Edgar Filing: GAMCO INVESTORS, INC. ET AL

form10q093012.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, 2012

[ ]	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. 001-14761

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, 2012
Class A Common Stock, .001 par value		6,684,215
Class B Common Stock, .001 par value		19,919,818

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, 2012 and 2011
	- Nine months ended September 30, 2012 and 2011

	Condensed Consolidated Statements of Comprehensive Income:
	- Three months ended September 30, 2012 and 2011
	- Nine months ended September 30, 2012 and 2011


	Condensed Consolidated Statements of Financial Condition:
	- September 30, 2012
	- December 31, 2011
	- September 30, 2011

	Condensed Consolidated Statements of Equity:

	- Nine months ended September 30, 2012 and 2011

	Condensed Consolidated Statements of Cash Flows:
	- Nine months ended September 30, 2012 and 2011

	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,
	2012			2011			2012			2011
Revenues
Investment advisory and incentive fees	$	67,790		$	65,244		$	202,783		$	197,407
Distribution fees and other income		11,139			11,486			33,768			33,419
Institutional research services		3,302			3,421			8,453			11,311
Total revenues		82,231			80,151			245,004			242,137
Expenses
Compensation		32,948			32,010			100,423			99,792
Management fee		3,056			1,387			9,855			8,126
Distribution costs		10,386			11,091			30,575			34,108
Other operating expenses		6,829			5,002			17,760			18,193
Total expenses		53,219			49,490			158,613			160,219		(a)

Operating income		29,012			30,661			86,391			81,918
Other income (expense)
Net gain/(loss) from investments		7,525			(16,152	)		17,234			(3,743	)
Extinguishment of debt (b)		(6,305	)		-			(6,307	)		-
Interest and dividend income		920			1,823			3,938			5,620
Interest expense		(3,586	)		(4,418	)		(12,419	)		(10,688	)
Total other income (expense), net		(1,446	)		(18,747	)		2,446			(8,811	)
Income before income taxes		27,566			11,914			88,837			73,107
Income tax provision		8,467			4,745			30,909			26,978
Net income		19,099			7,169			57,928			46,129
Net income/(loss) attributable to noncontrolling interests		95			(530	)		(17	)		140
Net income attributable to GAMCO Investors, Inc.'s shareholders	$	19,004		$	7,699		$	57,945		$	45,989

Net income attributable to GAMCO Investors, Inc.'s shareholders
per share:
Basic	$	0.72		$	0.29		$	2.20		$	1.72

Diluted	$	0.72		$	0.29		$	2.19		$	1.72

Weighted average shares outstanding:
Basic		26,250			26,496			26,309			26,686

Diluted		26,439			26,576			26,480			26,772

Dividends declared:	$	0.30	(c)	$	0.04		$	0.63		$	0.11

(a) Includes $5.6 million in costs directly related to the launch of a new closed-end fund.
(b) Relates to repurchase of $64.6 million (face value) of Subordinated Debentures.
(c) Includes regular quarterly dividend of $0.05 per share and special dividend of $0.25 per share.

See accompanying notes.

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


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011

Net income	$	19,099		$	7,169		$	57,928		$	46,129
Other comprehensive income/(loss), net of tax:
Foreign currency translation		(34	)		(18	)		(29	)		5
Net unrealized gains/(losses) on securities available for sale		2,938			(7,906	)		3,816			(6,969	)
Other comprehensive income/(loss)		2,904			(7,924	)		3,787			(6,964	)

Comprehensive income/(loss)		22,003			(755	)		61,715			39,165
Less: Comprehensive income/(loss) attributable to noncontrolling interests		(95	)		530			17			(140	)

Comprehensive income/(loss) attributable to GAMCO Investors, Inc.	$	21,908		$	(225	)	$	61,732		$	39,025

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,
	2012			2011			2011
ASSETS
Cash and cash equivalents	$	288,685		$	276,340		$	335,656
Investments in securities		235,445			238,333			214,759
Investments in sponsored registered investment companies		64,223			59,214			55,564
Investments in partnerships		102,604			100,893			98,286
Receivable from brokers		55,159			20,913			67,064
Investment advisory fees receivable		29,187			32,156			23,451
Income tax receivable		1,018			39			227
Other assets		22,250			28,861			25,883
Total assets	$	798,571		$	756,749		$	820,890

LIABILITIES AND EQUITY
Payable to brokers	$	28,039		$	10,770		$	15,590
Income taxes payable and deferred tax liabilities		16,445			15,296			21,235
Capital lease obligation		4,982			5,072			5,100
Compensation payable		33,998			17,695			31,559
Securities sold, not yet purchased		3,856			5,488			6,743
Mandatorily redeemable noncontrolling interests		1,356			1,386			1,490
Accrued expenses and other liabilities		30,175			24,441			31,450
Sub-total		118,851			80,148			113,167

5.5% Senior notes (due May 15, 2013)		99,000			99,000			99,000
5.875% Senior notes (due June 1, 2021)		100,000			100,000			100,000
Zero coupon subordinated debentures, Face value: $21.8 million at September 30, 2012,
$86.3 million at December 31, 2011 and $86.4 million at September 30, 2011
(due December 31, 2015)		17,118			64,119			62,973
Total liabilities		334,969			343,267			375,140

Redeemable noncontrolling interests		20,228			6,071			38,050
Commitments and contingencies (Note J)
Equity
GAMCO Investors, Inc. stockholders' equity
Preferred stock, $.001 par value; 10,000,000 shares authorized;
none issued and outstanding
Class A Common Stock, $0.001 par value; 100,000,000 shares authorized;
13,904,190, 13,627,397 and 13,600,897 issued, respectively; 6,685,414,
6,684,149 and 6,666,654 outstanding, respectively		13			13			13
Class B Common Stock, $0.001 par value; 100,000,000 shares authorized;
24,000,000 shares issued; 19,920,730, 20,070,746 and 20,106,746 shares
outstanding, respectively		20			20			20
Additional paid-in capital		267,914			264,409			264,028
Retained earnings		450,326			409,191			413,295
Accumulated other comprehensive income		26,307			22,520			18,425
Treasury stock, at cost (7,218,776, 6,943,248 and 6,934,243 shares, respectively)		(304,567	)		(292,181	)		(291,781	)
Total GAMCO Investors, Inc. stockholders' equity		440,013			403,972			404,000
Noncontrolling interests		3,361			3,439			3,700
Total equity		443,374			407,411			407,700

Total liabilities and equity	$	798,571		$	756,749		$	820,890

See accompanying notes.

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

For the nine months ended September 30, 2012
				GAMCO Investors, Inc. stockholders
											Accumulated
						Additional					Other									Redeemable
	Noncontrolling			Common		Paid-in		Retained			Comprehensive			Treasury						Noncontrolling
	Interests			Stock		Capital		Earnings			Income			Stock			Total			Interests
Balance at December 31, 2011	$	3,439		$	33	$	264,409	$	409,191		$	22,520		$	(292,181	)	$	407,411		$	6,071
Redemptions of redeemable
noncontrolling interests		-			-		-		-			-			-			-			(8,566	)
Contributions from redeemable
noncontrolling interests		-			-		-		-			-			-			-			22,662
Net income (loss)		(78	)		-		-		57,945			-			-			57,867			61
Net unrealized gains on
securities available for sale,
net of income tax ($2,241)		-			-		-		-			3,816			-			3,816			-
Foreign currency translation		-			-		-		-			(29	)		-			(29	)		-
Dividends declared ($0.63 per
share)		-			-		-		(16,810	)		-			-			(16,810	)		-
Stock based compensation
expense		-			-		2,615		-			-			-			2,615			-
Exercise of stock options
including tax benefit		-			-		890		-			-			-			890			-
Purchase of treasury stock		-			-		-		-			-			(12,386	)		(12,386	)		-
Balance at September 30, 2012	$	3,361		$	33	$	267,914	$	450,326		$	26,307		$	(304,567	)	$	443,374		$	20,228

See accompanying notes.

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

For the nine months ended September 30, 2011
			GAMCO Investors, Inc. stockholders
										Accumulated
					Additional					Other									Redeemable
	Noncontrolling		Common		Paid-in		Retained			Comprehensive			Treasury						Noncontrolling
	Interests		Stock		Capital		Earnings			Income			Stock			Total			Interests
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
Net unrealized gains on
securities available for sale,
net of income tax benefit ($4,093)		-		-		-		-			(6,969	)		-			(6,969	)		-
Foreign currency translation		-		-		-		-			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

See accompanying notes.

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

	Nine Months Ended
	September 30,
	2012			2011
Operating activities
Net income	$	57,928		$	46,129
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in net gains from partnerships		(4,445	)		(268	)
Depreciation and amortization		580			642
Stock based compensation expense		2,615			1,920
Deferred income taxes		1,708			(1,358	)
Tax benefit from exercise of stock options		108			-
Foreign currency translation		(29	)		5
Other-than-temporary loss on available for sale securities		20			-
Fair value of donated securities		393			111
Gains on sales of available for sale securities		(1,503	)		(584	)
Accretion of zero coupon debentures		2,908			3,393
Extinguishment of debt		6,307			-
(Increase) decrease in assets:
Investments in trading securities		(60	)		5,417
Investments in partnerships:
Contributions to partnerships		(26,893	)		(13,283	)
Distributions from partnerships		29,627			3,312
Receivable from brokers		(34,246	)		(26,130	)
Investment advisory fees receivable		2,970			21,339
Income tax receivable and deferred tax assets		(979	)		98
Other assets		6,045			(2,424	)
Increase (decrease) in liabilities:
Payable to brokers		17,268			14,036
Income taxes payable and deferred tax liabilities		(2,802	)		3,726
Compensation payable		16,301			7,787
Mandatorily redeemable noncontrolling interests		(30	)		47
Accrued expenses and other liabilities		5,394			9,579
Total adjustments		21,257			27,365
Net cash provided by operating activities	$	79,185		$	73,494

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

	Nine Months Ended
	September 30,
	2012			2011
Investing activities
Purchases of available for sale securities	$	(1,264	)	$	(4,374	)
Proceeds from sales of available for sale securities		3,068			5,685
Return of capital on available for sale securities		1,650			1,262
Net cash provided by investing activities		3,454			2,573

Financing activities
Contributions from redeemable noncontrolling interests		22,662			17,490
Redemptions of redeemable noncontrolling interests		(8,566	)		(2,340	)
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	)
Proceeds from exercise of stock options		781			-
Repurchase of zero coupon subordinated debentures		(56,215	)		-
Dividends paid		(16,558	)		(2,966	)
Purchase of treasury stock		(12,386	)		(20,008	)
Net cash (used in) provided by financing activities		(70,282	)		91,242
Effect of exchange rates on cash and cash equivalents		(12	)		(3	)
Net increase in cash and cash equivalents		12,345			167,306
Cash and cash equivalents at beginning of period		276,340			169,601
Decrease in cash from deconsolidation of partnership		-			(1,251	)
Cash and cash equivalents at end of period	$	288,685		$	335,656
Supplemental disclosures of cash flow information:
Cash paid for interest	$	4,684		$	3,554
Cash paid for taxes	$	31,639		$	23,587

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, 2012 and September 30, 2011, the Company accrued restricted stock
award dividends of $203 and $27, respectively.
See accompanying notes.

GAMCO INVESTORS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2012

(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, 2011 from which the accompanying condensed consolidated financial statements were derived.

Beginning with the period ended March 31, 2012 the Company has now separately disclosed the amount of investments in sponsored registered investment companies as a new line item in the condensed consolidated statements of financial condition. These amounts were previously included within investments in securities in the condensed consolidated statements of financial condition.

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 on the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Recent Accounting Developments

In May 2011, the Financial Accounting Standards Board (“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 condition but whose fair value must be disclosed and clarifies that the valuation premise and highest and best use concepts are not relevant to financial assets or liabilities. The guidance is effective for interim and annual periods beginning after December 15, 2011. The Level 3 investments held by the Company are not material, and therefore the adoption of this standard did not have a material impact on the Company.

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 historically, 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. In December 2011, the FASB indefinitely deferred a portion of the guidance that would have required entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which the net income is presented and the statement in which other comprehensive income is presented. The guidance is effective for fiscal years beginning after December 15, 2011, and for interim periods within those fiscal years. The Company adopted the guidance on January 1, 2012 and opted for the two separate but consecutive statements approach. Accordingly, the Company now presents the condensed consolidated statements of comprehensive income immediately following the condensed consolidated statements of income.

In December 2011, the FASB issued guidance which creates new disclosure requirements about the nature of an entity’s right of offset and related arrangements associated with its financial instruments and derivative instruments. The disclosure requirements are effective for annual reporting periods beginning on or after January 1, 2013, and interim periods therein, with retrospective application required. The new disclosures are designed to make financial statements that are prepared under U.S. GAAP more comparable to those prepared under International Financial Reporting Standards. The Company is currently evaluating the impact that the application of this guidance will have on its disclosures.

In July 2012, the FASB issued guidance allowing companies to first perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If a company determines, on the basis of qualitative factors, that the fair value of such asset is not more likely than not impaired, it would not need to calculate the fair value of such asset. However, if a company concludes otherwise, it must calculate the fair value of the asset, compare the value with its carrying amount and record an impairment charge, if any. To perform the qualitative assessment, a company must identify and evaluate events and circumstances that could affect the significant inputs used to determine the fair value of an indefinite-lived intangible asset. This guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. 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, 2012, December 31, 2011 and September 30, 2011 consisted of the following:

	September 30, 2012				December 31, 2011				September 30, 2011
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
	(In thousands)
Trading securities:
Government obligations	$	28,731	$	28,742	$	42,124	$	42,126	$	18,698	$	18,699
Common stocks		160,027		170,846		153,294		159,314		166,989		160,861
Mutual funds		1,064		1,461		1,084		1,307		1,081		1,178
Other investments		382		484		466		399		442		396
Total trading securities		190,204		201,533		196,968		203,146		187,210		181,134

Available for sale securities:
Common stocks		14,931		32,239		16,487		33,282		16,724		31,903
Mutual funds		1,105		1,673		1,362		1,905		1,361		1,722
Total available for sale securities		16,036		33,912		17,849		35,187		18,085		33,625

Total investments in securities	$	206,240	$	235,445	$	214,817	$	238,333	$	205,295	$	214,759

Securities sold, not yet purchased at September 30, 2012, December 31, 2011 and September 30, 2011 consisted of the following:

	September 30, 2012				December 31, 2011				September 30, 2011
	Proceeds		Fair Value		Proceeds		Fair Value		Proceeds		Fair Value
Trading securities:	(In thousands)
Common stocks	$	3,044	$	3,816	$	5,271	$	5,415	$	7,979	$	6,743
Other investments		-		40		49		73		-		-
Total securities sold, not yet purchased	$	3,044	$	3,856	$	5,320	$	5,488	$	7,979	$	6,743

Investments in sponsored registered investment companies at September 30, 2012, December 31, 2011 and September 30, 2011 consisted of the following:

	September 30, 2012				December 31, 2011				September 30, 2011
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
	(In thousands)
Trading securities:
Mutual funds	$	19	$	24	$	15	$	18	$	15	$	24
Total trading securities		19		24		15		18		15		24

Available for sale securities:
Closed-end funds		36,721		60,731		37,104		55,855		38,116		52,156
Mutual funds		2,080		3,468		2,213		3,341		2,241		3,384
Total available for sale securities		38,801		64,199		39,317		59,196		40,357		55,540

Total investments in sponsored
registered investment companies	$	38,820	$	64,223	$	39,332	$	59,214	$	40,372	$	55,564

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 the time of purchase are classified as cash equivalents. A substantial portion of investments in securities is held for resale in anticipation of short-term market movements and therefore is 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.

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, 2012, the Company had derivative transactions in equity derivatives which resulted in net losses of $411,000 and net losses of $425,000, respectively. For the three and nine months ended September 30, 2011, the Company had no derivative transactions. At September 30, 2011, the Company did not hold any derivatives. At September 30, 2012 and December 31, 2011, we held derivative contracts on 1.1 million equity shares and 142,000 equity shares, respectively, and the fair value was ($6,000) and $24,000, respectively; these are included in investments in securities in the condensed consolidated statements of financial condition. 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.

The following is a summary of the cost, gross unrealized gains, gross unrealized losses and fair value of available for sale investments as of September 30, 2012, December 31, 2011 and September 30, 2011:

	September 30, 2012
			Gross		Gross
			Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Common stocks	$	14,931	$	17,308	$	-		$	32,239
Closed-end Funds		36,721		24,010		-			60,731
Mutual funds		3,185		1,956		-			5,141
Total available for sale securities	$	54,837	$	43,274	$	-		$	98,111

	December 31, 2011
			Gross		Gross
			Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Common stocks	$	16,487	$	16,795	$	-		$	33,282
Closed-end Funds		37,104		18,779		(28	)		55,855
Mutual funds		3,575		1,671		-			5,246
Total available for sale securities	$	57,166	$	37,245	$	(28	)	$	94,383

	September 30, 2011
			Gross		Gross
			Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
	(In thousands)
Common stocks	$	16,724	$	15,179	$	-		$	31,903
Closed-end Funds		38,116		14,040		-			52,156
Mutual funds		3,602		1,504		-			5,106
Total available for sale securities	$	58,442	$	30,723	$	-		$	89,165

Unrealized changes to fair value, net of taxes, for the three months ended September 30, 2012 and September 30, 2011 of $2.9 million in gains and $7.9 million in losses, respectively, have been included in other comprehensive income, a component of equity, at September 30, 2012 and September 30, 2011. Return of capital on available for sale securities was $0.8 million and $0.5 million for the three months ended September 30, 2012 and September 30, 2011, respectively. Proceeds from sales of investments available for sale were approximately $2.3 million for the three months ended September 30, 2012. There were no sales of investments available for sale for the three months ended September 30, 2011. For the three months ended September 30, 2012, gross gains on the sale of investments available for sale amounted to $1.1 million and were reclassed from other comprehensive income into the condensed consolidated statements of income. There were no losses on the sale of investments available for sale for the three months ended September 30, 2012. Unrealized changes to fair value, net of taxes, for the nine months ended September 30, 2012 and September 30, 2011 of $3.8 million in gains and $7.0 million in losses, respectively, have been included in other comprehensive income, a component of equity, at September 30, 2012 and September 30, 2011. Return of capital on available for sale securities was $1.7 million and $1.3 million for the nine months ended September 30, 2012 and September 30, 2011, respectively. Proceeds from sales of investments available for sale were approximately $3.1 million and $5.7 million for the nine month periods ended September 30, 2012 and September 30, 2011, respectively. For the nine months ended September 30, 2012 and September 30, 2011, gross gains on the sale of investments available for sale amounted to $1.5 million and $0.6 million, respectively, and were reclassed from other comprehensive income into the condensed consolidated statements of income. There were no losses on the sale of investments available for sale for the nine months ended September 30, 2012 or September 30, 2011. The basis on which the cost of a security sold is determined is specific identification.

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, 2012						December 31, 2011							September 30, 2011
			Unrealized						Unrealized							Unrealized
	Cost		Losses		Fair Value		Cost		Losses			Fair Value		Cost		Losses			Fair Value
(in thousands)
Mutual Funds	$	-	$	-	$	-	$	101	$	(28	)	$	73	$	100	$	(21	)	$	79

At December 31, 2011 and September 30, 2011, there was one holding in a loss position which was not deemed to be other-than-temporarily impaired due to the length of time that it had been in a loss position and because it passed scrutiny in our evaluation of issuer-specific and industry-specific considerations. In this specific instance, the investment at December 31, 2011 and September 30, 2011 was a closed-end fund with diversified holdings across multiple companies and across multiple industries. The one holding was impaired for seven and four consecutive months at December 31, 2011 and September 30, 2011, respectively. The value of this holding at both December 31, 2011 and September 30, 2011 was $0.1 million.

At September 30, 2012, there were no available for sale holdings in loss positions.

For the nine months ended September 30, 2012, there was $20,000 of losses on available for sale securities deemed to be other than temporary.

C. Investments in Partnerships, Offshore Funds and Variable Interest Entities (“VIEs”)

The Company is general partner or co-general partner of various sponsored limited partnerships and the investment manager of various sponsored offshore funds, in which the Company has investments totaling $88.3 million, $86.9 million and $80.2 million at September 30, 2012, December 31, 2011 and September 30, 2011, respectively, and whose underlying assets consist primarily of marketable securities (the “affiliated entities”). We also have investments in unaffiliated partnerships, offshore funds and other entities of $14.3 million, $14.0 million and $18.1 million at September 30, 2012, December 31, 2011 and September 30, 2011, respectively (the “unaffiliated entities”). We evaluate each entity for the appropriate accounting treatment and disclosure. Certain of the affiliated entities are consolidated. In addition, our statement of financial condition caption “Investments in partnerships” includes those investments, in both affiliated and unaffiliated entities, which the Company accounts for under the equity method of accounting, as well as certain investments that the feeder funds hold that are carried at fair value, as described in Note D. 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.

The following table highlights the number of entities, including voting interest entities (“VOEs”), that we consolidate as well as under which accounting guidance they are consolidated, including consolidated feeder funds (“CFFs”), which retain their specialized investment company accounting, partnerships and offshore funds.

Entities consolidated
	CFFs				Partnerships					Offshore Funds					Total
	VIEs		VOEs		VIEs		VOEs			VIEs			VOEs		VIEs			VOEs
Entities consolidated at December 31, 2010		1		2		-		2			1			-		2			4
Additional consolidated entities		-		-		-		-			-			1		-			1
Deconsolidated entities		-		-		-		(1	)		-			-		-			(1	)
Entities consolidated at September 30, 2011		1		2		-		1			1			1		2			4
Additional consolidated entities		-		-		-		-			-			-		-			-
Deconsolidated entities		-		-		-		-			(1	)		-		(1	)		-
Entities consolidated at December 31, 2011		1		2		-		1			-			1		1			4
Additional consolidated entities		-		-		-		-			-			-		-			-
Deconsolidated entities		-		-		-		-			-			-		-			-
Entities consolidated at September 30, 2012		1		2		-		1			-			1		1			4

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 one particular 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 earn 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).

The following table includes the net impact by line item on the condensed consolidated statements of financial condition for each category of entity consolidated (in thousands):

	September 30, 2012
	Prior to
	Consolidation		CFFs		Partnerships			Offshore Funds		As Reported
Assets
Cash and cash equivalents	$	287,806	$	-	$	879		$	-	$	288,685
Investments in securities		222,489		-		6,908			6,048		235,445
Investments in sponsored registered investment companies		64,223		-		-			-		64,223
Investments in partnerships		109,801		1,540		(8,737	)