e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: |
March 31, 2008
- 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, a non-accelerated filer, or a smaller reporting company. See the
definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer o | |
Accelerated filer þ | |
Non-accelerated filer o | |
Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). o Yes þ No
At April 25, 2008, the company had 20,112,273 shares of Class A common stock and 100 shares of
Class B common stock outstanding.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except share data)
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March 31, |
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December 31, |
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2008 |
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2007 |
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(unaudited) |
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ASSETS: |
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Current assets |
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Cash and cash equivalents |
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$ |
69,056 |
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$ |
108,441 |
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Receivables: |
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Affiliates and affiliated funds |
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23,925 |
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27,641 |
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Customers |
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10,273 |
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11,699 |
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Investment securities |
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496,509 |
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535,476 |
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Partnership investments and offshore funds |
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332,934 |
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353,004 |
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Prepaid expenses |
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3,991 |
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3,139 |
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Deferred tax assets, net |
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10,523 |
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6,926 |
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Other assets |
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2,969 |
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2,206 |
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Total current assets |
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950,180 |
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1,048,532 |
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Non-current assets |
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Deferred tax assets, net |
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82,977 |
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83,358 |
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Deferred sales commissions |
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30,778 |
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34,076 |
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Property and equipment, net of accumulated depreciation ($24,308 at 3/31/08 and $21,841 at 12/31/07) |
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48,486 |
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48,420 |
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Other non-current assets |
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3,155 |
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3,286 |
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Total non-current assets |
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165,396 |
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169,140 |
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Total assets |
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1,115,576 |
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1,217,672 |
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LIABILITIES AND STOCKHOLDERS EQUITY: |
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Current liabilities |
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Accounts payable: |
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Brokers |
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17,284 |
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19,950 |
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Affiliates and affiliated funds |
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428 |
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372 |
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Accrued compensation and benefits |
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5,867 |
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26,462 |
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Interest payable |
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8,363 |
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12,636 |
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Accrued expenses and other current liabilities |
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6,766 |
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9,257 |
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Total current liabilities |
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38,708 |
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68,677 |
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Long-term liabilities |
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Long-term debt |
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525,000 |
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525,000 |
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Other long-term liabilities |
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9,888 |
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8,876 |
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Total long-term liabilities |
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534,888 |
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533,876 |
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Total liabilities |
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573,596 |
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602,553 |
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Minority interest in partnership investments and offshore funds |
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64,650 |
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49,177 |
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Minority interest in Calamos Holdings LLC |
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276,874 |
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352,205 |
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Stockholders equity: |
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Class A Common Stock, $0.01 par value; authorized 600,000,000 shares; 23,453,073 shares issued and
20,112,273 shares outstanding at March 31, 2008; 23,324,082 shares issued and 20,871,982 shares
outstanding at December 31, 2007 |
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235 |
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233 |
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Class B Common Stock, $0.01 par value; authorized 1,000 shares; issued and outstanding 100 shares |
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0 |
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0 |
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Additional paid-in capital |
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214,191 |
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198,924 |
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Retained earnings |
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68,347 |
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70,102 |
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Accumulated other comprehensive income |
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235 |
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5,081 |
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Treasury stock at cost; 3,340,800 shares at March 31, 2008 and 2,452,100 shares at December 31, 2007 |
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(82,552 |
) |
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(60,603 |
) |
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Total stockholders equity |
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200,456 |
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213,737 |
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Total liabilities, minority interest and stockholders equity |
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$ |
1,115,576 |
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$ |
1,217,672 |
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See accompanying notes to consolidated financial statements.
-2-
CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 2008 and 2007
(in thousands, except share data)
(unaudited)
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2008 |
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2007 |
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Revenues: |
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Investment management fees |
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$ |
77,274 |
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$ |
78,475 |
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Distribution and underwriting fees |
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32,470 |
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36,181 |
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Other |
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949 |
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1,044 |
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Total revenues |
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110,693 |
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115,700 |
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Expenses: |
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Employee compensation and benefits |
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23,460 |
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20,766 |
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Distribution and underwriting expense |
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24,158 |
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25,027 |
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Amortization of deferred sales commissions |
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6,120 |
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7,878 |
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Marketing and sales promotion |
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3,036 |
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3,482 |
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General and administrative |
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9,490 |
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8,392 |
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Total operating expenses |
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66,264 |
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65,545 |
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Operating income |
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44,429 |
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50,155 |
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Other income (expense): |
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Net interest income (expense) |
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(7,254 |
) |
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1,994 |
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Investment and other income (loss) |
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(46,774 |
) |
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392 |
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Minority interest in partnership investments and offshore funds |
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12,459 |
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751 |
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Total other income (expense), net |
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(41,569 |
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3,137 |
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Income before minority interest in Calamos Holdings LLC and income taxes |
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2,860 |
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53,292 |
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Minority interest in Calamos Holdings LLC |
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2,108 |
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40,708 |
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Income before income taxes |
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752 |
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12,584 |
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Income taxes |
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303 |
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5,050 |
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Net income |
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$ |
449 |
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$ |
7,534 |
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Earnings per share |
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Basic |
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$ |
0.02 |
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$ |
0.32 |
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Diluted |
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$ |
0.02 |
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$ |
0.32 |
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Weighted average shares outstanding |
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Basic |
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20,337,038 |
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23,324,182 |
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Diluted |
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97,621,495 |
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100,764,966 |
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Cash dividends per share |
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$ |
0.11 |
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$ |
0.11 |
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See accompanying notes to consolidated financial statements.
-3-
CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
Three Months Ended March 31, 2008
(in thousands)
(unaudited)
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Accumulated |
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Additional |
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Other |
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Common |
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Paid-in |
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Retained |
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Comprehensive |
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Treasury |
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Stock |
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Capital |
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Earnings |
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Income |
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Stock |
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Total |
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Balance at December 31, 2007 |
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$ |
233 |
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$ |
198,924 |
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$ |
70,102 |
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$ |
5,081 |
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$ |
(60,603 |
) |
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$ |
213,737 |
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Net income |
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|
449 |
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|
449 |
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Changes in unrealized gains
(losses) on available-for-sale
securities, net of minority
interest and income taxes |
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(4,704 |
) |
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(4,704 |
) |
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Total comprehensive income (loss) |
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|
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|
|
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|
|
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(4,255 |
) |
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Issuance of common stock (128,991
Class A common shares) |
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2 |
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(2 |
) |
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Sale of Calamos Holdings LLC
membership units (888,700 units) |
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17,364 |
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17,364 |
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Repurchase of common stock
(888,700 Class A common shares) |
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(21,949 |
) |
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(21,949 |
) |
Cumulative impact of changes in
ownership of Calamos Holdings LLC |
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(2,465 |
) |
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7 |
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(142 |
) |
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(2,600 |
) |
Compensation expense recognized
under stock incentive plans, net
of minority interest |
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|
370 |
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|
370 |
|
Dividends declared |
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(2,211 |
) |
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(2,211 |
) |
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Balance at March 31, 2008 |
|
$ |
235 |
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|
$ |
214,191 |
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$ |
68,347 |
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|
$ |
235 |
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|
$ |
(82,552 |
) |
|
$ |
200,456 |
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See accompanying notes to consolidated financial statements.
-4-
CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2008 and 2007
(in thousands)
(unaudited)
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2008 |
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|
2007 |
|
Cash and cash equivalents at beginning of year |
|
$ |
108,441 |
|
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$ |
328,841 |
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Cash flows from operating activities: |
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Net income |
|
|
449 |
|
|
|
7,534 |
|
Adjustments
to reconcile net income to net cash provided by operating activities: |
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Minority interest in Calamos Holdings LLC |
|
|
2,108 |
|
|
|
40,708 |
|
Minority interest in partnership investments and offshore funds |
|
|
(12,459 |
) |
|
|
(751 |
) |
Amortization of deferred sales commissions |
|
|
6,120 |
|
|
|
7,878 |
|
Other depreciation and amortization |
|
|
2,599 |
|
|
|
1,985 |
|
Unrealized depreciation on CFS securities, partnership investments and offshore funds |
|
|
49,692 |
|
|
|
950 |
|
Deferred taxes |
|
|
(272 |
) |
|
|
1,098 |
|
Stock-based compensation |
|
|
1,779 |
|
|
|
1,622 |
|
Employee taxes paid on vesting under stock incentive plans |
|
|
(1,715 |
) |
|
|
(1,853 |
) |
(Increase) decrease in assets: |
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Accounts receivable: |
|
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|
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|
Affiliates and affiliated mutual funds |
|
|
3,716 |
|
|
|
830 |
|
Customers |
|
|
1,426 |
|
|
|
1,103 |
|
Deferred sales commissions |
|
|
(2,822 |
) |
|
|
(3,024 |
) |
Other assets |
|
|
(1,905 |
) |
|
|
(1,313 |
) |
Increase (decrease) in liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
(2,610 |
) |
|
|
(640 |
) |
Accrued compensation and benefits |
|
|
(20,595 |
) |
|
|
(16,017 |
) |
Other liabilities and accrued expenses |
|
|
(5,270 |
) |
|
|
2,896 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
20,241 |
|
|
|
43,006 |
|
|
|
|
|
|
|
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|
|
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Cash flows used in investing activities: |
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|
|
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|
|
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Net additions to property and equipment |
|
|
(2,533 |
) |
|
|
(1,651 |
) |
Net purchases of investment securities |
|
|
(1,252 |
) |
|
|
(46,411 |
) |
Net changes in partnership investments and offshore funds |
|
|
(688 |
) |
|
|
(46,812 |
) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(4,473 |
) |
|
|
(94,874 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in financing activities: |
|
|
|
|
|
|
|
|
Deferred tax benefit on vesting under stock incentive plans |
|
|
192 |
|
|
|
209 |
|
Repurchase of common stock |
|
|
(21,949 |
) |
|
|
|
|
Cash dividends paid to minority shareholders |
|
|
(31,185 |
) |
|
|
(29,345 |
) |
Cash dividends paid to common shareholders |
|
|
(2,211 |
) |
|
|
(2,566 |
) |
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(55,153 |
) |
|
|
(31,702 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash |
|
|
(39,385 |
) |
|
|
(83,570 |
) |
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
69,056 |
|
|
$ |
245,271 |
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
-5-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(1) Organization and Description of Business
Calamos Asset Management, Inc. (CAM), together with its subsidiaries (the Company), primarily
provides investment advisory services to individuals and institutional investors through open-end
funds, closed-end funds, separate accounts, offshore funds and partnerships. CAM operates and
controls all of the business and affairs of Calamos Holdings LLC (Holdings) and, as a result of
this control, consolidates the financial results of Holdings with its own financial results.
(2) Basis of Presentation
The consolidated financial statements as of March 31, 2008 and for the three months ended March 31,
2008 and 2007 have not been audited by the Companys independent registered public accounting firm.
In the opinion of management, these statements contain all adjustments, including those of a normal
recurring nature, necessary for fair presentation of the financial condition and results of
operations. The results for the interim periods ended March 31 are not necessarily indicative of
the results to be obtained for a full fiscal year. Certain amounts for the prior year have been
reclassified to conform to the current years presentation.
Calamos Family Partners, Inc.s (CFP) and John P. Calamos, Sr.s (collectively, the Calamos
Interests) combined 79.3% and 76.8% interest in Holdings at March 31, 2008 and 2007, respectively,
is represented as minority interest in the Companys financial statements. Income before minority
interest in Calamos Holdings LLC and income taxes, which was $2.9 million for the three months
ended March 31, 2008, included approximately $269,500 of investment income earned on cash, cash
equivalents and investments held solely by CAM during the same period. This portion of CAMs
investment income is not reduced by any minority interests.
Calamos Partners LLC, a subsidiary of Holdings, is the general partner of Calamos Equity
Opportunities Fund LP and Calamos Market Neutral Opportunities Fund LP, private investment
partnerships that are primarily comprised of highly liquid marketable securities. 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.
In the fourth quarter of 2007, the Company established Calamos Global Funds PLC (Offshore Funds),
which is comprised of four Ireland-based offshore mutual funds. Because the Offshore Funds are
majority owned by the Company, the Company consolidates the financial results of the Offshore Funds
into its results.
The assets and liabilities of the Partnerships and Offshore Funds are presented on a net basis as
partnership investments and offshore funds in the consolidated statements of financial condition,
and the total income (loss) is included in investment and other income (loss) in the consolidated
statements of operations. Partnerships and Offshore Funds are presented on a net basis in order to
provide more transparency to the financial position and results from core operations of the
Company. The underlying assets and liabilities that are being consolidated are described in note 4.
The minority interests are presented as minority interest in partnership investments and offshore
funds in the respective financial statements.
Management of the Company has made a number of estimates and assumptions relating to the reporting
of assets, liabilities, revenues and expenses and the disclosure of contingent assets and
liabilities to prepare these consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America. Actual results could differ from
these estimates.
-6-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(3) Investment Securities
The following table provides a summary of investment securities owned as of March 31, 2008 and
December 31, 2007. Other investment securities consist of treasury bonds and common stock. As a
registered broker-dealer, Calamos Financial Services LLC is required to mark to market all
investment securities it owns (CFS Securities) and record all market fluctuations through current
earnings. As such, unrealized gains and losses on these securities are included in investment and
other income (loss) in the consolidated statements of operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2008 |
|
(in thousands) |
|
Available-for-Sale |
|
|
CFS Securities |
|
|
Total Securities |
|
Mutual Funds |
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
$ |
288,191 |
|
|
$ |
2,661 |
|
|
$ |
290,852 |
|
Balanced |
|
|
80,556 |
|
|
|
655 |
|
|
|
81,211 |
|
Fixed income |
|
|
119,829 |
|
|
|
|
|
|
|
119,829 |
|
High yield |
|
|
3,532 |
|
|
|
|
|
|
|
3,532 |
|
Other |
|
|
235 |
|
|
|
214 |
|
|
|
449 |
|
Total mutual funds |
|
|
492,343 |
|
|
|
3,530 |
|
|
|
495,873 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investment securities |
|
|
431 |
|
|
|
205 |
|
|
|
636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
492,774 |
|
|
$ |
3,735 |
|
|
$ |
496,509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2007 |
|
(in thousands) |
|
Available-for-Sale |
|
|
CFS Securities |
|
|
Total Securities |
|
Mutual Funds |
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
$ |
322,344 |
|
|
$ |
3,095 |
|
|
$ |
325,439 |
|
Balanced |
|
|
90,049 |
|
|
|
722 |
|
|
|
90,771 |
|
Fixed income |
|
|
114,439 |
|
|
|
|
|
|
|
114,439 |
|
High yield |
|
|
3,663 |
|
|
|
|
|
|
|
3,663 |
|
Other |
|
|
245 |
|
|
|
227 |
|
|
|
472 |
|
Total mutual funds |
|
|
530,740 |
|
|
|
4,044 |
|
|
|
534,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other investment securities |
|
|
430 |
|
|
|
262 |
|
|
|
692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
531,170 |
|
|
$ |
4,306 |
|
|
$ |
535,476 |
|
|
|
|
|
|
|
|
|
|
|
Of the $495.9 million and $534.8 million investments in mutual funds at March 31, 2008 and December
31, 2007, respectively, $334.2 million and $364.3 million was invested in affiliated mutual funds.
The table below summarizes the proceeds from the sale of available-for-sale securities, realized
gains (losses) on available-for-sale securities, and unrealized gains (losses) on
available-for-sale securities and on CFS securities for the three months ended March 31, 2008 and
2007.
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
(in thousands) |
|
2008 |
|
|
2007 |
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
Proceeds from sale |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
Realized gains (losses) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) |
|
|
(39,216 |
) |
|
|
3,363 |
|
|
|
|
|
|
|
|
CFS securities: |
|
|
|
|
|
|
|
|
Unrealized gains (losses) |
|
|
(573 |
) |
|
|
48 |
|
|
|
|
|
|
|
|
-7-
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 March 31, 2008 and December 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
(in thousands) |
|
2008 |
|
|
2007 |
|
Total cumulative unrealized gains on available-for-sale securities with net gains: |
|
|
|
|
|
|
|
|
Mutual Funds |
|
|
|
|
|
|
|
|
Equity |
|
$ |
22,539 |
|
|
$ |
39,461 |
|
Balanced |
|
|
674 |
|
|
|
5,860 |
|
Fixed income |
|
|
4,883 |
|
|
|
1,022 |
|
Other |
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
Total mutual funds |
|
|
28,096 |
|
|
|
46,348 |
|
|
|
|
|
|
|
|
|
|
Other investment securities |
|
|
254 |
|
|
|
297 |
|
|
|
|
|
|
|
|
Total gains |
|
|
28,350 |
|
|
|
46,645 |
|
|
|
|
|
|
|
|
|
|
Total cumulative unrealized losses on available-for-sale securities with net losses: |
|
|
|
|
|
|
|
|
Mutual Funds |
|
|
|
|
|
|
|
|
Equity |
|
|
(24,303 |
) |
|
|
(7,073 |
) |
Balanced |
|
|
(4,335 |
) |
|
|
(17 |
) |
Fixed income |
|
|
|
|
|
|
(334 |
) |
High yield |
|
|
(445 |
) |
|
|
(272 |
) |
Other |
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total mutual funds |
|
|
(29,090 |
) |
|
|
(7,696 |
) |
|
|
|
|
|
|
|
|
|
Other investment securities |
|
|
(2 |
) |
|
|
(475 |
) |
|
|
|
|
|
|
|
Total losses |
|
|
(29,092 |
) |
|
|
(8,171 |
) |
|
|
|
|
|
|
|
Total cumulative net unrealized gains (losses) on available-for-sale securities |
|
$ |
(742 |
) |
|
$ |
38,474 |
|
|
|
|
|
|
|
|
The Company periodically evaluates its available-for-sale investments for other-than-temporary
declines in value. Other-than-temporary declines in value may exist when the fair value of an
investment security has been below the carrying value for an extended period of time. If an
other-than-temporary decline in value is determined to exist, the unrealized investment loss, net
of tax is recognized as a charge to net income in the period in which the other-than-temporary
decline in value occurs, as well as an accompanying permanent adjustment to accumulated other
comprehensive income. At March 31, 2008, the Company believes all unrealized losses to be only
temporary and due to temporary market conditions.
-8-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(4) Partnership Investments and Offshore Funds
Presented below are the underlying assets and liabilities of the Partnerships and the Offshore
Funds that the Company reports on a net basis and the investments accounted for under the equity
method presented as partnership investments and offshore funds in its consolidated statements of
financial condition as of March 31, 2008 and December 31, 2007.
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
(in thousands) |
|
2008 |
|
|
2007 |
|
Calamos Equity Opportunities Fund LP: |
|
|
|
|
|
|
|
|
Securities owned |
|
$ |
60,258 |
|
|
$ |
111,142 |
|
Securities sold but not yet purchased |
|
|
|
|
|
|
(24,838 |
) |
Accrued expenses and other current liabilities |
|
|
(224 |
) |
|
|
(1,478 |
) |
Other current assets |
|
|
3,810 |
|
|
|
20 |
|
|
|
|
|
|
|
|
Calamos Equity Opportunities Fund LP securities, net |
|
|
63,844 |
|
|
|
84,846 |
|
|
|
|
|
|
|
|
|
|
Calamos Market Neutral Opportunities Fund LP: |
|
|
|
|
|
|
|
|
Securities owned |
|
|
67,797 |
|
|
|
81,361 |
|
Securities sold but not yet purchased |
|
|
(16,708 |
) |
|
|
(22,372 |
) |
Accrued expenses and other current liabilities |
|
|
(1,586 |
) |
|
|
(5,178 |
) |
Other current assets |
|
|
3,432 |
|
|
|
1,028 |
|
|
|
|
|
|
|
|
Calamos Market Neutral Opportunities Fund LP securities, net |
|
|
52,935 |
|
|
|
54,839 |
|
|
|
|
|
|
|
|
|
|
Calamos Global Funds PLC: |
|
|
|
|
|
|
|
|
Securities owned |
|
|
202,356 |
|
|
|
200,196 |
|
Other current assets |
|
|
6,277 |
|
|
|
5,107 |
|
Accrued expenses and other liabilities |
|
|
(1,439 |
) |
|
|
(2,045 |
) |
|
|
|
|
|
|
|
Calamos Global Funds PLC |
|
|
207,194 |
|
|
|
203,258 |
|
|
|
|
|
|
|
|
|
|
Investment in other partnerships |
|
|
8,961 |
|
|
|
10,061 |
|
|
|
|
|
|
|
|
Partnership investments and offshore funds |
|
$ |
332,934 |
|
|
$ |
353,004 |
|
|
|
|
|
|
|
|
As of March 31, 2008 and December 31, 2007, the Company had a net interest of $28.2 million (44.1%)
and $37.2 million (43.9%) in Calamos Equity Opportunities Fund LP, respectively. The minority
interests totaled 55.9% and 56.1% of Calamos Equity Opportunities Fund LP at March 31, 2008 and
December 31, 2007, respectively, and are presented in the consolidated statements of financial
condition as minority interest in partnership investments and offshore funds.
As of March 31, 2008 and December 31, 2007, the Company had a net interest of $51.4 million (97.2%)
and $53.3 million (97.2%) in Calamos Market Neutral Opportunities Fund LP, respectively. The
minority interests totaled 2.8% of Calamos Market Neutral Opportunities Fund LP at March 31, 2008
and December 31, 2007 and are presented in the consolidated statements of financial condition as
minority interest in partnership investments and offshore funds.
As of March 31, 2008 and December 31, 2007, the Company had a net interest of $179.7 million
(86.7%) and $203.3 million (100%) in Calamos Global Funds PLC, respectively. The minority interests
totaled 13.3% at March 31, 2008, and are presented in the consolidated statements of financial
condition as minority interest in partnership investments and offshore funds.
As of March 31, 2008 and December 31, 2007, the Company held a non-controlling interest in certain
other partnerships, and therefore, accounted for these investments using the equity method. These
investments are presented collectively as investments in other partnerships in the table above.
-9-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(5) Fair Value Measurements
Effective January 1, 2008, the Company adopted the provisions of the Financial Accounting Standards
Boards (FASB) Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements,
which defines fair value, establishes a framework for measuring fair value and requires additional
disclosure regarding fair value measurement. The implementation of SFAS 157 had no effect on the
Companys financial position or results of operations.
SFAS No. 157 establishes a three-tier fair value hierarchy which prioritizes the inputs used in
measuring fair value as follows: Level 1 observable inputs such as quoted prices in active
markets; Level 2 inputs, other than the quoted prices in active markets, that are observable
either directly or indirectly; and Level 3 unobservable inputs in which there is little or no
market data, which require the reporting entity to develop its own assumptions. At March 31, 2008,
the Company did not have any positions in Level 3 securities. For assets recorded at fair value,
the Company measures fair value using a market approach.
The following provides the hierarchy of inputs used to derive the fair value of the Companys
investment securities, securities owned by the Partnership Investments and by the Offshore Funds
and securities sold but not yet purchased as of March 31, 2008. Foreign currency contracts are
presented on a net basis where the right of offset exists. There was no net impact of these
positions at March 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using |
|
|
|
|
|
|
|
Quoted Prices |
|
|
Significant |
|
|
|
|
|
|
|
|
|
|
in Active |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
|
Markets for |
|
|
Observable |
|
|
Unobservable |
|
(in thousands) |
|
March 31, |
|
|
Identical Assets |
|
|
Inputs |
|
|
Inputs |
|
Description |
|
2008 |
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
Investment securities (note 3) |
|
$ |
496,509 |
|
|
$ |
496,509 |
|
|
$ |
|
|
|
$ |
|
|
Securities owned by Partnership Investments and Offshore Funds (note 4) |
|
|
330,411 |
|
|
|
272,382 |
|
|
|
58,029 |
|
|
|
|
|
Securities sold but not yet purchased (note 4) |
|
|
(16,708 |
) |
|
|
(16,708 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
810,212 |
|
|
$ |
752,183 |
|
|
$ |
58,029 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6) Minority Interest in Calamos Holdings LLC
Minority interest in Calamos Holdings LLC represents the Calamos Interests aggregate ownership
interest of 79.3% and 78.7% in Holdings at March 31, 2008 and December 31, 2007 respectively, 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 consolidated
statements of changes in stockholders equity. Income 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 three months ended March 31, 2008 is presented below:
(in thousands)
|
|
|
|
|
Minority interest at December 31, 2007 |
|
$ |
352,205 |
|
Income allocated to minority interests |
|
|
2,108 |
|
Changes in unrealized gains (losses) on available-for-sale securities |
|
|
(31,376 |
) |
Sale of Calamos Holdings LLC membership units |
|
|
(17,364 |
) |
Cumulative impact of changes in ownership of Calamos Holdings LLC units |
|
|
1,077 |
|
Compensation expense recognized under stock incentive plans |
|
|
1,409 |
|
Tax distributions |
|
|
(22,715 |
) |
Equity distributions |
|
|
(8,470 |
) |
|
|
|
|
Minority interest at March 31, 2008 |
|
$ |
276,874 |
|
|
|
|
|
-10-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(7) Earnings Per Share
The following table reflects the calculation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
(in thousands, except per share data) |
|
2008 |
|
|
2007 |
|
Earnings per share basic |
|
|
|
|
|
|
|
|
Earnings available to common shareholders |
|
$ |
449 |
|
|
$ |
7,534 |
|
Weighted average shares outstanding |
|
|
20,337 |
|
|
|
23,324 |
|
|
|
|
|
|
|
|
Earnings per share basic |
|
$ |
0.02 |
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share diluted |
|
|
|
|
|
|
|
|
Income before minority interest in Calamos Holdings LLC and income taxes |
|
$ |
2,860 |
|
|
$ |
53,292 |
|
Less: Impact of income taxes |
|
|
1,153 |
|
|
|
21,386 |
|
|
|
|
|
|
|
|
Earnings available to common shareholders |
|
$ |
1,707 |
|
|
$ |
31,906 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
20,337 |
|
|
|
23,324 |
|
Conversion of membership units for common stock |
|
|
77,000 |
|
|
|
77,000 |
|
Dilutive impact of restricted stock units |
|
|
284 |
|
|
|
368 |
|
Dilutive impact of stock options |
|
|
|
|
|
|
73 |
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
97,621 |
|
|
|
100,765 |
|
|
|
|
|
|
|
|
Earnings per share diluted |
|
$ |
0.02 |
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
Diluted shares outstanding for the three months ended March 31, 2008 and 2007 are calculated (a)
assuming that Calamos Interests 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. In calculating diluted earnings per
share, an effective tax rate of 40.3% and 40.1% was applied to income before minority interest in
Calamos Holdings LLC and income taxes for the three months ended March 31, 2008 and 2007,
respectively.
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 SFAS No.
123(R), Share-Based Payment, 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 upon exercise. 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 months ended March 31, 2008, stock options for 2,583,262
shares and RSUs for 205,637 shares were excluded from the computation of diluted earnings per share
as they were anti-dilutive. For the three months ended March 31, 2007, stock options for 1,441,187
shares and RSUs for 383,962 shares were excluded from the computation of diluted earnings per share
as they were anti-dilutive.
-11-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(8) Stock Based Compensation
Under the Companys incentive compensation plan, certain employees of the Company receive stock
based compensation comprised of stock options and RSUs. Historically, RSUs have been settled with
newly issued shares so that no cash was used by the Company to settle awards; however, the Company
may use treasury shares. The Companys Annual Report on Form 10-K for the year ended December 31,
2007 provides details of this plan and its provisions.
During the first quarter of 2008, the Company granted 943,917 stock options and 314,639 RSUs. There
were forfeitures of 174,240 stock options and 73,845 RSUs during the quarter. The weighted average
fair value of stock options at the date of grant for the three months ended March 31, 2008 was
$6.53, which was estimated on the date of grant using the Black-Scholes option-pricing model. The
assumptions used were a dividend yield of 2.27%, expected volatility of 35%, a risk-free interest
rate of 3.3% and an expected life of 7.5 years.
During the first quarter of 2008, 188,321 RSUs were exercised and, after 59,330 units were withheld
for taxes, 128,991 RSUs 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 $3.7 million. The
total tax benefit realized in connection with the exercise of the RSUs during the three months
ended March 31, 2008 was $481,000, as the Company receives tax benefits based upon the portion of
Holdings income that it recognizes.
During the three months ended March 31, 2008, expense recorded in connection with the RSUs and
stock options was $1.8 million of which $370,000, after giving effect to the minority interests,
was credited as additional paid-in capital. During the three months ended March 31, 2007, expense
recorded in connection with the RSUs and stock options was $1.6 million of which $377,000, after
giving effect to the minority interests, was credited as additional paid-in capital. The amount of
deferred tax asset created was $148,000 and $151,000 during the three months ended March 31, 2008
and 2007, respectively. At March 31, 2008, approximately $27.9 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 4.4 years.
(9) Total Other Income (Expense), Net
Total other income (expense), net was comprised of the following for the three months ended March
31, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
March 31, |
|
(in thousands) |
|
2008 |
|
|
2007 |
|
Interest income |
|
$ |
847 |
|
|
$ |
4,030 |
|
Interest expense |
|
|
(8,101 |
) |
|
|
(2,036 |
) |
|
|
|
|
|
|
|
Net interest income (expense) |
|
|
(7,254 |
) |
|
|
1,994 |
|
|
|
|
|
|
|
|
|
|
Capital gains and dividend income |
|
|
2,059 |
|
|
|
511 |
|
Unrealized appreciation (depreciation) |
|
|
(49,081 |
) |
|
|
(440 |
) |
Miscellaneous other income |
|
|
248 |
|
|
|
321 |
|
|
|
|
|
|
|
|
Investment and other income (loss) |
|
|
(46,774 |
) |
|
|
392 |
|
|
|
|
|
|
|
|
|
|
Minority interest in partnership investments |
|
|
12,459 |
|
|
|
751 |
|
|
|
|
|
|
|
|
Total other income (expense), net |
|
$ |
(41,569 |
) |
|
$ |
3,137 |
|
|
|
|
|
|
|
|
Total other income (expense), net had a negative $.25 per share impact on diluted earnings per
share during the first quarter of 2008, compared to a positive $.02 per share impact on diluted
earnings per share during the first quarter of 2007.
-12-
CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(10) Common Stock Repurchase
In 2007, the Board of Directors authorized the Company to repurchase up to 2 million shares of
Class A common stock, of which 1,340,800 shares have been repurchased as of March 31, 2008.
In order to maintain a one-for-one relationship between the Holdings membership units owned by CAM
and CAMs outstanding Class A common stock and to provide CAM with cash to repurchase shares, CAM
sold membership units to Holdings equal to the number of shares of Class A common stock that it
repurchased. The net impact of these transactions is presented in the consolidated statements of
changes in stockholders equity.
(11) Recently Issued Accounting Pronouncements
In December 2007, the FASB issued SFAS 141(R), Business Combinations, which establishes
requirements for how the acquirer in a business combination recognizes, measures and discloses
identified assets and goodwill acquired, liabilities assumed, and any noncontrolling interests.
SFAS 141(R) is effective for the Company for any business combination with an acquisition date that
is on or after January 1, 2009. The Company is currently evaluating the impact, if any, that the
adoption of SFAS 141(R) will have on its financial statements.
In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial
Statements an amendment of ARB No. 51, which establishes accounting and reporting requirements
for noncontrolling interest, which the Company currently refers to as minority interest. SFAS 160
would require noncontrolling interest to be reported as a component of equity on the consolidated
statements of financial position and the amount of net income attributable to noncontrolling
interest to be identified on the consolidated statements of income. SFAS 160 is effective for the
Company beginning January 1, 2009. The Company is currently evaluating the impact, if any, that the
adoption of SFAS 160 will have on its financial statements.
In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB Statement No. 133, which requires additional disclosures for
derivative instruments and hedging activities. SFAS 161 is effective for the Company beginning
January 1, 2009. The Company is currently evaluating the impact, if any, that the adoption of SFAS
161 will have on its financial statements.
-13-
Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
We provide investment advisory services to institutions and individuals, managing $40.9 billion in
client assets at March 31, 2008. 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.
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 March 31, 2008 and
2007.
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
(in millions) |
|
2008 |
|
|
2007 |
|
Mutual Funds |
|
|
|
|
|
|
|
|
Open-end funds |
|
$ |
23,784 |
|
|
$ |
25,706 |
|
Closed-end funds |
|
|
6,874 |
|
|
|
6,380 |
|
|
|
|
|
|
|
|
Total mutual funds |
|
|
30,658 |
|
|
|
32,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate Accounts |
|
|
|
|
|
|
|
|
Institutional accounts |
|
|
4,875 |
|
|
|
4,849 |
|
Managed accounts |
|
|
5,256 |
|
|
|
5,482 |
|
Alternative investments |
|
|
117 |
|
|
|
133 |
|
|
|
|
|
|
|
|
Total separate accounts |
|
|
10,248 |
|
|
|
10,464 |
|
|
|
|
|
|
|
|
Total assets under management |
|
$ |
40,906 |
|
|
$ |
42,550 |
|
|
|
|
|
|
|
|
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.
-14-
Operating Results
Three Months Ended March 31, 2008 Compared to Three Months Ended March 31, 2007
Assets Under Management
Assets under management decreased by $1.6 billion, or 4%, to $40.9 billion at March 31, 2008 from
$42.6 billion at March 31, 2007. At March 31, 2008 and 2007, our assets under management consisted
of 75% mutual funds and 25% separate accounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
March 31, |
|
|
Change |
|
(in millions) |
|
2008 |
|
|
2007 |
|
|
Amount |
|
|
Percent |
|
Mutual Funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management |
|
$ |
34,835 |
|
|
$ |
33,704 |
|
|
$ |
1,131 |
|
|
|
3 |
% |
Net redemptions |
|
|
(449 |
) |
|
|
(1,952 |
) |
|
|
1,503 |
|
|
|
77 |
|
Market appreciation (depreciation) |
|
|
(3,728 |
) |
|
|
334 |
|
|
|
(4,062 |
) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management |
|
|
30,658 |
|
|
|
32,086 |
|
|
|
(1,428 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management |
|
|
31,403 |
|
|
|
33,011 |
|
|
|
(1,608 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Separate Accounts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management |
|
|
11,373 |
|
|
|
11,021 |
|
|
|
352 |
|
|
|
3 |
|
Net purchases (redemptions) |
|
|
106 |
|
|
|
(679 |
) |
|
|
785 |
|
|
|
* |
|
Market appreciation (depreciation) |
|
|
(1,231 |
) |
|
|
122 |
|
|
|
(1,353 |
) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management |
|
|
10,248 |
|
|
|
10,464 |
|
|
|
(216 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management |
|
|
10,501 |
|
|
|
10,770 |
|
|
|
(269 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets Under Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under management |
|
|
46,208 |
|
|
|
44,725 |
|
|
|
1,483 |
|
|
|
3 |
|
Net redemptions |
|
|
(343 |
) |
|
|
(2,631 |
) |
|
|
2,288 |
|
|
|
87 |
|
Market appreciation (depreciation) |
|
|
(4,959 |
) |
|
|
456 |
|
|
|
(5,415 |
) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending assets under management |
|
|
40,906 |
|
|
|
42,550 |
|
|
|
(1,644 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average assets under management |
|
$ |
41,904 |
|
|
$ |
43,781 |
|
|
$ |
(1,877 |
) |
|
|
(4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the first quarter of 2008, net redemptions in our mutual funds were $449 million, a
favorable change of $1.5 billion from net redemptions of $2.0 billion in the prior-year quarter.
The improvement in net redemptions, compared to the first quarter of 2007, was primarily due to a
decrease of $1.6 billion in net redemptions of our Growth Fund, which comprises a significant
percentage of our total assets under management. Mutual funds were negatively impacted by market
depreciation of $3.7 billion during the three months ended March 31, 2008, compared to market
appreciation of $334 million during the three months ended March 31, 2007.
Separate accounts had net purchases of $106 million during the first quarter of 2008, mainly due to
separate account inflows generated within our institutional accounts, compared to net redemptions
of $679 million in the prior-year quarter. Separate accounts were negatively impacted by market
depreciation of $1.2 billion during the three months ended March 31, 2008, compared to market
appreciation of $122 million during the three months ended March 31, 2007.
-15-
Financial Overview
Operating income was $44.4 million for the first quarter of 2008, compared with $50.2 million for
the same period a year ago. Operating margin was 40.1% for the first quarter of 2008 and 43.3% for
the year-earlier period. Operating income, after giving effect to income taxes, contributed $0.27
per diluted share in the first quarter of 2008 versus $0.30 in the prior-year period.
Total other income (expense), net was a net expense of $41.6 million for the first quarter of 2008,
compared to net income of $3.1 million for the first quarter of 2007. The decrease in total other
income (expense), net for the three months ended March 31, 2008, compared to the prior-year
quarter, was mostly due to unrealized market depreciation in the current quarter, primarily on our
investments in consolidated partnerships and offshore funds. Total other income (expense), net,
after giving effect to income taxes, contributed a negative $0.25 per diluted share in the first
quarter of 2008 versus a positive $0.02 in the prior-year period.
Revenues
Total revenues decreased by $5.0 million, or 4%, to $110.7 million for the three months ended March
31, 2008 from $115.7 million for the prior year. The decrease was primarily due to lower investment
management fees and distribution and underwriting fees.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
Change |
|
(in thousands) |
|
2008 |
|
|
2007 |
|
|
Amount |
|
|
Percent |
|
Investment management fees |
|
$ |
77,274 |
|
|
$ |
78,475 |
|
|
$ |
(1,201 |
) |
|
|
(2 |
)% |
Distribution and underwriting fees |
|
|
32,470 |
|
|
|
36,181 |
|
|
|
(3,711 |
) |
|
|
(10 |
) |
Other |
|
|
949 |
|
|
|
1,044 |
|
|
|
(95 |
) |
|
|
(9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
110,693 |
|
|
$ |
115,700 |
|
|
$ |
(5,007 |
) |
|
|
(4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management fees decreased by $1.2 million, or 2%, to $77.3 million for the three months
ended March 31, 2008 from $78.5 million for the first quarter of 2007 as a result of a $1.9 billion
decrease in average assets under management. The overall decline in investment management fees was
primarily due to a decrease in fees from open-end funds, partially offset by higher investment
management fees from closed-end funds. Investment management fees from open-end funds were $46.8
million for the three months ended March 31, 2008 compared to $50.2 million for the prior year
period as a result of a $2.2 billion decrease in open-end fund average assets under management.
This decrease was partially offset by higher investment management fees from our closed-end funds,
which increased to $15.4 million for the first quarter of 2008 from $13.4 million for the first
quarter of 2007 as a result of a $618 million increase in closed-end fund average assets under
management mainly attributable to the assets raised from the launch of the Calamos Global Dynamic
Income Fund (CHW) in the second quarter of 2007. Investment management fees as a percentage of
average assets under management was 0.74% for the three months ended March 31, 2008 compared to
0.73% for the prior year.
Distribution and underwriting fees decreased by $3.7 million, or 10%, to $32.5 million for the
three months ended March 31, 2008 from $36.2 million for the first quarter of 2007. The decrease
was due to a $2.4 million decrease in distribution fees as a result of an 8% decrease in open-end
fund average assets under management and a $1.3 million decrease in contingent deferred sales
charges as a result of a decrease in redemptions.
Operating Expenses
Operating expenses increased by $719,000, or 1%, to $66.3 million for the three months ended March
31, 2008 from $65.5 million for the prior year.
To better align our expense structure with our decreasing revenues, which we believe are driven by
prevailing market volatility, we initiated cost containment efforts in February 2008. As part of
these efforts we reduced our staff levels by 28 associates, or 7%. In addition, our Chief Executive
Officer and our Co-Chief Investment Officer have temporarily reduced their base salaries by nearly
one million dollars in aggregate for 2008 as part of these efforts. However, our focus on growing
our business will not wane; therefore, we continue to redeploy resources to areas that we view as
key growth opportunities, specifically, institutional, wealth management, global expansion and
retirement plan distribution. We expect to prudently manage our operating expenses, primarily with
respect to employee compensation and benefits, marketing and sales promotion and general and
administrative expenses.
-16-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
Change |
|
(in thousands) |
|
2008 |
|
|
2007 |
|
|
Amount |
|
|
Percent |
|
Employee compensation and benefits |
|
$ |
23,460 |
|
|
$ |
20,766 |
|
|
$ |
2,694 |
|
|
|
13 |
% |
Distribution and underwriting expense |
|
|
24,158 |
|
|
|
25,027 |
|
|
|
(869 |
) |
|
|
(3 |
) |
Amortization of deferred sales commissions |
|
|
6,120 |
|
|
|
7,878 |
|
|
|
(1,758 |
) |
|
|
(22 |
) |
Marketing and sales promotion |
|
|
3,036 |
|
|
|
3,482 |
|
|
|
(446 |
) |
|
|
(13 |
) |
General and administrative |
|
|
9,490 |
|
|
|
8,392 |
|
|
|
1,098 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
$ |
66,264 |
|
|
$ |
65,545 |
|
|
$ |
719 |
|
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits expense increased by $2.7 million for the three months ended
March 31, 2008 when compared to the prior year. This increase largely reflects the impact of
additional staff to support the following initiatives: expand our wealth management and
institutional sales; diversify our product offerings by adding complementary fixed income and cash
management strategies; and strengthen our information technology infrastructure. Our cost
containment efforts resulted in severance-related expense of $1.5 million during the first quarter
of 2008 that we do not anticipate will recur. We expect that the full impact of these efforts will
be reflected as reductions to compensation and benefits expenses beginning in the second quarter of
2008. These increases in employee compensation and benefits for the first quarter of 2008 were
partially offset by a decrease in incentive compensation expense of $1.4 million to reflect below
target company performance.
Distribution and underwriting expense decreased by $0.9 million for the first quarter of 2008 when
compared to the prior-year period primarily due to a decrease of $1.3 million resulting from the
decline in average open-end fund assets under management, partially offset by an increase of $0.4
million due to higher 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 months ended March 31, 2008 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.
Amortization of deferred sales commissions decreased $1.8 million for the three months ended March
31, 2008 when compared to the prior-year period mainly due primarily lower Class C share sales
during the first quarter of 2008.
Marketing and sales promotion expense decreased by $0.4 million primarily due to a $0.6 million
reduction in expense that resulted from terminating our two remaining closed-end fund agreements
during the second quarter of 2007.
General and administrative expense increased by $1.1 million, of which $0.8 million is attributable
to increases in occupancy, depreciation and software licensing to support additional staff and the
implementation of our new trade order management and portfolio accounting systems.
-17-
Other Income (Expense), Net
Other income (expense), net for the three months ended March 31, 2008 was a net loss of $41.6
million as compared to a net income of $3.1 million for the three months ended March 31, 2007, and
was comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
March 31, |
|
|
|
|
(in thousands) |
|
2008 |
|
|
2007 |
|
|
Change |
|
Interest income |
|
$ |
847 |
|
|
$ |
4,030 |
|
|
$ |
(3,183 |
) |
Interest expense |
|
|
(8,101 |
) |
|
|
(2,036 |
) |
|
|
(6,065 |
) |
|
|
|
|
|
|
|
|
|
|
Net interest income (expense) |
|
|
(7,254 |
) |
|
|
1,994 |
|
|
|
(9,248 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital gains and dividend income |
|
|
2,059 |
|
|
|
511 |
|
|
|
1,548 |
|
Unrealized appreciation (depreciation) |
|
|
(49,081 |
) |
|
|
(440 |
) |
|
|
(48,641 |
) |
Miscellaneous other income |
|
|
248 |
|
|
|
321 |
|
|
|
(73 |
) |
|
|
|
|
|
|
|
|
|
|
Investment and other income (loss) |
|
|
(46,774 |
) |
|
|
392 |
|
|
|
(47,166 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority interest in partnership investments and offshore funds |
|
|
12,459 |
|
|
|
751 |
|
|
|
11,708 |
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense), net |
|
$ |
(41,569 |
) |
|
$ |
3,137 |
|
|
$ |
(44,706 |
) |
|
|
|
|
|
|
|
|
|
|
Total other income (expense), net was a net expense of $41.6 million for the first quarter of 2008,
compared to a net income of $3.1 million for the first quarter of 2007. The decrease in total other
income (expense), net for the three months ended March 31, 2008, compared to the prior-year
quarter, was mostly due to unrealized market depreciation of $36.6 million in the current quarter,
primarily on our investments in consolidated partnerships and offshore funds, after giving effect
to minority interests investment in those products.
As a point of reference, in the fourth quarter of 2007 we launched four offshore funds and seeded
these funds with $200 million, consistent with our practice of investing alongside our clients. We
view these investments as a component of our $834 million corporate investment portfolio at March
31, 2008, which is primarily comprised of products managed by us. Because our ownership in these
funds represents more than 50% of the funds assets, we are required to consolidate these
portfolios with our financial results. As such, market appreciation and depreciation of our
investment in these funds is included in non-operating income (expense), net in our consolidated
statement of operations. This accounting treatment of the market depreciation in the first quarter
was the primary driver of the decrease in earnings. This consolidation may no longer be required
once our investment represents less than 50% of the relevant funds total assets and at that point
future market appreciation and depreciation would be included as a component of stockholders
equity.
Also, interest expense was $8.1 million in the first quarter of 2008 and reflects an increase in
interest expense of $6.1 million related to the private debt offering that closed during the third
quarter of 2007.
Further, the unrealized gains and losses on a significant portion of our investment securities are
not recorded to net income; rather, these unrealized gains and losses are recorded 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 months ended
March 31, 2008, net unrealized losses generated by our investment securities was $39.2 million, of
which $4.7 million, net of minority interest and taxes, respectively, was recognized as a decrease
to accumulated other comprehensive income. For the three months ended March 31, 2007, net
unrealized gains generated by our investment securities was $3.4 million, of which $0.5 million,
net of minority interest and taxes, respectively, was recognized as an increase to accumulated
other comprehensive income.
Income Taxes
Our effective income tax rate was 40.3% and 40.1% for the first three months of 2008 and 2007.
Liquidity and Capital Resources
Our current financial condition remains highly liquid. Our corporate investment portfolio, which is
comprised of cash and cash equivalents, investment securities, partnership investments and offshore
funds, makes up a significant majority of our assets.
-18-
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 and offshore funds 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. 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.
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
(in thousands) |
|
2008 |
|
2007 |
Statements of financial condition data: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
69,056 |
|
|
$ |
108,441 |
|
Receivables |
|
|
34,198 |
|
|
|
39,340 |
|
Investment securities |
|
|
496,509 |
|
|
|
535,476 |
|
Partnership investments and offshore funds |
|
|
332,934 |
|
|
|
353,004 |
|
Deferred tax assets, net |
|
|
93,500 |
|
|
|
90,284 |
|
Deferred sales commissions |
|
|
30,778 |
|
|
|
34,076 |
|
Long-term debt |
|
|
525,000 |
|
|
|
525,000 |
|
Cash flows for the three months ended March 31, 2008 and 2007 are shown below:
|
|
|
|
|
|
|
|
|
|
|
March 31, |
(in thousands) |
|
2008 |
|
2007 |
Cash flow data: |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
20,241 |
|
|
$ |
43,006 |
|
Net cash used in investing activities |
|
|
(4,473 |
) |
|
|
(94,874 |
) |
Net cash used in financing activities |
|
|
(55,153 |
) |
|
|
(31,702 |
) |
Net cash provided by operating activities was $20.2 million for the three months ended March 31,
2008 and was primarily comprised of operating income of $44.4 million partially offset by 2007
non-equity incentive payments of $23.7 million.
The payment of deferred sales commissions by us to financial intermediaries who sell Class B and C
shares of our open-end funds was $2.8 million for the three months ended March 31, 2008. 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.
For the three months ended March 31, 2008, net cash used in investing activities was $4.5 million
and was comprised of our $2.5 million investment in property and equipment and dividend
reinvestments in our investment portfolio.
Net cash used by financing activities was $55.2 million for the three months ended March 31, 2008
and was comprised of distributions to minority shareholders of $31.2 million, including
distributions for their tax liabilities of $22.7 million, as well as dividends paid to common
shareholders of $2.2 million. Additionally, the Company repurchased 888,700 shares of its Class A
common stock at an aggregated cost of $21.9 million during the first quarter of 2008.
We expect our cash and liquidity requirements will be met with the cash on hand and through cash
generated by operations.
Recently Issued Accounting Pronouncements
In December 2007, the FASB issued SFAS 141(R), Business Combinations, which establishes
requirements for how the acquirer in a business combination recognizes, measures and discloses
identified assets and goodwill acquired, liabilities assumed, and any noncontrolling interests.
SFAS 141(R) is effective for us for any business combination with an acquisition date that is on or
after January 1, 2009. We are currently evaluating the impact, if any, that the adoption of SFAS
141(R) will have on our financial statements.
-19-
In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial
Statements an amendment of ARB No. 51, which establishes accounting and reporting requirements
for noncontrolling interest, which we
currently refer to as minority interest. SFAS 160 would require noncontrolling interest to be
reported as a component of equity on the consolidated statements of financial position and the
amount of net income attributable to noncontrolling interest to be identified on the consolidated
statements of income. SFAS 160 is effective for us beginning January 1, 2009. We are currently
evaluating the impact, if any, that the adoption of SFAS 160 will have on our financial statements.
In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB Statement No. 133, which requires additional disclosures for
derivative instruments and hedging activities. SFAS 161 is effective for us beginning January 1,
2009. We are currently evaluating the impact, if any, that the adoption of SFAS 161 will have on
our financial statements.
Critical Accounting Policies
Our significant accounting policies are summarized in note 2 of the Notes to the Consolidated
Financial Statements included in our Annual Report on Form 10-K for the year ended December 31,
2007. 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, 2007. There were no significant changes in our significant accounting
policies or critical accounting policies during the three months ended March 31, 2008.
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 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; the performance of our investment portfolio as well as our
alternative products and offshore funds we manage; our ownership and organizational 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; and the extent and timing of any share repurchases.
Further, the value and composition of our assets under management are, and will continue to be,
influenced by a variety of factors including, among other things: purchases and redemptions of
shares of the open-end funds and other investment products; fluctuations in both the underlying
value and liquidity of the financial markets around the world that result in appreciation or
depreciation of assets under management; mutual fund capital gain distributions; our ability to
access capital markets; our introduction of new investment strategies 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, 2007 discusses some of these and other
important factors in detail under the caption Risk Factors.
-20-
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, 2007. There were no material changes to the Companys market risk during the three
months ended March 31, 2008.
Item 4. Controls and Procedures
Our management, including our principal executive and principal financial officers, has evaluated
the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934) as of March 31, 2008, and has concluded that such disclosure
controls and procedures are effective to ensure that information required to be disclosed by us in
the reports that we file or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the SECs rules and forms.
There were no changes in the companys internal control over financial reporting that occurred
during our first quarter that have materially affected, or are reasonably likely to materially
affect, the companys internal control over financial reporting.
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
In October 2007, the Board of Directors authorized the Company to repurchase up to 2 million shares
of Class A common stock. At December 31, 2007, 1,547,900 shares remained available to be
repurchased. During the quarter, the Company repurchased the following shares available under this
program:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 |
|
January 1 January 31, 2008 |
|
|
547,900 |
|
|
$ |
26.44 |
|
|
|
547,900 |
|
|
|
1,000,000 |
|
February 1 February 29, 2008 |
|
|
340,800 |
|
|
|
21.90 |
|
|
|
340,800 |
|
|
|
659,200 |
|
March 1 March 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
659,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
888,700 |
|
|
$ |
24.70 |
|
|
|
888,700 |
|
|
|
659,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-21-
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 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
|
|
Employment Agreement between the Registrant and James F. Baka. |
|
|
|
10.2
|
|
Form of Employee Equity Award Statement. |
|
|
|
10.3
|
|
Form of Non-Employee Director Equity Award Statement. |
|
|
|
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. |
-22-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
CALAMOS ASSET MANAGEMENT, INC.
(Registrant)
|
|
Date: May 7, 2008 |
By: |
/s/ Cristina Wasiak
|
|
|
|
Cristina Wasiak |
|
|
|
Interim Chief Financial Officer |
|
|
-23-