Calamos Asset Management, Inc. Reports First Quarter 2010 Results and Declares Dividend

NAPERVILLE, Ill., May 4 /PRNewswire-FirstCall/ -- Calamos Asset Management, Inc. (Nasdaq: CLMS) today reported first quarter 2010 results, including revenues of $81.1 million and operating income of $30.5 million.  Income before income taxes was $37.4 million for the current quarter.  As a result of our ownership structure approximately 22% of pre-tax income is attributable to our common shareholders which results in net income of $4.8 million and diluted earnings per share of $0.24.  At March 31, 2010, assets under management totaled $33.0 billion.

Additionally, we declared a regular quarterly dividend of 7.5 cents per share payable on May 26, 2010 to shareholders of record on May 17, 2010.

Management Commentary

"Our company produced solid financial results from both our core operations and our investment portfolio during the first quarter of 2010.  These returns, coupled with our continued financial strength and significant liquidity, position us well for future success," said John P. Calamos, Sr., chairman, chief executive and co-chief investment officer.

"While last year's massive fiscal and economic stimulus appears to have restored investor confidence and stabilized the global economy, investors have been slow to return to the domestic equity markets.  Despite these headwinds, our global defensive equity and alternative strategies continued to see increasing demand and helped sustain our asset growth throughout the first quarter."

"Given the continued investor demand for emerging market and international equity strategies, we are optimistic that we will benefit from this trend as our international and global strategies continue to perform well over the short and long term.  Our International Growth Fund, which recently reached its five-year performance milestone in March 2010, has ranked in the first 7% or better over the one-, three- and five-year periods in total return in its Morningstar category,(1) " continued Calamos.

"The investment performance for our products has remained strong through March 31, 2010.  In the short term, over the one-, three- and five-year periods, the percentage of Calamos open-end mutual funds that ranked in the upper half of their Lipper categories on a total return basis was 69%, 73% and 67%, respectively.  Over the longer-term, five of six Calamos funds rank in the upper quartile of their Lipper categories over their 10-year history, and all four with a 15-year history are in the upper third of their categories, including three in their respective top decile.(2) "

"During the first quarter we completed the planned build-out of our institutional distribution capabilities.  We are pleased with our progress and are already seeing the results of this strategy. Institutional flows remained positive during the first quarter of 2010 and our team generated nearly $250 million in net new business.  While institutional flows are difficult to predict, we continue to be encouraged by the level of interest and activity, including the number of finals presentations that we have participated in and the number of accounts awarded to us but not yet funded."

Assets Under Management

Assets under management as of March 31, 2010 were $33.0 billion, representing an increase of $249 million, or 1 percent, from the previous quarter end. The increase consisted of $796 million in market appreciation and net redemptions of $547 million. Average assets under management were $32.3 billion during the first quarter of 2010, compared to $23.1 billion for the same period one year ago.

Net redemptions during the quarter were primarily attributable to net outflows from our managed accounts, which were partially offset by approximately $250 million of net inflows into our institutional separate accounts. The net outflows for the quarter were the result of our decision to increase the account minimums for our convertible-based strategies on separately-managed account (SMA) platforms.  In our view, trading and market dynamics in the convertible securities markets have changed in a way that limits our ability to effectively manage lower-dollar convertible managed accounts in a manner consistent with our investment philosophy and process. As a result, we took action to raise the account minimums for these accounts and, where appropriate, to seek to transfer affected accounts to our mutual funds with similar investment objectives.  

Investment Performance

Mutual Funds

Relative investment performance for our mutual funds remained strong with 69%, 73% and 67% of the Calamos open-end mutual funds in the upper half of their Lipper categories on a one-, three- and five-year total return basis, respectively, as of March 31, 2010. In long-term performance, 83% and 100% of the Calamos open-end mutual funds performed in the upper half of their Lipper categories on a ten- and fifteen-year total return basis, respectively, as of March 31, 2010.

Domestic and global equity funds posted strong one-year performance as all but one fund ranked in the upper third of its respective Lipper category.  On a three-year basis, 71% of our mutual funds ranked in the upper half. And on a five-year basis, 67% of our funds ranked in the upper half. Our Convertible Fund continues to be among the best performers on a three- and five-year basis. On the alternative side, our Market Neutral Income Fund has posted upper quartile performance on a one- and three-year basis and in the upper 36% on a five-year basis.

Institutional Strategies

Relative investment performance for our institutional strategies as reported within the eVestment Alliance(3) database compared favorably with 64%, 73%, 50% and 80% of our institutional strategies performing in the upper half of their eVestment Alliance categories on a one-, three-, five- and ten-year total return basis, respectively, as of March 31, 2010.

Leading the way were our global growth strategies where our International Growth strategy ranked in the upper 5% over the one-, three-, and five-year periods while Global Growth ranked in the upper 15% over the one- and three-year periods. Our U.S. and Global Opportunities strategies also ranked in the upper half of their peers over a three- and five-year basis. Our Growth strategy continues to perform strongly over the short term and ranked in the upper one-third over the past year but registers a three-year rank in the 52 percentile.  Of the Convertible strategies, our Global Convertible strategy ranked in upper 17% on a five-year basis and in the top 38%  on a three-year basis.

Financial Results

First quarter revenues were $81.1 million, a 36 percent increase from the $59.6 million in the first quarter of 2009 driven mostly by a 40 percent increase in average assets under management.

For the three months ended March 31, operating expenses were $50.6 million, an increase of $4.2 million compared to the same period of 2009. Compensation expense increased by $2.0 million, or 11%, from the same quarter a year ago mostly due to increases in performance-based incentive compensation. The rise in average mutual fund assets under management drove the increase in distribution expenses by $4.3 million during the current quarter when compared to the same quarter a year ago. These increases were partially offset by a $2.1 million, or 45%, reduction of amortization of deferred sales commissions that resulted from the change in estimated remaining life of the respective class B share mutual fund assets.

Operating income was $30.5 million for the first quarter of 2010 positively comparing to $13.2 million for the first quarter of 2009. Operating margin was 37.6 percent for the current quarter, up from 22.1 percent in the year-earlier period. The significant improvement in operating performance from the first quarter 2009 is a result of revenue growth generated from the increase in assets under management coupled with our continued effective management of expenses. Diluted earnings per share for the first quarter of 2010 were $0.24 versus $0.17 for the same period a year ago.

Non-Operating Results and Other Items

Non-operating income, net of non-controlling interest in partnerships, was $6.9 million during the first quarter of 2010 as presented in Table A compared to $12.3 million in the prior-year period.

Our financial condition remains strong with a high degree of liquidity.  Our investment portfolio was approximately $391.4 million, and provides a significant source of liquidity as it consists primarily of diversified investments in our funds and cash equivalents. We seek to manage our investment portfolio conservatively and utilize exchange-traded equity option contracts as an economic hedge to reduce the downside risk and price volatility of the total portfolio value.  

For the three months ended March 31, 2010, the net gain on our investment portfolio as presented in Table B was $5.3 million, a return of 2.0% for the current quarter, compared to $11.7 million, a return of 5.6% for the first quarter of 2009. However, due to differing financial accounting treatments, not all changes in the portfolio's value are reported in current earnings. Instead, all gains and losses from certain investment securities and derivatives held in the portfolio are reported in the Consolidated Condensed Statements of Operations, while unrealized gains and losses on securities designated as "available-for-sale" are captured as a component of equity until realized. Therefore, in the current quarter investment income of $8.6 million (as presented in both Table A and Table B) increased earnings, while the component of our portfolio that directly impacts equity generated net unrealized losses of $3.3 million. It should also be noted that a portion of investment income includes the results from our initiation of a long-term trading strategy that seeks to harvest capital gains to realize certain deferred tax assets.

Market Capitalization

Our fully consolidated market capitalization is estimated to be $1.3 billion as of March 31, 2010.  This estimate assumes that the closing stock price of our shares of $14.34 did not recognize any value associated with Calamos Asset Management, Inc.'s wholly-owned assets.  Please refer to Item 5 of our 2009 annual report filed on Form 10-K for a comprehensive discussion of the details and assumptions used in estimating our market capitalization.

Investor Conference Call

Management will hold an investor conference call at 4 p.m. Central time on Tuesday, May 4. To access the live call and view management's presentation, visit the Investor Relations section of our website at http://investors.calamos.com. Alternatively, participants may listen to the live call by dialing 888.529.1786 (706.634.9500 outside the U.S.), then entering conference ID number 68470425. A replay of the call will be available until the end of the day on May 14 by dialing 800.642.1687 (706.645.9291 outside the U.S.), then entering conference ID number 68470425. A webcast also will be available on the Investor Relations section of our website at http://investors.calamos.com for 90 days following the date of the call.

Calamos Asset Management, Inc. (NASDAQ: CLMS) is a diversified investment firm offering equity, convertible, defensive equity, fixed income and alternative investment strategies, among others. We serve institutions and individuals via separately managed accounts and a family of open-end and closed-end funds, offering a risk-managed approach to capital appreciation and income-producing strategies. For more information, visit www.calamos.com.

From time to time, information or statements provided by us, including those within this news release, may contain certain forward-looking statements relating to future events, future financial performance, strategies, expectations, the competitive environment and regulations.  Forward-looking statements are based on information available at the time those statements are made and/or management's good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. For a discussion concerning some of these and other risks, uncertainties and other important factors that could affect future results, see "Forward-Looking Information" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, where applicable, "Risk Factors" in our annual and quarterly reports filed with the U.S. Securities and Exchange Commission.

Data presented reflects past performance, which is no guarantee of future results. Strong rankings are not indicative of positive performance. Absolute performance for some strategies was negative.

Source: eVestment Alliance - rankings are based on total return for the period ending March 31,2010, and do not take into account any investment advisory and/or management fees that may be associated with these strategies.  eVestment Alliance is an independent third party database that contains performance information for select investment advisors.  Information contained in this database is supplied, on a voluntary basis, by investment advisors who choose to be included in the database and is reliant on the individual advisors to be timely and accurate. 

Data presented reflects past performance, which is no guarantee of future results. Strong rankings are not indicative of positive fund performance. Absolute performance for some funds was negative. For each fund rankings are for Class A Shares for the period ending March 31, 2010, and will differ for other shares classes.

Source: Lipper, a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments including mutual funds, retirement funds, hedge funds, fund fees and expenses to the asset management and media communities. Lipper ranks the performance of mutual funds within a classification of funds that have similar investment objectives. Rankings are historical with capital gains and dividends reinvested and do not include the effect of loads. If an expense waiver was in effect, it may have had a material effect on the total return or yield for the period.

Data presented reflects past performance, which is no guarantee of future results. Strong rankings are not indicative of positive fund performance. Absolute performance for some funds was negative. For each fund rankings are for Class A Shares for the period ending March 31, 2010, and will differ for other shares classes.

© 2009 Morningstar, Inc. All Rights Reserved.

SOURCE Calamos Asset Management, Inc.