Calamos Asset Management, Inc. Reports Second Quarter 2011 Results and Declares Dividend

NAPERVILLE, Ill., Aug. 2, 2011 /PRNewswire/ -- Calamos Asset Management, Inc. (NASDAQ: CLMS), a diversified global investment firm offering equity, fixed income, convertible and alternative strategies, today reported second quarter 2011 results.

Financial Highlights

  • Assets under management were $37.4 billion at June 30, 2011, a 2% decrease from $38.0 billion at the end of the first quarter and up by 25% from $29.9 billion at the end of the second quarter of 2010.
  • Revenues increased by 3% to $92.9 million from $90.5 million for the first quarter and by 15% from $80.5 million in the second quarter of 2010.
  • Operating income was $39.3 million, a 5% increase from $37.3 million in the first quarter and up 33% from $29.7 million in the second quarter of 2010.
  • Operating margin was 42.3% for the current quarter, up from 41.2% in the first quarter and up from 36.9% in the second quarter of the prior year.
  • Net income was $44.5 million, a 44% increase from the first quarter and a 42% increase from the second quarter of 2010. Net income attributable to Calamos Asset Management, Inc. was $6.7 million, representing 21.9% ownership interest in the underlying investment management business.
  • Diluted earnings per share was $0.32, compared to $0.23 per share last quarter and $0.23 a year ago.
    • Diluted earnings per share increased from the prior periods due to increases in operating income and realized gains on the sale of investment securities.
  • The company declared a regular quarterly dividend of 9.5 cents per share payable on August 31, 2011 to shareholders of record on August 16, 2011.

Management Commentary

"Calamos Asset Management continues its position of financial strength and the company's balance sheet remains solid. The quarter, however, brought a slight reduction in Assets under management largely due to market depreciation and, to a lesser extent, slightly negative outflows.  We remain constructive on the long-term opportunities we see for the firm as well as for our shareholders and clients," said John P. Calamos, Sr., chief executive officer and co-chief investment officer.

Distribution Efforts

"The firm is placing continued emphasis on growing the Calamos brand globally while deepening our existing partnerships in the United States. We continued to see positive net flows this quarter into our international growth equity products and from our non-U.S. distribution efforts, including the continued funding of a large institutional mandate in Asia and the awarding of the first institutional mandate into our emerging markets UCITS in the U.K.  Net flows for mutual funds were slightly negative, driven in part by the strategic decision to close the Convertible Fund to new sales earlier this year," said Calamos.

Investment Performance

"We are pleased with the firm's long-term investment performance, reflecting our investment team's philosophy to manage risk and return over an extended time horizon and throughout multiple market cycles. We also continue to generate notable returns from some of our newer strategies, including those for emerging markets and global/international equities. Overall investment performance for the quarter was at or near benchmark," said Calamos.

Investment Performance Highlights:

  • A majority of the institutional strategies rank in the upper half of their eVestment Alliance(1) peer groups for the 3-, 5-, 10-year and Since Inception periods as of June 30, 2011. Details of these rankings are provided in Table D.
  • At least half of Calamos mutual funds rank in the upper half of their respective Lipper(2) categories for the 3-, 5-, 10-, 15-year and Since Inception periods as of June 30, 2011. Details of these ratings can be found in Table E.
  • Eighty-two percent of the company's mutual funds with at least a three-year track record received a 3-, 4-, or 5-star overall rating from Morningstar(3) as of June 30,  2011. Details of the ratings can be found in Table F.
  • The three funds in the firm's global growth equity suite (Calamos Global Equity Fund, Calamos International Growth Fund and Calamos Evolving World Growth Fund) each solidly outperformed its respective benchmark since each fund's inception for A shares at NAV.(4)  
  • Additionally, the new Calamos Discovery Growth Fund, which seeks to find growth opportunities in small- to mid-cap companies, returned 12.91% as of June 30, 2011 compared to a 10.25% return for its benchmark, at NAV.(4)

For complete investment performance, please see Table G or visit www.calamos.com.

Assets Under Management and Flows

Assets under management as of June 30, 2011 totaled $37.4 billion, representing a decrease of $0.6 billion, or 2%, during the second quarter.

  • Average assets under management were $37.8 billion during the second quarter of 2011, compared to $31.7 billion for the same period one year ago.
  • Total net outflows for the quarter were $93 million while market depreciation contributed $516 million to the decrease in assets under management.
  • Average assets under management were $37.3 billion during the first six months of 2011, compared to $32.0 billion for the same period one year ago.
  • The company's investment companies had $218 million in outflows for the quarter and $128 million of inflows year-to-date.
  • Institutional separate accounts had $169 million of positive net inflows in the quarter and $423 million of inflows for the year.
  • Of the company's 18 funds, 11 generated net inflows with the highest concentration of net flows into the low-volatility equity and global strategies.  However, outflows from the Convertible Fund and Growth Fund reduced total net inflows.
  • UCITS funds, with more than $500 million in total assets under management, generated positive inflows of $84 million.

Financial Results

Quarterly Results

Second quarter revenues were $92.9 million, an increase of 15% from $80.5 million during the same period last year. For the three months ended June 30, 2011, operating expenses were $53.6 million, an increase of $2.8 million, or 5%, from the second quarter of 2010.

Investment management fees for the second quarter of 2011 increased by $11.7 million, or 20%, to $70.1 million compared to the second quarter of last year. The increase in investment management fees was principally driven by a 19% increase in average assets under management.  Distribution and underwriting fees increased by $679,000, or 3%, compared to the same period in 2010 as the increase in asset-based distribution fees was offset by lower contingent deferred sales charges.  Distribution fee revenue increased at a slower rate than average assets under management due to an increasing shift in the percentage of assets invested in Class I shares from which the company does not earn distribution revenue.

Compensation expenses of $20.2 million increased by $1.3 million or 7%, from the same quarter last year, mainly due to an increase in accruals for performance-based incentive compensation and, to a lesser extent, increases in salary and benefits expenses. For the second quarter of 2011, distribution expenses were $18.3 million, an increase of $1.8 million, or 11%, due to increased mutual fund assets under management and to the increasing age of Class C share assets. The company retains the distribution fees on Class C shares for a period of 12 months following the initial purchase after which these fees are paid to third party intermediaries and recorded as distribution expenses. Amortization of deferred sales commissions decreased by $1.0 million or 41% due to discontinuing Class B share sales in 2009 and the increasing age of Class C share assets. Marketing and sales promotion expenses were $4.7 million for the quarter, compared to $3.5 million in the second quarter of 2010 mainly due to the continued focus on building awareness of the company's brand and investment strategies. General and administrative expenses decreased by approximately $569,000, or 6%, to $9.0 million for the second quarter of 2011 versus the comparable period in the previous year.  

Operating Income

Management considers operating income to be a good indicator of company performance as it focuses on the core operations of the firm. Operating income was $39.3 million for the current quarter versus $37.3 million in the previous quarter and $29.7 million in the second quarter of the prior year. Operating margin was 42.3% for the current quarter, up from 41.2% in the first quarter and up from 36.9% in the second quarter of the prior year. Diluted earnings per share for the second quarter of 2011 were $0.32 versus $0.23 for the first quarter and $0.23 for the same period a year ago. The increase in earnings per share from the prior quarter was attributable both to a rise in operating income and the increase in non-operating income, principally reflecting realized gains on the sale of investment securities.

Year-to-date Results

Revenues for the first half of 2011 were $183.5 million, a 14% increase from $161.6 million in the first half of 2010.  Operating expenses were $106.8 million for the first six months of the year, a 5% increase from $101.4 million for the same period in 2010.

Investment management fees for the first half of 2011 increased by $20.7 million, or 18%, to $137.7 million compared to the same period of last year. The increase in investment management fees was principally driven by a 17% increase in average assets under management.  Distribution and underwriting fees increased by $1.0 million, or 2%, compared to the same period in 2010 as the asset-based increase in distribution fees was offset by lower contingent deferred sales charges. The differential between the growth in assets and fees is driven by the shift in the percentage of mutual fund assets invested in Class I shares, as noted previously.

For the six months ended June 30, 2011, compensation expenses of $40.8 million increased by $1.8 million or 5%, compared to the same period last year, mostly due to increases in accruals for performance-based incentive compensation.  Distribution expenses in the first half of the year were $36.5 million, an increase of $3.3 million, or 10%, due to increased mutual fund assets under management and to the increasing age of Class C share assets.  As previously stated, the company retains the distribution fees on Class C shares for a period of 12 months following the initial purchase after which these fees are paid to third party intermediaries and recorded as distribution expenses. Amortization of deferred sales commissions decreased by $1.8 million or 37% in the first half of the year due to discontinuing B share sales in 2009 and the increasing age of Class C share assets. Marketing and sales promotion expenses were $8.1 million for the six month period, compared to $6.2 million in the first half of 2010. Marketing and sales promotion expenses continue to rise mainly due to the ongoing focus on enhancing awareness regarding the company's brand and investment strategies and because of the asset-based supplemental distribution payments that we make to distribution intermediaries that have increased with the level of assets managed by the company.

Operating income was $76.7 million for the first half of 2011 versus $60.2 million in the first half of 2010. For the six months ended June 30, 2011, operating margin was 41.8% compared to 37.2% for the same period in 2010. Diluted earnings per share for the first half of 2011 were $0.55 versus $0.47 for the same period in 2010.

Non-Operating Results

Non-operating income, net of non-controlling interest in partnerships, was $9.2 million during the second quarter of 2011 as presented in Table A, compared to income of $4.7 million in the same period of 2010. For the six months ended June 30, 2011, non-operating income, net of non-controlling interest in partnerships was $5.6 million compared to $11.6 million in the same period in the prior year.

Liquidity

The company's financial condition remains strong with a high degree of liquidity. The investment portfolio was approximately $434.4 million at June 30, 2011 and was principally comprised of investments in products that the company manages. This portfolio consists primarily of diversified investments in the company's family of funds and cash equivalents and is used to provide seed capital for the development of new products. To reduce downside risk and price volatility of the total portfolio value, the company continues to use exchange-traded equity option contracts as an economic hedge.

Investment Portfolio Returns

For the three and six months ended June 30, 2011, the net gains and losses on the company's investment portfolio (as presented in Table B) were a loss of $1.6 million in the second quarter and a $10.6 million gain year-to-date, representing investment returns of (0.4)% and 2.9%, respectively. Certain investment securities require differing financial accounting treatments; hence, not all changes in the portfolio's value are reported in current earnings. Instead, only unrealized gains and losses from investment securities owned by the company's broker-dealer and from the company's derivatives positions 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 most recently completed quarter, investment gains of $10.7 million (as presented in both Table A and Table B) increased earnings, while the component of the company's portfolio that directly impacts equity generated net unrealized losses of $12.3 million. The company continues to realize gains from a trading strategy that seeks to harvest capital gains to realize certain deferred tax assets.

Investor Conference Call

Management will hold an investor conference call at 4 p.m. Central Time on Tuesday, August 2, 2011. To access the live call and view management's presentation, visit the Investor Relations section of our website at Calamos.com/Investors. Alternatively, participants may listen to the live call by dialing 888.312.9863 in the U.S. or Canada (719.325.2174 internationally), then entering conference ID #1942061. A replay of the call will be available until the end of the day on August 7, 2011 by dialing 888.203.1112 in the U.S. or Canada (719.457.0820 internationally), then entering conference ID #1942061. The webcast also will be available on the Investor Relations section of our website at Calamos.com/Investors for at least 90 days following the date of the call.

Calamos Asset Management, Inc. (NASDAQ: CLMS) is a globally diversified investment firm offering equity, convertible, low-volatility equity, fixed income and alternative investment strategies, among others. The firm serves institutions and individuals around the world via separately managed accounts and a family of open-end and closed-end funds as well as UCITS for non-U.S. investors, offering a risk-managed approach to capital appreciation and income-producing strategies. For more information, visit Calamos.com.

Performance data quoted represents past performance, which is no guarantee of future results. Current performance may be lower or higher than the performance quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost.

Investing involves risk, including the possible loss of principal. The value of your investment will fluctuate over time and you may gain or lose money. A fund's performance may be affected by risks that include those associated with non-diversification, non-investment grade debt securities, high-yield/high-risk securities, undervalued or overlooked companies, investments in specific industries or countries and potential conflicts of interest. Additional risks to funds may include those associated with investing in foreign securities, emerging markets, initial public offerings, derivatives, short sales and companies with relatively small market capitalizations.

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

Funds distributed by Calamos Financial Services LLC.

The Overall Morningstar Rating for a fund is derived from a weighted average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Rating metrics. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of the funds in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each share class is counted as a fraction of one fund within this scale and rated separately, which may cause slight variations in the distribution percentages.) The Morningstar Rating may differ among share classes of a mutual fund as a result of different sales loads and/or expense structures. It may be based, in part, on the performance of a predecessor fund. Morningstar does not rank funds with less than a three-year performance history.

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.

(1) eVestment Alliance rankings are based on total return for the period ending 6.30.2011, 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. Please see Table D for complete ranking information for the investment strategies listed herein.

(2) All references to Lipper ratings and rankings are based on total return for each respective fund's Class A shares at NAV for the period ending 6.30.2011. Complete Lipper rankings for the Calamos Family of Funds are listed in Table E.

(3) All references to Morningstar ratings and rankings are based on total return for each respective fund's Class A shares at NAV for the period ending 6.30.2011. Complete Morningstar rankings for the Calamos Family of Funds are listed in Table F.

(4) Performance data quoted represents past performance, which is no guarantee of future results. Current performance may be lower or higher than the performance quoted. Complete performance data for the Calamos Family of Funds can be found in Table G.

Calamos Asset Management, Inc.

Consolidated Condensed Statements of Operations

(in thousands, except share data)

(Unaudited)



Three Months Ended

June 30,


Six Months Ended

June 30,


2011


2010


2011


2010

Revenues:








Investment management fees

$70,136


$58,467


$137,744


$117,037

Distribution and underwriting fees

21,943


21,264


44,055


43,099

Other

845


735


1,673


1,460

Total revenues

92,924


80,466


183,472


161,596

Expenses:








Employee compensation and benefits

20,209


18,875


40,841


39,007

Distribution expenses

18,276


16,454


36,509


33,244

Amortization of deferred sales commissions

1,450


2,476


3,198


5,042

Marketing and sales promotion

4,691


3,487


8,130


6,219

General and administrative

8,950


9,519


18,131


17,911

Total operating expenses

53,576


50,811


106,809


101,423

Operating income

39,348


29,655


76,663


60,173

Non-operating income

9,170


4,664


5,648


11,573

Income before income tax provision

48,518


34,319


82,311


71,746

Income tax provision

4,050


3,020


6,957


6,242

Net income

44,468


31,299


75,354


65,504

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

(37,775)


(26,625)


(64,024)


(56,012)

Net income attributable to non-controlling interest in partnerships

-


(4)


(5)


(11)

Net income attributable to Calamos Asset Management, Inc.

$6,693


$4,670


$11,325


$9,481









Earnings per share








 Basic

$0.33


$0.23


$0.56


$0.48

 Diluted

$0.32


$0.23


$0.55


$0.47









Weighted average shares outstanding








 Basic

20,124,895


19,893,730


20,080,392


19,857,438

 Diluted

20,614,941


20,201,608


20,545,099


20,178,590



Calamos Asset Management, Inc.

Assets Under Management

(in millions)



Three Months Ended

June 30,


Six Months Ended

June 30,


2011


2010


2011


2010

Investment Companies








Beginning assets under management

$29,081


$25,040


$27,352


$24,480

Net purchases (redemptions)

(218)


(128)


128


(160)

Market appreciation (depreciation)

(395)


(1,770)


988


(1,178)

 Ending assets under management

28,468


23,142


28,468


23,142

 Average assets under management

28,803


24,379


28,586


24,363

Separate Accounts








Beginning assets under management

8,880


7,923


8,062


8,234

Net purchases (redemptions)

125


(583)


397


(1,098)

Market appreciation (depreciation)

(121)


(569)


425


(365)

 Ending assets under management

8,884


6,771


8,884


6,771

 Average assets under management

9,000


7,274


8,682


7,597

Total Assets Under Management








Beginning assets under management

37,961


32,963


35,414


32,714

Net purchases (redemptions)

(93)


(711)


525


(1,258)

Market appreciation (depreciation)

(516)


(2,339)


1,413


(1,543)

 Ending assets under management

37,352


29,913


37,352


29,913

 Average assets under management

$37,803


$31,653


$37,268


$31,960






At June 30,


Change


2011


2010


Amount


Percent

Investment Companies








 Open-end mutual funds

$22,911


$18,463


$4,448


24%

 Closed-end funds

5,557


4,679


878


19

   Total investment companies

28,468


23,142


5,326


23

Separate Accounts








 Institutional accounts

6,239


4,710


1,529


32

 Managed accounts

2,645


2,061


584


28

   Total separate accounts

8,884


6,771


2,113


31

     Ending assets under management

$37,352


$29,913


$7,439


25%






At June 30,


Change


2011


2010


Amount


Percent

Assets by Strategy








 Equity

$14,213


$10,445


$ 3,768


36%

 Low-volatility Equity

7,523


5,814


1,709


29

 Convertible

7,117


6,473


644


10

 Enhanced Fixed Income

3,139


2,632


507


19

 Total Return

2,418


2,047


371


18

 Alternative

2,395


1,950


445


23

 High Yield

339


333


6


2

 Fixed Income

208


219


(11)


5

  Ending assets under management

$37,352


$29,913


$7,439


25%




Table A

Calamos Asset Management, Inc.

Non-operating Income, Net of Non-controlling Interest in Partnership Investments

(in thousands)

(Unaudited)



Three Months Ended

June 30,


Six Months Ended

June 30,


2011


2010


2011


2010









Interest income

$53


$102


$122


$208

Interest expense

(1,662)


(1,950)


(3,626)