Edgar Filing: GAMCO INVESTORS, INC. ET AL

form10q093011.htm

SECURITIES & EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2011

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

For the transition period from ___ to ___

Commission File No. 1-106

GAMCO INVESTORS, INC.
(Exact name of Registrant as specified in its charter)

New York			13-4007862
(State of other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

One Corporate Center, Rye, NY			10580-1422
(Address of principle executive offices)			(Zip Code)

(914) 921-3700
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.

Yes

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesx Noo 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. (Check one):

Large accelerated filer ¨		Accelerated filer x

Non-accelerated filer o		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

Indicate the number of shares outstanding of each of the Registrant’s classes of Common Stock, as of the latest practical date.

Class		Outstanding at October 31, 2011
Class A Common Stock, .001 par value		6,666,654
Class B Common Stock, .001 par value		20,106,746

INDEX

GAMCO INVESTORS, INC. AND SUBSIDIARIES


PART I.	FINANCIAL INFORMATION


Item 1.	Unaudited Condensed Consolidated Financial Statements

	Condensed Consolidated Statements of Income:
	- Three months ended September 30, 2011 and 2010

	- Nine months ended September 30, 2011 and 2010






	Condensed Consolidated Statements of Financial Condition:
	- September 30, 2011
	- December 31, 2010
	- September 30, 2010

	Condensed Consolidated Statements of Equity and Comprehensive Income:

	- Nine months ended September 30, 2011 and 2010

	Condensed Consolidated Statements of Cash Flows:
	- Nine months ended September 30, 2011 and 2010

	Notes to Unaudited Condensed Consolidated Financial Statements

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk (Included in Item 2)

Item 4.	Controls and Procedures

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Item 6.	Exhibits

SIGNATURES

GAMCO INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(Dollars in thousands, except per share data)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Revenues
Investment advisory and incentive fees	$	65,244		$	50,249		$	197,407		$	149,862
Institutional research services		3,421			4,005			11,311			11,953
Distribution fees and other income		11,486			8,189			33,419			23,125
Total revenues		80,151			62,443			242,137			184,940
Expenses
Compensation		32,010			26,661			99,792			78,745
Management fee		1,387			3,540			8,126			7,368
Distribution costs		11,091			7,710			34,108			21,840
Other operating expenses		5,002			5,023			18,193			15,528
Total expenses (a)		49,490			42,934			160,219			123,481

Operating income		30,661			19,509			81,918			61,459
Other income (expense)
Net gain/(loss) from investments		(16,152	)		13,916			(3,743	)		11,351
Interest and dividend income		1,823			2,012			5,620			3,916
Interest expense		(4,418	)		(3,295	)		(10,688	)		(9,993	)
Total other income (expense), net		(18,747	)		12,633			(8,811	)		5,274
Income before income taxes		11,914			32,142			73,107			66,733
Income tax provision		4,745			11,686			26,978			24,381
Net income		7,169			20,456			46,129			42,352
Net income/(loss) attributable to noncontrolling interests		(530	)		350			140			471
Net income attributable to GAMCO Investors, Inc.'s shareholders	$	7,699		$	20,106		$	45,989		$	41,881

Net income attributable to GAMCO Investors, Inc.'s shareholders
per share:
Basic	$	0.29		$	0.75		$	1.72		$	1.55

Diluted	$	0.29		$	0.73		$	1.72		$	1.53

Weighted average shares outstanding:
Basic		26,496			26,828			26,686			26,996

Diluted		26,576			28,364			26,772			27,818

Dividends declared:	$	0.04		$	0.93		$	0.11		$	0.99
(a) Nine months ended September 30, 2011 includes $5.6 million in costs directly related to the launch of a new closed-end fund.

See accompanying notes.

GAMCO INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
UNAUDITED
(Dollars in thousands, except per share data)

	September 30,			December 31,			September 30,
	2011			2010			2010
ASSETS
Cash and cash equivalents, including restricted cash of $0, $0 and $62,308, respectively	$	335,656		$	169,601		$	294,271
Investments in securities		270,323			305,486			228,210
Investments in partnerships		98,286			82,871			79,244
Receivable from brokers		67,064			46,621			62,209
Investment advisory fees receivable		23,451			44,660			17,145
Income tax receivable and deferred tax assets		227			325			-
Other assets		25,883			23,172			21,140
Total assets	$	820,890		$	672,736		$	702,219

LIABILITIES AND EQUITY
Payable to brokers	$	15,590		$	1,554		$	4,151
Income taxes payable and deferred tax liabilities		21,235			23,225			4,533
Capital lease obligation		5,100			5,182			5,197
Compensation payable		31,559			23,771			23,575
Securities sold, not yet purchased		6,743			19,299			18,446
Mandatorily redeemable noncontrolling interests		1,490			1,444			1,367
Accrued expenses and other liabilities		31,450			23,089			25,436
Sub-total		113,167			97,564			82,705

5.5% Senior notes (due May 15, 2013)		99,000			99,000			99,000
5.875% Senior notes (due June 1, 2021)		100,000			-			-
6.5% Convertible note (due October 2, 2018; repaid October 13, 2010)		-			-			60,000
Zero coupon subordinated debentures, Face value: $86.4 million (due December 31, 2015)		62,973			59,580			-
Total liabilities		375,140			256,144			241,705

Redeemable noncontrolling interests		38,050			26,984			15,994
Commitments and contingencies (Note J)
Equity
GAMCO Investors, Inc. stockholders' equity
Class A Common Stock, $0.001 par value; 100,000,000 shares authorized;
13,600,897, 13,255,503 and 13,202,489 issued, respectively; 6,666,654,
6,763,221 and 6,970,410 outstanding, respectively		13			13			13
Class B Common Stock, $0.001 par value; 100,000,000 shares authorized;
24,000,000 shares issued; 20,106,746, 20,290,140 and 20,292,104 shares
outstanding, respectively		20			20			20
Additional paid-in capital		264,028			262,108			255,860
Retained earnings		413,295			370,272			425,383
Accumulated comprehensive income		18,425			25,389			19,306
Treasury stock, at cost (6,934,243, 6,492,282 and 6,232,079 shares, respectively)		(291,781	)		(271,773	)		(259,442	)
Total GAMCO Investors, Inc. stockholders' equity		404,000			386,029			441,140
Noncontrolling interests		3,700			3,579			3,380
Total equity		407,700			389,608			444,520

Total liabilities and equity	$	820,890		$	672,736		$	702,219

See accompanying notes.

GAMCO INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME
UNAUDITED
(In thousands)

For the Nine Months Ended September 30, 2011
			GAMCO Investors, Inc. shareholders
					Additional					Accumulated									Redeemable
	Noncontrolling		Common		Paid-in		Retained			Comprehensive			Treasury						Noncontrolling			Comprehensive
	Interests		Stock		Capital		Earnings			Income			Stock			Total			Interests			Income
Balance at December 31, 2010	$	3,579	$	33	$	262,108	$	370,272		$	25,389		$	(271,773	)	$	389,608		$	26,984		$	-
Redemptions of redeemable
noncontrolling interests		-		-		-		-			-			-			-			(2,340	)		-
Contributions from redeemable
noncontrolling interests		-		-		-		-			-			-			-			17,490			-
Deconsolidation of
Partnership		-		-		-		-			-			-			-			(4,103	)		-
Net income		121		-		-		45,989			-			-			46,110			19			46,129
Net unrealized losses on
securities available for sale,
net of income tax benefit ($4,093)		-		-		-		-			(6,969	)		-			(6,969	)		-			(6,969	)
Foreign currency translation		-		-		-		-			5			-			5			-			5
Dividends declared ($0.11 per
share)		-		-		-		(2,966	)		-			-			(2,966	)		-			-
Stock based compensation
expense		-		-		1,920		-			-			-			1,920			-			-
Purchase of treasury stock		-		-		-		-			-			(20,008	)		(20,008	)		-			-
Balance at September 30, 2011	$	3,700	$	33	$	264,028	$	413,295		$	18,425		$	(291,781	)	$	407,700		$	38,050		$	39,165
Comprehensive income attributable
to noncontrolling interest																							(140	)
Total comprehensive income
attributable to GAMCO Investors, Inc.																						$	39,025

See accompanying notes.

GAMCO INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME
UNAUDITED
(In thousands)

For the Nine Months Ended September 30, 2010
				GAMCO Investors, Inc. shareholders
						Additional					Accumulated									Redeemable
	Noncontrolling			Common		Paid-in		Retained			Comprehensive			Treasury						Noncontrolling			Comprehensive
	Interests			Stock		Capital		Earnings			Income			Stock			Total			Interests			Income
Balance at December 31, 2009	$	4,043		$	33	$	251,591	$	410,473		$	19,088		$	(241,567	)	$	443,661		$	1,464		$	-
Redemptions of redeemable
noncontrolling interests		-			-		-		-			-			-			-			(475	)		-
Contributions from redeemable
noncontrolling interests		-			-		-		-			-			-			-			14,700			-
Dividends paid to noncontrolling
interests		(829	)		-		-		-			-			-			(829	)		-			-
Net income		166			-		-		41,881			-			-			42,047			305			42,352
Net unrealized gains on
securities available for sale,
net of income tax ($129)		-			-		-		-			220			-			220			-			220
Foreign currency translation		-			-		-		-			(2	)		-			(2	)		-			(2	)
Dividends declared ($0.99 per
share)		-			-		-		(26,971	)		-			-			(26,971	)		-			-
Stock based compensation
expense		-			-		4,221		-			-			-			4,221			-			-
Exercise of stock options
including tax benefit		-			-		48		-			-			-			48			-			-
Purchase of treasury stock		-			-		-		-			-			(17,875	)		(17,875	)		-			-
Balance at September 30, 2010	$	3,380		$	33	$	255,860	$	425,383		$	19,306		$	(259,442	)	$	444,520		$	15,994		$	42,570
Comprehensive income attributable
to noncontrolling interest																								(471	)
Total comprehensive income
attributable to GAMCO Investors, Inc.																							$	42,099

See accompanying notes.

GAMCO INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(In thousands)

	Nine Months Ended
	September 30,
	2011			2010
Operating activities
Net income	$	46,129		$	42,352
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity in net gains from partnerships		(268	)		(4,869	)
Depreciation and amortization		642			520
Stock based compensation expense		1,920			4,221
Deferred income taxes		(1,358	)		724
Tax benefit from exercise of stock options		-			8
Foreign currency translation gain/(loss)		5			(2	)
Fair value of donated securities		111			(608	)
Gains on sales of available for sale securities		(584	)		(13	)
Amortization of discount on convertible debt		-			52
Accretion of zero coupon debentures		3,393			-
Loss on extinguishment of debt		-			497
(Increase) decrease in assets:
Investments in trading securities		5,417			(64,863	)
Investments in partnerships:
Contributions to partnerships		(13,283	)		(18,143	)
Distributions from partnerships		3,312			6,423
Receivable from brokers		(26,130	)		(32,137	)
Investment advisory fees receivable		21,339			18,539
Income tax receivable and deferred tax assets		98			-
Other assets		(2,424	)		(194	)
Increase (decrease) in liabilities:
Payable to brokers		14,036			3,756
Income taxes payable and deferred tax liabilities		3,726			(4,843	)
Compensation payable		7,787			10,273
Mandatorily redeemable noncontrolling interests		47			(255	)
Accrued expenses and other liabilities		9,579			(192	)
Total adjustments		27,365			(81,106	)
Net cash provided by (used in) operating activities	$	73,494		$	(38,754	)

GAMCO INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED (continued)
(In thousands)

	Nine Months Ended
	September 30,
	2011			2010
Investing activities
Purchases of available for sale securities	$	(4,374	)	$	(12	)
Proceeds from sales of available for sale securities		5,685			2,014
Return of capital on available for sale securities		1,262			1,901
Increase in restricted cash		-			(50	)
Net cash provided by investing activities		2,573			3,853

Financing activities
Contributions from redeemable noncontrolling interests		17,490			14,700
Redemptions of redeemable noncontrolling interests		(2,340	)		(475	)
Issuance of 5.875% Senior notes due June 1, 2021		100,000			-
Issuance costs on the 5.875% Senior notes due June 1, 2021		(934	)		-
Repayment of 6% Convertible note due August 14, 2011		-			(40,400	)
Proceeds from exercise of stock options		-			40
Dividends paid		(2,966	)		(26,565	)
Dividends paid to noncontrolling interests		-			(829	)
Purchase of treasury stock		(20,008	)		(17,875	)
Net cash provided by (used in) financing activities		91,242			(71,404	)
Effect of exchange rates on cash and cash equivalents		(3	)		(2	)
Net increase (decrease) in cash and cash equivalents		167,306			(106,307	)
Cash and cash equivalents at beginning of period		169,601			338,270
Decrease in cash from deconsolidation of partnership		(1,251	)		-
Cash and cash equivalents at end of period	$	335,656		$	231,963
Supplemental disclosures of cash flow information:
Cash paid for interest	$	3,554		$	9,775
Cash paid for taxes	$	23,587		$	28,004

Non-cash activity:
- On January 1, 2011, GAMCO Investors, Inc. was no longer deemed to have control over a certain partnership which
resulted in the deconsolidation of that partnership and decreases of approximately $1,251 of cash and cash
equivalents, $2,852 of net assets and $4,103 of noncontrolling interests.
- For the nine months ended September 30, 2011 and September 30, 2010, the Company accrued restricted stock
award dividends of $27 and $405, respectively.
See accompanying notes.

GAMCO INVESTORS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(Unaudited)

A. Significant Accounting Policies

Basis of Presentation

Unless we have indicated otherwise, or the context otherwise requires, references in this report to “GAMCO Investors, Inc.,” “GAMCO,” “the Company,” “GBL,” “we,” “us” and “our” or similar terms are to GAMCO Investors, Inc., its predecessors and its subsidiaries.

The unaudited interim condensed consolidated financial statements of GAMCO included herein have been prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP in the United States for complete financial statements. In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of financial position, results of operations and cash flows of GAMCO for the interim periods presented and are not necessarily indicative of a full year’s results.

The condensed consolidated financial statements include the accounts of GAMCO and its subsidiaries, including our new broker-dealer, G.distributors, LLC, a wholly-owned subsidiary of GAMCO, which became the distributor for the Gabelli/GAMCO family of funds on August 1, 2011. Intercompany accounts and transactions are eliminated.

These condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2010 from which the accompanying condensed consolidated financial statements were derived.

Certain items previously reported have been reclassified to conform to the current period’s condensed consolidated financial statements presentation.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Recent Accounting Developments

In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance to improve disclosures about fair value measurements. The guidance affects all entities that are required to make disclosures about recurring and nonrecurring fair value measurements. The guidance requires new disclosures regarding purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. The guidance is effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. The Company adopted the applicable portions of this guidance on January 1, 2011 without a material impact to the consolidated financial statement disclosures.

In May 2011, the FASB issued guidance on fair value measurement which expands existing disclosure requirements for fair value measurements and makes other amendments. The guidance requires, for level 3 fair value measurements, (1) a quantitative disclosure of the unobservable inputs and assumptions used in the measurement, (2) a description of the valuation processes in place, and (3) a narrative description of the sensitivity of the fair value to changes in unobservable inputs and interrelationships between those inputs. Additionally, the guidance requires disclosure of the level in the fair value hierarchy of items that are not measured at fair value in the statement of financial position but whose fair value must be disclosed and clarifies that the valuation premise and highest and best use concepts are not relevant to financial instruments. The guidance is effective for fiscal years beginning after December 15, 2011 and for interim periods within those fiscal years. The application of this guidance will result in enhanced footnote disclosure upon adoption on January 1, 2012.

In June 2011, the FASB issued guidance which revises the manner in which entities present comprehensive income in their financial statements. The new guidance requires entities to report comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. Under the two-statement approach, the first statement would include components of net income, which is consistent with the income statement format used currently, and the second statement would include components of other comprehensive income (“OCI”). The guidance does not change the items that must be reported in OCI. The guidance is effective for fiscal years beginning after December 15, 2011 and for interim periods within those fiscal years. The application of this guidance is not expected to be material to the condensed consolidated financial statements.

In September 2011, the FASB issued guidance which permits an entity to make a qualitative assessment of whether it is more likely than not that a reporting unit’s fair value is less than its carrying value before applying the quantitative two-step goodwill impairment model that is currently in place. If it is determined through the qualitative assessment that a reporting unit’s fair value is more likely than not greater than its carrying value, the remaining impairment steps would be unnecessary. The qualitative assessment is optional, allowing companies to go directly to the quantitative assessment. This guidance is effective for annual and interim goodwill impairment tests performed in fiscal years beginning after December 15, 2011. The application of this guidance is not expected to be material to the condensed consolidated financial statements.

B. Investment in Securities

Investments in securities at September 30, 2011, December 31, 2010 and September 30, 2010 consisted of the following:

	September 30, 2011				December 31, 2010				September 30, 2010
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
	(In thousands)
Trading securities:
Government obligations	$	18,698	$	18,699	$	27,327	$	27,288	$	1,388	$	1,363
Common stocks		166,989		160,861		158,455		170,374		122,720		128,386
Mutual funds		1,096		1,202		1,205		1,554		1,194		1,365
Convertible bonds		-		-		574		620		762		938
Preferred stocks		-		-		1,783		1,973		1,783		1,834
Other investments		442		396		1,559		1,350		785		582
Total trading securities		187,225		181,158		190,903		203,159		128,632		134,468

Available for sale securities:
Common stocks		16,724		31,903		16,835		37,139		16,918		31,594
Mutual funds		41,718		57,262		43,707		65,188		44,717		62,148
Total available for sale securities		58,442		89,165		60,542		102,327		61,635		93,742

Total investments in securities	$	245,667	$	270,323	$	251,445	$	305,486	$	190,267	$	228,210

Securities sold, not yet purchased at September 30, 2011, December 31, 2010 and September 30, 2010 consisted of the following:

	September 30, 2011				December 31, 2010				September 30, 2010
	Proceeds		Fair Value		Proceeds		Fair Value		Proceeds		Fair Value
Trading securities:	(In thousands)
Common stocks	$	7,979	$	6,743	$	19,071	$	19,299	$	18,026	$	18,387
Other		-		-		-		-		56		59
Total securities sold, not yet purchased	$	7,979	$	6,743	$	19,071	$	19,299	$	18,082	$	18,446

Management determines the appropriate classification of debt and equity securities at the time of purchase and reevaluates such designation as of each balance sheet date. Investments in United States Treasury Bills and Notes with maturities of greater than three months at the time of purchase are classified as investments in securities, and those with maturities of three months or less at time of purchase are classified as cash equivalents. A substantial portion of investments in securities are held for resale in anticipation of short-term market movements and therefore are classified as trading securities. Trading securities are stated at fair value, with any unrealized gains or losses, reported in current period earnings. Available for sale (“AFS”) investments are stated at fair value, with any unrealized gains or losses, net of taxes, reported as a component of equity except for losses deemed to be other than temporary which are recorded as unrealized losses in the condensed consolidated statements of income. There was no impairment of AFS securities for the three or nine month periods ended September 30, 2011 and September 30, 2010.

The Company recognizes all derivatives as either assets or liabilities measured at fair value and includes them in either investments in securities or securities sold, not yet purchased on the condensed consolidated statements of financial condition. From time to time, the Company and/or the partnerships and offshore funds that the Company consolidates will enter into hedging transactions to manage their exposure to foreign currencies and equity prices related to their proprietary investments. For the three and nine months ended September 30, 2011, the Company had no derivative transactions. For the three months ended September 30, 2010, the Company had derivative transactions in equity derivatives which resulted in net losses of $36,000. For the nine months ended September 30, 2010, the Company had derivative transactions in equity derivatives which resulted in net losses of $154,000. At December 31, 2010 and September 30, 2010, we held derivative contracts on 403,000 equity shares and 265,000 equity shares, respectively, and the fair value was $1.0 million and $285,000, respectively; these are included in investments in securities in the condensed consolidated statements of financial condition. At September 30, 2011, the Company did not hold any derivatives. These transactions are not designated as hedges for accounting purposes, and therefore changes in fair values of these derivatives are included in net gain/(loss) from investments in the condensed consolidated statements of income.

At September 30, 2011, December 31, 2010 and September 30, 2010, the fair value of common stock investments available for sale was $31.9 million, $37.1 million and $31.6 million, respectively. The total unrealized gains for common stock investments available for sale securities with unrealized gains was $15.2 million, $20.3 million and $14.7 million at September 30, 2011, December 31, 2010 and September 30, 2010, respectively. There were no unrealized losses for common stock investments available for sale at September 30, 2011, December 31, 2010 or September 30, 2010. At September 30, 2011, December 31, 2010 and September 30, 2010, the fair value of mutual fund investments available for sale with unrealized gains was $57.2 million, $65.2 million and $62.1 million, respectively. The total unrealized gains for mutual fund investments available for sale securities with unrealized gains at September 30, 2011, December 31, 2010 and September 30, 2010 was $15.6 million, $21.5 million and $17.4 million, respectively. At September 30, 2011, the fair value of mutual fund investments available for sale with unrealized losses was $0.1 million. The total unrealized losses for mutual fund investments available for sale with unrealized losses was less than $0.1 million at September 30, 2011. At December 31, 2010 and September 30, 2010, there were no unrealized losses for mutual fund investments available for sale.

Unrealized changes to fair value, net of taxes, for the three months ended September 30, 2011 and September 30, 2010 of $7.9 million in losses and $3.3 million in gains, respectively, have been included in other comprehensive income, a component of equity, at September 30, 2011 and September 30, 2010. Return of capital on available for sale securities for the three months ended September 30, 2011 and September 30, 2010 was $0.5 million and $0.6 million, respectively. There were no sales of investments available for sale for the three months ended September 30, 2011 or September 30, 2010. Unrealized changes to fair value, net of taxes, for the nine months ended September 30, 2011 and September 30, 2010 of $7.0 million in losses and $0.2 million in gains, respectively, have been included in other comprehensive income, a component of equity, at September 30, 2011 and September 30, 2010. Return of capital on available for sale securities for the nine months ended September 30, 2011 and September 30, 2010 was $1.3 million and $1.9 million, respectively. Proceeds from sales of investments available for sale were approximately $5.7 million and $2.0 million for the nine month periods ended September 30, 2011 and September 30, 2010, respectively. For the nine months ended September 30, 2011 and September 30, 2010, gross realized gains on the sale of investments available for sale amounted to $0.6 million and $13,000, respectively; there were no gross realized losses on the sale of investments available for sale.

Investments classified as available for sale that are in an unrealized loss position for which other-than-temporary impairment has not been recognized consisted of the following:

	September 30, 2011							December 31, 2010						September 30, 2010
			Unrealized							Unrealized						Unrealized
	Cost		Losses			Fair Value		Cost		Losses		Fair Value		Cost		Losses		Fair Value
(in thousands)
Mutual Funds	$	100	$	(21	)	$	79	$	-	$	-	$	-	$	-	$	-	$	-

At September 30, 2011, there was one holding in a loss position which was not deemed to be other-than-temporarily impaired because it passed scrutiny in our evaluation of the length of time that it had been in a loss position and our evaluation of issuer-specific and industry-specific considerations. In this specific instance, the investment at September 30, 2011 was a mutual fund with diversified holdings across multiple companies and across multiple industries. The one holding was impaired for four consecutive months and its fair value at September 30, 2011 was $0.1 million.

C. Investments in Partnerships

The Company is general partner or co-general partner of various sponsored limited partnerships and the investment manager of various sponsored offshore funds whose underlying assets consist primarily of marketable securities (the “affiliated entities”). We also have investments in unaffiliated partnerships, offshore funds and other entities. Certain of the affiliated entities are consolidated, generally because a majority of the equity is owned by the Company. Other investment partnerships for which we serve as the general partner but have only a minority ownership interest are not consolidated because the limited partners have substantive rights to replace the Company as general partner. Our balance sheet caption “investments in partnerships” includes those investments, in both affiliated and unaffiliated entities, which the Company accounts for under the equity method of accounting and certain investments in consolidated feeder funds that the Company accounts for at fair value, as described below. The Company reflects the equity in earnings of these equity method investees and the change in fair value of the consolidated feeder funds under the caption net gain/(loss) from investments on the condensed consolidated statements of income.

We also have sponsored a number of investment vehicles where we are the investment manager in which we do not have an equity investment. These vehicles are considered variable interest entities (“VIEs”), and we are not the primary beneficiary because we do not absorb a majority of the entities’ expected losses or expected returns. The Company has not provided any financial or other support to these entities. The total assets of these entities at September 30, 2011, December 31, 2010 and September 30, 2010 were $29.5 million, $13.3 million and $11.8 million, respectively. Our maximum exposure to loss as a result of our involvement with the VIEs is limited to the deferred carried interest that we have in one of the VIEs. On September 30, 2011, December 31, 2010 and September 30, 2010, we had a deferred carried interest in one of the VIE offshore funds of approximately $47,000, $325,000 and $307,000, respectively, and it was included in investments in partnerships on the condensed consolidated statements of financial condition. Additionally, as the general partner or investment manager to these VIEs, the Company earns fees for performing these roles. These revenues and associated receivables are dependent upon the AUM levels in the VIEs, would vary depending on these AUMs and would be reflected in the condensed consolidated statements of income, condensed consolidated statements of financial condition and condensed consolidated statements of cash flows.

In the case of two VIEs, we have determined that we are the primary beneficiary of each because we absorb a majority of each entity’s expected losses; therefore they are consolidated in the financial statements. The Company has not provided any financial support to these VIEs but does earn fees as the investment manager. The assets of these VIEs may only be used to satisfy obligations of the VIEs. The following table presents the balances related to these VIEs that were included on the condensed consolidated statements of financial condition as well as GAMCO’s net interest in these VIEs:

	September 30,
	2011
(In thousands)
Cash and cash equivalents	$	251
Investments in securities		44,227
Investments in partnerships		1,489
Receivable from brokers		50,060
Other assets		70
Securities sold, not yet purchased		(3,786	)
Accrued expenses and other liabilities		(525	)
Redeemable noncontrolling interests		(37,289	)
GAMCO's net interests in consolidated VIEs	$	54,497

On January 1, 2011, upon analysis of several factors, including the additional contribution of capital from unrelated third parties into a partnership that we consolidated for the year ended and as of December 31, 2010, we determined that the Company was no longer deemed to control the partnership, resulting in the deconsolidation of this partnership, effective January 1, 2011. The deconsolidation did not result in the recognition of any gain or loss. The Company continues to serve as the general partner and earns fees for this role, and it also maintains an investment in the deconsolidated partnership which is included in investments in partnerships on the condensed consolidated statements of financial condition and is accounted for under the equity method (which approximates fair value).

At September 30, 2011, December 31, 2010 and September 30, 2010, and for the three and nine months ended September 30, 2011 and September 30, 2010, the Company consolidated two limited partnerships and one offshore fund (the “consolidated feeder funds”) that owned 100% of their offshore master funds. The Company retained the specialized investment company accounting of the consolidated feeder funds in the Company’s consolidated financial statements. Included in the investment in partnerships on the Company’s consolidated statement of financial condition as of September 30, 2011, December 31, 2010 and September 30, 2010, are $27.1 million $27.7 million, and $26.8 million, respectively, which represent the consolidated feeder fund’s proportionate investment in the master funds carried at fair value at those dates.

D. Fair Value

All of the instruments within cash and cash equivalents, investments in securities and securities sold, not yet purchased are measured at fair value. Certain investments in partnerships are also measured at fair value.

The Company’s assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy in accordance with the FASB’s guidance on fair value measurement. The levels of the fair value hierarchy and their applicability to the Company are described below:

-	Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities at the reporting date. Level 1 assets include cash equivalents, government obligations, open-end mutual funds, closed-end funds and equities.
-	Level 2 inputs utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities that are not active and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly-quoted intervals. Assets that generally are included in this category may include certain limited partnership interests in private funds in which the valuations for substantially all of the investments within the fund are based upon Level 1 or Level 2 inputs and over the counter derivatives that have inputs to the valuations that can generally be corroborated by observable market data.
-	Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. Assets included in this category generally include equities that trade infrequently and direct private equity investments held within consolidated partnerships.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Investments are transferred into or out of any level at their beginning period values.

The availability of observable inputs can vary from product to product and is affected by a wide variety of factors, including, for example, the type of product, whether the product is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized as Level 3.

In the absence of a closing price, an average of the bid and ask price is used. Bid prices reflect the highest price that the market is willing to pay for an asset. Ask prices represent the lowest price that the market is willing to accept for an asset.

Cash equivalents – Cash equivalents primarily consist of an affiliated money market mutual fund which is invested solely in U.S. Treasuries. U.S. Treasury Bills and Notes with maturities of three months or less at the time of purchase are also considered cash equivalents. Cash equivalents are valued using quoted market prices.

Investments in securities and securities sold, not yet purchased – Investments in securities and securities sold, not yet purchased are generally valued based on quoted prices from an exchange. To the extent these securities are actively traded, valuation adjustments are not applied, and they are categorized in Level 1 of the fair value hierarchy. Securities categorized in Level 2 investments are valued using other observable inputs. Nonpublic and infrequently traded investments are included in Level 3 of the fair value hierarchy because significant inputs to measure fair value are unobservable.

Investments in Partnerships – The Company’s investments include limited partner investments in consolidated feeder funds. The Company considers the net asset value of the consolidated feeder fund to be the best estimate of fair value. Investments in private funds that are redeemable at the measurement date or within the near term, are categorized in Level 2 of the fair value hierarchy. These funds primarily invest in long and short investments in debt and equity securities that are traded in public and over-the-counter exchanges in the United States and are classified as Level 1 assets or liabilities in the funds’ financial statements. We may redeem our investments in these funds monthly with 30 days’ notice.

The following table presents information about the Company’s assets and liabilities by major categories measured at fair value on a recurring basis as of September 30, 2011, December 31, 2010 and September 30, 2010 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:

Assets and Liabilities Measured at Fair Value on a Recurring Basis as of September 30, 2011 (in thousands)

	Quoted Prices in Active		Significant Other		Significant		Balance as of
	Markets for Identical		Observable		Unobservable		September 30,
Assets	Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)		2011
Cash equivalents	$	335,098	$	-	$	-	$	335,098
Investments in partnerships		-		27,071		-		27,071
Investments in securities:
AFS - Common stocks		31,903		-		-		31,903
AFS - Mutual funds		57,262		-		-		57,262
Trading - Government obligations		18,699		-		-		18,699
Trading - Common stocks		160,259		8		594		160,861
Trading - Mutual funds		1,202		-		-		1,202
Trading - Other		38		-		358		396
Total investments in securities		269,363		8		952		270,323
Total investments		269,363		27,079		952		297,394
Total assets at fair value	$	604,461	$	27,079	$	952	$	632,492
Liabilities
Trading - Common stocks	$	6,743	$	-	$	-	$	6,743
Securities sold, not yet purchased	$	6,743	$	-	$	-	$	6,743

Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2010 (in thousands)

	Quoted Prices in Active		Significant Other		Significant		Balance as of
	Markets for Identical		Observable		Unobservable		December 31,
Assets	Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)		2010
Cash equivalents	$	167,548	$	-	$	-	$	167,548
Investments in partnerships		-		27,690		-		27,690
Investments in securities:
AFS - Common stocks		37,139		-		-		37,139
AFS - Mutual funds		65,188		-		-		65,188
Trading - Government obligations		27,288		-		-		27,288
Trading - Common stocks		170,204		23		147		170,374
Trading - Mutual funds		1,554		-		-		1,554
Trading - Convertible bonds		620		-		-		620
Trading - Preferred stocks		1,973		-		-		1,973
Trading - Other		72		1,000		278		1,350
Total investments in securities		304,038		1,023		425		305,486
Total investments		304,038		28,713		425		333,176
Total assets at fair value	$	471,586	$	28,713	$	425	$	500,724
Liabilities
Trading - Common stocks	$	19,299	$	-	$	-	$	19,299
Securities sold, not yet purchased	$	19,299	$	-	$	-	$	19,299

Assets and Liabilities Measured at Fair Value on a Recurring Basis as of September 30, 2010 (in thousands)

	Quoted Prices in Active		Significant Other		Significant		Balance as of
	Markets for Identical		Observable		Unobservable		September 30,
Assets	Assets (Level 1)		Inputs (Level 2)		Inputs (Level 3)		2010
Cash equivalents	$	293,661	$	-	$	-	$	293,661
Investments in partnerships		-		26,795		-		26,795
Investments in securities:
AFS - Common stocks		31,594		-		-		31,594
AFS - Mutual funds		62,148		-		-		62,148
Trading - Government obligations		1,363		-		-		1,363
Trading - Common stocks		128,113		90		183		128,386
Trading - Mutual funds		1,365		-		-		1,365
Trading - Convertible bonds		938		-		-		938
Trading - Preferred stocks		1,821		-		13		1,834
Trading - Other		204		285		93		582
Total investments in securities		227,546		375		289		228,210
Total investments		227,546		27,170		289		25