Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. Calamos Asset Management, Inc. /DE/ (1299033) 10-Q published on Nov 04, 2016 at 4:13 pm
Reporting Period: Sep 29, 2016
In August 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to add or clarify guidance on the classification of certain cash receipts and cash payments, such as debt prepayment and extinguishment costs, on the statement of cash flows. The amendment is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The Company early adopted this guidance, resulting in debt extinguishment costs of $4.9 million being classified as cash flows from financing activities for the nine months ended September 30, 2016.
Our operating results fluctuate primarily due to changes in the total value and composition of our assets under management. The value and composition of our assets under management are, and will continue to be, influenced by a variety of factors including: purchases and redemptions of shares of open-end funds; net inflows into and withdrawals from separate accounts that we manage; fluctuations in the financial markets around the world that result in appreciation or depreciation of assets under management; and the number and types of our investment strategies and products. We routinely experience inflows and outflows in our assets under management. We have received notice that one account, representing approximately $1.1 billion, or 5%, of our total assets under management at September 30, 2016, will be terminated in the fourth quarter of this year. The expected impact of this termination on annual revenue, if not replaced, is approximately $4.8 million. Based on our current pipeline and preliminary discussions with prospective new accounts, we see the potential to completely replace this lost revenue, starting with expected new awards in the first quarter of 2017.
Investment management fees decreased by 16% in the first nine months of 2016 compared with the first nine months of 2015, which was primarily due to a $3.5 billion, or 15%, decrease in average assets under management for the same period. Investment management fees from open-end funds decreased by 22% to $62.5 million for the first nine months of 2016, from $80.6 million for the first nine months of 2015, driven by a 19% decrease in average open-end fund assets. Investment management fees from our closed-end funds decreased by 9% to $42.1 million for the first nine months of 2016, from $46.1 million for the first nine months of 2015, due to a 9% decrease in average closed-end fund assets. Investment management fees from our separately managed accounts decreased by 4% to $12.9 million for the first nine months of 2016, from $13.4 million for the first nine months of 2015, due to a 6% decrease in average separately managed accounts assets under management. Investment management fees that we earned as a percentage of average assets under management for the first nine months of 2016 were 0.77%, compared with 0.78% for the first nine months of 2015. Investment management fees from assets under advisement for which we provide model portfolio design and oversight were $1.2 million for the first nine months of 2016, compared with $1.5 million for the first nine months of 2015. Investment management fees that we earned for assets under advisement for the first nine months of 2016 and 2015 were 0.30%.
Non-operating income (loss), net of redeemable non-controlling interest in consolidated funds and partnership investments increased by $11.8 million and $941,000 for the third quarter and first nine months of 2016, respectively, when compared with the third quarter and first nine months of 2015. The increase in the third quarter of 2016 included an increase in investment income of $40.9 million offset by an increase in net income attributable to redeemable non-controlling interest in consolidated funds and partnership investments of $25.0 million and $4.9 million in debt extinguishment costs related to the repayment of long-term debt on July 28, 2016. The increase in the first nine months of 2016, compared with the first nine months of 2015, was due to increases in investment income of $22.7 million and dividend income of $815,000, and a decrease in interest expense of $596,000, offset by an increase in net income attributable to redeemable non-controlling interest in consolidated funds and partnership investments of $18.2 million and $4.9 million in debt extinguishment costs related to the repayment of long-term debt. The increase in investment income for the nine months ended September 30, 2016, when compared with the same period in 2015, was mainly due to the consolidation of funds from the adoption of a new accounting pronouncement and realized and unrealized gains from investment securities offset by option contract losses within the Company's investment portfolio.
Net income
Net income attributable to CAM was $1.2 million and $69,000 for the third quarter and first nine months of 2016, respectively, compared with $363,000 and $2.5 million for the third quarter and first nine months of 2015. Non-GAAP net income attributable to CAM was $2.5 million and $6.4 million for the third quarter and first nine months of 2016, respectively, compared with $3.3 million and $10.4 million for the third quarter and first nine months of 2015. See "Supplemental Non-GAAP Financial Measures" below for descriptions of non-GAAP financial measures and a reconciliation of non-GAAP financial measures to GAAP financial measures.