SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2015
or
☐                  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)

Delaware
  
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   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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes  No

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

Large accelerated filer
 
Accelerated filer
     
Non-accelerated filer
 
Smaller reporting company
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes             No 
 
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, 2015
Class A Common Stock, .001 par value
  (Including 556,100 restricted stock awards)
6,247,452
Class B Common Stock, .001 par value
 
19,196,792


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 March 31, 2015 and 2014
 
-    Nine months ended September 30, 2015 and 2014
 
 
 
Condensed Consolidated Statements of Comprehensive Income:
 
-    Three months ended March 31, 2015 and 2014
 
-    Nine months ended September 30, 2015 and 2014
   
 
Condensed Consolidated Statements of Financial Condition:
 
-    September 30, 2015
 
-    December 31, 2014
 
-    September 30, 2014
 
 
 
Condensed Consolidated Statements of Equity:
 
-    Nine months ended September 30, 2015 and 2014
 
 
 
Condensed Consolidated Statements of Cash Flows:
 
-    Nine months ended September 30, 2015 and 2014
 
 
 
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
 


2

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,
  
 
  
2015
    
2014
    
2015
    
2014
  
Revenues
  
   
         
Investment advisory and incentive fees
  
$
82,182
    
$
92,591
    
$
257,563
    
$
270,544
  
Distribution fees and other income
    
12,301
      
15,727
      
39,402
      
46,367
  
Institutional research services
    
2,063
      
2,540
      
6,130
      
6,720
  
Total revenues
    
96,546
      
110,858
      
303,095
      
323,631
  
Expenses
                                
Compensation
    
39,731
      
43,316
      
127,627
      
131,258
  
Management fee
    
2,682
      
3,756
      
11,360
      
13,628
  
Distribution costs
    
12,344
      
15,101
      
39,747
      
44,087
  
Other operating expenses
    
5,593
      
5,099
      
19,271
      
17,036
  
Total expenses
    
60,350
      
67,272
      
198,005
      
206,009
  
 
                                
Operating income
    
36,196
      
43,586
      
105,090
      
117,622
  
Other income (expense)
                                
Net gain/(loss) from investments
    
(11,467
)
    
(9,086
)
    
(614
)
    
7,468
  
Interest and dividend income
    
884
      
1,084
      
3,227
      
3,557
  
Interest expense
    
(1,917
)
    
(1,987
)
    
(5,899
)
    
(6,000
)
Total other income/(expense), net
    
(12,500
)
    
(9,989
)
    
(3,286
)
    
5,025
  
Income before income taxes
    
23,696
      
33,597
      
101,804
      
122,647
  
Income tax provision
    
9,245
      
13,045
      
38,547
      
44,796
  
Net income
    
14,451
      
20,552
      
63,257
      
77,851
  
Net loss attributable to noncontrolling interests
    
(518
)
    
(3,113
)
    
(589
)
    
(2,718
)
Net income attributable to GAMCO Investors, Inc.'s shareholders
  
$
14,969
    
$
23,665
    
$
63,846
    
$
80,569
  
 
                                
Net income attributable to GAMCO Investors, Inc.'s shareholders per share:
                                
Basic
  
$
0.60
    
$
0.94
    
$
2.55
    
$
3.17
  
 
                                
Diluted
  
$
0.59
    
$
0.93
    
$
2.52
    
$
3.15
  
 
                                
Weighted average shares outstanding:
                                
Basic
    
24,947
      
25,296
      
25,047
      
25,385
  
 
                                
Diluted
    
25,241
      
25,517
      
25,337
      
25,595
  
 
                                
Dividends declared:
  
$
0.07
    
$
0.06
    
$
0.21
    
$
0.18
  

See accompanying notes.
3

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

   
Three Months Ended
    
Nine Months Ended
  
   
September 30,
    
September 30,
  
   
2015
    
2014
    
2015
    
2014
  
                 
Net income
  
$
14,451
    
$
20,552
    
$
63,257
    
$
77,851
  
Other comprehensive income/(loss), net of tax:
                                
Foreign currency translation
    
(35
)
    
(45
)
    
(22
)
    
(15
)
Net unrealized losses on securities available for sale (a)
    
(6,696
)
    
(2,407
)
    
(7,417
)
    
(6,832
)
Other comprehensive income / (loss)
    
(6,731
)
    
(2,452
)
    
(7,439
)
    
(6,847
)
                                 
Comprehensive income
    
7,720
      
18,100
      
55,818
      
71,004
  
Less: Comprehensive loss attributable to noncontrolling interests
    
(518
 )     
(3,113
 )     
(589
 )     
(2,718
 ) 
                                 
Comprehensive income attributable to GAMCO Investors, Inc.
  
$
8,238
    
$
21,213
    
$
56,407
    
$
73,722
  

(a) Net of income tax benefit of ($3,932), ($1,414), ($4,356) and ($4,013),respectively.

See accompanying notes.
4

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,
  
   
2015
    
2014
    
2014
  
ASSETS
  
   
   
 
Cash and cash equivalents
  
$
425,616
    
$
298,224
    
$
358,421
  
Investments in securities
    
126,917
      
259,537
      
254,630
  
Investments in sponsored registered investment companies
    
115,046
      
39,537
      
39,520
  
Investments in partnerships
    
101,025
      
107,637
      
107,434
  
Receivable from brokers
    
52,918
      
76,079
      
79,885
  
Investment advisory fees receivable
    
28,629
      
41,872
      
31,155
  
Income tax receivable
    
2,409
      
2,477
      
2,433
  
Other assets
    
20,109
      
41,067
      
25,282
  
Total assets
  
$
872,669
    
$
866,430
    
$
898,760
  
 
                        
LIABILITIES AND EQUITY
                        
Payable to brokers
  
$
49,074
    
$
43,409
    
$
46,790
  
Income taxes payable and deferred tax liabilities
    
10,529
      
27,939
      
27,412
  
Capital lease obligation
    
5,191
      
5,253
      
5,272
  
Compensation payable
    
88,747
      
39,983
      
93,535
  
Securities sold, not yet purchased
    
5,577
      
10,595
      
14,180
  
Mandatorily redeemable noncontrolling interests
    
1,257
      
1,302
      
1,304
  
Accrued expenses and other liabilities
    
34,246
      
29,657
      
31,007
  
Sub-total
    
194,621
      
158,138
      
219,500
  
 
                        
5.875% Senior notes (due June 1, 2021)
    
100,000
      
100,000
      
100,000
  
Zero coupon subordinated debentures, Face value: $6.9 million at September 30, 2015, $13.1
                        
    million at December 31, 2014 and $13.1 million at September 30, 2014 (due December 31, 2015)
    
6,750
      
12,163
      
11,941
  
Total liabilities
    
301,371
      
270,301
      
331,441
  
 
                        
Redeemable noncontrolling interests
    
6,018
      
68,334
      
56,086
  
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;
                        
   15,387,701, 15,341,433 and 15,230,433 issued, respectively; 6,340,992,
                        
   6,616,212 and 6,599,982 outstanding, respectively
    
14
      
14
      
14
  
Class B Common Stock, $0.001 par value; 100,000,000 shares authorized;
                        
   24,000,000 shares issued; 19,196,792, 19,239,260 and 19,279,260 shares
                        
   outstanding, respectively
    
19
      
19
      
19
  
Additional paid-in capital
    
299,769
      
291,681
      
289,664
  
Retained earnings
    
661,415
      
602,950
      
582,357
  
Accumulated other comprehensive income
    
17,575
      
25,014
      
23,392
  
Treasury stock, at cost (9,046,709, 8,725,221 and 8,630,451 shares, respectively)
    
(416,147
)
    
(394,617
)
    
(386,952
)
Total GAMCO Investors, Inc. stockholders' equity
    
562,645
      
525,061
      
508,494
  
Noncontrolling interests
    
2,635
      
2,734
      
2,739
  
Total equity
    
565,280
      
527,795
      
511,233
  
 
                        
Total liabilities and equity
  
$
872,669
    
$
866,430
    
$
898,760
  

See accompanying notes.
5

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

For the Nine months ended September 30, 2015

       
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, 2014
  
$
2,734
    
$
33
    
$
291,681
    
$
602,950
    
$
25,014
    
$
(394,617
)
  
$
527,795
    
$
68,334
  
Redemptions of redeemable
                                                                
   noncontrolling interests
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(602
)
Contributions from redeemable
                                                                
   noncontrolling
                                                                
   interests
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
1,036
  
Consolidation of a consolidated
                                                                
  feeder fund and a partnership
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
996
  
Deconsolidation of offshore
                                                                
  fund
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(63,256
)
Net income (loss)
    
(99
)
    
-
      
-
      
63,846
      
-
      
-
      
63,747
      
(490
)
Net unrealized losses on
                                                                
   securities available for sale,
                                                                
   net of income tax benefit ($4,341)
    
-
      
-
      
-
      
-
      
(7,392
)
    
-
      
(7,392
)
    
-
  
Amounts reclassified from
                                                                
   accumulated other
                                                                
   comprehensive income,
                                                                
   net of income tax benefit ($15)
    
-
      
-
      
-
      
-
      
(25
)
    
-
      
(25
)
    
-
  
Foreign currency translation
    
-
      
-
      
-
      
-
      
(22
)
    
-
      
(22
)
    
-
  
Dividends declared ($0.21 per
                                                                
 share)
    
-
      
-
      
-
      
(5,381
)
    
-
      
-
      
(5,381
)
    
-
  
Stock based compensation
                                                                
   expense
    
-
      
-
      
6,819
      
-
      
-
      
-
      
6,819
      
-
  
Exercise of stock options
                                                                
   including tax benefit ($102)
    
-
      
-
      
1,269
      
-
      
-
      
-
      
1,269
      
-
  
Purchase of treasury stock
    
-
      
-
      
-
      
-
      
-
      
(21,530
)
    
(21,530
)
    
-
  
Balance at September 30, 2015
  
$
2,635
    
$
33
    
$
299,769
    
$
661,415
    
$
17,575
    
$
(416,147
)
  
$
565,280
    
$
6,018
  

See accompanying notes.
6
GAMCO INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
UNAUDITED
(In thousands)

For the NIne months ended September 30, 2014

 
  
   
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, 2013
  
$
2,851
    
$
33
    
$
282,496
    
$
506,441
    
$
30,239
    
$
(361,878
)
  
$
460,182
    
$
6,751
  
Redemptions of redeemable
                                                                
   noncontrollin interests
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(1,666
)
Contributions from redeemable
                                                                
   noncontrolling
                                                                
   interests
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
53,607
  
Net income (loss)
    
(112
)
    
-
      
-
      
80,569
      
-
      
-
      
80,457
      
(2,606
)
Net unrealized losses on
                                                                
   securities available for sale,
                                                                
   net of income tax ($1,393)
    
-
      
-
      
-
      
-
      
(2,371
)
    
-
      
(2,371
)
    
-
  
Amount reclassed from
                                                                
   accumulated other
                                                                
   comprehensive income,
                                                                
   net of income tax benefit ($2,620)
    
-
      
-
      
-
      
-
      
(4,461
)
    
-
      
(4,461
)
    
-
  
Foreign currency translation
    
-
      
-
      
-
      
-
      
(15
)
    
-
      
(15
)
    
-
  
Dividends declared ($0.18 per
                                                                
   share)
    
-
      
-
      
-
      
(4,653
)
    
-
      
-
      
(4,653
)
    
-
  
Stock based compensation
                                                                
   expense
    
-
      
-
      
5,182
      
-
      
-
      
-
      
5,182
      
-
  
Exercise of stock options
                                                                
   including tax benefit ($349)
    
-
      
-
      
1,986
      
-
      
-
      
-
      
1,986
      
-
  
Purchase of treasury stock
    
-
      
-
      
-
      
-
      
-
      
(25,074
)
    
(25,074
)
    
-
  
Balance at September 30, 2014
  
$
2,739
    
$
33
    
$
289,664
    
$
582,357
    
$
23,392
    
$
(386,952
)
  
$
511,233
    
$
56,086
  

See accompanying notes.
7

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

 
  
Nine Months Ended
  
   
September 30,
  
 
  
2015
    
2014
  
Operating activities
  
   
 
Net income
  
$
63,257
    
$
77,851
  
Adjustments to reconcile net income to net cash provided by operating activities:
                
Equity in net gains from partnerships
    
(681
)
    
(572
)
Depreciation and amortization
    
475
      
507
  
Stock based compensation expense
    
6,819
      
5,182
  
Deferred income taxes
    
(8,033
)
    
(3,472
)
Tax benefit from exercise of stock options
    
102
      
349
  
Foreign currency translation gain/(loss)
    
(22
)
    
(15
)
Other-than-temporary loss on available for sale securities
    
150
      
69
  
Cost basis of donated securities
    
104
      
1,502
  
Gains on sales of available for sale securities
    
(30
)
    
(3,511
)
Accretion of zero coupon debentures
    
502
      
661
  
Loss on extinguishment of debt
    
310
      
84
  
(Increase) decrease in assets:
                
Investments in trading securities
    
29,096
      
(22,376
)
Investments in partnerships:
                
  Contributions to partnerships
    
(15,170
)
    
(15,698
)
  Distributions from partnerships
    
22,800
      
4,828
  
Receivable from brokers
    
(24,745
)
    
(30,424
)
Investment advisory fees receivable
    
13,046
      
20,351
  
Income tax receivable and deferred tax assets
    
68
      
(1,988
)
Other assets
    
20,402
      
563
  
Increase (decrease) in liabilities:
                
Payable to brokers
    
42,930
      
36,026
  
Income taxes payable and deferred tax liabilities
    
(5,019
)
    
(4,950
)
Compensation payable
    
48,768
      
58,873
  
Mandatorily redeemable noncontrolling interests
    
(45
)
    
(51
)
Accrued expenses and other liabilities
    
5,092
      
(1,639
)
Total adjustments
    
136,919
      
44,299
  
Net cash provided by operating activities
  
$
200,176
    
$
122,150
  

8

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

 
  
Nine Months Ended
  
   
September 30,
  
 
  
2015
    
2014
  
Investing activities
  
   
 
Purchases of available for sale securities
  
$
(43,030
)
  
$
(6,252
)
Proceeds from sales of available for sale securities
    
1,064
      
8,018
  
Return of capital on available for sale securities
    
554
      
827
  
Net cash (used in) provided by investing activities
    
(41,412
)
    
2,593
  
 
                
Financing activities
                
Contributions from redeemable noncontrolling interests
    
1,036
      
53,607
  
Redemptions of redeemable noncontrolling interests
    
(602
)
    
(1,666
)
Redemptions of noncontrolling interests
    
-
      
-
  
Proceeds from exercise of stock options
    
1,169
      
1,637
  
Dividends paid
    
(5,252
)
    
(4,567
)
Repurchase of zero coupon subordinated debentures
    
(6,224
)
    
(715
)
Purchase of treasury stock
    
(21,530
)
    
(25,074
)
Net cash (used in) provided by financing activities
    
(31,403
)
    
23,222
  
Effect of exchange rates on cash and cash equivalents
    
8
      
5
  
Net increase in cash and cash equivalents
    
127,369
      
147,970
  
Cash and cash equivalents at beginning of period
    
298,224
      
210,451
  
Increase in cash from consolidation
    
10
      
-
  
Increase in cash from deconsolidation
    
13
      
-
  
Cash and cash equivalents at end of period
  
$
425,616
    
$
358,421
  
Supplemental disclosures of cash flow information:
                
Cash paid for interest
  
$
3,897
    
$
3,847
  
Cash paid for taxes
  
$
49,590
    
$
52,956
  
 
                
Non-cash activity:
                
- For the nine months ended September 30, 2015 and September 30, 2014, the Company accrued dividends on restricted stock awards of $129 and $86, respectively.
- On January 1, 2015, GAMCO Investors, Inc. was no longer deemed to have control over a certain offshore fund and a certain consolidated feeder fund which resulted in the deconsolidation of that offshore fund and consolidated feeder fund and an increase of approximately $13 of cash and cash equivalents, a decrease of approximately $63,280 of net assets and a decrease of $63,267 of noncontrolling interests.
- On April 1, 2015, GAMCO Investors, Inc. was deemed to have control over a certain offshore fund and a certain partnership which resulted in the consolidation of that one offshore fund and one partnership and an increase of approximately $10 of cash and cash equivalents, an increase of approximately $986 of other net assets and an increase of approximately $996 of redeemable noncontrolling interest.
  

See accompanying notes.
9

GAMCO INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(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 U.S. 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 interim condensed consolidated financial statements include the accounts of GAMCO and its subsidiaries.  Intercompany accounts and transactions are eliminated.
 
These interim 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, 2014 from which the accompanying condensed consolidated financial statements were derived.

Use of Estimates

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

Recent Accounting Developments

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers," which supersedes the revenue recognition requirements in the Accounting Standards Codification ("Codification") Topic 605, Revenue Recognition, and most industry-specific guidance throughout the industry topics of the Codification.  The core principle of the new ASU No. 2014-09 is for companies to recognize revenue from the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services.  The new standard provides a five-step approach to be applied to all contracts with customers and also requires expanded disclosures about revenue recognition.  The ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods and is to be retrospectively applied.  Early adoption is not permitted.  The Company is currently evaluating this guidance and the impact it will have on its consolidated financial statements.

In June 2014, the FASB issued an accounting update clarifying that entities should treat performance targets that could be met after the requisite service period of a share-based payment award as performance conditions that affect vesting.  Therefore, an entity would not record compensation expense (measured as of the grant date) for an award where transfer to the employee is contingent upon satisfaction of the performance target until it becomes probable that the performance target will be met.  The guidance is effective for the Company beginning January 1, 2016.  Early adoption is permitted.  This guidance is not expected to have a material impact on the Company's consolidated financial statements.

In February 2015, the FASB issued an accounting update amending the consolidation requirements under GAAP.  This guidance is effective for the Company beginning January 1, 2016.  Early adoption is permitted.  The Company is continuing to analyze the impact, if any, that this update may have on its consolidated financial statements.

10

In May 2015, the FASB issued new guidance amending the current disclosure requirements for investments in certain entities that calculate net asset value per share.  The guidance requires investments for which fair value is measured using the net asset value per share practical expedient be removed from the fair value hierarchy.  Instead, those investment amounts shall be provided as a separate item to permit reconciliation of the fair value of investments included in the fair value hierarchy to the line items presented in the statement of financial condition.  This new guidance will be effective for the Company's first quarter of 2016.  The Company is currently evaluating the potential impact on its consolidated financial statements and related disclosures.

B.  Investment in Securities

Investments in securities at September 30, 2015, December 31, 2014 and September 30, 2014 consisted of the following:

 
  
September 30, 2015
    
December 31, 2014
    
September 30, 2014
  
 
  
Cost
    
Fair Value
    
Cost
    
Fair Value
    
Cost
    
Fair Value
  
 
  
(In thousands)
  
Trading securities:
  
   
   
   
   
   
 
Government obligations
  
$
-
    
$
-
    
$
18,994
    
$
18,996
    
$
20,995
    
$
20,999
  
Common stocks
    
78,025
      
87,745
      
170,977
      
195,029
      
167,714
      
190,939
  
Mutual funds
    
2,504
      
3,180
      
2,432
      
3,498
      
2,416
      
3,373
  
Other investments
    
505
      
723
      
743
      
1,704
      
753
      
1,550
  
Total trading securities
    
81,034
      
91,648
      
193,146
      
219,227
      
191,878
      
216,861
  
 
                                                
Available for sale securities:
                                                
Common stocks
    
13,561
      
34,095
      
13,637
      
38,942
      
14,228
      
36,380
  
Mutual funds
    
627
      
1,174
      
681
      
1,368
      
681
      
1,389
  
Total available for sale securities
    
14,188
      
35,269
      
14,318
      
40,310
      
14,909
      
37,769
  
 
                                                
Total investments in securities
  
$
95,222
    
$
126,917
    
$
207,464
    
$
259,537
    
$
206,787
    
$
254,630
  

Securities sold, not yet purchased at September 30, 2015, December 31, 2014 and September 30, 2014 consisted of the following:

 
  
September 30, 2015
    
December 31, 2014
    
September 30, 2014
  
 
  
Proceeds
    
Fair Value
    
Proceeds
    
Fair Value
    
Proceeds
    
Fair Value
  
Trading securities:
  
(In thousands)
  
Common stocks
  
$
6,123
    
$
5,482
    
$
9,835
    
$
9,960
    
$
11,699
    
$
13,514
  
Other investments
    
8
      
95
      
1
      
635
      
71
      
666
  
Total securities sold, not yet purchased
  
$
6,131
    
$
5,577
    
$
9,836
    
$
10,595
    
$
11,770
    
$
14,180
  

Investments in sponsored registered investment companies at September 30, 2015, December 31,2014 and September 30, 2014 consisted of the following:

 
  
September 30, 2015
    
December 31, 2014
    
September 30, 2014
  
 
  
Cost
    
Fair Value
    
Cost
    
Fair Value
    
Cost
    
Fair Value
  
 
  
(In thousands)
  
Trading securities:
  
   
   
   
   
   
 
Mutual funds
  
$
40,097
    
$
41,820
    
$
1
    
$
1
    
$
1
    
$
1
  
Total trading securities
    
40,097
      
41,820
      
1
      
1
      
1
      
1
  
 
                                                
Available for sale securities:
                                                
Closed-end funds
    
63,068
      
70,349
      
21,962
      
36,323
      
21,819
      
36,142
  
Mutual funds
    
1,883
      
2,877
      
1,898
      
3,213
      
1,922
      
3,377
  
Total available for sale securities
    
64,951
      
73,226
      
23,860
      
39,536
      
23,741
      
39,519
  
 
                                                
Total investments in sponsored
                                                
   registered investment companies
  
$
105,048
    
$
115,046
    
$
23,861
    
$
39,537
    
$
23,742
    
$
39,520
  
11

Management determines the appropriate classification of debt and equity securities at the time of purchase and reevaluates such designation as of the date of each consolidated statement of financial condition.  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.  The portion of investments in securities held for resale in anticipation of short-term market movements 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 ("OTT") which are recorded as realized losses in the condensed consolidated statements of income.

The following table identifies all reclassifications out of accumulated other comprehensive income ("AOCI") into income for the three and nine months ended September 30, 2015 and 2014 (in thousands):
 
Amount
  
Affected Line Items
Reason for
Reclassified
  
in the Statements
Reclassification
from AOCI
  
Of Income
from AOCI
Three months ended September 30,
  
 
  
2015
    
2014
       
 
$
-
    
$
348
  
 Net gain/(loss) from investments
 Realized gain on sale of AFS securities
   
45
      
-
  
 Other operating expenses/net gain from investments
 Realized gain on donation of AFS securities
   
(150
)
    
-
  
 Net gain/(loss) from investments
 OTT impairment of AFS securities
   
(105
)
    
348
  
 Income before income taxes
 
   
39
      
(129
)
 Income tax provision
 
 
$
(66
)
  
$
219
  
 Net income
 
                        
Amount
  
Affected Line Items
Reason for
Reclassified
  
in the Statements
Reclassification
from AOCI
  
Of Income
from AOCI
Nine months ended September 30,
       
   
2015
      
2014
       
 
$
30
    
$
3,511
  
 Net gain/(loss) from investments
 Realized gain on sale of AFS securities
   
80
      
3,639
  
 Other operating expenses/net gain from investments
 Realized gain on donation of AFS securities
   
(150
)
    
(69
)
 Net gain/(loss) from investments
 OTT impairment of AFS securities
   
(40
)
    
7,081
  
 Income before income taxes
  
   
15
      
(2,620
)
 Income tax provision
  
 
$
(25
)
  
$
4,461
  
 Net 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.  At September 30, 2015, December 31, 2014 and September 30, 2014, we held derivative contracts on 170,000 equity shares, 3.8 million equity shares and 2.3 million equity shares, respectively, that are included in investments in securities or securities sold, not yet purchased on the condensed consolidated statements of financial condition.   We had two, one and one foreign exchange contracts outstanding at September 30, 2015, December 31, 2014 and September 30, 2014, respectively, that are included in receivable from brokers or payable to brokers on the condensed consolidated statements of financial condition.  Aside from one foreign exchange contract, 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 on the condensed consolidated statements of income.  The one foreign exchange contract that is designated as a hedge was for a short of British Pounds to hedge the long investment that we have in our London Stock Exchange listed Gabelli Value Plus+ Trust Ltd. closed-end fund which is denominated in British Pounds.  As the underlying investment that is being hedged is an available for sale security, the portion of the change in value of the closed-end fund that is currency related is recorded in net gain/(loss) from investments on the condensed consolidated statements of income and not in accumulated comprehensive income.
 
12
The following tables identify the fair values and gains and losses of all derivatives held by the Company (in thousands):

 
  
  
Asset Derivatives Fair Value
  
 
  
Liability Derivatives Fair Value
  
Balance Sheet Location
  
September 30, 2015
    
December 31, 2014
    
September 30, 2014
  
Balance Sheet Location
  
September 30, 2015
    
December 31, 2014
    
September 30, 2014
  
Derivatives designated as hedging instruments under
   
   
 
 
  
   
   
 
    FASB ASC 815-20                                   
Foreign exchange contracts
Receivable from brokers
  
$
-
    
$
-
    
$
-
  
Payable to brokers
  
$
36,354
    
$
-
    
$
-
  
Sub total
 
  
$
-
    
$
-
    
$
-
  
 
  
$
36,354
    
$
-
    
$
-
  
Derivatives Not Designated As Hedging Instruments Under Fasb Asc 815-20
                  
 
                        
  Investments in                          Securities sold,                         
Equity contracts
securities
  
$
143
    
$
896
    
$
800
  
 not yet purchased
  
$
95
    
$
635
    
$
666
  
Foreign exchange contracts
Receivable from brokers
    
-
      
-
      
-
  
Payable to brokers
    
5,172
      
5,470
      
6,343
  
Sub total
 
  
$
143
    
$
896
    
$
800
  
 
  
$
5,267
    
$
6,105
    
$
7,009
  
Total derivatives
 
  
$
143
    
$
896
    
$
800
  
 
  
$
41,621
    
$
6,105
    
$
7,009
  


Type of Derivative
Income Statement Location
Three Months ended September 30,
  
Nine Months ended September 30,
  
 
  
2015
  
2014
  
2015
  
2014
  
Foreign exchange contracts
Net gain/(loss) from investments
  
$
1,985
    
$
482
    
$
1,885
    
$
541
  
Equity contracts
Net gain/(loss) from investments
    
27
      
758
      
199
      
591
  
Total
 
  
$
2,012
    
$
1,240
    
$
2,084
    
$
1,132
  


The Company is a party to enforceable master netting arrangements for swaps entered into as part of the investment strategy of the Company's proprietary portfolio.  They are typically not used as hedging instruments.  These swaps, while settled on a net basis with the counterparties, major U.S. financial institutions, are shown gross in assets and liabilities on the condensed consolidated statements of financial condition.  The swaps have a firm contract end date and are closed out and settled when each contract expires. 


               
Gross Amounts Not Offset in the
  
               
Statements of Financial Condition
  
   
Gross
    
Gross Amounts
    
Net Amounts of
              
   
Amounts of
    
Offset in the
    
Assets Presented
              
   
Recognized
    
Statements of
    
in the Statements of
    
Financial
    
Cash Collateral
      
   
Assets
    
Financial Condition
    
Financial Condition
    
Instruments
    
Received
    
Net Amount
  
Swaps:
  
(in thousands)
  
September 30, 2015
  
$
143
    
$
-
    
$
143
    
$
(89
)
  
$
-
    
$
54
  
December 31, 2014
    
896
      
-
      
896
      
(634
)
    
-
      
262
  
September 30, 2014
  
$
800
    
$
-
    
$
800
    
$
(657
)
  
$
-
    
$
143
  
                                                 
                           
Gross Amounts Not Offset in the
  
                           
Statements of Financial Condition
  
   
Gross
    
Gross Amounts
    
Net Amounts of
                          
   
Amounts of
    
Offset in the
    
Liabilities Presented
                          
   
Recognized
    
Statements of
    
in the Statements of
    
Financial
    
Cash Collateral
          
   
Liabilities
    
Financial Condition
    
Financial Condition
    
Instruments
    
Pledged
    
Net Amount
  
Swaps:
  
(in thousands)
  
September 30, 2015
  
$
89
    
$
-
    
$
89
    
$
(89
)
  
$
-
    
$
-
  
December 31, 2014
    
634
      
-
      
634
      
(634
)
    
-
      
-
  
September 30, 2014
  
$
657
    
$
-
    
$
657
    
$
(657
)
  
$
-
    
$
-
  
13

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, 2015, December 31, 2014 and September 30, 2014:

 
  
September 30, 2015
  
       
Gross
    
Gross
      
       
Unrealized
    
Unrealized
      
 
  
Cost
    
Gains
    
Losses
    
Fair Value
  
 
  
(In thousands)
  
Common stocks
  
$
13,561
    
$
20,534
    
$
-
    
$
34,095
  
Closed-end Funds
    
63,068
      
10,128
      
(2,847
)
    
70,349
  
Mutual funds
    
2,510
      
1,620
      
(79
)
    
4,051
  
Total available for sale securities
  
$
79,139
    
$
32,282
    
$
(2,926
)
  
$
108,495
  

 
  
December 31, 2014
  
       
Gross
    
Gross
      
       
Unrealized
    
Unrealized
      
 
  
Cost
    
Gains
    
Losses
    
Fair Value
  
 
  
(In thousands)
  
Common stocks
  
$
13,637
    
$
25,305
    
$
-
    
$
38,942
  
Closed-end Funds
    
21,962
      
14,398
      
(37
)
    
36,323
  
Mutual funds
    
2,579
      
2,030
      
(28
)
    
4,581
  
Total available for sale securities
  
$
38,178
    
$
41,733
    
$
(65
)
  
$
79,846
  

 
  
September 30, 2014
  
       
Gross
    
Gross
      
       
Unrealized
    
Unrealized
      
 
  
Cost
    
Gains
    
Losses
    
Fair Value
  
 
  
(In thousands)
  
Common stocks
  
$
14,228
    
$
22,152
    
$
-
    
$
36,380
  
Closed-end Funds
    
21,819
      
14,325
      
(2
)
    
36,142
  
Mutual funds
    
2,603
      
2,163
      
-
      
4,766
  
Total available for sale securities
  
$
38,650
    
$
38,640
    
$
(2
)
  
$
77,288
  

Changes in net unrealized losses, net of taxes, for the three months ended September 30, 2015 and September 30, 2014 of ($6.7) million in losses and ($2.4) million in losses, respectively, have been included in other comprehensive income, a component of equity, at September 30, 2015 and September 30, 2014.  Return of capital on available for sale securities was $0.3 million and $0.3 million for the three months ended September 30, 2015 and September 30, 2014, respectively.  During the three months ended September 30, 2015, there were no proceeds from the sales of investments available for sale and no gross gains on the sale of investments available for sale.  Proceeds from sales of investments available for sale were approximately $1.5 million for the three months ended September 30, 2014.  For the three months ended September 30, 2014, gross gains on the sale of investments available for sale amounted to $0.3 million and were reclassified from other comprehensive income into net gain from investments in 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, 2015 or September 30, 2014.  Changes in net unrealized losses, net of taxes, for the nine months ended September 30, 2015 and September 30, 2014 of $(7.4) million in losses and $(6.8) million in losses, respectively, have been included in other comprehensive income, a component of equity, at September 30, 2015 and September 30, 2014.  Return of capital on available for sale securities was $0.6 million and $0.8 million for the nine months ended September 30, 2015 and September 30, 2014, respectively.  Proceeds from sales of investments available for sale were approximately $1.1 million and $8.0 million for the nine months ended September 30, 2015 and September 30, 2014, respectively.  For the nine months ended September 30, 2015 and September 30, 2014, gross gains on the sale of investments available for sale amounted to $30,000 and $3.5 million, respectively, and were reclassified from other comprehensive income into net gain from investments in 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, 2015 or September 30, 2014.  The basis on which the cost of a security sold is determined using specific identification.
 
14

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, 2015
    
December 31, 2014
    
September 30, 2014
  
       
Unrealized
            
Unrealized
            
Unrealized
      
 
  
Cost
    
Losses
    
Fair Value
    
Cost
    
Losses
    
Fair Value
    
Cost
    
Losses
    
Fair Value
  
(in thousands)
                                    
Cosed-end funds
  
$
40,537
    
$
(2,847
)
  
$
37,690
    
$
812
    
$
(37
)
  
$
775
    
$
79
    
$
(2
)
  
$
77
  
Mutual Funds
    
303
      
(79
)
    
224
      
303
      
(28
)
    
275
      
-
      
-
      
-
  
Total available for sale securities
  
$
40,840
    
$
(2,926
)
  
$
37,914
    
$
1,115
    
$
(65
)
  
$
1,050
    
$
79
    
$
(2
)
  
$
77
  

At September 30, 2015, there were four holdings in loss positions which were not deemed to be other-than-temporarily impaired due to the length of time that they had been in a loss position and because they passed scrutiny in our evaluation of issuer-specific and industry-specific considerations.  In these specific instances, the investments at September 30, 2015 were mutual funds and closed-end funds with diversified holdings across multiple companies and across multiple industries.  One holding was impaired for two months, one holding was impaired for three months, one holding was impaired for seven months and one holding was impaired for eight months at September 30, 2015.  The value of these holdings at September 30, 2015 was $37.9 million.

At December 31, 2014, there were four holdings in loss positions which were not deemed to be other-than-temporarily impaired due to the length of time that they had been in a loss position and because they passed scrutiny in our evaluation of issuer-specific and industry-specific considerations.  In these specific instances, the investments at December 31, 2014 were mutual funds and closed-end funds with diversified holdings across multiple companies and across multiple industries.  One holding was impaired for one month, one for three months and two for four months at December 31, 2014. The value of these holdings at December 31, 2014 was $1.1 million.

At September 30, 2014, 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 September 30, 2014 was a closed-end fund with diversified holdings across multiple companies and across multiple industries.  The one holding was impaired for one month at September 30, 2014.  The value of this holding at September 30, 2014 was $0.1 million.

For the three months ended September 30, 2015 there were $150,000 of losses on available for sale securities deemed to be other than temporary and a loss has been recorded in net gain from investments.  There were no losses recognized on AFS securities for the three months ended September 30, 2014.  For the nine months ended September 30, 2015 and September 30, 2014, there were $150,000 and $69,000, respectively, of losses on available for sale securities deemed to be other than temporary and a loss has been recorded in net gain from investments.
 
15
C. Fair Value

The following tables present information about the Company's assets and liabilities by major categories measured at fair value on a recurring basis as of September 30, 2015, December 31, 2014 and September 30, 2014 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, 2015 (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)
    
2015
  
Cash equivalents
  
$
425,392
    
$
-
    
$
-
    
$
425,392
  
Investments in partnerships
    
-
      
14,319
      
-
      
14,319
  
Investments in securities:
                                
AFS - Common stocks
    
34,095
      
-
      
-
      
34,095
  
AFS - Mutual funds
    
1,174
      
-
      
-
      
1,174
  
Trading - Common stocks
    
86,970
      
-
      
775
      
87,745
  
Trading - Mutual funds
    
3,180
      
-
      
-
      
3,180
  
Trading - Other
    
263
      
143
      
317
      
723
  
Total investments in securities
    
125,682
      
143
      
1,092
      
126,917
  
Investments in sponsored registered investment companies:
                          
AFS - Closed-end Funds
    
70,349
      
-
      
-
      
70,349
  
AFS - Mutual Funds
    
2,877
      
-
      
-
      
2,877
  
Trading - Mutual funds
    
41,820
      
-
      
-
      
41,820
  
Total investments in sponsored