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

September 30, 2010

o		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 (State or Other Jurisdiction of Incorporation or Organization)		32-0122554 (I.R.S. Employer Identification No.)
2020 Calamos Court, Naperville, Illinois (Address of Principal Executive Offices)		60563 (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 o 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). o Yes o 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 o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(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). o Yes þ No

At October 26, 2010, the company had 19,894,773 shares of Class A common stock and 100 shares of Class B common stock outstanding.

 

 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except share data)

		September 30,				December 31,
		2010				2009
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	93,425			$	145,431
Receivables:
Affiliates and affiliated funds			17,205				17,174
Customers			9,988				9,315
Investment securities			295,454				207,886
Derivative assets			706				1,720
Partnership investments, net			39,875				37,549
Prepaid expenses			2,730				2,741
Deferred tax assets, net			9,221				9,610
Other current assets			2,365				2,133
Total current assets			470,969				433,559
Non-current assets:
Deferred tax assets, net			70,052				76,646
Deferred sales commissions			9,388				12,705
Property and equipment, net of accumulated depreciation ($46,355 at September 30, 2010 and $40,174 at December 31, 2009)			27,918				32,912
Other non-current assets			1,061				1,256
Total non-current assets			108,419				123,519
Total assets		$	579,388			$	557,078
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Current liabilities:
Payables to brokers		$	15,257			$	16,102
Accrued compensation and benefits			16,545				15,768
Current portion of long-term debt			32,885				—
Interest payable			1,968				3,026
Derivative liabilities			—				3,450
Accrued expenses and other current liabilities			3,424				3,711
Total current liabilities			70,079				42,057
Long-term liabilities:
Long-term debt			92,115				125,000
Deferred rent			9,447				9,419
Other long-term liabilities			808				776
Total long-term liabilities			102,370				135,195
Total liabilities			172,449				177,252
STOCKHOLDERS’ EQUITY
Class A Common Stock, $0.01 par value; authorized 600,000,000 shares; 23,894,773 shares issued and 19,894,773 shares outstanding at September 30, 2010; 23,668,583 shares issued and 19,668,583 shares outstanding at December 31, 2009			239				237
Class B Common Stock, $0.01 par value; authorized 1,000 shares; 100 shares issued and outstanding at September 30, 2010 and December 31, 2009			0				0
Additional paid-in capital			211,689				209,895
Retained earnings			55,663				46,035
Accumulated other comprehensive income			4,501				4,362
Treasury stock at cost; 4,000,000 shares at September 30, 2010 and December 31, 2009			(95,215	)			(95,215	)
Calamos Asset Management, Inc. stockholders’ equity			176,877				165,314
Non-controlling interest in Calamos Holdings LLC			228,374				212,887
Non-controlling interest in partnership investments			1,688				1,625
Total non-controlling interest			230,062				214,512
Total stockholders’ equity			406,939				379,826
Total liabilities and stockholders’ equity		$	579,388			$	557,078

See accompanying notes to consolidated financial statements.

CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Nine Months Ended September 30, 2010 and 2009
(in thousands, except share data)
(unaudited)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
REVENUES
Investment management fees		$	57,572			$	52,868			$	174,609			$	142,362
Distribution and underwriting fees			20,118				20,271				63,217				56,287
Other			729				659				2,189				1,797
Total revenues			78,419				73,798				240,015				200,446
EXPENSES
Employee compensation and benefits			18,287				17,686				57,294				53,155
Distribution expenses			15,931				15,713				49,175				42,473
Amortization of deferred sales commissions			2,198				2,494				7,240				9,710
Marketing and sales promotion			3,264				2,627				9,483				8,089
General and administrative			8,128				7,904				26,039				25,071
Total operating expenses			47,808				46,424				149,231				138,498
Operating income			30,611				27,374				90,784				61,948
NON-OPERATING INCOME (LOSS)
Net interest expense			(1,852	)			(1,764	)			(5,544	)			(5,284	)
Investment and other income (loss)			5,467				(6,208	)			20,732				1,669
Total non-operating income (loss)			3,615				(7,972	)			15,188				(3,615	)
Income before income tax provision			34,226				19,402				105,972				58,333
Income tax provision			2,598				1,670				8,840				5,096
Net income			31,628				17,732				97,132				53,237
Net income attributable to non-controlling interest in Calamos Holdings LLC			(26,883	)			(15,001	)			(82,895	)			(45,178	)
Net income attributable to non-controlling interest in partnership investments			(52	)			(141	)			(63	)			(330	)
Net income attributable to Calamos Asset Management, Inc.		$	4,693			$	2,590			$	14,174			$	7,729
Earnings per share:
Basic		$	0.24			$	0.13			$	0.71			$	0.39
Diluted		$	0.23			$	0.13			$	0.70			$	0.39
Weighted average shares outstanding:
Basic			19,894,637				19,621,137				19,869,974				19,616,455
Diluted			20,143,747				20,090,555				20,153,369				19,948,616
Cash dividends per share		$	0.075			$	0.055			$	0.225			$	0.165

See accompanying notes to consolidated financial statements.

CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
Nine Months Ended September 30, 2010
(in thousands, except share data)
(unaudited)

																						Non-
		CALAMOS ASSET MANAGEMENT, INC. STOCKHOLDERS																				controlling				Non-
														Accumulated								Interest in				controlling
						Additional								Other								Calamos				Interest in
		Common				Paid-in				Retained				Comprehensive				Treasury				Holdings				Partnership
		Stock				Capital				Earnings				Income				Stock				LLC				Investments				Total
Balance at Dec. 31, 2009		$	237			$	209,895			$	46,035			$	4,362			$	(95,215	)		$	212,887			$	1,625			$	379,826
Net income			—				—				14,174				—				—				82,895				63				97,132
Changes in unrealized gains on available-for-sale securities, net of income taxes			—				—				—				1,854				—				11,783				—				13,637
Reclassification adjustment for realized gains on available-for-sale securities included in income, net of income tax			—				—				—				(1,779	)			—				(13,088	)			—				(14,867	)
Total comprehensive income																															95,902
Issuance of common stock (226,190 Class A common shares)			2				(2	)			—				—				—				—				—				—
Cumulative impact of changes in ownership of Calamos Holdings LLC			—				278				(3	)			64				—				(1,401	)			—				(1,062	)
Compensation expense recognized under stock incentive plans			—				1,518				—				—				—				5,493				—				7,011
Dividend equivalent accrued under stock incentive plans			—				—				(78	)			—				—				(280	)			—				(358	)
Distribution to non-controlling interests			—				—				—				—				—				(69,915	)			—				(69,915	)
Dividends declared			—				—				(4,465	)			—				—				—				—				(4,465	)
Balance at Sept. 30, 2010		$	239			$	211,689			$	55,663			$	4,501			$	(95,215	)		$	228,374			$	1,688			$	406,939

See accompanying notes to consolidated financial statements.

CALAMOS ASSET MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2010 and 2009
(in thousands)
(unaudited)

		2010				2009
Cash and cash equivalents at beginning of period		$	145,431			$	59,425
Cash flows provided by operating activities:
Net income			97,132				53,237
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred sales commissions			7,240				9,710
Other depreciation and amortization			6,457				7,823
Loss on write-off of property and equipment			119				—
Deferred rent			28				163
Change in unrealized gains on trading securities, derivative assets, derivative liabilities and partnership investments, net			(1,550	)			(17,396	)
Net realized (gain) loss on sale of investment securities, derivative assets and derivative liabilities			(16,074	)			18,565
Deferred taxes			6,849				4,518
Stock-based compensation			7,011				6,248
Employee taxes paid on vesting under stock incentive plans			(1,021	)			(175	)
(Increase) decrease in assets:
Receivables:
Affiliates and affiliated funds, net			(31	)			(2,190	)
Customers			(673	)			(1,507	)
Deferred sales commissions			(3,923	)			(4,918	)
Other assets			(102	)			4,347
Increase (decrease) in liabilities:
Payables to brokers			(845	)			1,407
Accrued compensation and benefits			777				3,930
Accrued expenses and other liabilities			(1,613	)			(2,298	)
Net cash provided by operating activities			99,781				81,464
Cash flows provided by (used in) investing activities:
Net additions to property and equipment			(1,489	)			(2,069	)
Purchase of investment securities			(361,360	)			(2,358	)
Proceeds from sale of investment securities			295,512				15,073
Net (purchases) sales of derivatives			(9,776	)			1,405
Net changes in partnership investments			(235	)			(241	)
Net cash provided by (used in) investing activities			(77,348	)			11,810
Cash flows used in financing activities:
Excess tax liability on vesting under stock incentive plans			(59	)			(136	)
Distributions paid to non-controlling interests			(69,915	)			(19,858	)
Dividends paid to common stockholders			(4,465	)			(3,236	)
Net cash used in financing activities			(74,439	)			(23,230	)
Net increase (decrease) in cash			(52,006	)			70,044
Cash and cash equivalents at end of period		$	93,425			$	129,469
Supplemental disclosure of cash flow information:
Cash paid for:
Income taxes		$	2,691			$	206
Interest		$	6,816			$	6,816

See accompanying notes to consolidated financial statements.

CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

(1) Organization and Description of Business

Calamos Asset Management, Inc. (CAM), together with its subsidiaries (the Company), primarily provides investment advisory services to individuals and institutional investors through open-end funds, closed-end funds, separate accounts, offshore funds and partnerships. CAM operates and controls all of the business and affairs of Calamos Holdings LLC (Holdings) and, as a result of this control, consolidates the financial results of Holdings and its subsidiaries with its own financial results.

(2) Basis of Presentation

The consolidated financial statements as of September 30, 2010 and for the nine months ended September 30, 2010 and 2009 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 ended September 30 are not necessarily indicative of the results to be obtained for a full fiscal year. Certain amounts for the prior year have been reclassified to conform to the current year’s presentation. This Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

Calamos Family Partners, Inc.’s (CFP) and John P. Calamos, Sr.’s (collectively, the Calamos Interests) combined 78.3% and 78.6% interest in Holdings at September 30, 2010 and 2009, respectively, is represented as non-controlling interest in Calamos Holdings LLC. Non-controlling interest in Calamos Holdings LLC is derived by multiplying the historical equity of Holdings 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 Holdings. The Company’s corresponding changes to stockholders’ equity are reflected in the consolidated statement of changes in stockholders’ equity. Income is allocated to non-controlling interests based on the average ownership interest during the period in which the income is earned.

Calamos Partners LLC, a subsidiary of Holdings, is the general partner of Calamos Market Neutral Opportunities Fund LP (the Partnership), a private investment partnership that is primarily comprised of highly liquid marketable securities. Substantially all the activities of the Partnership are conducted on behalf of the Company and its related parties; therefore, the Company consolidates the financial results of the Partnership into its results. The assets and liabilities of the Partnership are presented on a net basis as partnership investments, net in the consolidated statements of financial condition, the net income is included in investment and other income (loss) 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 Partnership is 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 of the Partnership that are being consolidated are described in Note 5. The non-controlling interests of the Partnership are presented as non-controlling interest in partnership investments in the respective consolidated financial statements.

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 and accounts for these investments using the equity method.

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from these estimates.

CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(3) Investment Securities

The following table provides a summary of investment securities owned as of September 30, 2010 and December 31, 2009. As a registered broker-dealer, Calamos Financial Services LLC is required to carry all investment securities it owns (CFS Securities) at fair value and record all changes in fair value in current earnings. As such, unrealized gains and losses on CFS Securities, as well as realized gains and losses on all investment securities, are included in investment and other income (loss) in the consolidated statements of operations.

		September 30, 2010
										Total
		Available-for-				CFS				Investment
(in thousands)		Sale				Securities				Securities
Mutual Funds
Equity		$	146,950			$	3,300			$	150,250
Fixed income			89,080				—				89,080
Defensive equity			54,679				—				54,679
Other			1,342				—				1,342
Total mutual funds			292,051				3,300				295,351
Common stock			—				103				103
Total		$	292,051			$	3,403			$	295,454

		December 31, 2009
										Total
		Available-for-				CFS				Investment
(in thousands)		Sale				Securities				Securities
Mutual Funds
Equity		$	67,981			$	27,938			$	95,919
Fixed income			81,908				—				81,908
Defensive equity			28,736				—				28,736
Other			1,218				—				1,218
Total mutual funds			179,843				27,938				207,781
Common stock			—				105				105
Total		$	179,843			$	28,043			$	207,886

Of the $295.4 million and $207.8 million investments in mutual funds at September 30, 2010 and December 31, 2009, respectively, $252.7 million and $169.5 million were invested in affiliated mutual funds.

CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The table below summarizes information on available-for-sale securities as well as the unrealized gains on CFS Securities for the three and nine months ended September 30, 2010 and 2009. No losses were realized on available-for-sale securities for the three and nine months ended September 30, 2010 and 2009.

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in thousands)		2010				2009				2010				2009
Available-for-sale securities:
Proceeds from sale		$	147,771			$	—			$	295,512			$	—
Gross realized gains on sales		$	5,078			$	—			$	21,292			$	—
Unrealized gains		$	22,197			$	16,648			$	15,051			$	30,638
Net gains reclassified out of accumulated other comprehensive income to earnings		$	1,845			$	—			$	16,205			$	—
CFS securities:
Unrealized gains		$	369			$	4,151			$	298			$	8,361

The cumulative net unrealized gains on available-for-sale securities consisted of the following as of September 30, 2010 and December 31, 2009:

		September 30,				December 31,
(in thousands)		2010				2009
Total cumulative unrealized gains on available-for-sale securities with net gains:
Equity		$	23,617			$	21,965
Fixed income			1,001				6,581
Defensive equity			10,353				7,669
Other			45				32
Total gains			35,016				36,247
Total cumulative unrealized losses on available-for-sale securities with net losses:
Equity			(19	)			(26	)
Fixed income			—				(16	)
Defensive equity			(16	)			(24	)
Other			(254	)			(300	)
Total losses			(289	)			(366	)
Total cumulative net unrealized gains on available-for-sale securities		$	34,727			$	35,881

The aggregate fair value of available-for-sale investment securities that were in an unrealized loss position at September 30, 2010 and December 31, 2009 was $1.3 million and $1.5 million, respectively. The cumulative losses on securities that had been in a continuous loss position for 12 months or longer were immaterial as of the end of each reporting period.

The Company periodically evaluates its available-for-sale investments for other-than-temporary declines in value. Other-than-temporary declines in value may exist when the fair value of an investment security has been below the carrying value for an extended period of time. If an other-than-temporary decline in value is determined to exist, the unrealized investment loss, net of tax is recognized as a charge to net income in the period in which the other-than-temporary decline in value occurs, as well as an accompanying permanent adjustment to accumulated other comprehensive income. At September 30, 2010, the Company believes all unrealized losses to be only temporary, and it has the intent and ability to hold these securities for a period of time sufficient to allow for recovery in fair value.

CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(4) Derivative Assets and Liabilities

In order to reduce the volatility in fair value of the Company’s corporate investment portfolio, the Company uses exchange traded equity option contracts as an economic hedge of price changes in its investment securities portfolio. The Company’s investment securities, totaling $295.5 million at September 30, 2010, consist primarily of positions in several Calamos equity, fixed income and defensive equity mutual funds. The equity price risk in the investment portfolio is hedged using exchange-traded put and call option contracts on several major equity market indices that correlate most closely with the change in value of the portfolio being hedged. The use of both purchased put and sold call options is part of a single strategy to minimize downside risk in the hedged portfolio, while participating in a portion of the upside of a market rally. 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 fair value of purchased puts and sold call contracts is reported in derivative assets and derivative liabilities, respectively, in the consolidated statements of financial condition. Net gains and losses on these contracts are reported in investment and other income (loss) in the consolidated statements of operations with net losses of $3.8 million and $16.4 million for the three months ended September 30, 2010 and 2009, respectively. Net losses of $7.3 million and $17.5 million were recorded for the nine months ended September 30, 2010 and 2009, respectively. The Company is using these derivatives for risk management purposes but has not designated the contracts as hedges for accounting purposes.

(5) Partnership Investments

Presented below are the underlying assets and liabilities of the Partnerships that the Company reports on a net basis, as well as the Company’s investments in other partnerships accounted for under the equity method. These investments are presented as partnership investments, net in its consolidated statements of financial condition as of September 30, 2010 and December 31, 2009.

		September 30,				December 31,
(in thousands)		2010				2009
Calamos Market Neutral Opportunities Fund LP:
Deposits with broker		$	9,483			$	8,008
Securities owned			17,011				21,976
Securities sold but not yet purchased			(6,309	)			(10,934	)
Accrued expenses and other current liabilities			(1,094	)			(112	)
Other current assets			951				214
Calamos Market Neutral Opportunities Fund LP, net			20,042				19,152
Investment in other partnerships			19,833				18,397
Partnership investments, net		$	39,875			$	37,549

As of September 30, 2010 and December 31, 2009, the Company held a controlling interest of $18.4 million (91.6%) and $17.5 million (91.5%), respectively, in Calamos Market Neutral Opportunities Fund LP. The non-controlling interest totaled 8.4% and 8.5% of Calamos Market Neutral Opportunities Fund LP at September 30, 2010 and December 31, 2009, respectively. The non-controlling interest is presented in the consolidated statements of financial condition as non-controlling interest in partnership investments.

(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 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, 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 positions in Level 3 securities.

CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following tables provide the hierarchy of inputs used to derive the fair value of the Company’s investment securities, derivative assets, derivative liabilities, securities and derivatives owned by the Partnership, and securities sold but not yet purchased and derivative liabilities of the Partnership as of September 30, 2010 and December 31, 2009. Foreign currency contracts are presented on a net basis where the right of offset exists, and no impact of these positions exists for either period presented.

						Fair Value Measurements Using
						Quoted
						Prices in
						Active				Significant
						Markets for				Other
						Identical				Observable
(in thousands)		September 30,				Assets				Inputs
Description		2010				(Level 1)				(Level 2)
Investment securities (Note 3)
Mutual Funds
Equity		$	150,250			$	150,250				—
Fixed income			89,080				89,080				—
Defensive equity			54,679				54,679				—
Other			1,342				1,342				—
Total mutual funds			295,351				295,351				—
Common stock			103				103				—
			295,454				295,454				—
Derivative assets (Note 4)
Exchange-traded put option contracts			706				706				—
Securities and derivatives owned by the Partnership (Note 5)
Purchased options			187				187				—
Convertible bonds			16,516				—				16,516
Corporate bonds			308				—				308
			17,011				187				16,824
Securities sold but not yet purchased and derivative liabilities of the Partnership (Note 5)
Common stocks			(6,297	)			(6,297	)			—
Exchange-traded call option contracts			(12	)			(12	)			—
			(6,309	)			(6,309	)			—
Total		$	306,862			$	290,038			$	16,824

CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

						Fair Value Measurements Using
						Quoted Prices				Significant
						in Active				Other
						Markets for				Observable
(in thousands)		December 31,				Identical Assets				Inputs
Description		2009				(Level 1)				(Level 2)
Investment securities (Note 3)
Mutual Funds
Equity		$	95,919			$	95,919				—
Fixed income			81,908				81,908				—
Defensive equity			28,736				28,736				—
Other			1,218				1,218				—
Total mutual funds			207,781				207,781				—
Common stock			105				105				—
			207,886				207,886				—
Derivative assets (Note 4)
Exchange-traded put option contracts			1,720				1,720				—
Derivative liabilities (Note 4)
Exchange-traded call option contracts			(3,450	)			(3,450	)			—
Securities and derivatives owned by the Partnership (Note 5)
Common stocks			532				532				—
Convertible preferred stocks			1,767				660			$	1,107
Purchased options			179				179				—
Convertible bonds			18,798				—				18,798
Corporate bonds			700				—				700
			21,976				1,371				20,605
Securities sold but not yet purchased and derivative liabilities of the Partnership (Note 5)
Common stocks			(10,893	)			(10,893	)			—
Exchange-traded call option contracts			(41	)			(41	)			—
			(10,934	)			(10,934	)			—
Total		$	217,198			$	196,593			$	20,605

(7) Fair Value of Financial Instruments

The fair value of long-term debt and the current portion of long-term debt, which has a total carrying value of $125 million at September 30, 2010 and December 31, 2009, was approximately $143.3 million and $137.4 million at September 30, 2010 and December 31, 2009, respectively. Fair value estimates are calculated using discounted cash flows based on the Company’s incremental borrowing rates for the debt and market prices for similar bonds at the measurement date. This method of assessing fair value may differ from the actual amount realized.

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

CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(8) Earnings Per Share

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

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in thousands, except per share data)		2010				2009				2010				2009
Earnings per share — basic
Earnings available to common shareholders		$	4,693			$	2,590			$	14,174			$	7,729
Weighted average shares outstanding			19,895				19,621				19,870				19,616
Earnings per share — basic		$	0.24			$	0.13			$	0.71			$	0.39
Earnings per share — diluted
Earnings available to common shareholders		$	4,693			$	2,590			$	14,174			$	7,729
Weighted average shares outstanding			19,895				19,621				19,870				19,616
Dilutive impact of restricted stock units			249				470				283				333
Weighted average diluted shares outstanding			20,144				20,091				20,153				19,949
Earnings per share — diluted		$	0.23			$	0.13			$	0.70			$	0.39

Diluted earnings per share is calculated (a) assuming the Calamos Interests exchange all their ownership in Holdings and their CAM Class B common stock for shares of CAM’s Class A common stock (collectively, the Exchange) and (b) including the effect of outstanding dilutive equity incentive compensation awards.

The Company uses the treasury stock method to reflect the dilutive effect of unvested restricted stock units (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 but 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.

Effective March 1, 2009, 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 issued at the time of the Exchange. As a result, the effects of the Exchange are anti-dilutive and are therefore excluded from the calculation of diluted earnings per share for the three and nine months ended September 30, 2010 and 2009. 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, including its ownership in Holdings. This valuation may result in the actual number of shares being materially different from the shares presented in the table below as the shares presented in the table are estimated based solely on the formula as described in the Schedule 14C and does not reflect any adjustments that may be made by the independent directors in determining the fair market value as noted above.

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								Nine Months Ended
		September 30,								September 30,
		2010				2009				2010				2009
Exchange of Calamos Interests’ ownership in Holdings for shares of Class A common stock			45,948,392				53,894,411				45,948,392				53,894,411
Restricted stock units			814,695				290,699				561,598				797,813
Stock options			2,438,926				2,472,381				2,438,926				2,472,381
Total			49,202,013				56,657,491				48,948,916				57,164,605

CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(9) Stock Based Compensation

Under the Company’s incentive compensation plan, certain employees of the Company receive stock based compensation comprised of stock options and 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 or issue new 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, 2009 provides details of this plan and its provisions.

During the nine months ended September 30, 2010, the Company granted 529,161 RSUs. There were forfeitures of 31,355 stock options and 20,372 RSUs during the nine months ended September 30, 2010.

During the nine months ended September 30, 2010, 310,882 RSUs vested with 84,692 units withheld for taxes and 226,190 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 $2.8 million. The total tax benefit realized in connection with the vesting of the RSUs during the nine months ended September 30, 2010 was $327,000, as the Company receives tax benefits based upon the portion of Holdings’ income that it recognizes.

During the nine months ended September 30, 2010, expense recorded in connection with the RSUs and stock options was $7.0 million of which $1.5 million, after giving effect to the non-controlling interests, was credited as additional paid-in capital. During the nine months ended September 30, 2009, expense recorded in connection with the RSUs and stock options was $6.2 million of which $1.3 million, after giving effect to the non-controlling interests, was credited as additional paid-in capital. The amount of deferred tax asset created was $562,000 and $495,000 during the nine months ended September 30, 2010 and 2009, respectively. At September 30, 2010, approximately $19.2 million of total unrecognized compensation expense related to nonvested stock option and RSU awards is expected to be recognized over a weighted-average period of 3.4 years.

(10) Income Taxes

Holdings 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. As presented in the table below, CAM’s effective income tax rate for the nine months ended September 30, 2010 and 2009 was approximately 37.3% and 38.0%, respectively.

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in thousands)		2010				2009				2010				2009
Income tax provision		$	2,598			$	1,670			$	8,840			$	5,096
Income tax (provision) benefit attributable to non-controlling interest in Calamos Holdings LLC			144				(99	)			(396	)			(357	)
Income tax provision attributable to CAM			2,742				1,571				8,444				4,739
Net income attributable to CAM			4,693				2,590				14,174				7,729
Income before taxes attributable to CAM		$	7,435			$	4,161			$	22,618			$	12,468
CAM’s effective income tax rate			36.9	%			37.8	%			37.3	%			38.0	%

CALAMOS ASSET MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(11) Non-operating Income (Loss)

Non-operating income (loss) was comprised of the following components for the three and nine months ended September 30, 2010 and 2009:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in thousands)		2010				2009				2010				2009
Interest income		$	98			$	186			$	306			$	566
Interest expense			(1,950	)			(1,950	)			(5,850	)			(5,850	)
Net interest expense			(1,852	)			(1,764	)			(5,544	)			(5,284	)
Investment income (loss)			5,399				(6,060	)			20,348				1,452
Miscellaneous other income (loss)			68				(148	)			384				217
Investment and other income (loss)			5,467				(6,208	)			20,732				1,669
Non-operating income (loss)		$	3,615			$	(7,972	)		$	15,188			$	(3,615	)

(12) Recently Issued Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (FASB) issued a new statement which modifies the analysis required to determine whether a company’s variable interest(s) give it a controlling financial interest in a variable interest entity (VIE).

This analysis identifies the primary beneficiary of a VIE as the enterprise that has both the power to direct the activities of a VIE and the obligation to absorb significant losses or the right to receive significant benefits of the VIE. This statement was subsequently codified in December 2009 under Accounting Standards Update (ASU) No. 2009-17 and is effective for fiscal years beginning after November 15, 2009. In February 2010, the FASB issued ASU No. 2010-10, Consolidation, Amendments for Certain Investment Funds, that defers the implementation of ASU 2009-17 for a reporting entity’s interest in an entity (1) that has all the attributes of an investment company or (2) for which it is industry practice to apply measurement principles for financial reporting purposes that are consistent with those followed by investment companies. The Company analyzed the entities in which it holds an investment interest and determined that the entities meet the criteria for deferral under ASU No. 2010-10. As such, the Company has applied ASU No. 2010-10 during 2010, which had no impact on the Company’s financial statements.

In February 2010, the FASB issued ASU No. 2010-09, Subsequent Events, Amendments to Certain Recognition and Disclosure Requirements, which allows Securities and Exchange Commission (SEC) filers to evaluate events that occur after the balance sheet date through the date the financial statements are issued, however, SEC filers are no longer required to disclose the date through which subsequent events have been evaluated. The update was effective upon issuance and, accordingly, the Company adopted the update during the first quarter 2010.

In February 2010, the FASB issued ASU No. 2010-08, Technical Corrections to Various Topics, which eliminate the various inconsistencies and outdated provisions within Generally Accepted Accounting Principles. The update is primarily effective for the first reporting period (including interim periods) beginning after the issuance of the update. The Company adopted the update, which had no impact on the Company’s financial statements.

In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures, which requires additional disclosures related to (1) transfers in and out of Levels 1 and 2 and the reasons for the transfers, and (2) the Level 3 reconciliation, specifically separately presenting purchases, sales, issuances and settlements. The update is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010. Early adoption is permitted. The Company adopted the update, which had no impact on the Company’s disclosures within the financial statements.

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

We are a firm of 320 full-time employees that provides investment advisory services to institutions and individuals, managing $32.6 billion in assets at September 30, 2010. 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 mutual funds and additional funding 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 through a variety of products designed to suit various investment needs. We currently manage four types of mutual fund and separate account investment products. The following table details our assets under management at September 30, 2010 and 2009.

		September 30,
(in millions)		2010				2009
Mutual Funds
Open-end funds		$	20,088			$	18,092
Closed-end funds			5,088				4,764
Total mutual funds			25,176				22,856
Separate Accounts
Institutional accounts			5,110				4,219
Managed accounts			2,278				3,468
Total separate accounts			7,388				7,687
Total assets under management		$	32,564			$	30,543

Our revenues are substantially comprised of investment management fees earned under contracts with the mutual funds and separate accounts. Our revenues are also comprised of distribution and underwriting fees, including asset-based distributions 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 or depreciation and the level of net purchases and redemptions, which represent the sum of new client investments, additional funding from existing clients, withdrawals of assets from and termination of client accounts, and purchases and redemptions of mutual fund shares. The mix of assets under management among our investment products also has an impact on our revenues as our fee schedules vary by product.

Our largest operating expenses are typically related to employee compensation and benefits, which includes salaries, incentive compensation and related benefits costs, the distribution of mutual funds, including Rule 12b-1 payments, marketing and sales promotion expenses and the amortization of deferred sales commissions for open-end mutual funds. Operating expenses may fluctuate due to a number of factors, including changes in distribution expense as a result of fluctuations in mutual fund net sales and market appreciation or depreciation, variations in staffing and compensation, and marketing-related expenses that include supplemental distribution payments to financial intermediaries.

Operating Results

Third Quarter and Nine Months Ended September 30, 2010 Compared to Third Quarter and Nine Months Ended September 30, 2009

Assets Under Management

Assets under management increased by $2.0 billion, or 7%, to $32.6 billion at September 30, 2010 from $30.5 billion at September 30, 2009. Our assets under management consisted of 77% mutual funds, 16% institutional accounts and 7% managed accounts at September 30, 2010 compared to 75% mutual funds, 14% institutional accounts and 11% managed accounts at September 30, 2009.

		Three Months Ended September 30,																Nine Months Ended September 30,
										Change																Change
(in millions)		2010				2009				Amount				Percent				2010				2009				Amount				Percent
Total Mutual Funds
Beginning assets under management		$	23,142			$	20,003			$	3,139				16	%		$	24,480			$	17,498			$	6,982				40	%
Net purchases (redemptions)			(141	)			21				(162	)			*				(301	)			95				(396	)			*
Market appreciation			2,175				2,832				(657	)			(23	)			997				5,263				(4,266	)			(81	)
Ending assets under management			25,176				22,856				2,320				10				25,176				22,856				2,320				10
Average assets under management			23,997				21,382				2,615				12				24,239				19,092				5,147				27
Institutional Accounts
Beginning assets under management			4,710				3,898				812				21				4,619				3,498				1,121				32
Net purchases (redemptions)			(155	)			(217	)			62				29				119				(274	)			393				*
Market appreciation			555				538				17				3				372				995				(623	)			(63	)
Ending assets under management			5,110				4,219				891				21				5,110				4,219				891				21
Average assets under management			4,854				4,044				810				20				4,812				3,774				1,038				28
Managed Accounts
Beginning assets under management			2,061				3,131				(1,070	)			(34	)			3,615				3,044				571				19
Net redemptions			(103	)			(85	)			(18	)			(21	)			(1,475	)			(436	)			(1,039	)			(238	)
Market appreciation			320				422				(102	)			(24	)			138				860				(722	)			(84	)
Ending assets under management			2,278				3,468				(1,190	)			(34	)			2,278				3,468				(1,190	)			(34	)
Average assets under management			2,144				3,295				(1,151	)			(35	)			2,628				3,085				(457	)			(15	)
Total Assets Under Management
Beginning assets under management			29,913				27,032				2,881				11				32,714				24,040				8,674				36
Net redemptions			(399	)			(281	)			(118	)			(42	)			(1,657	)			(615	)			(1,042	)			(169	)
Market appreciation			3,050				3,792				(742	)			(20	)			1,507				7,118				(5,611	)			(79	)
Ending assets under management		$	32,564			$	30,543			$	2,021				7			$	32,564			$	30,543			$	2,021				7
Average assets under management		$	30,995			$	28,721			$	2,274				8	%		$	31,679			$	25,951			$	5,728				22	%