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

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

1 Year

3 Years

5 Years

10 Years

Since

Inception

2014

2013

2014

2013

2014

2013

2014

2013

2014

2013

54%

8%

15%

33%

33%

45%

38%

43%

71%

69%

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%

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%.