Calamos Asset Management, Inc. /DE/ - FORM 10-Q

Attached files

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EXCEL - IDEA: XBRL DOCUMENT - Calamos Asset Management, Inc. /DE/	Financial_Report.xls
EX-32.2 - SECTION 906 CERTIFICATION CFO - Calamos Asset Management, Inc. /DE/	clms-2014x09x30xex322.htm
EX-32.1 - SECTION 906 CERTFICIATION CEO - Calamos Asset Management, Inc. /DE/	clms-2014x09x30xex321.htm
EX-31.2 - SECTION 302 CERTIFICATION CFO - Calamos Asset Management, Inc. /DE/	clms-2014x09x30xex312.htm
EX-31.1 - SECTION 302 CERTIFICATION CEO - Calamos Asset Management, Inc. /DE/	clms-2014x09x30xex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

FORM 10-Q

________________



þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	FOR THE QUARTERLY PERIOD ENDED: September 30, 2014

or

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

Commission File Number: 000-51003

________________

CALAMOS ASSET MANAGEMENT, INC.

(Exact Name of Registrant as Specified in its Charter)

________________



Delaware		32-0122554
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

2020 Calamos Court, Naperville, Illinois		60563
(Address of Principal Executive Offices)		(Zip Code)

(630) 245-7200

(Registrant’s telephone number, including area code)

___________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. þ Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer ¨	Accelerated filer þ	Non-accelerated filer ¨	Smaller reporting company ¨
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes þ No

At October 31, 2014, there were 20,530,571 shares of Class A common stock and 100 shares of Class B common stock outstanding.

TABLE OF CONTENTS



PART I — FINANCIAL INFORMATION
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations	18
Item 3. Quantitative and Qualitative Disclosures About Market Risk	29
Item 4. Controls and Procedures	29
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	29
Item 6. Exhibits	30
SIGNATURES	31

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

CALAMOS ASSET MANAGEMENT, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(in thousands, except share data)



	September 30, 2014			December 31, 2013
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	73,740		$	39,078
Receivables:
Affiliates and affiliated funds	15,912			16,306
Customers	3,609			5,806
Investment securities	287,657			472,241
Partnership investments, net	138,932			34,047
Prepaid expenses	3,633			2,812
Deferred tax assets, net	6,793			10,165
Other current assets	2,863			2,283
Total current assets	533,139			582,738
Non-current assets:
Deferred tax assets, net	33,833			36,575
Goodwill	6,380			6,380
Property and equipment, net of accumulated depreciation and amortization ($60,031 at September 30, 2014 and $60,339 at December 31,2013)	14,854			16,990
Other non-current assets	2,992			3,183
Total non-current assets	58,059			63,128
Total assets	$	591,198		$	645,866
LIABILITIES AND EQUITY
LIABILITIES
Current liabilities:
Distribution fees payable	$	10,429		$	10,655
Accrued compensation and benefits	19,914			22,527
Current portion of long-term debt	—			46,160
Interest payable	628			2,729
Accrued expenses and other current liabilities	6,044			7,224
Total current liabilities	37,015			89,295
Non-current liabilities:
Long-term debt	45,955			45,955
Deferred rent	8,845			9,013
Other non-current liabilities	1,579			3,121
Total non-current liabilities	56,379			58,089
Total liabilities	93,394			147,384

Redeemable non-controlling interest in partnership investments	82,491			7,551

EQUITY
Class A Common Stock, $0.01 par value; authorized 600,000,000 shares; 24,890,637 shares issued and 17,890,637 shares outstanding at September 30, 2014; 24,696,095 shares issued and 19,475,765 shares outstanding at December 31, 2013	249			247
Class B Common Stock, $0.01 par value; authorized 1,000 shares; 100 shares issued and outstanding at September 30, 2014 and December 31, 2013	—			—
Additional paid-in capital	220,333			218,359
Retained earnings	87,287			86,115
Accumulated other comprehensive income	977			2,863
Treasury stock; 7,000,000 shares at September 30, 2014 and 5,220,330 shares at December 31, 2013	(106,024		)	(99,528		)
Calamos Asset Management, Inc. stockholders’ equity	202,822			208,056
Non-controlling interest in Calamos Investments LLC (Calamos Interests)	212,491			282,875
Total equity	415,313			490,931
Total liabilities and equity	$	591,198		$	645,866

See accompanying notes to consolidated financial statements.

CALAMOS ASSET MANAGEMENT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share data)

(unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
REVENUES
Investment management fees	$	50,418		$	51,289		$	150,393		$	159,886
Distribution and underwriting fees	12,438			13,024			38,069			40,730
Other	676			652			2,005			1,992
Total revenues	63,532			64,965			190,467			202,608
EXPENSES
Employee compensation and benefits	21,738			23,508			65,464			67,453
Distribution expenses	12,164			12,913			37,122			40,085
Marketing and sales promotion	3,897			4,208			12,268			11,536
General and administrative	9,880			8,912			29,050			27,591
Total operating expenses	47,679			49,541			143,904			146,665
Operating income	15,853			15,424			46,563			55,943
NON-OPERATING INCOME
Net interest expense	(851		)	(1,456		)	(3,776		)	(4,307		)
Investment and other income	4,482			6,786			16,529			12,128
Total non-operating income	3,631			5,330			12,753			7,821
Income before income taxes	19,484			20,754			59,316			63,764
Income tax provision	1,870			1,603			5,278			6,154
Net income	17,614			19,151			54,038			57,610
Net income attributable to non-controlling interest in Calamos Investments LLC (Calamos Interests)	(15,936		)	(15,000		)	(43,749		)	(48,259		)
Net (income) loss attributable to redeemable non-controlling interest in partnership investments	1,691			(1,454		)	(1,553		)	(1,579		)
Net income attributable to Calamos Asset Management, Inc.	$	3,369		$	2,697		$	8,736		$	7,772
Earnings per share:
Basic	$	0.19		$	0.14		$	0.47		$	0.39
Diluted	$	0.18		$	0.13		$	0.46		$	0.38
Weighted average shares outstanding:
Basic	17,888,694			19,671,742			18,399,379			19,998,922
Diluted	18,781,856			20,387,651			19,158,720			20,599,821

Cash dividends declared per share	$	0.15		$	0.125		$	0.40		$	0.375

See accompanying notes to consolidated financial statements.

CALAMOS ASSET MANAGEMENT, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Net income	$	17,614		$	19,151		$	54,038		$	57,610
Other comprehensive income (loss), before income tax provision (benefit)
Unrealized gains (losses) on available-for-sale securities:
Unrealized gains (losses)	(9,123		)	20,094			1,531			20,485
Reclassification adjustment for realized (gains) losses included in net income	(5,949		)	610			(11,559		)	(4,973		)
Other comprehensive income (loss), before income tax provision (benefit)	(15,072		)	20,704			(10,028		)	15,512
Income tax provision (benefit) related to other comprehensive income	(1,533		)	1,874			(1,108		)	1,316
Other comprehensive income (loss), after income tax provision (benefit)	(13,539		)	18,830			(8,920		)	14,196
Comprehensive income	4,075			37,981			45,118			71,806
Comprehensive income attributable to non-controlling interest in Calamos Investments LLC (Calamos Interests)	(5,007		)	(30,641		)	(36,696		)	(60,218		)
Comprehensive (income) loss attributable to redeemable non-controlling interest in partnership investments	1,691			(1,454		)	(1,553		)	(1,579		)
Comprehensive income attributable to Calamos Asset Management, Inc.	$	759		$	5,886		$	6,869		$	10,009

See accompanying notes to consolidated financial statements.

CALAMOS ASSET MANAGEMENT, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Nine Months Ended September 30, 2014

(in thousands, except share data)

(unaudited)



	Calamos Asset Management, Inc. Stockholders
(in thousands)	Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Non-controlling Interest in Calamos Investments LLC (Calamos Interests)			Total			Redeemable Non-controlling Interest in Partnership Investments
Balance at December 31, 2013	$	247	$	218,359		$	86,115		$	2,863		$	(99,528	)	$	282,875		$	490,931		$	7,551
Net income	—		—			8,736			—			—			43,749			52,485			1,553
Changes in unrealized gains on available-for-sale securities, net of income taxes	—		—			—			119			—			1,353			1,472			—
Reclassification adjustment for realized gains on available-for-sale securities included in income, net of income tax	—		—			—			(1,986		)	—			(8,406		)	(10,392		)	—
Issuance of common stock (194,542 Class A common shares)	2		(2		)	—			—			—			—			—			—
Repurchase of common stock by Calamos Investments LLC (1,779,670 Class A common shares)	—		—			—			—			(4,795		)	(16,796		)	(21,591		)	—
Impact of the redemption of common stock from Calamos Investments LLC by Calamos Asset Management, Inc. (194,542 Class A common shares)	—		1,701			—			—			(1,701		)	—			—			—
Cumulative impact of changes in ownership of Calamos Investments LLC	—		(132		)	—			(19		)	—			(381		)	(532		)	—
Compensation expense recognized under stock incentive plans	—		1,034			—			—			—			3,616			4,650			—
Impact on non-controlling interests as a result of dividends paid to Calamos Investments LLC on repurchased common stock	—		(627		)	—			—			—			627			—			—
Dividend equivalent accrued under stock incentive plans	—		—			(158		)	—			—			(552		)	(710		)	—
Consolidation of Calamos Global Opportunities Fund LP	—		—			—			—			—			—			—			73,387
Equity and tax distributions paid to non-controlling interests in Calamos Investments LLC (Calamos Interests)	—		—			—			—			—			(93,594		)	(93,594		)	—
Dividends declared	—		—			(7,406		)	—			—			—			(7,406		)	—
Balance at September 30, 2014	$	249	$	220,333		$	87,287		$	977		$	(106,024	)	$	212,491		$	415,313		$	82,491

See accompanying notes to consolidated financial statements.

CALAMOS ASSET MANAGEMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



	Nine Months Ended September 30,
	2014			2013
Cash and cash equivalents at beginning of period	$	39,078		$	106,796
Cash flows provided by operating activities:
Net income	54,038			57,610
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred sales commissions	1,987			2,121
Other depreciation and amortization	3,274			3,441
Gain on disposal of property and equipment	(111		)	—
Amortization of deferred rent	(168		)	(183		)
Change in unrealized gains on trading securities, derivative assets, derivative liabilities and partnership investments, net	(7,785		)	(2,306		)
Net realized gains on sale of investment securities, derivative assets, derivative liabilities and partnership investments, net	(3,388		)	(5,131		)
Change in deferred tax asset valuation allowance	—			900
Deferred taxes, net	7,208			6,170
Stock-based compensation	4,650			4,887
Employee taxes paid on vesting under stock incentive plans	(510		)	(294		)
(Increase) decrease in assets:
Receivables:
Affiliates and affiliated funds, net	394			2,262
Customers	2,197			2,535
Other assets	(3,233		)	(4,579		)
Decrease in liabilities:
Distribution fees payable	(226		)	(1,861		)
Accrued compensation and benefits	(2,613		)	(2,075		)
Accrued expenses and other liabilities	(5,527		)	(2,623		)
Net cash provided by operating activities	50,187			60,874
Cash flows provided by (used in) investing activities:
Net additions to property and equipment	(991		)	(856		)
Purchases of investment securities	(131,478		)	(374,360		)
Proceeds from sale of investment securities	317,109			329,686
Net purchases of derivatives	—			(1,720		)
Net changes in partnership investments	(31,400		)	16,426
Net cash provided by (used in) investing activities	153,240			(30,824		)
Cash flows used in financing activities:
Repayment of long-term debt	(46,160		)	—
Deferred tax expense on vesting under stock incentive plans	(14		)	(96		)
Repurchase of common stock by Calamos Investments LLC (1,779,670 at September 30, 2014, and 904,350 at September 30, 2013 Class A common shares)	(21,591		)	(9,717		)
Equity distributions paid to non-controlling interests (Calamos Interests)	(71,571		)	(21,009		)
Tax distributions paid to non-controlling interests (Calamos Interests)	(22,023		)	(26,922		)
Cash dividends paid to common stockholders	(7,406		)	(7,520		)
Net cash used in financing activities	(168,765		)	(65,264		)
Net increase (decrease) in cash and cash equivalents	34,662			(35,214		)
Cash and cash equivalents at end of period	$	73,740		$	71,582
Supplemental disclosure of cash flow information:
Cash paid for (refunded):
Income taxes, net	$	(1,416	)	$	1,593
Interest	$	5,954		$	5,954

See accompanying notes to consolidated financial statements.

CALAMOS ASSET MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Organization and Description of Business

Calamos Asset Management, Inc. (“CAM”), representing the public shares outstanding, as of September 30, 2014, owned 22.2% of the operating company, Calamos Investments LLC (“Calamos Investments”), with the remaining 77.8% privately owned by Calamos Family Partners, Inc. (“CFP”), a Delaware corporation, and John P. Calamos, Sr., the Chairman, Chief Executive Officer and Global Co-Chief Investment Officer of CAM. CAM, together with Calamos Investments and Calamos Investments’ subsidiaries (the “Company”), operates the investment advisory and distribution services businesses reported within these consolidated financial statements. CAM operates and is the sole manager, and thus controls all of the business and affairs of Calamos Investments and, as a result of this control, consolidates the financial results of Calamos Investments with its own financial results. CFP and John P. Calamos, Sr. (collectively "Calamos Interests") ownership interest, in accordance with applicable accounting guidance, is reflected and referred to within these consolidated financial statements as “non-controlling interest in Calamos Investments LLC”. As shown in the diagram below, CFP also owns all of CAM’s outstanding Class B common stock, which represents 97.4% of the combined voting power of all classes of CAM’s voting stock. The graphic below illustrates our organizational and ownership structure as of September 30, 2014:


(1)	Represents combined economic interest of Calamos Family Partners, Inc. and John P. Calamos, Sr. who is also a member of Calamos Investments LLC.

(2)

Represents combined economic interest of all public stockholders, including John P. Calamos, Sr. and John P. Calamos, Jr.’s combined 17.8% ownership interest of Class A common stock. The calculation of ownership interest includes options and restricted stock units ("RSUs") that vest within 60 days, as well as CFP’s indirect ownership interest in Class A common stock purchased by Calamos Investments LLC, pursuant to the Company’s share repurchase plan.

CALAMOS ASSET MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company primarily provides investment advisory services to individuals and institutional investors through a number of investment products that include open-end funds and closed-end funds (the “Funds”), separate accounts, offshore funds, exchange traded funds and partnerships, as well as provides model portfolio design and oversight for separately managed accounts. The subsidiaries through which the Company provides these services include: Calamos Advisors LLC (“CAL”), a Delaware limited liability company and registered investment advisor; Calamos Financial Services LLC (“CFS”), a Delaware limited liability company and registered broker-dealer; Calamos Wealth Management LLC, a Delaware limited liability company and registered investment advisor; and Calamos Investments LLP, a United Kingdom limited liability partnership, registered investment advisor with the Financial Conduct Authority in the United Kingdom, and a global distributor of the offshore funds and Company products. For reporting purposes, the offshore funds are included within the open-end funds.

(2)Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), which require the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Management believes the accounting estimates are appropriate and reasonably stated; however, due to the inherent uncertainties in making estimates, actual amounts could differ from these estimates.

The consolidated financial statements as of September 30, 2014 and for the three months ended September 30, 2014 and 2013 have not been audited by the Company’s independent registered public accounting firm. In the opinion of management, these statements contain all adjustments, including those of a normal recurring nature, necessary for fair presentation of the financial condition and results of operations. The results for the interim periods presented are not necessarily indicative of the results to be obtained for a full fiscal year. This Form 10-Q filing should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Principles of Consolidation

The Company consolidates investments in which the Company’s ownership exceeds 50% or in which the Company operates and controls the business and affairs of the entity or is deemed to be the primary beneficiary. In order to make this determination, an analysis is performed to determine if the investment in an affiliate or partnership is a variable interest entity ("VIE"). The Company has evaluated its investments in affiliates and partnerships and has concluded that they are not VIEs. With respect to partnership investments, the limited partners have no control of the business and affairs of the partnership, no substantive ability to dissolve (liquidate) the partnership, or otherwise remove the general partner (CAL and Calamos Investments) without cause or have other substantive rights.

The consolidated financial statements include the financial statements of CAM, Calamos Investments, Calamos Investments’ wholly-owned subsidiaries, and the Company’s partnerships in which it owns a majority interest or in which it has operating control. The equity method of accounting is used for investments in which the Company has significant influence, but less than 50% ownership. All significant intercompany balances and transactions have been eliminated.

The Calamos Interests’ combined 77.8% interest in Calamos Investments at September 30, 2014 and December 31, 2013, is represented as a non-controlling interest in Calamos Investments LLC in the Company’s consolidated financial statements. Non-controlling interest in Calamos Investments is derived by multiplying the historical equity of Calamos Investments by the Calamos Interests’ aggregate ownership percentage for the periods presented. Issuances and repurchases of CAM’s common stock may result in changes to CAM’s ownership percentage and to the non-controlling interests’ ownership percentage of Calamos Investments with resulting changes reflected in the consolidated statements of changes in equity. Income is allocated based on the average ownership interest during the period in which the income is earned.

CAM owns certain assets to which it has exclusive economic rights. As of September 30, 2014 and 2013, these assets included cash, cash equivalents and investment securities of $73.4 million and $71.7 million, net current and non-current deferred tax assets of $40.6 million and $46.8 million, net current income taxes receivable of $2.9 million and $3.1 million, respectively, and a loan receivable from Calamos Investments of $25.2 million as of September 30, 2014, that are reported together with Calamos Investments’ consolidated assets in the consolidated statements of financial condition. The proceeds from the $25.0 million short term, interest-bearing loan from CAM to Calamos Investments were used to repay $46.2 million of senior notes outstanding on July 15, 2014. Calamos Investments repaid the loan from CAM subsequent to September 30, 2014. Additionally, net income before income taxes of $59.3 million and $63.8 million for the nine months ended September 30, 2014 and 2013, respectively, each included $1.3 million and $139,000, respectively, of interest income, dividend income and realized gains and losses on cash and cash equivalents held solely by CAM. These portions of CAM’s income and expense are not affected by non-controlling interests.

CALAMOS ASSET MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Calamos Investments, through a wholly owned subsidiary, is indirectly the general partner and controls the operations of Calamos Arista Strategic Fund LP (formerly Black Strategic Fund, LP), a U.S. feeder fund and Calamos Arista Strategic Fund Ltd, an offshore feeder fund both to Calamos Arista Strategic Master Fund LTD (formerly Black Strategic Master Fund Ltd.), a hedge fund in the Cayman Islands. As Calamos Investments is the general partner and controls the operations of Calamos Arista Strategic Fund LP and Calamos Arista Strategic Fund Ltd, the results of these partnerships and the master fund are included in the Company’s consolidated financial results. Calamos Investments, through its wholly owned subsidiaries and affiliates, is indirectly the general partner and controls the operations of Calamos Global Opportunities Fund LP, for which it acquired a majority interest in the partnership during the second quarter of 2014. The results of this partnership are included in the Company's consolidated financial statements for the three and nine months ended September 30, 2014. The operations of Calamos International Growth Fund LP were controlled by CAL, the general partner. In December 2013, the limited partners of Calamos International Growth Fund LP redeemed all of their interests in the fund. As a result, the Company deconsolidated Calamos International Growth Fund LP and accounted for this partnership investment using the equity method as of December 31, 2013. Calamos International Growth Fund LP was dissolved on April 10, 2014. See Note 5, Partnership Investments, for more discussion regarding these funds.

For the periods the partnerships are consolidated, the assets and liabilities of the partnerships are presented on a net basis within partnership investments, net in the consolidated statements of financial condition. The net income for these partnerships is included in investment and other income in the consolidated statements of operations, and the change in partnership investments is included in the net changes in partnership investments in the consolidated statements of cash flows. The partnerships are presented on a net basis in order to provide more clarity to the financial position and results of the core operations of the Company. The underlying assets and liabilities that are being consolidated are described in Note 5, Partnership Investments. The combined interests of all of the consolidated partnerships, not owned by the Company and that are redeemable at net asset value at the option of the holder, are presented as redeemable non-controlling interest in partnership investments in the Company’s consolidated financial statements for the periods those partnerships were consolidated.

The Company holds non-controlling interests in certain other partnership investments that are included in partnership investments, net in the consolidated statements of financial condition. These other partnership investments are accounted for under the equity method.

Restricted Cash

The Company has a $431,000 security deposit that is restricted from the Company’s general corporate use and is being reported in other non-current assets in the consolidated statements of financial condition.

Treasury Stock

During the first quarter of 2013, the Company’s board of directors approved a Class A common share repurchase program. Under the repurchase program, Calamos Investments was authorized to repurchase up to 3 million shares of CAM’s common stock over a period of 2 years. The program was implemented primarily to manage the dilution from share issuances under the Company’s incentive compensation plan. During the nine months ended September 30, 2014, Calamos Investments repurchased 1,779,670 shares of Class A common stock, at an average purchase price of $12.13 and a total cost of $21.6 million. During the second quarter of 2014, Calamos Investments completed the share repurchase program for a total cumulative cost of $34.8 million. As Calamos Investments is consolidated with CAM, the repurchased shares are reported as treasury shares. As such, CAM’s 22.2% ownership interest in these shares totaling $4.8 million is reported in treasury stock, with Calamos Interests’ 77.8% ownership interest in these shares totaling $16.8 million reported in non-controlling interest in the consolidated statements of financial condition. The total shares repurchased are not included in the calculation of basic and diluted earnings per share in accordance with GAAP.

During the three and nine months ended September 30, 2014, CAM redeemed 5,222 and 194,542, respectively, Class A common shares from Calamos Investments for a value of $61,000 and $2.2 million, respectively, which represents the fair value of the shares on the date of redemption. As Calamos Investments is consolidated with CAM, the impact of the distribution reflecting the non-controlling interest is $47,000 and $1.7 million, respectively.

During the three and nine months ended September 30, 2014, dividends on shares held by Calamos Investments totaled $396,000 and $806,000, respectively. The payment of these dividends increased Calamos Investments' equity resulting in a $308,000 adjustment for the third quarter of 2014, and a $627,000 adjustment for the nine months ended September 30, 2014, from additional paid in capital to non-controlling interest in Calamos Investments LLC in the consolidated statement of changes in equity. These adjustments represent Calamos Interests' ownership interest in those dividend payments.

For a comprehensive disclosure of the Company's significant accounting policies, see the Company's Annual Report on Form 10-K for the year ended December 31, 2013.

CALAMOS ASSET MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(3)Investment Securities

The Company is required to carry all investment securities it owns at fair value and record all changes in fair value in current earnings. As such, unrealized gains and losses on trading securities, as well as realized gains and losses on all investment securities, are included in investment and other income in the consolidated statements of operations. Unrealized gains and losses on available-for-sale securities are reported, net of CAM's deferred income tax, as a separate component of accumulated other comprehensive income in equity until realized.

The following table provides a summary of investment securities as of September 30, 2014 and December 31, 2013:



(in thousands)
September 30, 2014	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Available-for-sale securities:
Funds
Equity
Global Growth	$	142,535	$	5,832	$	(1,374	)	$	146,993
U.S. Growth	64,964		1,638		(1,051		)	65,551
Value	9,979		141		(40		)	10,080
Alternative	40,065		990		(193		)	40,862
Fixed Income/High Yield	17,361		133		(107		)	17,387
Other	1,613		237		(3		)	1,847
Total Funds	276,517		8,971		(2,768		)	282,720
Common stock	135		95		—			230
Total available-for-sale securities	$	276,652	$	9,066	$	(2,768	)	$	282,950
Trading securities:
Funds
Equity
U.S. Growth	$	4,682	$	72	$	(47	)	$	4,707
Total investment securities								$	287,657



(in thousands)
December 31, 2013	Cost		Unrealized Gains		Unrealized Losses			Fair Value
Available-for-sale securities:
Funds
Equity
Global Growth	$	214,811	$	11,097	$	(15	)	$	225,893
U.S. Growth	55,109		2,971		(436		)	57,644
Value	9,886		315		(243		)	9,958
Alternative	35,436		2,000		—			37,436
Fixed Income/High Yield	98,834		429		(4		)	99,259
Other	1,414		133		(2		)	1,545
Total Funds	415,490		16,945		(700		)	431,735
Common stock	133		80		—			213
Total available-for-sale securities	$	415,623	$	17,025	$	(700	)	$	431,948
Trading securities:
Funds
Equity
U.S. Growth	$	48,539	$	320	$	(8,566	)	$	40,293
Total investment securities								$	472,241

CALAMOS ASSET MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Of the $287.4 million and $472.0 million investments in Funds at September 30, 2014 and December 31, 2013, respectively, $287.4 million and $427.6 million, respectively, were invested in affiliated funds and accounts that are separately managed.

The aggregate fair value of available-for-sale investment securities that were in an unrealized loss position at September 30, 2014 and December 31, 2013 was $108.7 million and $14.0 million, respectively. As of September 30, 2014, the Company's investment securities that had been in a continuous loss position for 12 months or longer were not significant. As of December 31, 2013, the Company had no investment securities that had been in a continuous loss position for 12 months or longer.

As of September 30, 2014 and December 31, 2013, the Company believes that the $2.8 million and $700,000, respectively, in unrealized losses on certain available-for-sale securities are only temporary in nature, as these losses are a result of short-term declines in the net asset value of the funds. Further, the Company has the intent and ability to hold these securities for a period of time sufficient to allow for recovery of the market value. The Company also considered current market conditions and the nature of the securities held when determining the recoverability of those securities' market value. As of September 30, 2014, no other-than-temporary impairment charge was recorded.

The following table provides a summary of changes in investment securities for the three and nine months ended September 30, 2014 and 2013:



	Three Months Ended September 30,					Nine Months Ended September 30,
(in thousands)	2014			2013		2014		2013
Available-for-sale securities:
Proceeds from sales	$	84,917		$	77,465	$	279,245	$	325,447
Gross realized gains on sales	$	5,539		$	2,833	$	11,011	$	10,171
Trading securities:
Change in unrealized gains (losses)	$	(167	)	$	429	$	8,270	$	(143	)

The table below summarizes the tax provision (benefit) on unrealized gains (losses) and gains (losses) reclassified out of accumulated other comprehensive income (loss) on available-for-sale securities for the three and nine months ended September 30, 2014 and 2013:



	Three Months Ended September 30, 2014									Three Months Ended September 30, 2013
(in thousands)	Before-Tax Amount			Tax Benefit			After-Tax Amount			Before-Tax Amount		Tax Provision		After-Tax Amount
Available-for-sale securities:
Changes in unrealized gains (losses)	$	(9,123	)	$	(912	)	$	(8,211	)	$	20,094	$	1,823	$	18,271
Reclassification adjustment for realized (gains) losses included in income	(5,949		)	(621		)	(5,328		)	610		51		559
Other comprehensive income (loss)	$	(15,072	)	$	(1,533	)	$	(13,539	)	$	20,704	$	1,874	$	18,830



	Nine Months Ended September 30, 2014									Nine Months Ended September 30, 2013
(in thousands)	Before-Tax Amount			Tax Provision (Benefit)			After-Tax Amount			Before-Tax Amount			Tax Provision (Benefit)			After-Tax Amount
Available-for-sale securities:
Changes in unrealized gains	$	1,531		$	59		$	1,472		$	20,485		$	1,724		$	18,761
Reclassification adjustment for realized gains included in income	(11,559		)	(1,167		)	(10,392		)	(4,973		)	(408		)	(4,565		)
Other comprehensive income (loss)	$	(10,028	)	$	(1,108	)	$	(8,920	)	$	15,512		$	1,316		$	14,196

Reclassification of realized (gains) losses out of accumulated other comprehensive income (loss) are reported in non-operating income, in investment income, in the consolidated statement of operations. See Note 9, Non-Operating Income.

CALAMOS ASSET MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(4)Derivative Assets and Liabilities

The Company used exchange-traded option contracts as an economic hedge of price changes in its investment securities portfolio in order to reduce the volatility equity markets have on the fair value of the Company's corporate investment portfolio and to assist in compliance with its debt covenants during the third quarter of 2014. The Company's investment securities, totaling $287.7 million at September 30, 2014, consist primarily of positions in several Calamos equity and fixed income funds. The equity price risk in the investment portfolio was hedged using exchange-traded option contracts that correlate most closely with the change in value of the portfolio being hedged. The use of these option contracts was part of a hedge overlay strategy to minimize downside risk in the hedged portfolio. The Company may adjust its hedge position in response to movement and volatility in prices and changes in the composition of the hedged portfolio, but generally is not actively buying and selling contracts.

The Company has elected not to offset its derivative assets with its derivative liabilities even if a right of offset exists. When applicable, the fair value of option contracts is reported on a gross basis in derivative assets and derivative liabilities in the consolidated statements of financial condition. Net gains and losses on these contracts are reported in investment and other income in the consolidated statements of operations with net gains of $1.8 million and net losses of $1.9 million for the nine months ended September 30, 2014 and 2013, respectively. The Company used these derivatives for risk management purposes but has not designated the contracts as hedges for accounting purposes. The Company had no derivative instruments outstanding as of September 30, 2014.

(5)Partnership Investments

Presented below are the underlying assets and liabilities of the partnerships that the Company reports on a net consolidated basis, as well as partnership investments that the Company accounts for under the equity method. These investments are presented collectively as partnership investments, net in its consolidated statements of financial condition as of September 30, 2014 and December 31, 2013.



(in thousands)	September 30, 2014			December 31, 2013
Consolidated partnerships:
Securities owned	$	124,993		$	29,149
Cash and cash equivalents	20,820			12,208
Receivables for securities sold	1,052			1,076
Receivables for foreign exchange	20,261			—
Other current assets	1,320			30
Exchange-traded option contracts, net	634			94
Securities sold not yet purchased	(8,114		)	(10,670		)
Payables for securities purchased	(1,656		)	(1,576		)
Payables for foreign currency	(20,261		)	—
Accrued expenses and other current liabilities	(167		)	(76		)
Total	138,882			30,235
Equity method investment in partnerships	50			3,812
Partnership investments, net	$	138,932		$	34,047

During the second quarter of 2014, Calamos Investments, through its wholly owned subsidiaries and affiliates, acquired a majority interest in Calamos Global Opportunities Fund LP. The results of this partnership are included in the Company's consolidated financial statements for the three and nine months ended September 30, 2014.

(6)Fair Value Measurements

The Company utilizes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows: Level 1 — observable inputs such as quoted prices for identical assets and liabilities in active markets; Level 2 — inputs, other than the quoted prices in active markets, that are observable either directly or indirectly (including quoted prices of similar securities, interest rates, credit risk, fair value adjustments to quoted foreign securities, etc.); and Level 3 — unobservable inputs in which there is little or no market data, and require the reporting entity to develop its own assumptions. For each period presented, the Company did not have any assets or liabilities measured at fair value using Level 3 measurements. Transfers between levels are measured at the end of the reporting period. The Company had no transfers between levels during the period.

CALAMOS ASSET MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Investments are presented in the consolidated financial statements at fair value in accordance with GAAP. Investments in open-end funds are stated at fair value based on end of day published net asset values of shares owned by the Company. The fair value of investments in open-end funds was $245.7 million and $450.4 million at the end of September 30, 2014 and December 31, 2013, respectively. There are no unfunded commitments related to these investments. These investments may be redeemed daily with a redemption notice period of up to seven days. Investments in securities traded on a national securities exchange are stated at the last reported sales price on the day of valuation. Other securities, including derivatives, traded in the over-the-counter market and listed securities for which no sale was reported on that date are stated at the last quoted bid price. However, short sales positions and call options written are reported at the last quoted asked price. Convertible bonds, fixed income securities and other securities for which quotations are not readily available are valued at fair value based on observable inputs such as market prices for similar instruments as validated by third party pricing agencies and the Company’s prime broker.

The following tables provide the hierarchy of inputs used to derive the fair value of the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2014 and December 31, 2013, respectively. Foreign currency contracts are carried in the Company's partnership investments and are presented on a net basis where the right of offset exists, and had no impact for either period presented.



				Fair Value Measurements Using
(in thousands) Description	September 30, 2014			Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)			Significant Other Observable Inputs (Level 2)
Cash and cash equivalents
Money market funds	$	11,258		$	11,258		$	—
Investment securities (Note 3)
Funds
Equity
Global Growth	146,993			146,993			—
U.S. Growth	70,258			70,258			—
Value	12,209			12,209			—
Alternative	42,117			42,117			—
Fixed Income/High Yield	17,387			17,387			—
Other	1,847			1,847			—
Total Funds	290,811			290,811			—
Common stock	230			230			—
Investment securities	291,041			291,041			—
Securities and derivatives owned by partnership investments (Note 5)
Common stocks	75,654			48,742			26,912
Convertible preferred stocks	5,365			2,850			2,515
Convertible bonds	38,330			—			38,330
Corporate bonds	5,644			—			5,644
Short term investments	7,973			7,973			—
Exchange-traded put option contracts	706			706			—
	133,672			60,271			73,401
Securities sold but not yet purchased by partnership investments (Note 5)
Common stocks	(7,850		)	(7,141		)	(709		)
Exchange-traded funds	(264		)	(264		)	—
Exchange-traded call option contracts	(72		)	(72		)	—
Securities sold but not yet purchased (Note 3)
Common stocks	(3,384		)	(3,384		)	—
	(11,570		)	(10,861		)	(709		)
Total	$	424,401		$	351,709		$	72,692

CALAMOS ASSET MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)



				Fair Value Measurements Using
(in thousands) Description	December 31, 2013			Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)			Significant Other Observable Inputs (Level 2)
Cash and cash equivalents
Money market funds	$	1,752		$	1,752		$	—
Investment securities (Note 3)
Funds
Equity
Global Growth	225,892			225,892			—
U.S. Growth	97,936			97,936			—
Value	9,959			9,959			—
Alternative	37,436			37,436			—
Fixed Income/High Yield	99,260			99,260			—
Other	1,545			1,545			—
Total Funds	472,028			472,028			—
Common stock	213			213			—
Investment securities	472,241			472,241			—
Securities and derivatives owned by partnership investments (Note 5)
Common stocks	29,149			29,149			—
Exchange-traded put option contracts	150			150			—
	29,299			29,299			—
Securities sold but not yet purchased by partnership investments (Note 5)
Common stocks	(10,185		)	(10,185		)	—
Exchange-traded funds	(485		)	(485		)	—
Exchange-traded call option contracts	(56		)	(56		)	—
	(10,726		)	(10,726		)	—
Total	$	492,566		$	492,566		$	—

The fair value of the Company’s long-term debt, which has a total carrying value of $46.0 million and $92.1 million at September 30, 2014 and December 31, 2013, was $54.2 million and $104.4 million, respectively. During the third quarter of 2014, $46.2 million of senior notes outstanding were repaid. The fair value of the Company’s payment obligation, which has a carrying value of $1.7 million and $3.4 million at September 30, 2014 and December 31, 2013, was $1.7 million and $3.3 million, respectively. This obligation is associated with the Company's purchase of Black Capital LLC in 2012, reported in other current liabilities in the consolidated statements of financial condition. These fair value estimates are calculated using discounted cash flows based on the Company’s incremental borrowing rates and market inputs for similar bonds for the debt, and the treasury yield curve plus market spread for the payment obligation. The fair values of the debt and payment obligation are based on Level 2 inputs within the fair value hierarchy.

The carrying value of all other financial instruments approximates fair value due to the short maturities of these financial instruments.

(7)Loans Payable

The Company has access to margin loans for the settlement of call options, as well as an additional source of liquidity. The interest rate that can be charged on margin loans is 2.5% per annum, based on the brokerage firm’s lending rate. These loans are due on demand. The Company can borrow up to 70% of its marginable securities on deposit with its brokerage firm. The Company had no margin loan balances outstanding at September 30, 2014 and December 31, 2013.

CALAMOS ASSET MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(8)Stock-Based Compensation

Under the Company’s incentive compensation plan, certain employees of the Company receive stock-based compensation comprised of stock options and restricted stock units (“RSUs”). Historically, RSUs have been settled with newly issued shares so that no cash was used by the Company to settle awards; however, the Company may also use treasury shares upon the exercise of stock options and upon conversion of RSUs. The Company’s Annual Report on Form 10-K for the year ended December 31, 2013 provides details of this plan and its provisions.

During the nine months ended September 30, 2014, the Company granted 861,155 RSUs and there were 464,973 RSUs forfeited. During the same period, the Company granted no stock options and there were 188,947 stock options forfeited.

During the nine months ended September 30, 2014, 238,774 RSUs vested with 44,232 units withheld for taxes and 194,542 RSUs converted into an equal number of shares of CAM’s Class A common stock. The total intrinsic value and the fair value of the converted shares was $2.3 million. The total tax benefit realized in connection with the vesting of the RSUs during the nine months ended September 30, 2014 was $265,000, as the Company receives tax benefits based upon the portion of Calamos Investments’ expense that it recognizes.

During the nine months ended September 30, 2014 and 2013, compensation expense recorded in connection with the RSUs and stock options was $4.7 million and $4.9 million, respectively, of which $1.0 million and $1.1 million, respectively, was credited as additional paid-in capital after giving effect to the non-controlling interests. The amount of deferred tax asset created was $382,000 and $401,000 during the nine months ended September 30, 2014 and 2013, respectively. As of September 30, 2014, $17.9 million of total unrecognized compensation expense related to unvested stock option and RSU awards is expected to be recognized over a weighted-average period of 3.1 years.

(9)Non-Operating Income

Non-operating income was comprised of the following components for the three and nine months ended September 30, 2014 and 2013:



	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2014			2013			2014			2013
Interest income	$	34		$	49		$	123		$	209
Interest expense	(885		)	(1,505		)	(3,899		)	(4,516		)
Net interest expense	(851		)	(1,456		)	(3,776		)	(4,307		)
Investment income	3,852			5,606			14,621			9,091
Dividend income	605			1,017			1,615			2,750
Miscellaneous other income	25			163			293			287
Investment and other income	4,482			6,786			16,529			12,128
Non-operating income	$	3,631		$	5,330		$	12,753		$	7,821

CALAMOS ASSET MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

(10)Income Taxes

Calamos Investments is subject to certain income-based state taxes; therefore, income taxes reflect not only the portion attributed to CAM stockholders but also a portion of income taxes attributable to non-controlling interests.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
(in thousands)
Income tax provision	$	1,870		$	1,603		$	5,278		$	6,154
Income tax (provision) benefit attributable to non-controlling interest in Calamos Investments	(69		)	10			(148		)	(37		)
Income tax provision attributable to CAM	1,801			1,613			5,130			6,117
Net income attributable to CAM	3,369			2,697			8,736			7,772
Income before taxes attributable to CAM	$	5,170		$	4,310		$	13,866		$	13,889
CAM’s effective income tax rate	34.8		%	37.4		%	37.0		%	44.0		%

As of December 31, 2013, the Company's total capital loss carryforward was $6.3 million, of which $5.8 million will expire in 2014 and $456,000 will expire in 2017, if not used before the expiration dates. As of September 30, 2014, the Company's valuation allowance on this deferred tax asset was $2.1 million.

The effective tax rate for the first nine months of 2013 includes the impact of an increase in the deferred tax valuation allowance of $900,000, to reduce our deferred income tax assets to an amount that is more likely than not to be realized. Excluding the deferred tax valuation allowance, our effective income tax rate would be 37.6% for the first nine months of 2013.

(11)Earnings Per Share

The following table reflects the calculation of basic and diluted earnings per share:



	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share amounts)	2014		2013		2014		2013
Earnings per share – basic:
Earnings available to common shareholders	$	3,369	$	2,697	$	8,736	$	7,772
Weighted average shares outstanding	17,889		19,672		18,399		19,999
Earnings per share – basic	$	0.19	$	0.14	$	0.47	$	0.39
Earnings per share – diluted:
Earnings available to common shareholders	$	3,369	$	2,697	$	8,736	$	7,772
Weighted average shares outstanding	17,889		19,672		18,399		19,999
Dilutive impact of restricted stock units	893		716		759		601
Weighted average shares outstanding	18,782		20,388		19,158		20,600
Earnings per share – diluted	$	0.18	$	0.13	$	0.46	$	0.38

When dilutive, diluted shares outstanding are calculated (a) assuming that Calamos Interests exchanged all of their ownership interest in Calamos Investments and their CAM Class B common stock for shares of CAM’s Class A common stock (the "Exchange") and (b) including the effect of outstanding dilutive equity incentive compensation awards. As of September 30, 2014, and 2013, the impact of the Exchange was anti-dilutive and, therefore, excluded from the calculation of diluted earnings per share.

The Company uses the treasury stock method to reflect the dilutive effect of unvested RSUs and unexercised stock options on diluted earnings per share. Under the treasury stock method, if the average market price of common stock increases above the option’s exercise price, the proceeds that would be assumed to be realized from the exercise of the option would be used to acquire outstanding shares of common stock. However, the awards may be anti-dilutive even when the market price of the underlying stock exceeds the option’s exercise price. This result is possible because compensation cost attributed to future services and not yet recognized is included as a component of the assumed proceeds upon exercise. The dilutive effect of such options and RSUs would increase the weighted average number of shares used in the calculation of diluted earnings per share.

CALAMOS ASSET MANAGEMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

The Company amended its certificate of incorporation requiring that the Exchange be based on a fair value approach (details of the amendment are set forth in the Company’s Schedule 14C filed with the Securities and Exchange Commission on January 12, 2009). The amendment results in the same or fewer shares of Class A common stock being issuable at the time of the Exchange.

The shares issuable upon the Exchange as presented are estimated solely on the formula as described in Schedule 14C that does not necessarily reflect all inputs used in a fair valuation. It is critical to note that this formula does not incorporate certain economic factors and as such, in the event of an actual Exchange, the majority of the Company’s independent directors may determine the fair market value of CAM’s net assets and its ownership in Calamos Investments. For example, premiums and/or discounts for control and marketability as well as a different discount rate for future cash flows may be applied. Therefore, the directors’ valuation may result in the actual number of shares being materially different from the shares presented. Further, based upon currently available information, the Company believes it is unlikely that any Exchange would transpire without a fair market valuation of CAM’s net assets and possibly an agreement by Calamos Interests to Exchange, based upon that fair market valuation.

The following table shows the number of shares which were excluded from the computation of diluted earnings per share as they were anti-dilutive:



	Three Months Ended September 30,		Nine Months Ended September 30,
	2014	2013	2014	2013
Shares of Class A common stock issuable upon an Exchange of Calamos Interests’ ownership in Calamos Investments*	22,592,845	31,877,237	22,592,845	31,877,237
Stock options	1,912,621	2,101,568	1,912,621	2,101,568
Total	24,505,466	33,978,805	24,505,466	33,978,805

* Number of shares calculated with the value of Calamos Investments LLC determined by using the closing price of our shares as of September 30, 2014 ($11.27) and September 30, 2013 ($9.99) as well as assuming said closing prices fully reflect all of CAM's assets; including the application of a 12% discount rate to certain deferred tax assets at each of September 30, 2014 and 2013. The value of Calamos Investments is then multiplied by Calamos Interests' percentage ownership in Calamos Investments LLC, with the result divided by the applicable period-end closing price. See Note 2, Summary of Significant Accounting Policies - Principles of Consolidation, for a description of certain assets owned by CAM.

(12)Recently Issued Accounting Pronouncements

The Company has reviewed all newly issued accounting pronouncements that are applicable to its business and to the preparation of its consolidated financial statements, including those not yet required to be adopted. The Company does not believe any such pronouncements will have a material effect on the Company’s financial position or results of operations. Accounting guidance that will become effective in future years, with respect to the Company’s consolidated financial statements, is described below:

In May 2014, the Financial Accounting Standards Board ("FASB") issued new guidance on revenue from contracts with customers. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for annual and interim periods beginning after December 15, 2016 and shall be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. Early application of this standard is not permitted. The Company's effective date is January 1, 2017. The Company is evaluating the effect of adopting this new accounting guidance but does not expect adoption will have a material impact on its results of operations, cash flows or financial position.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

We are a firm of 360 full-time associates that primarily provides investment advisory services to institutions and individuals, managing and servicing $24.5 billion and $26.6 billion in assets under management as of September 30, 2014 and 2013, respectively. Assets under management do not include assets under advisement of $729 million and $844 million as of September 30, 2014 and 2013, respectively, for which the Company provides model portfolio design and oversight.

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 market our investment strategies to our clients through a variety of products designed to suit their investment needs. We currently categorize the portfolios that we manage within four investment product types captured in our funds and separate accounts. The following table lists our assets under management by product as of September 30, 2014 and 2013.



	September 30,
(in millions)	2014		2013
Funds
Open-end funds	$	15,495	$	15,679
Closed-end funds	6,314		6,019
Total funds	21,809		21,698
Separate Accounts
Institutional accounts	1,801		3,900
Managed accounts	904		1,020
Total separate accounts	2,705		4,920
Total assets under management	$	24,514	$	26,618

Our revenues are substantially comprised of investment management fees earned under contracts with funds and separate accounts that we manage or service. Our revenues are also comprised of distribution and underwriting fees, including asset-based distribution and/or service fees received pursuant to Rule 12b-1 plans. Investment management fees and distribution and underwriting fees may fluctuate based on a number of factors including: the total value and composition of our assets under management; market appreciation and depreciation on investments; the level of net inflows and outflows, which represent the sum of new and existing client funding, withdrawals and terminations; and purchases and redemptions of open-end fund shares. The mix of assets under management among our investment products impacts our revenues as our fee schedules vary by product.

Our largest operating expenses are typically related to: employee compensation and benefits expenses, which include salaries, incentive compensation and related benefits costs; distribution expenses, which include open-end funds distribution cost (such as Rule 12b-1 payments) and amortization of deferred sales commissions; and marketing and sales promotion expenses, which include expenses necessary to market products offered by us. Operating expenses may fluctuate due to a number of factors including variations in staffing and compensation, changes in distribution expense as a result of fluctuations in open-end fund net sales and market appreciation or depreciation, and marketing-related expenses that include supplemental distribution payments.

Operating Results

Third Quarter and Nine Months Ended September 30, 2014 Compared with Third Quarter and Nine Months Ended September 30, 2013

Assets Under Management

Assets under management were $24.5 billion and $26.6 billion as of September 30, 2014 and 2013, respectively, and consisted of 89% funds and 11% separate accounts as of September 30, 2014, and 82% funds and 18% separate accounts as of September 30, 2013.



	Three Months Ended September 30,										Nine Months Ended September 30,
							Change										Change
(in millions)	2014			2013			Amount			Percent	2014			2013			Amount			Percent
Open-end Funds
Beginning assets under management	$	16,072		$	15,151		$	921		6%	$	16,128		$	17,829		$	(1,701	)	(10)%
Sales	1,542			1,041			501			48	3,702			3,284			418			13
Redemptions	(1,912		)	(1,653		)	(259		)	16	(4,656		)	(7,156		)	2,500			(35)
Market appreciation (depreciation)	(207		)	1,140			(1,347		)	*	321			1,722			(1,401		)	(81)
Ending assets under management	15,495			15,679			(184		)	(1)	15,495			15,679			(184		)	(1)
Average assets under management	15,854			15,516			338			2	15,901			16,363			(462		)	(3)
Closed-end Funds
Beginning assets under management	6,511			5,828			683			12	6,266			5,500			766			14
Sales	6			—			6			—	58			308			(250		)	(81)
Market appreciation (depreciation)	(203		)	191			(394		)	*	(10		)	211			(221		)	*
Ending assets under management	6,314			6,019			295			5	6,314			6,019			295			5
Average assets under management	6,437			5,969			468			8	6,353			5,824			529			9
Institutional Accounts
Beginning assets under management	2,195			3,823			(1,628		)	(43)	3,081			5,191			(2,110		)	(41)
Sales	17			67			(50		)	(75)	174			267			(93		)	(35)
Redemptions	(390		)	(310		)	(80		)	26	(1,546		)	(2,023		)	477			(24)
Market appreciation (depreciation)	(21		)	320			(341		)	*	92			465			(373		)	(80)
Ending assets under management	1,801			3,900			(2,099		)	(54)	1,801			3,900			(2,099		)	(54)
Average assets under management	2,080			3,887			(1,807		)	(46)	2,447			4,352			(1,905		)	(44)
Managed Accounts
Beginning assets under management	977			995			(18		)	(2)	1,068			1,135			(67		)	(6)
Sales	20			35			(15		)	(43)	61			100			(39		)	(39)
Redemptions	(83		)	(73		)	(10		)	14	(239		)	(336		)	97			(29)
Market appreciation (depreciation)	(10		)	63			(73		)	*	14			121			(107		)	(88)
Ending assets under management	904			1,020			(116		)	(11)	904			1,020			(116		)	(11)
Average assets under management	929			1,009			(80		)	(8)	994			1,077			(83		)	(8)
Total Assets Under Management
Beginning assets under management	25,755			25,797			(42		)	—	26,543			29,655			(3,112		)	(10)
Sales	1,585			1,143			442			39	3,995			3,959			36			1
Redemptions	(2,385		)	(2,036		)	(349		)	17	(6,441		)	(9,515		)	3,074			(32)
Market appreciation (depreciation)	(441		)	1,714			(2,155		)	*	417			2,519			(2,102		)	(83)
Ending assets under management	$	24,514		$	26,618		$	(2,104	)	(8)	$	24,514		$	26,618		$	(2,104	)	(8)
Average assets under management	$	25,300		$	26,381		$	(1,081	)	(4)%	$	25,695		$	27,616		$	(1,921	)	(7)%

________________

* Not meaningful

Fund inflows in the third quarter and first nine months of 2014 were primarily due to sales in our alternative, U.S. growth, and global growth strategies⁽¹⁾, but were not sufficient to overcome the aggregate outflows sustained from redemptions in our U.S. growth, alternative, and global growth strategies. Net redemptions in our funds were $364 million in the third quarter of 2014, compared with net redemptions of $612 million in the third quarter of 2013. Depreciation of $410 million in the third quarter of 2014 was $1.7 billion less than market appreciation of $1.3 billion in the third quarter of 2013. Net redemptions of $896 million for the first nine months of 2014 represent a favorable change of $2.7 billion from redemptions of $3.6 billion for the first nine months of 2013. Market appreciation in all of our funds totaled $311 million in the first nine months of 2014, and $1.9 billion in the first nine months of 2013.

Separate accounts, which represent accounts we manage for both institutions and individuals, combined net redemptions were $436 million in the third quarter of 2014, compared with $281 million in the third quarter of 2013. Institutional net redemptions of $373 million were driven primarily from U.S. growth and global growth strategies and were $130 million less than net redemptions of $243 million in the third quarter of 2013. Managed account net redemptions were $63 million, compared with net

redemptions of $38 million in the third quarter of 2013. Separate account combined depreciation in the third quarter of 2014 was $31 million, compared with appreciation of $383 million in the third quarter of 2013.

Separate account net redemptions in the first nine months of 2014 were $1.6 billion, with institutional account net redemptions of $1.4 billion and managed account net redemptions of $178 million. This represents a favorable change compared with net redemptions of $2.0 billion in the first nine months of 2013, with institutional account net redemptions of $1.8 billion and managed account net redemptions of $236 million. Separate account combined appreciation was $106 million in the first nine months of 2014, compared with $586 million in the first nine months of 2013.


⁽¹⁾	Prior period assets by strategy have been reclassified.

Financial Overview



	Three Months Ended September 30,											Nine Months Ended September 30,
							Change											Change
	2014			2013			Amount			Percent		2014			2013			Amount			Percent
(in thousands, except margin)
Operating income	$	15,853		$	15,424		$	429		3	%	$	46,563		$	55,943		$	(9,380	)	(17	)%
Operating margin	25.0		%	23.7		%	1.3		%	5	%	24.4		%	27.6		%	(3.2		)%	(12	)%
Net income attributable to Calamos Asset Management, Inc.	$	3,369		$	2,697		$	672		25	%	$	8,736		$	7,772		$	964		12	%

Operating income for the third quarter of 2014 of $15.9 million increased by $429,000, or 3%, from the third quarter of 2013. Operating margin for the third quarter of 2014 increased to 25.0% from 23.7% for the third quarter of 2013. The increase in both operating income and operating margin in the third quarter of 2014 was attributable to operating expenses that decreased more than revenues. Operating income for the first nine months of 2014 decreased by 17% to $46.6 million from $55.9 million for the same period a year ago. Operating margin was 24.4% for the first nine months of 2014, a decline from 27.6% for the first nine months of 2013. The decrease in both operating income and operating margin in the first nine months of 2014 was primarily due to the decrease in investment management fees.

In order to grow assets under management, we engage in distribution and underwriting activities, principally with respect to our family of open-end funds. When analyzing our business, we consider the result of these distribution activities on a net revenue basis as they are typically a result of a single open-end fund share purchase. Generally accepted accounting principles in the United States of America (“GAAP”) requires that we present these activities on a gross revenue basis, thus resulting in a reduction to our overall operating margin, as the margin on distribution activities is lower than the margins on the remainder of our business. While we do not adjust our margin for these activities on a net revenue basis, we believe the margin table below is useful for understanding the impact of distribution activities on our margin.

The following table summarizes the net distribution fee margin for the third quarter and nine months ended September 30, 2014 and 2013:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
(in thousands)
Distribution and underwriting fees	$	12,438		$	13,024		$	38,069		$	40,730
Distribution expenses	(12,164		)	(12,913		)	(37,122		)	(40,085		)
Net distribution fees	$	274		$	111		$	947		$	645
Net distribution fee margin	2		%	1		%	2		%	2		%

Net distribution fee margin varies by share class because each share class has different distribution and underwriting activities, which are described in our 2013 Annual Report on Form 10-K. Distribution fee revenues and the majority of distribution expenses vary with average open-end fund assets, while deferred sales commissions included in distribution expenses are typically amortized on a straight-line basis.

Revenues

Total revenues decreased by $1.4 million, or 2%, to $63.5 million for the third quarter of 2014 from $65.0 million for the third quarter of 2013. Total revenues decreased by $12.1 million, or 6%, to $190.5 million for the first nine months of 2014, from $202.6 million for the first nine months of 2013. The decrease was primarily due to lower investment management fees.



	Three Months Ended September 30,									Nine Months Ended September 30,
					Change									Change
(in thousands)	2014		2013		Amount			Percent		2014		2013		Amount			Percent
Investment management fees	$	50,418	$	51,289	$	(871	)	(2	)%	$	150,393	$	159,886	$	(9,493	)	(6	)%
Distribution and underwriting fees	12,438		13,024		(586		)	(4	)%	38,069		40,730		(2,661		)	(7	)%
Other	676		652		24			4	%	2,005		1,992		13			1	%
Total revenues	$	63,532	$	64,965	$	(1,433	)	(2	)%	$	190,467	$	202,608	$	(12,141	)	(6	)%

Investment management fees decreased by 2% in the third quarter of 2014 compared with the third quarter of 2013, which was primarily due to a $1.1 billion, or 4%, decrease in average assets under management for the same periods. Investment management fees from open-end funds increased by 3% to $30.8 million for the third quarter of 2014, from $29.9 million for the third quarter of 2013, driven by a 2% increase in average open-end fund assets. Investment management fees from our closed-end funds increased by 8% to $14.8 million for the third quarter of 2014, from $13.7 million for the third quarter of 2013, due to an 8% increase in average closed-end fund assets. Investment management fees from our separately managed accounts decreased by 40% to $4.2 million for the third quarter of 2014, from $7.0 million for the third quarter of 2013, due to a 39% decrease in average separately managed accounts assets under management. Investment management fees that we earned as a percentage of average assets under management were 0.78% for the third quarter of 2014, compared with 0.76% for the third quarter of 2013. Investment management fees from assets under advisement for which we provide model portfolio design and oversight were $581,000 for the third quarter of 2014, compared with $638,000 for the third quarter of 2013. Investment management fees that we earned as a percentage of assets under advisement for the third quarter of 2014 and 2013 were 0.30%.

Investment management fees decreased by 6% in the first nine months of 2014, compared with the first nine months of 2013, which was primarily due to a $1.9 billion, or 7%, decrease in average assets under management for the same periods. Investment management fees from open-end funds decreased by 4% to $90.9 million for the first nine months of 2014, from $94.8 million for the first nine months of 2013, driven by a 3% decrease in average open-end fund assets. Investment management fees from our closed-end funds increased by 9% to $43.5 million for the first nine months of 2014, from $39.8 million for the first nine months of 2013, due to a 9% increase in average closed-end fund assets. Investment management fees from our separately managed accounts decreased by 39% to $14.2 million for the first nine months of 2014, from $23.3 million for the first nine months of 2013, due to a 37% decrease in average separately managed accounts assets under management. Investment management fees that we earned as a percentage of average assets under management were 0.77% for the first nine months of 2014, compared with 0.76% for the first nine months of 2013. Investment management fees from assets under advisement for which we provide model portfolio design and oversight were $1.8 million for the first nine months of 2014, compared with $2.0 million for the first nine months of 2013. Investment management fees that we earned as a percentage of assets under advisement for the first nine months of 2014 and 2013 were 0.30%.

Distribution and underwriting fees decreased by 4%, or $586,000 to $12.4 million for the third quarter of 2014. Distribution and underwriting fees decreased by 7%, or $2.7 million to $38.1 million for the first nine months of 2014, compared with the first nine months of 2013. The decreases were primarily due to a shift in open-end fund assets from Class A, B and C shares to Class I shares. More open-end fund investors are choosing to compensate their financial advisors through fee-based models, increasing the demand for and a shift towards our Class I shares. Because we do not collect distribution fees from Class I shares, our distribution revenue has decreased with this shift in assets. For the third quarter of 2014, average open-end fund assets increased by 2% across most share classes compared with the third quarter of 2013. For the first nine months of 2014, average open-end fund assets decreased by 3% across most share classes compared with the first nine months of 2013. The decrease in average open-end fund assets when compared with the prior year is largely due to net redemptions in our U.S. growth and global growth strategies.

Operating Expenses

Operating expenses decreased by $1.9 million and $2.8 million for the third quarter and first nine months of 2014, respectively, from the third quarter and first nine months of 2013. For the third quarter of 2014, decreases in employee compensation and benefits expenses, distribution expenses, and marketing and sales promotion expenses were partially offset by an increase in general and administrative expenses. For the first nine months of 2014, decreases in distribution expenses and employee

compensation and benefits expenses were partially offset by increases in general and administrative expenses and marketing and sales promotion expenses.



	Three Months Ended September 30,									Nine Months Ended September 30,
					Change									Change
(in thousands)	2014		2013		Amount			Percent		2014		2013		Amount			Percent
Employee compensation and benefits	$	21,738	$	23,508	$	(1,770	)	(8	)%	$	65,464	$	67,453	$	(1,989	)	(3	)%
Distribution expenses	12,164		12,913		(749		)	(6	)%	37,122		40,085		(2,963		)	(7	)%
Marketing and sales promotion	3,897		4,208		(311		)	(7	)%	12,268		11,536		732			6	%
General and administrative	9,880		8,912		968			11	%	29,050		27,591		1,459			5	%
Total operating expenses	$	47,679	$	49,541	$	(1,862	)	(4	)%	$	143,904	$	146,665	$	(2,761	)	(2	)%

Employee compensation and benefits expenses decreased by $1.8 million and $2.0 million for the third quarter and first nine months of 2014, respectively, when compared with the third quarter and first nine months of 2013. The decrease in the third quarter of 2014 was primarily due to the impact of the departure of a senior executive in the third quarter of 2013, a decrease in incentive compensation expenses, partially offset by an increase in equity compensation and base salaries and related benefits. The decrease in the first nine months of 2014 was primarily due to the impact of the departure of a senior executive in the third quarter of 2013, decreases in equity and incentive compensation expenses, partially offset by an increase in base salaries and related benefits. The increase in equity compensation expenses in the third quarter of 2014 was primarily the result of the reversal of inception-to-date expense on terminated associates in the prior year quarter. The decrease in equity compensation expenses in the first nine months of 2014 was primarily the result of the reversal of inception-to-date expense on terminated associates. Salary expenses increased in the third quarter and first nine months of 2014 primarily due to increases in the number of associates we employ on our investment team. The decreases in incentive compensation expenses for both periods were primarily a result of lower investment performance.

Distribution expenses decreased by $749,000 and $3.0 million for the third quarter and first nine months of 2014, respectively, when compared with the third quarter and first nine months of 2013. The decreases were primarily due to a shift of average open-end fund assets to Class I shares which do not result in distribution expenses.

Marketing and sales promotion expenses decreased by $311,000 for the third quarter of 2014, when compared with the third quarter of 2013, largely the result of a decrease in waived fund expenses which limit the annual ordinary operating expenses of each fund. Marketing and sales promotion expenses increased by $732,000 for the first nine months of 2014, when compared with the first nine months of 2013, primarily due to a fee rate increase for distribution intermediaries, partially offset by a decrease in waived fund expenses which limit the annual ordinary operating expenses of each fund.

General and administrative expenses increased by $968,000 and $1.5 million for the third quarter and first nine months of 2014, respectively, when compared with the third quarter and first nine months of 2013. The increase in expenses during the third quarter of 2014 was primarily due to higher professional services and travel and entertainment expenses. The increase for the first nine months of 2014 was primarily due to higher professional services, travel and entertainment and occupancy-related expenses.

Non-Operating Activities, Net of Redeemable Non-controlling Interest in Partnership Investments

Non-operating income, net of redeemable non-controlling interest in partnership investments increased by $1.4 million and $5.0 million for the third quarter and first nine months of 2014, respectively, when compared with the third quarter and first nine months of 2013. The increase in the third quarter of 2014 was driven by an increase in realized gains from tax harvesting activities and equity option contracts offset with unrealized losses on partnership investments when compared with the third quarter of 2013. The increase in the first nine months of 2014 was due to an increase in investment income of $5.5 million when compared with the first nine months of 2013. The increase in investment income was mainly due to an increase in realized gains generated from tax harvesting activities and an other-than-temporary impairment charge of $4.4 million recorded in the second quarter of 2013 on certain available-for-sale securities with unrealized losses held in the investment portfolio.

The following table summarizes our non-operating activities, net of redeemable non-controlling interest in partnership investments for the third quarter and nine months ended September 30, 2014 and 2013:



	Three Months Ended September 30,									Nine Months Ended September 30,
(in thousands)	2014			2013			Change			2014			2013			Change
Interest income	$	34		$	49		$	(15	)	$	123		$	209		$	(86	)
Interest expense	(885		)	(1,505		)	620			(3,899		)	(4,516		)	617
Net interest expense	(851		)	(1,456		)	605			(3,776		)	(4,307		)	531
Investment income	3,852			5,606			(1,754		)	14,621			9,091			5,530
Dividend income	605			1,017			(412		)	1,615			2,750			(1,135		)
Miscellaneous other income	25			163			(138		)	293			287			6
Investment and other income	4,482			6,786			(2,304		)	16,529			12,128			4,401
Non-operating income, GAAP basis	3,631			5,330			(1,699		)	12,753			7,821			4,932
Net (income) loss attributable to redeemable non-controlling interest in partnership investments	1,691			(1,454		)	3,145			(1,553		)	(1,579		)	26
Non-operating income, net of redeemable non-controlling interest in partnership investments, non-GAAP basis ⁽¹⁾	$	5,322		$	3,876		$	1,446		$	11,200		$	6,242		$	4,958


⁽¹⁾	Non-operating income, net of redeemable non-controlling interest in partnership investments is a non-GAAP financial measure. Management believes this measure provides comparability of this information among reporting periods and is an effective measure for reviewing the Company’s non-operating contribution to its results.

The following table provides a summary of the returns that we generated from our corporate investment portfolio. This table combines the investment and dividend income as reported in our consolidated statement of operations with the change in fair value of our investment securities that are recorded in accumulated other comprehensive income, a component of equity, for the third quarter and nine months ended September 30, 2014:



	Three Months Ended September 30, 2014									Nine Months Ended September 30, 2014
(in thousands)	Non-Operating Income, net			Change in Accumulated Other Comprehensive Income			Total			Non-Operating Income, net			Change in Accumulated Other Comprehensive Income			Total
Funds and common stock	$	5,445		$	(15,072	)	$	(9,627	)	$	11,146		$	(10,028	)	$	1,118
Partnership investments	(3,411		)	—			(3,411		)	1,657			—			1,657
Equity option contracts	1,818			—			1,818			1,818			—			1,818
Investment income	3,852			(15,072		)	(11,220		)	14,621			(10,028		)	4,593
Dividend income	605						605			1,615						1,615
Redeemable non-controlling interest in partnership investments	1,691						1,691			(1,553		)				(1,553		)
Investment portfolio results	$	6,148					$	(8,924	)	$	14,683					$	4,655
Less: Non-controlling interest in Calamos Investments LLC				10,929									7,034
Deferred income taxes				1,533									1,108
Change in accumulated other comprehensive income				$	(2,610	)							$	(1,886	)

Our investment portfolio lost $8.9 million, or 2.4%, and returned $4.7 million, or 1.2%, in the third quarter and first nine months of 2014, respectively. The loss in the third quarter of 2014 was due to higher unrealized losses from investment securities partially offset by realized gains from tax harvesting activities and equity option contracts in the corporate investment portfolio. The increase in the first nine months of 2014 primarily reflected higher realized gains from tax harvesting activities and equity option contracts partially offset by unrealized losses from investment securities in the corporate investment portfolio.

Income Tax Provision

Calamos Investments LLC (“Calamos Investments”) is subject to certain income-based state taxes; therefore, income taxes reflect not only the portion attributed to us but also income taxes attributable to non-controlling interests. CAM's effective income tax

rate for the third quarter and first nine months of 2014 was approximately 34.8% and 37.0%, respectively, compared with 37.4% and 44.0% for the third quarter and first nine months of 2013.

The effective tax rates for the first nine months of 2013, include the impact of an increase in the deferred tax valuation allowance of $900,000, to reduce CAM's deferred income tax assets to an amount that is more likely than not to be realized. Excluding the deferred tax valuation allowance, CAM's effective income tax rate would be 37.6% for the first nine months of 2013.

As of September 30, 2014, the deferred tax asset related to the capital loss carryforwards that expire in 2014 was $2.1 million and the Company's valuation allowance on this deferred tax asset was $2.1 million. The ultimate realization of this deferred tax asset is dependent upon the generation of sufficient capital gains prior to the expiration.

Net income

Net income attributable to CAM was $3.4 million and $8.7 million for the third quarter and first nine months of 2014, respectively, compared with $2.7 million and $7.8 million for the third quarter and first nine months of 2013. Non-GAAP net income attributable to CAM was $4.3 million and $12.5 million for the third quarter and first nine months of 2014, respectively, compared with $4.1 million and $13.7 million for the third quarter and first nine months of 2013. 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.

Supplemental Non-GAAP Financial Measures

We provide 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 increase in deferred tax valuation allowance and CAM’s non-operating income, net of taxes. We believe these adjustments are appropriate to enhance an overall understanding of our operating financial performance, as well as to facilitate comparisons with our historical earnings results. These adjustments to our GAAP results are made with the intent of providing investors a more complete understanding of our underlying earnings results and trends and our marketplace performance. In addition, these non-GAAP financial measures are among the primary indicators management uses as a basis of managing our business.

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 the table below:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
(in thousands, except per share data)
GAAP net income attributable to CAM	$	3,369		$	2,697		$	8,736		$	7,772
Adjustments:
Deferred tax amortization on intangible assets	1,979			1,979			5,937			5,937
Increase in deferred tax valuation allowance	—			—			—			900
Non-operating income, net of taxes	(1,039		)	(542		)	(2,218		)	(872		)
Non-GAAP net income attributable to CAM	$	4,309		$	4,134		$	12,455		$	13,737
Diluted - Weighted average shares outstanding	18,781,856			20,387,651			19,158,720			20,599,821
Diluted earnings per share	$	0.18		$	0.13		$	0.46		$	0.38
Non-GAAP diluted earnings per share	$	0.23		$	0.20		$	0.65		$	0.67

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)	increase 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 $2.0 million in future income taxes owed by us through 2019, to the extent that a tax payable exists during the quarter. As a result, this cash savings has accrued solely for the benefit of the shareholders of CAM’s common stock. We believe that adjusting this item from the calculation of the above non-GAAP items can be a useful measure in allowing investors to see our 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, we believe that measures excluding these items are useful in analyzing operating trends and allows for more comparability between periods, which may be useful to investors.

We believe 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 our 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 our net income attributable to CAM and diluted earnings per share calculated under GAAP, but are not substitutes for those calculations.

Liquidity and Capital Resources

We manage our liquidity position to ensure adequate resources are available to fund ongoing operations of the business, provide seed capital for new funds, provide conservative levels of capital for the Company’s regulated subsidiaries, and invest in other corporate strategic initiatives. Our principal sources of liquidity are cash flows from operating activities and our corporate investment portfolio, which is comprised of cash and cash equivalents, investment securities, derivatives and partnership investments. Investment securities are principally comprised of Company-sponsored funds. In addition, the individual securities held within our partnership investments are typically highly liquid. Borrowings by Calamos Investments have also been a source of liquidity.

Our working capital requirements historically have been met through cash generated by operations. We believe cash generated from operations and financing activities will be sufficient over the foreseeable future to meet our working capital requirements and liquidity needs with respect to the foregoing activities, as well as to support future growth.

The following table summarizes our principal sources of liquidity as of September 30, 2014 and December 31, 2013:



(in thousands)	September 30, 2014		December 31, 2013		Increase (Decrease)
Cash and cash equivalents	$	73,740	$	39,078	$	34,662
Investment securities	287,657		472,241		(184,584		)
Partnership investments, net of redeemable non-controlling interests	56,441		26,496		29,945
Total corporate investment portfolio	$	417,838	$	537,815	$	(119,977	)

Calamos Investments is the borrower of our $46.0 million in long-term debt. Calamos Investments was in compliance with all financial covenants as of September 30, 2014 and December 31, 2013.

On July 15, 2014, Calamos Investments repaid at maturity $46.2 million of senior notes outstanding. The notes were repaid out of cash on hand and the proceeds from a $25.0 million short term, interest-bearing loan from CAM. Calamos Investments repaid the loan from CAM subsequent to September 30, 2014.

The following is a summary of covenant compliance as of September 30, 2014 with the terms and covenants having the same meanings set forth under our amended note purchase agreements:



Covenant		September 30, 2014
EBITDA/interest expense - not less than 3.0		14.09
Debt/EBITDA - not more than 2.75		0.91
Investment coverage ratio - not less than 1.175		4.84
Net worth - not less than $160 million		$273.1 million

The following table summarizes key data relating to our liquidity and capital resources:



(in thousands)	September 30, 2014		December 31, 2013
Statements of financial condition data:
Cash and cash equivalents	$	73,740	$	39,078
Receivables	19,521		22,112
Investment securities	287,657		472,241
Partnership investments, net of redeemable non-controlling interests	56,441		26,496
Deferred tax assets, net	40,626		46,740
Long-term debt, including current portion	45,955		92,115

The deferred tax assets above include an annual reduction of $7.9 million in future income taxes owed by us through 2019. This reduction results from our election under Section 754 of the Internal Revenue Code, whereby we stepped up the tax basis in certain intangible assets to their fair market value. These assets are amortized over fifteen years on CAM’s tax return. As a result, this cash savings will accrue solely for the benefit of the Company.

Cash flows for the first nine months ended September 30, 2014 and 2013 are shown below.



	September 30,
(in thousands)	2014			2013
Cash flow data:
Net cash provided by operating activities	$	50,187		$	60,874
Net cash provided by (used in) investing activities	153,240			(30,824		)
Net cash used in financing activities	(168,765		)	(65,264		)

Net cash provided by operating activities totaled $50.2 million for the nine months ended September 30, 2014. These net cash flows are primarily attributable to investment management and distribution and underwriting fees generated by core business activities, partially offset by staff, distribution, and other operating expenses.

Net cash provided by investing activities totaled $153.2 million for the nine months ended September 30, 2014. The net cash provided by investing activities primarily represents net cash inflows as a result of proceeds from sales of investments of $222.9 million partially offset by cash outflows of $65.6 million of seed capital to help expand our product offering.

Net cash used in financing activities totaled $168.8 million for the nine months ended September 30, 2014, largely represents pro rata equity and income tax distributions paid by Calamos Investments to our non-controlling interests of $93.6 million. Net cash used in financing activities was also due to Calamos Investments' repayment of long-term debt of $46.2 million, repurchase of $21.6 million in Class A common stock as a result of our stock repurchase program, and cash dividends paid to common stockholders of $7.4 million. Finally, we expect cash flows from financing activities to change with tax distributions based on the levels of income that we generate.

Recently Issued Accounting Pronouncements

Critical Accounting Policies and Estimates

Our significant accounting policies are summarized in note 2 of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2013. A complete discussion of critical accounting policies is included in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2013. There were no significant changes in our significant accounting policies or critical accounting policies during the nine months ended September 30, 2014.

Other Information - Market Capitalization

Calamos Investments LLC (“Calamos Investments”) is owned (a) 22.2% by Calamos Asset Management, Inc. (“CAM”), and (b) 77.8% by Calamos Family Partners, Inc. and John P. Calamos, Sr. (the “Calamos Interests”). As of September 30, 2014, CAM holds two groups of assets: (1) CAM’s 22.2% ownership interest in Calamos Investments and (2) primarily cash and cash equivalents, investment securities, income tax receivables, net deferred tax assets, and a loan receivable from Calamos Investments. CAM presents the entire operations of Calamos Investments with its own in the consolidated financial statements. Calamos Interests’ 77.8% ownership in Calamos Investments is presented as a non-controlling interest in the consolidated financial statements. Prior to March 1, 2009, we added approximately 77 million shares to the Class A common shares outstanding so our number of fully diluted shares would reflect Calamos Interests’ ownership in Calamos Investments. The resulting share count of approximately 97 million provided a reasonable proxy for the number of shares used in determining the market capitalization of the fully consolidated company.

During 2009, CAM’s certificate of incorporation was amended to provide that ownership in Calamos Investments is exchangeable into Class A shares of CAM on a fair value basis rather than a one-to-one basis, as previously structured. As a result, the reported market capitalization of CAM only reflects CAM’s 22.2% interest in Calamos Investments, rather than the full value of Calamos Investments.

Forward-Looking Information

This report and other documents or statements made or filed by us contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements may include, without limitation: statements regarding proposed new products; results of operations or liquidity; projections, predictions, expectations, estimates or forecasts of our business; financial and operating results and future economic performance; market capitalization; management's goals and objectives; payment of dividends; and other similar expressions concerning matters that are not historical facts.

Forward-looking statements may sometimes be identified by words such as “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “opportunity,” “potential,” “predict,” “seek,” “should,” “trend,” “will,” “would,” and similar expressions.

Forward-looking statements are not a guarantee of future performance or results, or of the date of such performance or results, if achieved. Forward-looking statements are based on information available and known at the time those statements are made as well as 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, including risks not otherwise listed or described in this report.

Important factors that could cause such differences include, but are not limited to: changes in applicable laws, rules or regulations; downward fee pressures and increased industry competition; risks inherent to the investment management business; the loss of revenues due to contract terminations and redemptions; unsatisfactory service levels by third-party vendors; the inability to maintain compliance with financial covenants; the performance of our investment strategies and corporate investment portfolio; our ownership and organizational structure; general and prolonged declines in the prices of securities; realization of deferred income tax assets; significant changes in market conditions and the economy that require a modification to our business plan; catastrophic or unpredictable events; the loss of key executives; the unavailability, consolidation and elimination of third-party retail distribution channels; increased costs of and timing of payments related to distribution; failure to recruit and retain qualified personnel; a loss of assets, and thus revenues; fluctuation in the level of our expenses; fluctuation in foreign currency exchange rates with respect to our global operations and business; changes in accounting estimates; poor performance of our largest funds; damage to our reputation; the extent and timing of any share repurchases; and the variability of any exchanges of interests in Calamos Investments into Class A common stock.

Further, the value and composition of our assets under management are, and will continue to be, influenced by a variety of factors including, among other things: purchases and redemptions of shares of the open-end funds and other investment products;

fluctuation in both the underlying value and liquidity of the financial markets around the world that result in appreciation or depreciation of assets under management; open-end fund capital gain distributions; our ability to access capital markets; our introduction of new investment strategies, products and programs; our ability to educate our clients about our investment philosophy and provide them with best-in-class service; the relative investment performance of our products as compared to competing offerings and market indices; competitive conditions in the pooled fund, asset management and broader financial services sectors; investor sentiment and confidence; our decision to open or close products and strategies; and our ability to execute on our strategic plan to expand the business. Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2013 discusses some of these and other important factors in detail under the caption “Risk Factors.”

Forward-looking statements speak only as of the date the statements are made. Readers should not place undue reliance on any forward-looking statements when deciding whether to buy, sell or hold our securities. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

An analysis of our market risk was included in our Annual Report on Form 10-K for the year ended December 31, 2013. There were no material changes to the Company’s market risk during the nine months ended September 30, 2014.

Item 4. Controls and Procedures

Our management, including our principal executive and principal financial officers, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of September 30, 2014, and has concluded that such disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

There were no changes in the Company’s internal control over financial reporting that occurred during the third quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

In the normal course of business, we may be party to various legal proceedings from time to time. Currently, there are no legal proceedings that management believes may have a material effect on our consolidated financial position or results of operations.

Item 6. Exhibits



Exhibit Number			Description of Exhibit

3(i)			Second Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3(i) to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 13, 2009).

3(ii)			Second Amended and Restated By-laws of the Registrant (incorporated by reference to Exhibit 3(ii) to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 13, 2009).

4.1			Stockholders’ Agreement among John P. Calamos, Sr., Nick P. Calamos and John P. Calamos, Jr., certain trusts controlled by them, Calamos Family Partners, Inc. and the Registrant (incorporated by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 3, 2004 File No. 000-51003).

4.2			Registration Rights Agreement between Calamos Family Partners, Inc., John P. Calamos, Sr. and the Registrant (incorporated by reference to Exhibit 4.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 3, 2004 File No. 000-51003).

4.3			Note Purchase Agreement, dated as of July 13, 2007, by and among Calamos Investments LLC and various institutional investors (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 18, 2007).

4.4			Waiver and First Amendment to 2007 Note Purchase Agreement, dated as of December 22, 2008, between Calamos Investments LLC and various institutional investors (incorporated by reference to Exhibit 4.5 to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 29, 2008).

31.1			Certification of Principal Executive Officer pursuant to Rule 13a-14(a).

31.2			Certification of Principal Financial Officer pursuant to Rule 13a-14(a).

32.1			Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.

32.2			Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.

101.INS			XBRL Instance Document

101.SCH			XBRL Taxonomy Extension Schema Document

101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB			XBRL Taxonomy Extension Label Linkbase Document

101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF			XBRL Taxonomy Extension Definition Linkbase Document

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CALAMOS ASSET MANAGEMENT, INC.

(Registrant)



Date:	November 6, 2014	By: /s/ Nimish S. Bhatt
		Name: Nimish S. Bhatt
		Title: Senior Vice President and Chief Financial Officer

Attached files

Calamos Asset Management, Inc. /DE/ Reports

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