2014

Calamos Asset Management, Inc. Reports First Quarter 2014 Results and Declares Dividend

NAPERVILLE, Ill., April 24, 2014 /PRNewswire/ -- Calamos Asset Management, Inc. (NASDAQ: CLMS), a diversified global investment firm offering equity, lower-volatility equity1, fixed income, convertible and alternative strategies, today reported first quarter 2014 results.

Highlights

Non-GAAP diluted earnings per share was $0.20 for the first quarter compared with $0.25 in the previous quarter and $0.24 in the first quarter of 2013.2 Non-GAAP net income attributable to Calamos Asset Management, Inc. (CAM) was $3.9 million for the quarter compared with $5.0 million last quarter and $5.1 million in the first quarter of 2013.

GAAP diluted earnings per share was $0.11 for the first quarter of 2014 compared with $0.54 in the previous quarter3 and $0.16 in the first quarter of 2013. Net income attributable to CAM was $2.1 million for the quarter compared with $10.9 million last quarter and $3.2 million in the first quarter of 2013.

Our total revenues for the current quarter were $63.9 million compared with $66.5 million in the previous quarter and $71.0 million in the first quarter a year ago. Operating margin was 22.0% for the first quarter, 33.0% in the previous quarter, and 31.2% in the first quarter of 2013.

Assets Under Management4 were $26.1 billion at March 31, 2014 compared with $26.5 billion at the end of last quarter and $28.3 billion at March 31, 2013. Net outflows were $574 million for the quarter compared with net outflows of $1.4 billion in the previous quarter and net outflows of $2.5 billion in the first quarter of 2013.

The Board of Directors of CAM declared a regular quarterly dividend of 12.5 cents per share payable on May 19, 2014 to shareholders of record on May 5, 2014.

Calamos Investments LLC (Calamos Investments) repurchased 2.3 million shares of CAM's common stock since the share repurchase program was announced in the first quarter of 2013, for a total cost of $25.4 million.

The table below highlights certain GAAP and non-GAAP financial measures:


Three Months Ended


March 31,


December 31,


March 31,


2014


2013


2013

(in millions)






Ending Assets Under Management

$26,147


$26,543


$28,325

Average Assets Under Management

$26,242


$26,712


$29,224

Net outflows

$(574)


$(1,421)


$(2,467)







(in thousands, except earnings per share)






Total revenues

$63,930


$66,522


$70,953

Total operating expenses

$49,854


$44,579


$48,838

Operating income

$14,076


$21,943


$22,115

Operating margin

22.0%


33.0%


31.2%

Net income attributable to CAM

$2,139


$10,856


$3,234

Non-GAAP net income attributable to CAM   

$3,913


$5,015


$5,061

Diluted earnings per share

$0.11


$0.54


$0.16

Non-GAAP diluted earnings per share

$0.20


$0.25


$0.24

Business Commentary

  • We continue to be encouraged by our short-term performance as we have seen improvement in our one-year results compared with a year ago, even though our one-year performance was adversely impacted as investors shifted from secular growth sectors to defensive sectors near the end of the quarter.5

1 Year

3 Years

5 Years

10 Years

Since

Inception


2014

2013

2014

2013

2014

2013

2014

2013

2014

2013

Percentage of Calamos Funds beating the performance average for their respective Morningstar category as of March 31

54%

8%

15%

33%

33%

45%

38%

43%

71%

69%

  • We experienced slowing of outflows during the quarter with respect to prior periods. Outflows totaled $574 million in the first quarter of 2014 compared with $2.5 billion in the first quarter of 2013. We saw continued outflows in our equity and lower-volatility equity strategies, partially offset by inflows to convertible and market neutral income strategies.
  • We remain committed to strategically expanding our product breadth to meet the evolving investment needs of our clients. To this end, during the quarter we filed with the U.S. Securities and Exchange Commission (SEC) for a new closed-end fund. Furthermore, during the period we experienced sustained investor interest in our alternative, convertible and emerging markets strategies.

Assets Under Management and Flows

Assets Under Management as of March 31, 2014 were $26.1 billion, a decrease of $396 million from the end of the fourth quarter.

  • Net outflows were $574 million for the quarter, resulting primarily from outflows from our equity and lower-volatility equity strategies.
  • The company's funds experienced net outflows of $195 million for the quarter. Separate accounts had $379 million of net outflows for the quarter.
  • Market appreciation was $178 million for the quarter, driven primarily by equity and lower-volatility equity strategies.
  • The company's alternative strategies had net inflows of $334 million for the quarter and convertible strategies had net inflows of $134 million.

Financial Discussion

Operating Income

First quarter 2014 revenues of $63.9 million decreased 10% from first quarter 2013 primarily due to a decrease in Average Assets Under Management. Total operating expenses for the first quarter were $49.9 million, an increase of 2% from $48.8 million in the first quarter of 2013 as a result of increases across all expense categories, except for distribution expenses. Operating income was $14.1 million for the first quarter versus $22.1 million in the first quarter of last year. Operating margin was 22.0% for the first quarter, down from 31.2% in the first quarter of 2013.

Non-Operating Income

Non-operating income (GAAP) was $118,000 for the first quarter of 2014, as presented in Table B. Non-GAAP non-operating income, net of redeemable non-controlling interest in partnerships,6 was $55,000 during the first quarter of 2014, as presented in Table B.

Financial Position

As of March 31, 2014, the corporate investment portfolio was $473.3 million, which included cash, cash equivalents, and investments that were principally comprised of investments in products that the company manages. The corporate investment portfolio is used to provide seed capital for new products, to maintain conservative levels of capital for the company's regulated subsidiaries, to fund the company's share repurchase program and to invest in other corporate strategic initiatives. The company's financial strength is also instrumental in maintaining the firm's investment-grade credit rating.

As of March 31, 2014, total debt was $92.1 million, of which $46.2 million is due on July 15, 2014. Total equity was $440.9 million.

As part of the share repurchase program to acquire up to 3 million shares of the company's common stock, as announced in the first quarter of 2013, Calamos Investments7 repurchased 1.0 million shares of CAM's common stock at an average price of $11.77 per share and a total cost of $12.2 million during the first quarter of 2014.

Market Capitalization

As of March 31, 2014, CAM, representing the public shares outstanding, owns 22.2% of the operating company, Calamos Investments, and the remaining 77.8% is privately owned by Calamos Family Partners, Inc. Because of this complex ownership structure, reported market capitalization does not reflect the entire value of the company, but rather only the market capitalization pertaining to CAM's 22.2% interest, which is publicly traded.

Investor Conference Call

Management will hold an investor conference call at 4 p.m. Central Time on Thursday, April 24, 2014. To access the live call and view management's presentation, visit the Investor Relations section of the company's website at www.calamos.com/investors. Alternatively, participants may listen to the live call by dialing 800.946.0786 in the U.S. or Canada (719.325.2325 internationally), then entering conference ID #5975560. A replay of the call will be available for one week following the date of the call by dialing 888.203.1112 in the U.S. or Canada (719.457.0820 internationally), then entering conference ID #5975560. The webcast also will be available on the Investor Relations section of the company's website at www.calamos.com/investors for at least 90 days following the date of the call.

Calamos Asset Management, Inc. (NASDAQ: CLMS) is a diversified global investment firm offering innovative investment strategies including equity, lower-volatility equity, fixed income, convertible and alternative investments. The firm offers strategies through separately managed portfolios, mutual funds, closed-end funds, private funds and UCITS funds. Clients include major corporations, pension funds, endowments, foundations and individuals, as well as the financial advisors and consultants who serve them. Headquartered in the Chicago metropolitan area, the firm also has offices in London and New York. For more information visit www.calamos.com.

Forward-Looking Statements & Important Risk Disclosures

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.

Past Performance is not a guarantee of future results. While the investment objective stated in a fund's prospectus may or may not reflect how the fund actually invests, the Morningstar category is assigned based on the underlying securities in each portfolio. Morningstar categories help investors and investment professionals make meaningful comparisons between funds. Morningstar data: © 2014 Morningstar, Inc. All rights reserved. The information contained herein is proprietary to Morningstar and/or its content providers; may not be copied or distributed; and is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

Investments in mutual funds are subject to risks, and you could lose money on your investment in the fund. There can be no assurance that the fund will achieve its investment objective. Your investment in the fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. The risks associated with an investment in the fund can increase during times of significant market volatility. The fund-specific principal risks are described below. More detailed information can be found in the fund's prospectus.

As a result of political or economic instability in foreign countries, there can be special risks associated with investing in foreign securities, including fluctuations in currency exchange rates, increased price volatility and difficulty obtaining information. In addition, emerging markets may present additional risk due to potential for greater economic and political instability in less developed countries.

Before investing carefully consider the fund's investment objectives, risks, charges and expenses. Please see the prospectus and summary prospectus containing this and other information at www.calamos.com or call 1-800-582-6959. Read it carefully.

 

 

Calamos Asset Management, Inc.

Consolidated Condensed Statements of Operations

(in thousands, except share data)

(Unaudited)



Three Months Ended


March 31,


December 31,


March 31,


2014


2013


2013

Revenues






Investment management fees

$50,278


$52,512


$55,942

Distribution and underwriting fees

12,989


13,338


14,328

Other

663


672


683

   Total revenues

63,930


66,522


70,953

Expenses






Employee compensation and benefits

23,996


18,098


22,565

Distribution expenses

12,651


12,997


13,931

Marketing and sales promotion

3,705


4,192


3,389

General and administrative

9,502


9,292


8,953

   Total operating expenses

49,854


44,579


48,838

   Operating income

14,076


21,943


22,115

   Non-operating income

118


21,854


1,800

Income before income tax provision

14,194


43,797


23,915

Income tax provision

1,362


108


1,976

   Net income

12,832


43,689


21,939

Net income attributable to non-controlling interest in Calamos Investments LLC

(10,630)


(31,910)


(17,997)

Net income attributable to redeemable non-controlling interest in partnership investments

(63)


(923)


(708)

Net income attributable to CAM

$2,139


$10,856


$3,234







Earnings per share:






Basic

$0.11


$0.55


$0.16

Diluted

$0.11


$0.54


$0.16







Weighted average shares outstanding:






Basic

19,079,163


19,620,371


20,301,373

Diluted

19,805,828


20,214,360


20,836,996







Supplemental Information:






Non-GAAP net income attributable to CAM

$3,913


$5,015


$5,061

Non-GAAP diluted earnings per share

$0.20


$0.25


$0.24







 

 

Calamos Asset Management, Inc.

Assets Under Management

(in millions)

(Unaudited)



Three Months Ended


March 31,


December 31,


March 31,


2014


2013


2013

Open-end Funds






Beginning Assets Under Management

$16,128


$15,679


$17,829

Sales

1,213


1,485


1,131

Redemptions

(1,416)


(1,818)


(2,861)

Market appreciation

84


782


726

   Ending Assets Under Management

16,009


16,128


16,825

   Average Assets Under Management

16,017


15,940


17,485

Closed-end Funds






Beginning Assets Under Management

6,266


6,019


5,500

Sales

8


-


86

Market appreciation

63


247


148

   Ending Assets Under Management

6,337


6,266


5,734

   Average Assets Under Management

6,290


6,157


5,678

Institutional Accounts






Beginning Assets Under Management

3,081


3,900


5,191

Sales

93


23


103

Redemptions

(452)


(1,082)


(863)

Market appreciation

35


240


215

   Ending Assets Under Management

2,757


3,081


4,646

   Average Assets Under Management

2,883


3,569


4,921

Managed Accounts






Beginning Assets Under Management

1,068


1,020


1,135

Sales

19


29


49

Redemptions

(39)


(58)


(112)

Market appreciation (depreciation)

(4)


77


48

   Ending Assets Under Management

1,044


1,068


1,120

   Average Assets Under Management

1,052


1,046


1,140

Total Assets Under Management






Beginning Assets Under Management

26,543


26,618


29,655

Sales

1,333


1,537


1,369

Redemptions

(1,907)


(2,958)


(3,836)

Market appreciation

178


1,346


1,137

   Ending Assets Under Management

$26,147


$26,543


$28,325

   Average Assets Under Management

$26,242


$26,712


$29,224







Ending Assets Under Management

by Strategy






Equity

$8,238


$8,609


$10,104

Lower-volatility Equity

4,841


5,423


6,929

Convertible

2,332


2,173


2,249

Enhanced Fixed Income

3,549


3,494


3,259

Alternative

3,921


3,563


2,696

Total Return

2,788


2,772


2,475

High Yield

358


361


399

Fixed Income

120


148


214

   Ending Assets Under Management

$26,147


$26,543


$28,325

 

 

Table A

Calamos Asset Management, Inc.

Reconciliation of GAAP to Non-GAAP Diluted Earnings Per Share

(in thousands, except share data)

(Unaudited)



Three Months Ended


March 31,


December 31,


March 31,


2014


2013


2013







GAAP net income attributable to CAM

$2,139


$10,856


$3,234

Adjustments:






Deferred tax amortization on intangible assets

1,979


1,979


1,979

Decrease in deferred tax valuation allowance

-


(3,926)


-

Non-operating income, net of taxes

(205)


(3,894)


(152)

Non-GAAP net income attributable to CAM

$3,913


$5,015


$5,061







Diluted - Weighted average shares outstanding

19,805,828


20,214,360


20,836,996







GAAP diluted earnings per share

$0.11


$0.54


$0.16

Non-GAAP diluted earnings per share

$0.20


$0.25


$0.24

 

 

Table A – Notes

Calamos Asset Management, Inc.

Notes to Reconciliation of GAAP to Non-GAAP


The company provides investors with certain adjusted, non-GAAP financial measures including non-GAAP net income attributable to CAM and non-GAAP diluted earnings per share. These non-GAAP financial measures are provided to supplement the consolidated financial statements presented on a GAAP basis. These non-GAAP financial measures adjust GAAP financial measures to include the tax benefit from the amortization of deferred taxes on intangible assets and to exclude the change in deferred tax valuation allowance and CAM's non-operating income, net of taxes. The company believes these adjustments are appropriate to enhance an overall understanding of operating financial performance, as well as to facilitate comparisons with historical earnings results. These adjustments to the company's GAAP results are made with the intent of providing investors a more complete understanding of the company's underlying earnings results and trends and marketplace performance. In addition, these non-GAAP financial measures are among the primary indicators management uses as a basis of managing the company.


The presentation of this additional information is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. Investors should review the reconciliations of the non-GAAP financial measures to their most directly comparable GAAP financial measures as provided in Table A.


Non-GAAP net income attributable to CAM is calculated by adjusting the following items from GAAP net income attributable to CAM:


(i) amortization of deferred taxes on intangible assets associated with the election under section 754 of the Internal Revenue Code of 1986, as amended (Section 754 election);


(ii) change in deferred tax valuation allowance; and


(iii) Non-operating income, net of taxes.



Non-GAAP diluted earnings per share is calculated by dividing non-GAAP net income attributable to CAM by diluted weighted average shares outstanding.


The deferred tax assets from the Section 754 election allows for a quarterly reduction of approximately $2.0 million in future income taxes owed by the company through 2019, to the extent that a tax payable exists during the quarter. As a result, this cash savings will accrue solely for the benefit of the shareholders of the company's common stock. The company believes that adjusting this item from the calculation of the above non-GAAP items can be a useful measure in allowing investors to see the company's performance. The change in the allowance on the deferred tax asset is excluded from the above non-GAAP items as it may fluctuate in future periods affecting prior period comparisons. Non-operating income is excluded from the above non-GAAP items as it can distort comparisons between periods. As noted above, the company believes that measures excluding these items are useful in analyzing operating trends and allowing for more comparability between periods, which may be useful to investors.


The company believes that non-GAAP net income attributable to CAM and non-GAAP diluted earnings per share are useful measures of performance and may be useful to investors, because they provide measures of the company's core business activities adjusting for items that are non-cash and costs that may distort comparisons between periods. These measures are provided in addition to the company's net income attributable to CAM and diluted earnings per share calculated under GAAP, but are not substitutes for those calculations.

 

 

Table B

Calamos Asset Management, Inc.

Non-Operating Income, Net of Redeemable Non-Controlling Interest in Partnership Investments

(in thousands)

(Unaudited)



Three Months Ended


March 31,


December 31,


March 31,


2014


2013


2013







Interest income

$39


$48


$87

Interest expense

(1,504)


(1,505)


(1,506)

Net interest expense

(1,465)


(1,457)


(1,419)







Investment income

1,520


23,405


3,176

Miscellaneous other income (loss)

63


(94)


43

Investment and other income

1,583


23,311


3,219

   Non-operating income (GAAP)

118


21,854


1,800







Net income attributable to redeemable non-controlling interest in partnership investments

(63)


(923)


(708)







Non-GAAP non-operating income, net of redeemable non-controlling interest in partnership investments

$55


$20,931


$1,092

 

 

Table C

Calamos Asset Management, Inc.

Summary of Corporate Investment Portfolio Returns

(in thousands)

(Unaudited)



Three Months Ended


March 31,


December 31,


March 31,


2014


2013


2013

Returns reflected in earnings






Investment income

$1,520


$23,405


$3,176

Net income attributable to redeemable non-controlling interest in partnership investments

(63)


(923)


(708)







Returns reflected in equity






Net unrealized gain reported in equity, inclusive of non-controlling interest

1,702


4,386


6,327

   Total corporate investment portfolio returns

$3,159


$26,868


$8,795

Average corporate portfolio

$417,172


$445,469


$383,064

Total corporate investment portfolio returns

0.8%


6.0%


2.3%

 

 

Table D

Calamos Asset Management, Inc.

Effective Income Tax Rate

(in thousands)

(Unaudited)



Three Months Ended


March 31,


December 31,


March 31,


2014


2013


2013







Income tax provision

$1,362


$108


$1,976

Income tax provision attributable to non-controlling interest in Calamos Investments LLC

(45)


(19)


(31)

Income tax provision attributable to CAM

1,317


89


1,945

Net income attributable to CAM

2,139


10,856


3,234

   Income before taxes attributable to CAM

$3,456


$10,945


$5,179

   CAM's effective income tax rate8

38.1%


0.8%


37.6%

 







1

These strategies attempt to achieve equity-like returns with lower than equity market risk by managing a portfolio that it believes will exhibit less volatility over full market cycles.

2

See Table A for a more detailed description of non-GAAP financial measures, how they may be useful to management and investors in evaluating the company, how they may differ from non-GAAP financial measures disclosed by other companies, and a reconciliation of such adjusted measures to the most related GAAP financial measures.

3

A non-operating gain of $3.9 million, or $0.19 per share, related to a decrease in the company's deferred tax valuation allowance and investment income, net of redeemable non-controlling interest in partnership investments of $22.5 million, or $0.20 per share, increased GAAP earnings for the fourth quarter of 2013.

4

Assets Under Management do not include $791 million, $834 million, and $939 million as of March 31, 2014, December 31, 2013, and March 31, 2013, respectively, of assets under advisement for which the company provides model portfolio design and oversight.

5

Past performance is not a guarantee of future results. See Forward-Looking Statements & Important Risk Disclosures.

6

Management believes non-operating income, net of redeemable non-controlling interest in partnership investments provides comparability of this information among reporting periods and is an effective measure for reviewing the company's non-operating contribution to its results.

7

Common stock purchased under our share repurchase program is by Calamos Investments LLC and not directly for the individual, personal accounts of John P. Calamos, Sr.

8

The income tax provision for the three months ended December 31, 2013 includes a decrease in the valuation allowance of $3.9 million. Excluding this allowance, CAM's effective income tax rate would be 36.7%.

 

SOURCE Calamos Asset Management, Inc.



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