Calamos Asset Management, Inc. Q2 2008 Earnings Call Transcript

Transcript by:

Calamos Asset Management, Inc. (CLMS)

Q2 2008 Earnings Call Transcript

July 17, 2008 5:00 pm ET

Executives

Philip Kranz - Dresner Corporate Services

John Calamos - Chairman, CEO and Co-CIO

Cris Wasiak - Interim CFO

Mark Infanger - VP and Corporate Controller

Analysts

William Katz - Analyst

Craig Siegenthaler - Analyst

Cynthia Mayer - Analyst

Robert Lee - Analyst

Presentation

Operator

Good afternoon. My name is Nicole and I will be your conference operator today. At this time, I would like to welcome everyone to the second quarter 2008 earnings call for Calamos Asset Management conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions).

Mr. Philip Kranz, you may begin your conference.

Philip Kranz

Thank you. Good afternoon. From time to time, information or statements provided by us, including those within this conference call, may contain certain forward-looking statements relating to future events, future financial performance, strategies, expectations, 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 performances or results to differ materially from those expressed in or suggested by the forward-looking statements.

Such risks or uncertainties include, but are not limited to, loss of revenues due to contract terminations and redemptions, our ownership structure, catastrophic or unpredictable events, unavailability of third-party distribution channels, damage to our reputation, our interpretation of and positioning relative to the market, fluctuations in the financial markets and the competitive conditions in the mutual fund, asset management, and broader financial services sectors.

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 the company’s annual and quarterly reports filed with the U.S. Securities and Exchange Commission.

With me today is John Calamos, Chairman, Chief Executive Officer and Co-Chief Investment Officer; Cris Wasiak, Interim Chief Financial Officer; and Mark Infanger, Vice President and Corporate Controller.

With that, I would now like to pass the call over to John.

John Calamos

Thank you, Phil, and thank you for joining us on the Calamos Asset Management second quarter 2008 earnings call. We appreciate your interest in our company and for taking time to be with us today.

I will review some of the overall numbers for the quarter and make some comments about our overall business strategy. Cris Wasiak, our CFO, will then give greater detail on our financials prior to the opening of the conference call to the Q&A. And then before we open the call on the Q&A, I’d like to recap our investment performance and provide a brief market outlook.

On slide 5, our second quarter 2008 results. This is a complex slide. There is a lot of information out there. I want to focus on the adjusted results for the quarter as it’s represented of how we look at the business and make for a better comparison of period-over-period results.

As we have discussed in the past, because of the volatility in non-operating earnings, we think it’s important to reinforce operating results. Operating income was $49.1 million in the current quarter and contributed to $0.32 diluted earnings per share. This compares to operating income as adjusted $47.3 million in the second quarter of ‘07, which contributed to $0.28 of earnings per share and $44.4 million in the first quarter of ‘08, which contributed to $0.27 per share earnings.

As you may recall, operating results for the second quarter ‘07 were negatively impacted by the $26.4 million one-time marketing and sales promotion expense, which reduced operating income by $26.4 million and operating earnings per share by $0.16.

Non-operating income expense net was at net income of $17.1 million in the second quarter of ‘08, contributing to $0.11 per share to diluted EPS. There have been recent developments in the state of Illinois that have resulted in significant income tax savings for the company beginning in 2008. As a result, our state tax rate decreased by 3%, which we view as a tremendous positive to business as we expect this to translate into approximately 7.5% reduction in tax payments.

The reduction in the state income tax rate resulted in a one-time tax expense of $6.8 million in the second quarter of ‘08, which negatively impacted diluted earnings per share by $0.34. Cris will address this impact in more detail in her section.

Slide 6, assets under management. As of June 30th of this year, assets under management were $41.2 billion, down 11% from December of ‘07 and down 6% from June 30th of 2007. Second quarter revenues were $112.2 million, down 2% from second quarter of ‘07 and up 1% from the first quarter of ‘08.

On slide 7, the net flow trends are improving as second quarter net redemptions of $199 million are down from $343 million in first quarter ‘08 and down from $1.3 billion in second quarter of ‘07. We are pleased that in this difficult market environment our net purchases are improving, especially on our strategic growth initiatives. Specifically, institutional net purchases for the quarter were a positive $233 million.

Read the rest of this transcript for free on seekingalpha.com