs were exercised, of which 162,184 RSUs, net
of units withheld for taxes, were converted, on a one-for-one basis, for shares of CAMs Class A
common stock. The total intrinsic value and the fair value of the converted shares was $4.4
million. The total tax benefit realized in connection with the exercise of the RSUs during the
three months ended March 31, 2007 was $588,000, as the Company receives tax benefits based upon the
portion of Holdings income that it recognizes.
Expense recorded in connection with the RSUs and stock options was $3.5 million during the six
months ended June 30, 2007 of which $788,000, net of minority interest, was credited as additional
paid-in capital. Expense recorded in connection with the RSUs and stock options was $3.1 million
during the six months ended June 30, 2006 of which $718,000, net of minority interest, was credited
as additional paid-in capital. The amount of deferred tax asset created was $315,000 and $287,000
during the six months ended June 30, 2007 and 2006, respectively, as the Company receives tax
benefits based upon the portion of Holdings income that it recognizes. At June 30, 2007,
approximately $26.9 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 4.3 years.
(6) Income Taxes
Effective January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48 (FIN
48), Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109. At
June 30, 2007, the Company had no unrecognized tax benefits and it does not anticipate any
unrecognized tax benefits arising in the next 12 months that would result in a material change to
its financial position. As such, the Company recognized no liability for unrecognized tax benefits
in connection with the adoption of FIN 48. A reconciliation is not provided, as the beginning and
ending amounts of unrecognized benefits are zero with no interim additions, reductions or
settlements.
While the Company does not have any accrued interest or penalties related to uncertain tax
positions at June 30, 2007, any future interest or penalties will be recognized in income tax
expense when determined.
The Company files income tax returns in the U.S. federal jurisdiction and various states. The
Company is no longer subject to U.S. federal, state and local examinations by tax authorities for
years before 2004. The Internal Revenue Service (IRS) commenced its examination of the Companys
U.S. income tax return for 2004 in the first quarter of 2007. The IRS has not proposed any
adjustments to the Companys tax return as filed.
(7) Common Stock Repurchase
In October 2006, the Board of Directors authorized the Company to purchase up to 2 million shares
of Class A common stock. During the second quarter of 2007, the Company repurchased 787,800 shares
at an aggregated cost of $18.8 million. At June 30, 2007, approximately 1.2 million additional
shares remain available for repurchase under this program.
-9-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(8) Minority Interest in Calamos Holdings LLC
Minority interest in Calamos Holdings LLC represents CFPs and John P. Calamos, Sr.s combined
ownership interest of 77.4% in Holdings at June 30, 2007, and is derived by multiplying the
historical equity of Holdings by their aggregate ownership percentage for the periods presented.
Issuances and repurchases of CAMs common stock result in changes to CAMs ownership percentage and
to the minority interests ownership percentage of Holdings. The Companys corresponding changes to
stockholders equity are reflected in the statements of changes in stockholders equity. Income,
which is reflected in retained earnings, is allocated to minority interests based on the average
ownership interest during the period in which the income is earned.
A rollforward of minority interest for the six months ended June 30, 2007 is presented below:
|
|
|
|
|
(in thousands) |
|
|
|
|
Minority interest at December 31, 2006 |
|
$ |
319,513 |
|
Issuance of common stock under stock incentive plans |
|
|
(520 |
) |
Purchase of common stock |
|
|
2,723 |
|
Income allocated to minority interests |
|
|
61,075 |
|
Compensation expense recognized under stock incentive plans |
|
|
2,677 |
|
Shares withheld for taxes paid on vesting under stock incentive plans |
|
|
(1,422 |
) |
Changes in unrealized gains on available-for-sale securities |
|
|
12,379 |
|
Dividend equivalent accrued under stock incentive plans |
|
|
(234 |
) |
Dividends declared |
|
|
(55,121 |
) |
|
|
|
|
Minority interest at June 30, 2007 |
|
$ |
341,070 |
|
|
|
|
|
The table below represents CAMs unconsolidated statement of financial condition as of June 30,
2007 and December 31, 2006. Upon consolidation, CAMs investment in subsidiaries is eliminated in
its entirety. The remaining net assets after giving effect to this elimination, as well as the
interest earned from the cash and cash equivalents, are not subject to any reduction for minority
interest.
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
(in thousands) |
|
2007 |
|
|
2006 |
|
Cash and equivalents |
|
$ |
23,654 |
|
|
$ |
18,796 |
|
Current deferred tax assets, net |
|
|
6,212 |
|
|
|
7,375 |
|
Other current assets |
|
|
3,146 |
|
|
|
432 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
33,012 |
|
|
|
26,603 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current deferred tax assets, net |
|
|
88,478 |
|
|
|
91,865 |
|
Investment in subsidiaries |
|
|
418,399 |
|
|
|
435,208 |
|
|
|
|
|
|
|
|
Total non-current assets |
|
|
506,877 |
|
|
|
527,073 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
539,889 |
|
|
|
553,676 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
539,837 |
|
|
|
553,676 |
|
|
|
|
|
|
|
|
Total liabilities, minority interest and
stockholders equity |
|
$ |
539,889 |
|
|
$ |
553,676 |
|
|
|
|
|
|
|
|
-10-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(9) Recently Issued Accounting Pronouncements
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. The Company is
currently evaluating the impact, if any, that the adoption of SFAS 157 will have on its financial
statements.
In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and
Financial Liabilities Including an amendment of FASB Statement No. 115, which permits the option
to measure certain financial instruments and other items at fair value. SFAS 159 is effective for
the Company beginning January 1, 2008. The Company is currently analyzing the option of adopting
SFAS 159 and the impact, if any, that it would have on its financial statements.
(10) Subsequent Event
In July 2007, Holdings completed a private debt offering of $375 million aggregate principal amount
of senior unsecured notes, consisting of $197 million of 6.33% notes due July 15, 2014, $85 million
of 6.52% notes due July 15, 2017 and $93 million of 6.67% notes due July 15, 2019. The aggregate
average interest rate on the notes is 6.49% over the life of the notes. Under the note purchase
agreement governing the terms of these notes, Holdings 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 Holdings subsidiaries to incur debt
and restrict the ability of Holdings or its subsidiaries to create liens and to merge or
consolidate, or sell or convey all or substantially all of Holdings assets.
-11-
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
We provide investment advisory services to institutions and individuals, managing $43.8 billion in
client assets at June 30, 2007. Our operating results fluctuate primarily due to changes in the
total value and composition of our assets under management. The value and composition of our assets
under management are, and will continue to be, influenced by a variety of factors, including
purchases and redemptions of shares of mutual funds and separate accounts that we manage,
fluctuations in the financial markets around the world that result in appreciation or depreciation
of assets under management and our introduction of new investment strategies and products.
The value and composition of our assets under management and our ability to continue to attract
clients depend on a variety of factors, including the education of our clients about our investment
philosophy, the delivery of best-in-class service, the relative investment performance of our
investment products as compared to competing offerings and market indices, the 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.
We market our investment strategies to our clients through a variety of products designed to suit
their investment needs. We currently offer five types of mutual fund and separate account
investment products. The following table details our assets under management at June 30, 2007 and
2006.
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
(in millions) |
|
2007 |
|
|
2006 |
|
Mutual Funds |
|
|
|
|
|
|
|
|
Open-end funds |
|
$ |
25,996 |
|
|
$ |
28,087 |
|
Closed-end funds |
|
|
7,290 |
|
|
|
6,130 |
|
|
|
|
|
|
|
|
Total mutual funds |
|
|
33,286 |
|
|
|
34,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate Accounts |
|
|
|
|
|
|
|
|
Institutional accounts |
|
|
4,710 |
|
|
|
5,460 |
|
Managed accounts |
|
|
5,677 |
|
|
|
6,038 |
|
Alternative investments |
|
|
138 |
|
|
|
97 |
|
|
|
|
|
|
|
|
Total separate accounts |
|
|
10,525 |
|
|
|
11,595 |
|
|
|
|
|
|
|
|
Total assets under management |
|
$ |
43,811 |
|
|
$ |
45,812 |
|
|
|
|
|
|
|
|
Our revenues are substantially comprised of investment management fees earned under contracts with
the mutual funds and separate accounts that we manage. Our revenues are also comprised of
distribution and underwriting fees, including asset-based distributions and/or service fees
received pursuant to Rule 12b-1 plans. Investment management fees and distribution and underwriting
fees may fluctuate based on a number of factors, including the total value and composition of our
assets under management, market appreciation or depreciation and the level of net purchases and
redemptions, which represent the sum of new client investments, additional funding from existing
clients, withdrawals of assets from and termination of client accounts and purchases and
redemptions of mutual fund shares. The mix of assets under management among our investment products
also has an impact on our revenues, as some products carry different fees than others.
Our largest operating expenses are typically related to the distribution of mutual funds, including
Rule 12b-1 payments and the amortization of deferred sales commissions for open-end mutual funds,
as well as to employee compensation and benefits expense, which includes salaries, incentive
compensation and related benefits costs. Operating expenses may fluctuate due to a number of
factors, including changes in distribution expense as a result of fluctuations in mutual fund sales
and market appreciation or depreciation, variations in staffing and compensation, marketing-related
expenses that include supplemental distribution payments, and depreciation and amortization
relating to capital expenditures incurred to maintain and enhance our administrative and operating
services infrastructure.
-12-
Operating Results
Second Quarter and Six Months Ended June 30, 2007 Compared to Second Quarter and Six Months Ended
June 30, 2006
Assets Under Management
Assets under management decreased by $2.0 billion, or 4%, to $43.8 billion at June 30, 2007 from
$45.8 billion at June 30, 2006. At June 30, 2007, our assets under management consisted of 76%
mutual funds and 24% separate accounts, as compared to 75% mutual funds and 25% separate accounts
at June 30, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
|
|
|
|
Change |
|
($ in millions) |
|
2007 |
|
|
2006 |
|
|
Amount |
|
|
Percent |
|
|
2007 |
|
|
2006 |
|
|
Amount |
|
|
Percent |
|
Mutual Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management |
|
$ |
32,086 |
|
|
$ |
35,392 |
|
|
$ |
(3,306 |
) |
|
|
9 |
% |
|
$ |
33,704 |
|
|
$ |
32,244 |
|
|
$ |
1,460 |
|
|
|
5 |
% |
Net purchases (redemptions) |
|
|
(766 |
) |
|
|
654 |
|
|
|
(1,420 |
) |
|
|
* |
|
|
|
(2,718 |
) |
|
|
2,047 |
|
|
|
(4,765 |
) |
|
|
* |
|
Market appreciation (depreciation) |
|
|
1,966 |
|
|
|
(1,829 |
) |
|
|
3,795 |
|
|
|
* |
|
|
|
2,300 |
|
|
|
(74 |
) |
|
|
2,374 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management |
|
|
33,286 |
|
|
|
34,217 |
|
|
|
(931 |
) |
|
|
3 |
|
|
|
33,286 |
|
|
|
34,217 |
|
|
|
(931 |
) |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management |
|
|
32,979 |
|
|
|
34,948 |
|
|
|
(1,969 |
) |
|
|
6 |
|
|
|
32,995 |
|
|
|
34,603 |
|
|
|
(1,608 |
) |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate Accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management |
|
|
10,464 |
|
|
|
12,209 |
|
|
|
(1,745 |
) |
|
|
14 |
|
|
|
11,021 |
|
|
|
11,561 |
|
|
|
(540 |
) |
|
|
5 |
|
Net purchases (redemptions) |
|
|
(540 |
) |
|
|
(124 |
) |
|
|
(416 |
) |
|
|
* |
|
|
|
(1,219 |
) |
|
|
(71 |
) |
|
|
(1,148 |
) |
|
|
* |
|
Market appreciation (depreciation) |
|
|
601 |
|
|
|
(490 |
) |
|
|
1,091 |
|
|
|
* |
|
|
|
723 |
|
|
|
105 |
|
|
|
618 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management |
|
|
10,525 |
|
|
|
11,595 |
|
|
|
(1,070 |
) |
|
|
9 |
|
|
|
10,525 |
|
|
|
11,595 |
|
|
|
(1,070 |
) |
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management |
|
|
10,565 |
|
|
|
11,985 |
|
|
|
(1,420 |
) |
|
|
12 |
|
|
|
10,696 |
|
|
|
11,968 |
|
|
|
(1,272 |
) |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets Under Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management |
|
|
42,550 |
|
|
|
47,601 |
|
|
|
(5,051 |
) |
|
|
11 |
|
|
|
44,725 |
|
|
|
43,805 |
|
|
|
920 |
|
|
|
2 |
|
Net purchases (redemptions) |
|
|
(1,306 |
) |
|
|
530 |
|
|
|
(1,836 |
) |
|
|
* |
|
|
|
(3,937 |
) |
|
|
1,976 |
|
|
|
(5,913 |
) |
|
|
* |
|
Market appreciation (depreciation) |
|
|
2,567 |
|
|
|
(2,319 |
) |
|
|
4,886 |
|
|
|
* |
|
|
|
3,023 |
|
|
|
31 |
|
|
|
2,992 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management |
|
|
43,811 |
|
|
|
45,812 |
|
|
|
(2,001 |
) |
|
|
4 |
|
|
|
43,811 |
|
|
|
45,812 |
|
|
|
(2,001 |
) |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management |
|
$ |
43,544 |
|
|
$ |
46,933 |
|
|
$ |
(3,389 |
) |
|
|
7 |
% |
|
$ |
43,692 |
|
|
$ |
46,571 |
|
|
$ |
(2,879 |
) |
|
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual funds had net redemptions of $766 million during the second quarter of 2007, a decrease of
$1.4 billion from $654 million of net purchases in the prior-year quarter. Mutual funds had net
redemptions of $2.7 billion during the six months ended June 30, 2007, a decrease of $4.8 billion
from $2.1 billion of net purchases in the same period of the prior year. These decreases were
primarily due to lower purchases and higher redemptions of our Growth Fund and our Growth and
Income Fund, each of which comprise a significant percentage of our total assets under management.
We believe that the decreases in net flows are attributable to the short-term underperformance of
our Growth Fund and our Growth and Income Fund during 2006. However, during the second quarter of
2007, we continued to experience net purchases in a number of our mutual funds, primarily our
Market Neutral Income Fund, Global Growth and Income Fund and International Growth Fund, as well as
our Calamos Global Dynamic Fund (CHW), which had an initial public offering of $840 million during
the second quarter. Also during the second quarter, we seeded aggregate investments of $80 million
in our Calamos Total Return Bond Fund and Calamos Government Money Market Fund.
Separate accounts had net redemptions of $540 million and $1.2 billion during the second quarter
and year-to-date periods ended June 30, 2007, respectively, primarily due to separate account
outflows in our equity and convertible strategies. The decreases in net flows were principally due
to outflows in our growth strategy, driven by short-term underperformance. Our convertible
strategies remain closed to new investors.
Results of Operations
Overview
Results of operations for the three and six months ended June 30, 2007 were significantly impacted
by two one-time marketing and sales promotion expenses that management believes will benefit our
longer-term financial performance. First, we incurred a one-time expense of $19.5 million, or 12
cents per diluted share, by terminating our remaining two additional compensation agreements that
required us to make recurring payments of approximately $2.6 million annually based on the assets
of Calamos Convertible Opportunities and Income Fund and Calamos Strategic Total Return Fund.
Terminating these agreements is
-13-
expected to have a positive annualized after-tax impact of approximately 1.5 cents per diluted
share. Second, we incurred a $6.9 million, or 4 cents per diluted share, one-time structuring fee
related to CHW.
Management considers results adjusted for these one-time expenses, as presented below, to provide a
better indication of the companys operations. These adjusted items are considered non-GAAP
financial measures as defined by Regulation S-K of the Securities and Exchange Commission. In
evaluating operating performance, management considers operating expense, operating income and net
income, each calculated in accordance with accounting principles generally accepted in the United
States (GAAP), and each item on an as-adjusted basis, which constitute non-GAAP financial measures.
Items presented on an as-adjusted basis exclude the impact of terminating the two closed-end fund
additional compensation agreements and the CHW closed-end fund structuring fees. As these one-time
items are not expected to impact future periods, management believes that excluding these items
better enables it to evaluate the companys operating performance relative to the prior periods.
Management considers these non-GAAP financial measures when evaluating the performance of the
company and believes the presentation of these amounts provides the reader with information
necessary to analyze the companys operations for the periods compared. Reconciliation of these
measurements to the most directly comparable GAAP financial measures for the three and six months
ended June 30, 2007 and 2006 are provided in the table below and should be carefully evaluated by
the reader:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
June 30, |
|
June 30, |
($ in thousands) |
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
|
|
Operating expenses |
|
$ |
93,835 |
|
|
$ |
64,406 |
|
|
$ |
159,380 |
|
|
$ |
126,399 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination of closed-end fund compensation agreements |
|
|
19,500 |
|
|
|
|
|
|
|
19,500 |
|
|
|
|
|
Closed-end fund structuring fees |
|
|
6,904 |
|
|
|
|
|
|
|
6,904 |
|
|
|
|
|
|
|
|
Operating expenses, as adjusted |
|
$ |
67,431 |
|
|
$ |
64,406 |
|
|
$ |
132,976 |
|
|
$ |
126,399 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
20,932 |
|
|
$ |
59,947 |
|
|
$ |
71,087 |
|
|
$ |
118,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination of closed-end fund compensation agreements |
|
|
19,500 |
|
|
|
|
|
|
|
19,500 |
|
|
|
|
|
Closed-end fund structuring fees |
|
|
6,904 |
|
|
|
|
|
|
|
6,904 |
|
|
|
|
|
|
|
|
Operating income, as adjusted |
|
$ |
47,336 |
|
|
$ |
59,947 |
|
|
$ |
97,491 |
|
|
$ |
118,572 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
3,805 |
|
|
$ |
8,101 |
|
|
$ |
11,339 |
|
|
$ |
17,106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination of closed-end fund compensation agreements |
|
|
2,634 |
|
|
|
|
|
|
|
2,634 |
|
|
|
|
|
Closed-end fund structuring fees |
|
|
933 |
|
|
|
|
|
|
|
933 |
|
|
|
|
|
|
|
|
Net income, as adjusted |
|
$ |
7,372 |
|
|
$ |
8,101 |
|
|
$ |
14,906 |
|
|
$ |
17,106 |
|
|
|
|
Operating Income
Operating income was $20.9 million and $71.1 million for the three and six months ended June 30,
2007, respectively, compared to $59.9 million and $118.6 million for the prior-year periods.
Operating income, as adjusted for the one-time marketing and sales promotion expense was $47.3
million and $97.5 million for the second quarter and first half of 2007, respectively, compared
to $59.9 million and $118.6 million for the year-earlier periods.
Revenues
Total revenues decreased by $9.6 million, or 8%, to $114.8 million for the three months ended June
30, 2007 from $124.4 million for the prior year. For the six months ended June 30, 2007, total
revenues decreased by $14.5 million, or 6%, to $230.5 million from $245.0 million for the prior
year. These decreases were primarily due to lower investment management fees and distribution and
underwriting fees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
|
|
|
|
Change |
|
($ in thousands) |
|
2007 |
|
|
2006 |
|
|
Amount |
|
|
Percent |
|
|
2007 |
|
|
2006 |
|
|
Amount |
|
|
Percent |
|
Investment management fees |
|
$ |
78,313 |
|
|
$ |
84,328 |
|
|
$ |
(6,015 |
) |
|
|
7 |
% |
|
$ |
156,788 |
|
|
$ |
165,807 |
|
|
$ |
(9,019 |
) |
|
|
5 |
% |
Distribution and
underwriting fees |
|
|
35,560 |
|
|
|
38,997 |
|
|
|
(3,437 |
) |
|
|
9 |
|
|
|
71,741 |
|
|
|
77,137 |
|
|
|
(5,396 |
) |
|
|
7 |
|
Other |
|
|
894 |
|
|
|
1,028 |
|
|
|
(134 |
) |
|
|
13 |
|
|
|
1,938 |
|
|
|
2,027 |
|
|
|
(89 |
) |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
114,767 |
|
|
$ |
124,353 |
|
|
$ |
(9,586 |
) |
|
|
8 |
% |
|
$ |
230,467 |
|
|
$ |
244,971 |
|
|
$ |
(14,504 |
) |
|
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-14-
Investment management fees decreased for the three and six months ended June 30, 2007
primarily due to decreases in average assets under management of $3.4 billion and $2.9 billion for
the second quarter and first half of 2007, respectively. The decline in investment management fees
was due primarily to a decrease in open-end fund investment management fees, which were $49.9
million and $100.1 million for the three and six months ended June 30, 2007, respectively, compared
to $54.8 million and $107.6 million for the prior-year periods, as a result of a $2.4 billion and
$1.9 billion decrease in open-end fund average assets under management for the same periods of the
prior year. Conversely, closed-end fund investment management fees increased to $13.9 million and
$27.3 million for the three and six months ended June 30, 2007, respectively, from $13.0 million
and $25.8 million for the prior-year periods as a result of an increase in closed-end fund average
assets under management of $402 million and $337 million for the second quarter and first half of
2007 when compared to prior-year periods. Beginning in July 2007 and over the next five years, we
expect our closed-end fund investment management fee revenue to increase as the fee waivers on our
Convertible Opportunities and Income Fund and our Convertible and High Income Fund expire.
Investment management fees from separate accounts decreased to $14.5 million and $29.4 million for
the three and six months ended June 30, 2007, respectively, from $16.6 million and $32.4 million
for the prior-year periods as a result of a decrease in separate accounts average assets under
management of $1.4 billion and $1.3 billion when compared to the year-earlier periods. Investment
management fees as a percentage of average assets under management were 0.72% for the three and six
months ended June 30, 2007 and 2006.
Distribution and underwriting fees decreased by $3.4 million and $5.4 million for the three and six
months ended June 30, 2007, respectively, compared to the second quarter and first half of 2006,
due to a $2.4 billion and $1.9 billion decrease in open-end fund average assets under management
when compared to the year-earlier periods, and to a decrease in underwriter commissions that
resulted from lower Class A share sales.
Operating Expenses
Operating expenses increased to $93.8 million and $159.4 million for the three and six months ended
June 30, 2007, respectively, from $64.4 million and $126.4 million for the same periods in the
prior year. These increases were primarily due to two significant one-time marketing and sales
promotion charges, as well as higher employee compensation and benefits and general and
administrative expenses.
Operating expenses, as adjusted for one-time marketing and sales promotion expenses increased to
$67.4 million and $133.0 million for the second quarter and first half of 2007, respectively, from
$64.4 million and $126.4 million for the prior-year periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
|
|
|
|
Change |
|
($ in thousands) |
|
2007 |
|
|
2006 |
|
|
Amount |
|
|
Percent |
|
|
2007 |
|
|
2006 |
|
|
Amount |
|
|
Percent |
|
Employee compensation and benefits |
|
$ |
22,512 |
|
|
$ |
18,287 |
|
|
$ |
4,225 |
|
|
|
23 |
% |
|
$ |
43,278 |
|
|
$ |
37,293 |
|
|
$ |
5,985 |
|
|
|
16 |
% |
Distribution and underwriting
expense |
|
|
25,196 |
|
|
|
25,864 |
|
|
|
(668 |
) |
|
|
3 |
|
|
|
50,223 |
|
|
|
50,829 |
|
|
|
(606 |
) |
|
|
1 |
|
Amortization of deferred sales
commissions |
|
|
7,278 |
|
|
|
8,123 |
|
|
|
(845 |
) |
|
|
10 |
|
|
|
15,156 |
|
|
|
15,863 |
|
|
|
(707 |
) |
|
|
4 |
|
Marketing and sales promotion |
|
|
29,731 |
|
|
|
4,487 |
|
|
|
25,244 |
|
|
|
563 |
|
|
|
33,213 |
|
|
|
7,710 |
|
|
|
25,503 |
|
|
|
331 |
|
General and administrative |
|
|
9,118 |
|
|
|
7,645 |
|
|
|
1,473 |
|
|
|
19 |
|
|
|
17,510 |
|
|
|
14,704 |
|
|
|
2,806 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
$ |
93,835 |
|
|
$ |
64,406 |
|
|
$ |
29,429 |
|
|
|
46 |
% |
|
$ |
159,380 |
|
|
$ |
126,399 |
|
|
$ |
32,981 |
|
|
|
26 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits expense increased by $4.2 million and $6.0 million for the
three and six months ended June 30, 2007, respectively, when compared to the prior-year periods.
This increase largely reflects the impact of staff additions to support the following initiatives:
expand our wealth management and institutional sales; diversify our product offering by adding
complementary fixed income and cash management strategies; and strengthen our information
technology infrastructure.
Distribution and underwriting expense decreased $0.7 million and $0.6 million for the three and six
months ended June 30, 2007 when compared to the prior-year periods. These expenses decreased by
$1.5 million for the second quarter of 2007 when compared to the prior-year period due to decreases
in average open-end fund assets under management, partially offset by increases of $0.9 million due
to the growth in the Class C share assets older than one year. These expenses decreased by $2.0
million for the first half of 2007 when compared to the prior-year period due to decreases in
average open-end fund assets under management, partially offset by increases of $1.6 million due to
the growth in the Class C share assets older than one year. Although the Rule 12b-1 fee rates we
paid to broker-dealers and other intermediaries in the three and six months ended June 30, 2007 did
not change from the rates paid in the prior year, we expect distribution expense to vary with the
change in open-end mutual funds assets under management and with the age of the Class C share
assets.
-15-
Marketing and sales promotion expense increased by $25.2 million and $25.5 million for the three
and six months ended June 30, 2007, respectively, primarily due to two one-time expenses totaling
$26.4 million that we believe will have a positive impact on our future performance. Conversely,
supplemental distribution payments to third party selling agents decreased by $1.2 million and
$0.9 million when compared to the same periods of the prior year primarily due to lower assets
under management and lower sales. During the second quarter of 2007, we incurred a one-time expense
of $19.5 million by terminating our remaining two agreements that required annual payments based on
the assets of two closed-end funds. Also during the second quarter of 2007, we incurred a one-time
$6.9 million structuring fee in connection with the CHW initial public offering.
General and administrative expense increased by $1.5 million and $2.8 million for the three and six
months ended June 30, 2007, respectively, of which $0.4 million and $0.9 million, respectively, was
attributable to occupancy, depreciation and business services related to supporting additional
staff. Further, increases of $0.4 million and $0.8 million for the same periods, respectively, were
attributable to professional services, including our decision to outsource certain facility-related
functions, which were historically reflected in employee compensation and benefits expense. Also,
travel and entertainment expenses increased $0.4 million and $0.5 million for the same periods,
respectively, principally related to increased sales efforts of CHW.
Other Income (Expense), Net
Other income (expense), net was a net income of $5.9 million for the three months ended June 30,
2007 as compared to a net expense of $1.9 million for the three months ended June 30, 2006. Other
income (expense), net was a net income of $9.0 million for the six months ended June 30, 2007 as
compared to a net income of $4.1 million for the six months ended June 30, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
($ in thousands) |
|
2007 |
|
|
2006 |
|
|
Change |
|
|
2007 |
|
|
2006 |
|
|
Change |
|
Net interest income (expense) |
|
$ |
1,495 |
|
|
$ |
820 |
|
|
$ |
675 |
|
|
$ |
3,489 |
|
|
$ |
1,182 |
|
|
$ |
2,307 |
|
Investment and other income |
|
|
7,378 |
|
|
|
(7,927 |
) |
|
|
15,305 |
|
|
|
7,770 |
|
|
|
4,004 |
|
|
|
3,766 |
|
Minority interest in partnership
investments |
|
|
(3,020 |
) |
|
|
5,171 |
|
|
|
(8,191 |
) |
|
|
(2,269 |
) |
|
|
(1,091 |
) |
|
|
(1,178 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense), net |
|
$ |
5,853 |
|
|
$ |
(1,936 |
) |
|
$ |
7,789 |
|
|
$ |
8,990 |
|
|
$ |
4,095 |
|
|
$ |
4,895 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The changes in net interest income (expense) of $0.7 million and $2.3 million for the three
and six months ended June 30, 2007, respectively, were solely due to increases in interest income
on cash and cash equivalents as interest expense remained constant at $2.0 million and $4.1 million
for the three and six months ended June 30, 2007 and 2006.
Investment and other income increased by $15.3 million and $3.8 million for the second quarter and
first half of 2007, respectively, primarily due to favorable changes of $15.7 million and $3.7
million in the market value of the consolidated partnership securities and the Calamos Financial
Services securities that we own. The $8.2 million and $1.2 million changes in minority interest in
partnership investments represent the corresponding minority interests portion of the changes in
market value from our consolidated partnerships.
Further, 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 upon the receipt of capital
gains distributions, which typically occur during the fourth quarter of the calendar year. For the
three and six months ended June 30, 2007, net unrealized gains generated by our investment
securities were $12.7 million and $16.1 million, respectively, of which $1.8 million and $2.2
million, net of minority interest and taxes, respectively, were recognized as increases to
accumulated other comprehensive income. For the second quarter of 2006, net unrealized losses
generated by our investment securities were $6.1 million, of which $0.8 million, net of minority
interest and taxes, was recognized as a decrease to accumulated other comprehensive income. For the
first half of 2006, net unrealized gains generated by our investment securities were $2.1 million,
of which $0.3 million, net of minority interest and taxes, was recognized as an increase to
accumulated other comprehensive income.
-16-
Income Taxes
Income taxes as a percentage of income before income taxes was 40.7% and 40.3% for the three and
six months ended June 30, 2007, compared to 40.1% for the three and six months ended June 30,
2006. The increased effective tax rates for the 2007 periods were primarily a result of lower
pretax income which caused the permanent non-deductible expenses for income tax purposes per the
Internal Revenue Code to be a greater percentage of pretax income.
Net Income
Net income was $3.8 million and $11.3 million for the three and six months ended June 30, 2007,
respectively, compared to $8.1 million and $17.1 million for the prior-year periods.
Net income, as adjusted for the one-time marketing and sales promotion expenses, was $7.4 million
and $14.9 million for the second quarter and first half of 2007, respectively, compared to $8.1
million and $17.1 million for the year-earlier periods.
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 securities. We anticipate utilizing our cash and cash equivalent
balances to develop and invest 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 securities 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. We believe these resources will be sufficient
over the foreseeable future to meet our requirements with respect to the foregoing activities and
to support future growth.
The following tables summarize key statements of financial condition data relating to our liquidity
and capital resources.
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
(in thousands) |
|
2007 |
|
2006 |
Statements of financial condition data: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
147,604 |
|
|
$ |
328,841 |
|
Receivables |
|
|
34,044 |
|
|
|
36,787 |
|
Investment securities |
|
|
312,654 |
|
|
|
143,112 |
|
Partnership securities |
|
|
138,218 |
|
|
|
86,409 |
|
Deferred tax assets, net |
|
|
94,689 |
|
|
|
99,240 |
|
Deferred sales commissions |
|
|
40,207 |
|
|
|
49,891 |
|
Long-term debt |
|
|
150,000 |
|
|
|
150,000 |
|
Cash flows for the six months ended June 30, 2007 and 2006 are shown below:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
(in thousands) |
|
2007 |
|
2006 |
Cash flow data: |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
103,485 |
|
|
$ |
106,605 |
|
Net cash used in investing activities |
|
|
(205,474 |
) |
|
|
(7,378 |
) |
Net cash used in financing activities |
|
|
(79,248 |
) |
|
|
(55,035 |
) |
Net cash provided by operating activities was $103.5 million for the six months ended June 30, 2007
and was primarily comprised of income before minority interest and income taxes of $80.1 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 was $5.5 million for the six months ended June 30, 2007. 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 $205.5 million for the six months ended June 30, 2007 and
was primarily comprised of investments of $200.5 million in products managed by us. During the
first half of 2007, we made investments into Calamos Market Neutral Opportunities Fund LP of $50
million, the Calamos Global Equity Fund of $30 million and the Calamos Total
-17-
Return Bond Fund of $30 million. Additionally, we invested $90 million largely in fixed income
securities with maturities of less than 365 days. We anticipate increasing the future level of
investments in our products as opportunities arise.
Net cash used by financing activities was $79.2 million for the six months ended June 30, 2007 and
was primarily comprised of distributions to minority shareholders of $55.1 million, including
distributions for their tax liabilities of $38.2 million, as well as dividends paid to common
shareholders of $5.1 million. Additionally, the Company repurchased 787,800 shares at an aggregated
cost of $18.8 million during the second quarter of 2007.
In July 2007, Holdings completed a private debt offering of $375 million aggregate principal amount
of senior unsecured notes, consisting of $197 million of 6.33% notes due July 15, 2014, $85 million
of 6.52% notes due July 15, 2017 and $93 million of 6.67% notes due July 15, 2019. The aggregate
average interest rate on the notes is 6.49% over the life of the notes. Under the note purchase
agreement governing the terms of these notes, Holdings 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 Holdings subsidiaries to incur debt
and restrict the ability of Holdings or its subsidiaries to create liens and to merge or
consolidate, or sell or convey all or substantially all of Holdings assets.
We expect our cash and liquidity requirements will be met with the cash on hand and through cash
generated by operations. Further, we have access to capital via debt and equity capital markets
that may assist in satisfying our capital requirements.
Recently Issued Accounting Pronouncements
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.
In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and
Financial Liabilities Including an amendment of FASB Statement No. 115, which permits the option
to measure certain financial instruments and other items at fair value. SFAS 159 is effective for
the Company beginning January 1, 2008. We are currently analyzing the option of adopting SFAS 159
and the impact, if any, that it would have on our financial statements.
Critical Accounting Policies
Our significant accounting policies are described in note 3 of the Notes to the Consolidated
Financial Statements included in our Annual Report on Form 10-K for the year ended December 31,
2006. A discussion of critical accounting policies is included in Managements Discussion and
Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the
year ended December 31, 2006. There were no significant changes in our critical accounting policies
during the six months ended June 30, 2007.
Forward-Looking Information
From time to time, information or statements provided by us or on our behalf, including those
within this Quarterly Report on Form 10-Q, 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. 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
-18-
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 and timing of payments related to distribution; failure to recruit and retain
qualified personnel; a loss of assets, and thus revenues; fluctuation in the level of our expenses;
poor performance of our largest funds; 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 our Annual Report on Form 10-K for the year ended December 31, 2006 discusses
some of these and other important factors in detail under the caption Risk Factors.
Forward-looking statements speak only as of the date the statements are made. Readers should not
place undue reliance on any forward-looking statements. We assume no obligation to update
forward-looking statements to reflect actual results, changes in assumptions or changes in other
factors affecting forward-looking information, except to the extent required by applicable
securities laws.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
An analysis of our market risk was included in our Annual Report on Form 10-K for the year ended
December 31, 2006. There were no material changes to the Companys market risk during the six
months ended June 30, 2007.
Item 4. Controls and Procedures
Our management, including our principal executive and principal financial officers, has evaluated
the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934) as of June 30, 2007, and has concluded that such disclosure
controls and procedures are effective to ensure that information required to be disclosed by us in
the reports that we file or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the SECs rules and forms.
There were no changes in the Companys internal control over financial reporting that occurred
during our second quarter of 2007 that have materially affected, or are reasonably likely to
materially affect, the Companys internal control over financial reporting.
-19-
PART II OTHER INFORMATION
Item 1. Legal Proceedings
In the normal course of business, we may be subject to various legal proceedings from time to time.
Currently, there are no material legal proceedings pending against us.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On October 19, 2006, the Board of Directors authorized the company to purchase up to 2.0 million
shares of Class A common stock. During the quarter, the Company repurchased shares under this
program as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 |
|
April 1 April 30, 2007 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
2,000,000 |
|
May 1 May 31, 2007 |
|
|
787,800 |
|
|
|
23.91 |
|
|
|
787,800 |
|
|
|
1,212,200 |
|
June 1 June 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,212,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
787,800 |
|
|
$ |
23.91 |
|
|
|
787,800 |
|
|
|
1,212,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of stockholders on May 25, 2007, John P. Calamos, Sr., Nick P. Calamos, G.
Bradford Bulkley, Mitchell S. Feiger, Richard W. Gilbert and Arthur L. Knight were elected as
directors of the Company with terms expiring at the annual meeting of stockholders in 2008. The
results of the votes were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Shares |
|
Class B Shares |
|
Class A Shares |
|
Class B Shares |
Election of: |
|
For |
|
For |
|
Withheld |
|
Withheld |
|
John P. Calamos, Sr. |
|
|
n/a |
|
|
|
768,000,000 |
|
|
|
n/a |
|
|
|
0 |
|
Nick P. Calamos |
|
|
n/a |
|
|
|
768,000,000 |
|
|
|
n/a |
|
|
|
0 |
|
G. Bradford Bulkley |
|
|
20,120,020 |
|
|
|
768,000,000 |
|
|
|
498,936 |
|
|
|
0 |
|
Mitchell S. Feiger |
|
|
20,119,096 |
|
|
|
768,000,000 |
|
|
|
499,860 |
|
|
|
0 |
|
Richard W. Gilbert |
|
|
20,120,116 |
|
|
|
768,000,000 |
|
|
|
498,840 |
|
|
|
0 |
|
Arthur L. Knight |
|
|
20,119,616 |
|
|
|
768,000,000 |
|
|
|
499,340 |
|
|
|
0 |
|
Stockholders at the meeting also ratified KPMG LLP as the Companys independent registered public
accounting firm for the Companys fiscal year ending December 31, 2007 by a combined Class A and
Class B stockholder vote of 788,553,562 shares for, 21,756 shares against and 43,638
abstaining.
-20-
Item 6. Exhibits
|
|
|
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)
|
|
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). |
|
|
|
3(iv)
|
|
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 March 8, 2007). |
|
|
|
4.1
|
|
Stockholders Agreement among John P. Calamos, Sr., Nick P. Calamos and John P. Calamos,
Jr., certain trusts controlled by them, Calamos Family Partners, Inc. and the Registrant
(incorporated by reference to Exhibit 4.1 to the Registrants Quarterly Report on Form 10-Q
filed with the Securities and Exchange Commission on December 3, 2004). |
|
|
|
4.2
|
|
Registration Rights Agreement between Calamos Family Partners, Inc., John P. Calamos, Sr.
and the Registrant (incorporated by reference to Exhibit 4.2 to the Registrants Quarterly
Report on Form 10-Q filed with the Securities and Exchange Commission on December 3, 2004). |
|
|
|
10.1
|
|
Management Services and Resources Agreement by and among the Registrant, Calamos Family
Partners, Inc. and Calamos Property Holdings LLC. |
|
|
|
10.2
|
|
Amendment Number 1 to Employment Agreement between the Registrant and Nick P. Calamos. |
|
|
|
10.3
|
|
Amendment Number 1 to Employment Agreement between the Registrant and Patrick H. Dudasik. |
|
|
|
10.4
|
|
Amendment Number 1 to Employment Agreement between the Registrant and James S. Hamman, Jr. |
|
|
|
31.1
|
|
Certification pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act. |
|
|
|
31.2
|
|
Certification pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange Act. |
|
|
|
32.1
|
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
32.2
|
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
-21-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
CALAMOS ASSET MANAGEMENT, INC.
(Registrant)
|
|
Date: August 8, 2007 |
By: |
/s/ Patrick H. Dudasik
|
|
|
|
Patrick H. Dudasik |
|
|
|
Executive Vice President, Chief Operating
Officer,
Chief Financial Officer and Treasurer |
|
|
-22-