Edgar Filing: GAMCO INVESTORS, INC. ET AL

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, 2016

 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, 2016
Class A Common Stock, .001 par value	(Including 424,840 restricted stock awards)	10,401,705
Class B Common Stock, .001 par value		19,093,311

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, 2016 and 2015
	- Nine Months Ended September 30, 2016 and 2015

	Condensed Consolidated Statements of Comprehensive Income:
	- Three Months Ended September 30, 2016 and 2015
	- Nine Months Ended September 30, 2016 and 2015

	Condensed Consolidated Statements of Financial Condition:
	- September 30, 2016
	- December 31, 2015
	- September 30, 2015

	Condensed Consolidated Statements of Equity:
	- Nine Months Ended September 30, 2016 and 2015

	Condensed Consolidated Statements of Cash Flows:
	- Nine Months Ended September 30, 2016 and 2015

	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,
	2016			2015			2016			2015
Revenues
Investment advisory and incentive fees	$	75,952		$	79,900		$	219,594		$	251,269
Distribution fees and other income		11,769			12,260			33,456			39,390
Total revenues		87,721			92,160			253,050			290,659
Expenses
Compensation		21,233			34,022			62,130			109,177
Management fee		1,163			4,056			3,376			12,385
Distribution costs		11,568			12,363			32,786			40,093
Other operating expenses		5,681			4,443			14,993			14,157
Total expenses		39,645			54,884			113,285			175,812

Operating income		48,076			37,276			139,765			114,847
Other income (expense)
Net gain from investments		55			72			518			220
Interest and dividend income		371			553			1,104			1,584
Interest expense		(3,155	)		(1,815	)		(9,729	)		(5,575	)
Total other expense, net		(2,729	)		(1,190	)		(8,107	)		(3,771	)
Income before income taxes		45,347			36,086			131,658			111,076
Income tax provision		14,486			13,635			47,229			41,702
Income from continuing operations		30,861			22,451			84,429			69,374
Loss from discontinued operations, net of taxes		-			(7,482	)		-			(5,528	)
Net income attributable to GAMCO Investors, Inc.'s shareholders	$	30,861		$	14,969		$	84,429		$	63,846

Net income/(loss) attributable to GAMCO Investors, Inc.'s shareholders
per share:
Basic - Continuing operations	$	1.06		$	0.90		$	2.89		$	2.77
Basic - Discontinued operations		-			(0.30	)		-			(0.22	)
Basic - Total	$	1.06		$	0.60		$	2.89		$	2.55

Diluted - Continuing operations	$	1.03		$	0.89		$	2.85		$	2.74
Diluted - Discontinued operations		-			(0.30	)		-			(0.22	)
Diluted - Total	$	1.03		$	0.59		$	2.85		$	2.52

Weighted average shares outstanding:
Basic		29,185			24,947			29,222			25,047

Diluted		30,406			25,241			29,811			25,337

Dividends declared:	$	0.02		$	0.07		$	0.06		$	0.21

See accompanying notes.

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,
	2016				2015				2016				2015

Net income		$	30,861			$	14,969			$	84,429			$	63,846
Other comprehensive gain/(loss), net of tax:
Foreign currency translation			(28	)			(35	)			(121	)			(22	)
Net unrealized gain/(loss) on securities available for sale (a)			506				(6,696	)			323				(7,417	)
Other comprehensive gain/(loss)			478				(6,731	)			202				(7,439	)

Comprehensive income attributable to GAMCO Investors, Inc.		$	31,339			$	8,238			$	84,631			$	56,407

(a) Net of income tax expense/(benefit) of $297, ($3,932), $190 and ($4,356), respectively.

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,
	2016			2015			2015
ASSETS
Cash and cash equivalents	$	33,852		$	13,719		$	62,561
Investments in securities		32,889			32,975			34,095
Receivable from brokers		344			1,091			1,157
Investment advisory fees receivable		26,606			31,048			26,638
Receivable from affiliates		4,745			5,041			27,957
Income tax receivable and deferred tax asset		10,634			6,787			2,409
Other assets		12,198			13,238			10,776
Assets of discontinued operations		-			-			706,523
Total assets	$	121,268		$	103,899		$	872,116

LIABILITIES AND EQUITY
Payable to brokers	$	10,203		$	12		$	533
Income taxes payable and deferred tax liabilities		164			4,823			5,963
Capital lease obligation		5,094			5,170			5,191
Compensation payable		31,469			24,426			83,700
Securities sold, not yet purchased		-			129			-
Payable to affiliates		7,679			7,687			153
Accrued expenses and other liabilities		31,801			28,882			32,467
Liabilities of discontinued operations		-			-			66,614
Sub-total		86,410			71,129			194,621

4.5% Convertible note (net of issuance costs of $174) (due August 15, 2021) (Note F)		109,826			-			-
AC 4% PIK Note (due November 30, 2020) (Note F)		100,000			250,000			-
Loan from GGCP (due December 28, 2016) (Note F)		-			35,000			-
5.875% Senior notes (net of issuance costs of $110, $128 and $553, respectively)
(due June 1, 2021) (Note F)		24,115			24,097			99,447
Zero coupon subordinated debentures, Face value: $0.0 million at September 30, 2016,
$0.0 million at December 31, 2015 and $6.9 million at September 30, 2015,
respectively (due December 31, 2015) (Note F)		-			-			6,750
Total liabilities		320,351			380,226			300,818

Redeemable noncontrolling interests from discontinued operations		-			-			6,018
Commitments and contingencies (Note I)		-			-			-
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;
15,480,032, 15,422,901 and 15,387,701 issued, respectively;10,454,392,
10,664,107 and 6,340,992 outstanding, respectively		14			14			14
Class B Common Stock, $0.001 par value; 100,000,000 shares authorized;
24,000,000 shares issued; 19,093,311, 19,156,792 and 19,196,792 shares
outstanding, respectively		19			19			19
Additional paid-in capital		3,135			345			299,769
Retained earnings (deficit)		48,412			(34,224	)		661,415
Accumulated other comprehensive income		9,317			9,115			17,575
Treasury stock, at cost (5,025,640, 4,758,794 and 9,046,709 shares, respectively)		(259,980	)		(251,596	)		(416,147	)
Total GAMCO Investors, Inc. stockholders' equity (deficit)		(199,083	)		(276,327	)		562,645
Noncontrolling interests from discontinued operations		-			-			2,635
Total equity (deficit)		(199,083	)		(276,327	)		565,280

Total liabilities and equity (deficit)	$	121,268		$	103,899		$	872,116

See accompanying notes.

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 interest		-			-		-		-			-			-			-			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	)		-
Amount reclassed 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.

GAMCO INVESTORS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

UNAUDITED

(In thousands)

For the Nine Months Ended September 30, 2016

	GAMCO Investors, Inc. stockholders
									Accumulated
			Additional			Retained			Other
	Common		Paid-in			Earnings			Comprehensive			Treasury
	Stock		Capital			(Deficit)			Income			Stock			Total
Balance at December 31, 2015	$	33	$	345		$	(34,224	)	$	9,115		$	(251,596	)	$	(276,327	)
Net income		-		-			84,429			-			-			84,429
Net unrealized gains on
securities available for sale,
net of income tax expense ($129)		-		-			-			221			-			221
Amounts reclassified from
accumulated other
comprehensive income,
net of income tax expense ($61)		-		-			-			102			-			102
Foreign currency translation		-		-			-			(121	)		-			(121	)
Dividends declared
($0.06 per share)		-		-			(1,793	)		-			-			(1,793	)
Stock based compensation
expense		-		3,258			-			-			-			3,258
Reduction of deferred tax asset
for excess of recorded RSA tax
benefit over actual tax benefit		-		(468	)		-			-			-			(468	)
Purchase of treasury stock		-		-			-			-			(8,384	)		(8,384	)
Balance at September 30, 2016	$	33	$	3,135		$	48,412		$	9,317		$	(259,980	)	$	(199,083	)

See accompanying notes.

GAMCO INVESTORS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

(In thousands)

	Nine Months Ended
	September 30,
	2016			2015
Operating activities
Net income	$	84,429		$	63,846
Add: Loss from discontinued operations, net of taxes		-			5,528
Income from continuing operations		84,429			69,374
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		470			466
Stock based compensation expense		3,258			4,923
Deferred income taxes		(3,930	)		(1,902	)
Tax benefit from exercise of stock options		-			102
Foreign currency translation loss		(121	)		(22	)
Cost basis of donated securities		68			31
Net gains on sales of available for sale securities		(4	)		(5	)
Accretion of zero coupon debentures		-			502
Loss on extinguishment of zero coupon debentures		-			310
(Increase) decrease in assets:
Investments in trading securities		223			-
Receivable from affiliates		290			(1,517	)
Receivable from brokers		747			526
Investment advisory fees receivable		4,442			11,090
Income tax receivable and deferred tax assets		(3,847	)		24
Other assets		534			1,617
Increase (decrease) in liabilities:
Payable to affiliates		(8	)		(202	)
Payable to brokers		10,190			522
Income taxes payable and deferred tax liabilities		(1,384	)		(8,349	)
Compensation payable		7,051			52,901
Accrued expenses and other liabilities		2,804			4,470
Total adjustments		20,783			65,487
Net cash provided by operating activities from continuing operations	$	105,212		$	134,861

GAMCO INVESTORS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED (continued)

(In thousands)

	Nine Months Ended
	September 30,
	2016			2015
Investing activities
Purchases of available for sale securities	$	(223	)	$	-
Proceeds from sales of available for sale securities		408			51
Net cash provided by investing activities from continuing operations		185			51

Financing activities
Net cash transferred from AC		-			77,533
Issuance of 4.5% Convertible note		109,826			-
Proceeds from exercise of stock options		-			1,167
Dividends paid		(1,752	)		(5,252	)
Repurchase of Zero coupon subordinated debentures		-			(6,224	)
Purchase of treasury stock		(8,384	)		(21,530	)
Repayment of AC 4% PIK Note		(150,000	)		-
Repayment of loan from GGCP		(35,000	)		-
Amortization of debt issuance costs		18			73
Net cash (used in) provided by financing activities from continuing operations		(85,292	)		45,767
Cash flows of discontinued operations
Net cash provided by operating activities		-			59,154
Net cash used in investing activities		-			(41,464	)
Net cash used in financing activities		-			(148,510	)
Net cash used in discontinued operations		-			(130,820	)
Effect of exchange rates on cash and cash equivalents		28			8
Net increase in cash and cash equivalents		20,133			49,867
Cash and cash equivalents at beginning of period		13,719			12,694
Cash and cash equivalents at end of period	$	33,852		$	62,561
Supplemental disclosures of cash flow information:
Cash paid for interest	$	4,561		$	3,531
Cash paid for taxes	$	55,216		$	49,587

Non-cash activity:

-	For the nine months ended September 30, 2016 and September 30, 2015, the Company accrued dividends on restricted stock awards of $41 and $129, respectively.

-	For the nine months ended September 30, 2016, the Company recorded $468 as a reduction to its deferred tax asset and additional paid-in capital for the excess of the recorded restricted stock award tax benefit over the actual tax benefit.

See accompanying notes.

GAMCO INVESTORS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2016

(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, 2015.

Reclassifications

Certain amounts reported for the prior period in the accompanying condensed consolidated financial statements have been reclassified in order to conform to the current period’s presentation. Assets and liabilities related to the spin-off (“Spin-off”) of Associated Capital Group, Inc. (“AC”) on November 30, 2015 on the Company’s condensed consolidated statement of financial condition as of September 30, 2015 have been reclassified as assets and liabilities of discontinued operations (See Note J. Discontinued Operations for further details). All assets and liabilities related to discontinued operations are excluded from the footnotes for all periods presented unless otherwise noted. In addition, the historical results of AC and certain investment partnerships and offshore funds have been reflected in the accompanying consolidated statements of income for the quarter and nine months ended September 30, 2015 as discontinued operations and financial information related to discontinued operations has been excluded from the notes to these interim condensed consolidated financial statements for all periods presented.

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 April 2015, the FASB issued ASU 2015-03, which amends the presentation of debt issuance costs in financial statements. This amended guidance requires entities to present the cost of debt issuances as a reduction of the related debt rather than as an asset. This guidance is effective for the Company beginning January 1, 2016. The Company adopted this guidance retrospectively on January 1, 2016. As a result, the debt issuance costs related to the 5.875% Senior Notes are now shown net in the liability section on the consolidated statements of financial condition. At December 31, 2015 and September 30, 2015, the 5.875% Senior Notes are now disclosed net of issuance costs of $128,000 and $553,000, respectively. These amounts were previously disclosed in other assets on the consolidated statements of financial condition.

In January 2016, the FASB issued ASU 2016-01, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Although the ASU retains many current requirements, it significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. For public companies, the new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2017. To adopt the amendments, entities will be required to make a cumulative-effect adjustment to beginning retained earnings as of the beginning of the fiscal year in which the guidance is effective. The Company is currently evaluating this guidance and the impact it will have on its consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, which amends the guidance in U.S. GAAP for the accounting for leases. ASU 2016-02 requires a lessee to recognize assets and liabilities arising from most operating leases in the condensed consolidated statement of financial position. ASU 2016-02 is effective beginning January 1, 2019. The Company is currently evaluating this guidance and the impact it will have on its consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, which simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. For public companies, the ASU is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating this guidance and the impact it will have on its consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, which adds and clarifies guidance on the classification of certain cash receipts and payments in the consolidated statements of cash flows. For public companies, the ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating this guidance and the impact it will have on its consolidated financial statements.

B. Investment in Securities

Investments in securities at September 30, 2016, December 31, 2015 and September 30, 2015 consisted of the following:

	September 30, 2016				December 31, 2015				September 30, 2015
	Cost		Fair Value		Cost		Fair Value		Cost		Fair Value
	(In thousands)
Trading securities:
Common stocks	$	16	$	16	$	385	$	368	$	-	$	-
Total trading securities		16		16		385		368		-		-

Available for sale securities:
Common stocks		17,649		32,873		17,898		32,607		13,561		34,095
Total available for sale securities		17,649		32,873		17,898		32,607		13,561		34,095

Total investments in securities	$	17,665	$	32,889	$	18,283	$	32,975	$	13,561	$	34,095

Securities sold, not yet purchased at September 30, 2016, December 31, 2015 and September 30, 2015 consisted of the following:

	September 30, 2016						December 31, 2015						September 30, 2015
	Proceeds			Fair Value			Proceeds			Fair Value			Proceeds			Fair Value
Trading securities:	(In thousands)
Common stocks		$	-		$	-		$	123		$	129		$	-		$	-
Total securities sold, not yet purchased		$	-		$	-		$	123		$	129		$	-		$	-

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 condensed 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, 2016 and 2015 (in thousands):

Amount								Affected Line Items	Reason for
Reclassified								in the Statements	Reclassification
from AOCI								Of Income	from AOCI
Three Months Ended September 30,
2016				2015
	$	-			$	-		Net gain from investments	Realized gain on sale of AFS securities
		7				45		Other operating expenses/net gain from investments	Realized gain on donation of AFS securities
		7				45		Income before income taxes
		(3	)			(17	)	Income tax provision
	$	4			$	28		Net income

Amount								Affected Line Items	Reason for
Reclassified								in the Statements	Reclassification
from AOCI								Of Income	from AOCI
Nine Months Ended September 30,
2016				2015
	$	4			$	5		Net gain from investments	Realized gain on sale of AFS securities
		159				80		Other operating expenses/net gain from investments	Realized gain on donation of AFS securities
		163				85		Income before income taxes
		(61	)			(32	)	Income tax provision
	$	102			$	53		Net 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, 2016, December 31, 2015 and September 30, 2015:

	September 30, 2016
				Gross			Gross
				Unrealized			Unrealized
	Cost			Gains			Losses			Fair Value
	(In thousands)
Common stocks		$	17,649		$	15,224		$	-		$	32,873
Total available for sale securities		$	17,649		$	15,224		$	-		$	32,873

	December 31, 2015
				Gross			Gross
				Unrealized			Unrealized
	Cost			Gains			Losses			Fair Value
	(In thousands)
Common stocks		$	17,898		$	14,709		$	-		$	32,607
Total available for sale securities		$	17,898		$	14,709		$	-		$	32,607

	September 30, 2015
				Gross			Gross
				Unrealized			Unrealized
	Cost			Gains			Losses			Fair Value
	(In thousands)
Common stocks		$	13,561		$	20,534		$	-		$	34,095
Total available for sale securities		$	13,561		$	20,534		$	-		$	34,095

Changes in net unrealized gain, net of taxes, for the three months ended September 30, 2016 of $0.5 million and changes in net unrealized loss, net of taxes, for the three months ended September 30, 2015 of $6.7 million have been included in other comprehensive income, a component of equity, at September 30, 2016 and September 30, 2015, respectively. There were no sales of investments available for sale for the three months ended September 30, 2016 and September 30, 2015. Changes in net unrealized gain, net of taxes, for the nine months ended September 30, 2016 of $0.3 million and changes in net unrealized loss, net of taxes, for the nine months ended September 30, 2015 of $7.4 million have been included in other comprehensive income, a component of equity, at September 30, 2016 and September 30, 2015, respectively. During the nine months ended September 30, 2016 and September 30, 2015, proceeds from the sales of investments available for sale were approximately $408,000 and $51,000, respectively. For the nine months ended September 30, 2016 and September 30, 2015, gross gains on the sale of investments available for sale amounted to $4,000 and $5,000, respectively, and were reclassified from other comprehensive income into net gain from investments in the condensed consolidated statements of income. There were no realized losses on the sale of investments available for sale for the nine months ended September 30, 2016 or September 30, 2015. The basis on which the cost of a security sold is determined using specific identification. Accumulated other comprehensive income on the consolidated statements of equity is primarily comprised of unrealized gains/losses, net of taxes, for AFS securities.

GBL has an established accounting policy and methodology to determine other-than-temporary impairment on available for sale securities. Under this policy, available for sale securities are evaluated for other than temporary impairments and any impairment charges are recorded in net gain/(loss) from investments on the condensed consolidated statements of income. Management reviews all available for sale securities whose cost exceeds their market value to determine if the impairment is other than temporary. Management uses qualitative factors such as diversification of the investment, the amount of time that the investment has been impaired, the intent to sell and the severity of the decline in determining whether the impairment is other than temporary.

There were no investments classified as available for sale that were in an unrealized loss position at September 30, 2016, December 31, 2015 or September 30, 2015.

For the three and nine months ended September 30, 2016 and 2015 there were no losses on available for sale securities that were deemed to be other than temporary.

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, 2016, December 31, 2015 and September 30, 2015 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, 2016 (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)		2016
Cash equivalents	$	33,576	$	-	$	-	$	33,576
Investments in securities:
AFS - Common stocks		32,873		-		-		32,873
Trading - Common stocks		16		-		-		16
Total investments in securities		32,889		-		-		32,889
Total assets at fair value	$	66,465	$	-	$	-	$	66,465
Liabilities
Securities sold, not yet purchased:
Trading - Common stocks	$	-	$	-	$	-	$	-
Total securities sold, not yet purchased	$	-	$	-	$	-	$	-

Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2015 (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)		2015
Cash equivalents	$	13,538	$	-	$	-	$	13,538
Investments in securities:
AFS - Common stocks		32,607		-		-		32,607
Trading - Common stocks		368		-		-		368
Total investments in securities		32,975		-		-		32,975
Total assets at fair value	$	46,513	$	-	$	-	$	46,513
Liabilities
Securities sold, not yet purchased:
Trading - Common stocks	$	129	$	-	$	-	$	129
Total securities sold, not yet purchased	$	129	$	-	$	-	$	129

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	$	62,398	$	-	$	-	$	62,398
Investments in securities:
AFS - Common stocks		34,095		-		-		34,095
Trading - Common stocks		-		-		-		-
Total investments in securities		34,095		-		-		34,095
Total assets at fair value	$	96,493	$	-	$	-	$	96,493
Liabilities
Securities sold, not yet purchased:
Trading - Common stocks	$	-	$	-	$	-	$	-
Total securities sold, not yet purchased	$	-	$	-	$	-	$	-

During the quarters ended September 30, 2016 and 2015, there were no transfers between any Level 1 and Level 2 holdings, or between Level 1 and Level 3 holdings.

Other than certain securities which were part of the Spin-off, the Company did not hold any Level 2 or 3 securities at September 30, 2016, December 31, 2015 or September 30, 2015.

D. Income Taxes

The effective tax rate ("ETR) for the three months ended September 30, 2016 and September 30, 2015 was 31.9% and 37.8%, respectively. The ETR for the nine months ended September 30, 2016 and September 30, 2015 was 35.9% and 37.5%, respectively. The change in rates is primarily due to the reversal of tax accruals related to the closing out of a state audit.

E. Earnings Per Share

The computations of basic and diluted net income per share are as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
(in thousands, except per share amounts)	2016		2015			2016		2015
Basic:
Income from continuing operations	$	30,861	$	22,451		$	84,429	$	69,374
Income from discontinued operations, net of taxes		-		(7,482	)		-		(5,528	)
Net income attributable to GAMCO Investors, Inc.'s
shareholders	$	30,861	$	14,969		$	84,429	$	63,846

Weighted average shares outstanding		29,185		24,947			29,222		25,047

Basic net income per share attributable to GAMCO
Investors, Inc.'s shareholders:
Continuing operations	$	1.06	$	0.90		$	2.89	$	2.77
Discontinued operations		-		(0.30	)		-		(0.22	)
Total	$	1.06	$	0.60		$	2.89	$	2.55

Diluted:
Income from continuing operations	$	30,861	$	22,451		$	84,429	$	69,374
Add interest on convertible note, net of management fee and taxes		387		-			387		-
Total income from continuing operations		31,248		22,451			84,816		69,374
Income from discontinued operations, net of taxes		-		(7,482	)		-		(5,528	)
Net income attributable to GAMCO Investors, Inc.'s
shareholders	$	31,248	$	14,969		$	84,816	$	63,846

Weighted average share outstanding		29,185		24,947			29,222		25,047
Dilutive stock options and restricted stock awards		221		294			253		290
Assumed conversion of convertible note		1,000		-			336		-
Total		30,406		25,241			29,811		25,337

Diluted net income per share attributable to GAMCO
Investors, Inc.'s shareholders:
Continuing operations	$	1.03	$	0.89		$	2.85	$	2.74
Discontinued operations		-		(0.30	)		-		(0.22	)
Total	$	1.03	$	0.59		$	2.85	$	2.52

F. Debt

Debt consists of the following:

	September 30, 2016						December 31, 2015						September 30, 2015
	Carrying			Fair Value			Carrying			Fair Value			Carrying			Fair Value
	Value			Level 2			Value			Level 2			Value			Level 2
(In thousands)
4.5 % Convertible note		$	109,826		$	112,172		$	-		$	-		$	-		$	-
AC 4% PIK Note			100,000			101,347			250,000			250,000			-			-
Loan from GGCP			-			-			35,000			35,000			-			-
5.875% Senior notes			24,115			25,073			24,097			24,437			99,447			106,625
0% Subordinated debentures			-			-			-			-			6,750			6,800
Total		$	233,941		$	238,592		$	309,097		$	309,437		$	106,197		$	113,425

4.5% Convertible Note

On August 15, 2016, the Company issued and sold a 5-year, $110 million convertible note (“Convertible Note”). The note bears interest at a rate of 4.5% per annum and is convertible into shares of the Company’s Class A Common stock (“Class A Stock”) at an initial conversion price of $55.00 per share. The Convertible Note is initially convertible into two million shares of the Company’s Class A Stock, subject to adjustment pursuant to the terms of the Convertible Note. The Company is required to repurchase the Convertible Note at the request of the holder on specified dates or after certain circumstances involving a Fundamental Change (as defined in the Convertible Note). The Company recorded $174,000 of costs in connection with the issuance of the Convertible Note. GGCP, Inc. (“GGCP”), which owns approximately 62% of the equity interest of the Company, has deposited cash equal to the principal amount of the Note and six months interest (“Initial Deposit”) into an escrow account established pursuant to an escrow agreement by and among GGCP, the Company, the Convertible Note holder and the escrow agent. In connection with the Initial Deposit made by GGCP, the Company has agreed that GGCP has a right to demand payment in an amount equal to any funds withdrawn from the escrow account by the Convertible Note holder.

AC 4% PIK Note

In connection with the spin-off of AC on November 30, 2015, the Company issued a $250 million promissory note (the “AC 4% PIK Note”) payable to AC. The AC 4% PIK Note bears interest at 4.0% per annum. The original principal amount has a maturity date of November 30, 2020. Interest on the AC 4% PIK Note will accrue from the date of the last interest payment, or if no interest has been paid, from the effective date of the AC 4% PIK Note. At the election of the Company, payment of interest on the AC 4% PIK Note may be paid in kind (in whole or in part) on the then-outstanding principal amount (a “PIK Amount”) in lieu of cash. All PIK Amounts added to the outstanding principal amount of the AC 4% PIK Note will mature on the fifth anniversary from the date the PIK Amount was added to the outstanding principal of the AC 4% PIK Note. In no event may any interest be paid in kind subsequent to November 30, 2019. The Company may prepay the AC 4% PIK Note (in whole or in part) prior to maturity without penalty.

During the three months ended September 30, 2016, the Company prepaid $150 million of principal of the AC 4% PIK Note. $50 million of the prepayment was applied against the principal amount due on November 30, 2016, $40 million against the principal amount due on November 30, 2017, $30 million against the principal amount due on November 30, 2018, and $30 million against the principal amount due on November 30, 2019. Of the $100 million principal amount outstanding at September 30, 2016, $10 million is due on November 30, 2017, $20 million is due on November 30, 2018, $20 million is due on November 30, 2019, and $50 million is due on November 30, 2020.

5.875% Senior notes

On May 31, 2011, the Company issued 10-year, $100 million senior notes ("Senior Notes"). The Senior Notes mature on June 1, 2021 and bear interest at 5.875% per annum, payable semi-annually on June 1 and December 1 of each year and commenced on December 1, 2011. Upon the occurrence of a change of control triggering event, as defined in the indenture, the Company would be required to offer to repurchase the Senior Notes at 101% of their principal amount.

On November 18, 2015, the Company commenced a tender offer (the “Offer”) to purchase for cash up to $100 million aggregate principal amount of the Senior Notes at a price of 101% of the principal amount. $75.8 million of face value Senior Notes were tendered upon the expiration of the Offer. At September 30, 2016, December 31, 2015 and September 30, 2015, the debt was recorded at its face value, net of issuance costs, of $24.1 million, $24.1 million and $99.4 million, respectively.

Loan from GGCP

In connection with the Offer, the Company borrowed $35.0 million from GGCP. The loan has a term of one year and bears interest at 90-day LIBOR plus 3.25%, reset and payable quarterly. On March 18, 2016, the Company paid back $15.0 million of the loan. During the second quarter of 2016 the Company paid back the remaining $20.0 million of the loan. At December 31, 2015, the debt was recorded at its face value of $35.0 million.

Zero coupon Subordinated debentures due December 31, 2015

On December 31, 2010, the Company issued $86.4 million in par value of five year zero coupon subordinated debentures due December 31, 2015 ("Debentures") to its shareholders of record on December 15, 2010 through the declaration of a special dividend of $3.20 per share. The Debentures have a par value of $100 and are callable at the option of the Company, in whole or in part, at any time or from time to time, at a redemption price equal to 100% of the principal amount of the Debentures to be redeemed. During the three and nine month periods ended September 30, 2015 the Company repurchased 16 Debentures and 62,242 Debentures, respectively, having a face value of $1,600 and $6.2 million, respectively. The redemptions were accounted for as extinguishments of debt and resulted in losses of less than $1,000 and $310,000, respectively, which was included in net gain from investments on the condensed consolidated statements of income. The debt was being accreted to its face value using the effective rate on the date of issuance of 7.45%. At September 30, 2015, the debt was recorded at its accreted value of $6.8 million. The debt matured on December 31, 2015 and was fully paid at that time.

The fair value of the Company's debt, which is a Level 2 valuation, is estimated based on either quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities or using market standard models. Inputs in these standard models include credit rating, maturity and interest rate.

On May 4, 2015, the Securities and Exchange Commission (“SEC”) declared effective the “shelf” registration statement filed by the Company. The "shelf" provides the Company with the flexibility of issuing any combination of senior and subordinated debt securities, convertible securities and common and preferred securities up to a total amount of $500 million and replaced the existing shelf registration which expired in May 2015. As of September 30, 2016, $500 million is available on the shelf.

G. Stockholders' Equity

Shares outstanding were 29.5 million, 29.8 million and 25.5 million on September 30, 2016, December 31, 2015 and September 30, 2015, respectively.

Dividends

	Payment	Record
	Date	Date	Amount

Three months ended March 31, 2016	March 29, 2016	March 15, 2016	$	0.02
Three months ended June 30, 2016	June 28, 2016	June 14, 2016		0.02
Three months ended September 30, 2016	September 27, 2016	September 13, 2016		0.02
Nine months ended September 30, 2016			$	0.06

Three months ended March 31, 2015	March 31, 2015	March 17, 2015	$	0.07
Three months ended June 30, 2015	June 30, 2015	June 16, 2015		0.07
Three months ended September 30, 2015	September 29, 2015	September 15, 2015		0.07
Nine months ended September 30, 2015			$	0.21

Voting Rights

The holders of Class A Stock and Class B Common stock ("Class B Stock") have identical rights except that (i) holders of Class A Stock are entitled to one vote per share, while holders of Class B Stock are entitled to ten votes per share on all matters to be voted on by shareholders in general, and (ii) holders of Class A Stock are not eligible to vote on matters relating exclusively to Class B Stock and vice versa.

Stock Award and Incentive Plan

The Company maintains two Plans approved by the shareholders, which are designed to provide incentives which will attract and retain individuals key to the success of GBL through direct or indirect ownership of our common stock. Benefits under the Plans may be granted in any one or a combination of stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, dividend equivalents and other stock or cash based awards. A maximum of 3.5 million shares of Class A Stock have been reserved for issuance under the Plans by a committee of the Board of Directors responsible for administering the Plans ("Compensation Committee"). Under the Plans, the committee may grant RSAs and either incentive or nonqualified stock options with a term not to exceed ten years from the grant date and at an exercise price that the committee may determine.

As of September 30, 2016, December 31, 2015 and September 30, 2015, there were 427,290 RSA shares, 553,100 RSA shares and 688,550 RSA shares outstanding, respectively, that were previously issued at an average weighted grant price of $65.72, $64.02 and $67.34, respectively. These RSA grants occurred prior to the spin-off of Associated Capital. On November 30, 2015, pursuant to the spin-off, all RSA grant holders received shares of Associated Capital’s Class A common stock as a result of their ownership of their GAMCO unvested RSAs (one share of Associated Capital for each share of GBL). All grants of the RSA shares were recommended by the Company's Chairman, who did not receive a RSA, and approved by the Compensation Committee. This expense, net of estimated forfeitures, is recognized over the vesting period for these awards which is either (1) 30% over three years from the date of grant and 70% over five years from the date of grant or (2) 30% over three years from the date of grant and 10% each year over years four through ten from the date of grant. During the vesting period, dividends to RSA holders are held for them until the RSA vesting dates and are forfeited if the grantee is no longer employed by the Company on the vesting dates. Dividends declared on these RSAs, less estimated forfeitures, are charged to retained earnings (deficit) on the declaration date.

For the three months ended September 30, 2016 and September 30, 2015, we recognized stock-based compensation expense of $1.2 million and $1.6 million, respectively. For the nine months ended September 30, 2016 and September 30, 2015, we recognized stock-based compensation expense of $3.3 million and $4.9 million, respectively. Actual and projected stock-based compensation expense for RSA shares for the years ended December 31, 2015 through December 31, 2024 (based on awards currently issued or granted) is as follows (in thousands):

		2015		2016		2017		2018		2019		2020		2021		2022		2023		2024
	Q1	$	1,639	$	1,037	$	685	$	464	$	365		219		145		93		48		7
	Q2		1,640		1,036		685		453		365		204		145		93		48		7
	Q3		1,644		1,186		602		402		323		169		114		66		24		5
	Q4		4,945		691		520		366		295		145		93		48		7		-
Full Year		$	9,868	$	3,950	$	2,492	$	1,685	$	1,348		737		497		300		127		19

The total compensation cost related to non-vested RSAs not yet recognized is approximately $7.9 million as of September 30, 2016. There were no options exercised for the three or nine months ended September 30, 2016. For both the three and nine months ended September 30, 2015 proceeds from the exercise of 26,000 stock options were $1.2 million resulting in a tax benefit to GAMCO of $102,000.

Stock Repurchase Program

In March 1999, GAMCO's Board of Directors established the Stock Repurchase Program to grant management the authority to repurchase shares of our Class A Common Stock. For the three months ended September 30, 2016 and September 30, 2015, the Company repurchased 223,811 shares and 172,007 shares, respectively, at an average price per share of $31.50 and $61.11, respectively. For the nine months ended September 30, 2016 and September 30, 2015, the Company repurchased 266,846 shares and 321,488 shares, respectively, at an average price per share of $31.41 and $66.96, respectively. From the inception of the program through September 30, 2016, 9,819,499 shares have been repurchased at an average price of $44.44 per share. At September 30, 2016, the total shares available under the program to be repurchased in the future were 315,309.

H. Identifiable Intangible Assets

As a result of becoming the advisor to the Gabelli Enterprise Mergers and Acquisitions Fund and the associated consideration paid, the Company maintains an identifiable intangible asset of $1.9 million within other assets on the condensed consolidated statements of financial condition at September 30, 2016, December 31, 2015 and September 30, 2015. The investment advisory agreement is subject to annual renewal by the fund's Board of Directors, which the Company expects to be renewed, and the Company does not expect to incur additional expense as a result, which is consistent with other investment advisory agreements entered into by the Company. The advisory contract is next up for renewal in February 2017. On November 1, 2015, as a result of becoming the advisor to the Bancroft Fund Ltd. and the Ellsworth Growth and Income Fund Ltd. and the associated consideration paid, the Company maintains an identifiable intangible asset of $1.6 million within other assets on the condensed consolidated statement of financial condition at September 30, 2016 and December 31, 2015. The advisory contracts for the Bancroft Fund Ltd. and the Ellsworth Growth and Income Fund Ltd. are both next up for renewal in November 2017. The Company assesses the recoverability of this intangible asset at least annually, or more often should events warrant. There were no indicators of impairment for the three months ended September 30, 2016 or September 30, 2015, and as such there was no impairment analysis performed or charge recorded.

I. Commitments and Contingencies

From time to time, the Company may be named in legal actions and proceedings. These actions may seek substantial or indeterminate compensatory as well as punitive damages or injunctive relief. The Company is also subject to governmental or regulatory examinations or investigations. The examinations or investigations could result in adverse judgments, settlements, fines, injunctions, restitutions or other relief. For any such matters, the condensed consolidated financial statements include the necessary provisions for losses that the Company believes are probable and estimable. Furthermore, the Company evaluates whether there exist losses which may be reasonably possible and will, if material, make the necessary disclosures. However, management believes such amounts, both those that are probable and those that are reasonably possible, are not material to the Company's financial condition, operations or cash flows at September 30, 2016.

J. Discontinued Operations

As a result of the Spin-off, the results of AC’s operations through the Spin-off Date, as well as transaction costs related to the Spin-off, have been classified in the condensed consolidated statements of income as discontinued operations. There was no gain or loss on the Spin-off for the Company, and it was a tax-free spin-off to GAMCO’s shareholders.

The three and nine months ended September 30, 2015 results include $0 and $1.5 million, respectively, in costs incurred with respect to the Spin-off and are included in Other operating expenses below. Operating results for the period from January 1, 2015 through September 30, 2015 is summarized below:

	Three Months Ended			Nine Months Ended
	September 30, 2015			September 30, 2015
Revenues
Investment advisory and incentive fees	$	2,560		$	6,954
Distribution fees and other income		41			276
Institutional research services		2,446			7,278
Total revenues		5,047			14,508
Expenses
Compensation		5,079			16,555
Stock based compensation		630			1,895
Management fee		(1,374	)		(1,025	)
Distribution costs		(19	)		(82	)
Other operating expenses		1,811			6,922
Total expenses		6,127			24,265
Operating loss		(1,080	)		(9,757	)
Other income (expense)
Net gain from investments		(11,539	)		(834	)
Interest and dividend income		551			2,303
Interest expense		(322	)		(984	)
Total other income (expense), net		(11,310	)		485
Loss from discontinued operations before income taxes		(12,390	)		(9,272