GAMCO INVESTORS, INC. ET AL - FORM 8-K - EX-99.1 - EXHIBIT 99.1, DATED NOVEMBER 4, 2016 - November 4, 2016

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8-K - FORM 8-K, DATED NOVEMBER 4, 2016 - GAMCO INVESTORS, INC. ET ALgblpr110416.htm
Exhibit 99.1
 
 
 
For Immediate Release:
 
Contact:
 
Douglas R. Jamieson
 
 
President
and Chief Operating Officer
 
 
(914) 921-5020
 
 
 
 
 
For further information please visit
 
 
www.gabelli.com
 
GAMCO Investors, Inc. Reports Third Quarter Results
·  
Third Quarter Earnings of $1.03 per diluted share
·  
Average AUM at $39.9 billion
·  
Launched 15th Closed-End Fund – The Gabelli Go Anywhere Trust
·  
Issued $110 million convertible note to Cascade Investment, L.L.C. convertible into 16% of Class A Shares

Rye, New York, November 4, 2016 – GAMCO Investors, Inc. (“GAMCO” or the “Company”) (NYSE: GBL) today reported financial results for the third quarter including revenues of $87.7 million, net income of $30.9 million and earnings of $1.03 per diluted share.  On a comparable continuing operations basis, revenues were $92.2 million, net income was $22.5 million, and earnings were $0.89 per diluted share in the third quarter of 2015.
 
Financial Highlights
                                                
 
  
Third Quarter
          
YTD
        
($'s in 000's except AUM and per share data)
  
2016 (a)
          
2015 (b)
          
2016 (a)
          
2015 (b)
        
 
                                                
AUM - end of period (in millions)
  
$
39,581
          
$
38,490
          
$
39,581
          
$
38,490
        
AUM - average (in millions)
    
39,883
            
41,586
            
38,727
            
44,231
        
 
                                                        
Revenues
    
87,721
            
92,160
            
253,050
            
290,659
        
 
                                                        
Operating income
    
48,076
              
37,276
              
139,765
              
114,847
          
Operating margin
            
54.8
%
            
40.4
%
            
55.2
%
            
39.5
%
 
                                                                
Other expense, net
    
(2,729
)
            
(1,190
)
            
(8,107
)
            
(3,771
)
        
 
                                                                
Income before income taxes
    
45,347
              
36,086
              
131,658
              
111,076
          
Effective tax rate
            
31.9
%
            
37.8
%
            
35.9
%
            
37.5
%
 
                                                                
Income from continuing operations
    
30,861
              
22,451
              
84,429
              
69,374
          
 
                                                                
Loss from discontinued operations
    
-
              
(7,482
)
            
-
              
(5,528
)
        
 
                                                                
Net income
    
30,861
              
14,969
              
84,429
              
63,846
          
 
                                                                
Income per share - continuing operations
  
$
1.03
            
$
0.89
            
$
2.85
            
$
2.74
          
 
                                                                
Loss per share - discontinued operations
  
$
-
              
(0.30
)
          
$
-
              
(0.23
)
        
 
                                                                
Net income per share
  
$
1.03
            
$
0.59
            
$
2.85
            
$
2.51
          
 
                                                                
Shares outstanding at September 30 (c)
    
29,548
              
25,538
              
29,548
              
25,538
          
(a) See page 3 for discussion of deferred compensation impact.
                                                  
(b) Adjusted for spin-off of AC.
                                                                
(c) Shares outstanding consist of 29,121 non-RSA shares and 427 RSA shares at September 30, 2016 and 24,849 non-RSA shares and 689 RSA shares at September 30, 2015.
 
                                          

 
1
Assets Under Management
 
 
                    
% Change From
  
 
  
September 30,
    
December 31,
    
September 30,
    
December 31,
    
September 30,
  
 
  
2016
    
2015
    
2015
    
2015
    
2015
  
Equities:
                              
Open-end Funds
  
$
13,799
    
$
13,811
    
$
14,075
      
(0.1
%)
    
(2.0
%)
Closed-end Funds
    
7,178
      
6,492
      
6,205
      
10.6
      
15.7
  
Institutional & PWM - direct
    
13,245
      
13,366
      
13,190
      
(0.9
)
    
0.4
  
Institutional & PWM - sub-advisory
    
3,542
      
3,401
      
3,302
      
4.1
      
7.3
  
SICAV
    
42
      
37
      
36
      
13.5
      
16.7
  
Total Equities
    
37,806
      
37,107
      
36,808
      
1.9
      
2.7
  
Fixed Income:
                                        
Money-Market Fund
    
1,738
      
1,514
      
1,637
      
14.8
      
6.2
  
Institutional & PWM
    
37
      
38
      
45
      
(2.6
)
    
(17.8
)
Total Fixed Income
    
1,775
      
1,552
      
1,682
      
14.4
      
5.5
  
Total Assets Under Management
  
$
39,581
    
$
38,659
    
$
38,490
      
2.4
      
2.8
  
Institutional & PWM - direct includes $286 million, $226 million and $227 million of Money Market Fund AUM at September 30, 2016,
  
December 31, 2015 and September 30, 2015, respectively.
                          
 
                                        
Average AUM were $39.9 billion for the third quarter of 2016 versus $38.9 billion for the second quarter of 2016 and $41.6 billion for the third quarter of 2015.
Our third quarter 2016 increase in AUM versus June 30, 2016 AUM of $39.3 billion was due to market appreciation of $1.0 billion partially offset by net outflows of $0.5 billion and distributions of $0.2 billion.

Revenues

-
Total revenues for the third quarter of 2016 were $87.7 million, compared with $92.2 million in the prior year, reflecting investment advisory fees based on a lower level of assets and a decline in distribution and other income.

-
Investment advisory fees were $76.0 million in the third quarter of 2016 versus $79.9 million in the third quarter of 2015.  Revenues from our open-end and closed-end funds tracked our average AUM in the funds.  Lower billable assets at June 30, 2016 in Institutional and Private Wealth Management accounted for $26.2 million of the revenues.

-
Distribution fees from our open-end equity funds and other income were $11.8 million for the third quarter 2016, down from $12.3 million in the prior year quarter.

Operating Income – Third Quarter – Operating margin 54.8% vs. 40.4%

Operating income, which is net of management fee expense, increased 29.0% or $10.8 million, to $48.1 million in the third quarter of 2016 versus $37.3 million in the prior year period.  Lower revenues of $4.4 million in the third quarter were offset by reduced variable compensation expense of $12.5 million.  The December 2015 Restricted Stock Units (“RSU”) agreement with Mr. Gabelli reduced variable compensation by $13.3 million in the 2016 third quarter.  There were $0.6 million of launch costs incurred during the third quarter of 2016 and $0.5 million of incremental RSA expense in the third quarter of 2015.  After adjusting for removal of these items in the 2016 and 2015 periods, operating income was $35.4 million in the third quarter of 2016 versus $37.7 million, $2.3 million less than the comparable prior year period.  Operating margin after these adjustments decreased to 40.4% versus 40.9% in the prior year period.  See Notes to Non-GAAP measures on page 7 for further information.
 
 
2
Operating income before management fee was $49.2 million in the third quarter 2016 versus $41.3 million in the third quarter 2015.  Operating margin before management fee was 56.1% versus 44.8% in the third quarter of 2015.  After adjusting for the removal of the items in both the 2016 and 2015 periods, operating income before management fee was $38.4 million in the third quarter of 2016 as compared to $41.8 million in the third quarter of 2015 while operating margins before management fee was 43.7% vs. 45.3% in the prior year quarter.  See Notes on Non-GAAP measures on page 7 for further information.  Further information regarding Non-GAAP measures is included in Notes on Non-GAAP Financial Measures and Table V included elsewhere herein.

Other expense

We recognized $2.7 million in net other expenses in the 2016 quarter versus net other expenses of $1.2 million in the third quarter of 2015, principally due to the higher interest expense of $3.2 million in the 2016 quarter versus $1.8 million in the third quarter of 2015.  In 2016, the AC 4% PIK Note issued in November 2015 was outstanding as was the 4.5% convertible note issued in August 2016, offset in part by the tender of $78 million of the Senior Notes in December 2015.  Investment income for 2016 decreased $0.2 million to $0.4 million in 2016 vs. $0.6 million in 2015.

Income Taxes

The Company’s effective tax rate (“ETR”) for the quarter ended September 30, 2016 was 31.9% versus 37.8% for the quarter ended September 30, 2015.  The current quarter benefited from the reversal of tax accruals related to the closing out of a state audit.

Deferred compensation

The GAAP-mandated treatment of the December 2015 deferred compensation agreement materially contributed to the year over year third quarter 2016 results.  In 2016, certain variable compensation will be in the form of RSUs determined by the volume-weighted average price of the Company’s Class A Stock.  Margins for the third quarter 2016 therefore are not comparable with prior year periods.  Under GAAP, only 25% of this deferred compensation expense is being recognized in the current year with the remainder amortized as expense in 2017, 2018, and 2019.  Expressed another way, and assuming no renewal of the deferred compensation agreement, the 2016 third quarter (as well as the balance of 2016) benefit from a reduction of 75% of the compensation, and 2017, 2018, and 2019 will, in turn, be impacted by an additional 25% of the compensation from 2016 in each year.  The Board’s decision to grant these RSUs in December 2015 and thereby defer the cash payment of certain 2016 variable compensation until January 1, 2020 was to provide the Company with greater financial flexibility.
 
3
The balance sheet is also impacted; the compensation payable at September 30, 2016 and in each future period-end of 2016 is only 25% of the full amount of the 2016 compensation that will be due once the RSUs are fully vested.  At September 30, 2016, the amount of unrecognized compensation was $38.9 million.
 
On an economic basis, there was $18.1 million of compensation subject to the deferred compensation agreement for the third quarter of 2016.  Of this amount, only $4.8 million was recorded under GAAP, with the remaining $13.3 million to be expensed over the vesting period.  Absent the deferred compensation arrangement during the third quarter of 2016, total compensation costs were $32.1 million, management fee expense was $3.6 million, income tax expense was $9.6 million, net income was $22.4 million and earnings per fully diluted share was $0.75.

The following tables show a reconciliation of our results for the third quarter of 2016 and our balance sheet at September 30, 2016 between the GAAP basis and the non-GAAP adjusted basis of the deferred compensation (the RSU grant) described above.  We believe this adjusted measure, which removes the impact of the deferred compensation agreement, is useful in evaluating the ongoing operating results of the Company and increases the comparability of the results with prior periods.
 
 
  
For the three months ended September 30, 2016
  
 
        
Impact of
        
 
  
Reported
    
Deferred
        
 
  
GAAP
    
Compensation
    
Non-GAAP
  
 
                  
Total revenues
  
$
87,721
    
$
-
    
$
87,721
  
 
                        
Compensation costs
    
21,233
      
10,885
      
32,118
  
Distribution costs
    
11,568
      
-
      
11,568
  
Other operating expenses
    
5,681
      
-
      
5,681
  
Total expenses
    
38,482
      
10,885
      
49,367
  
 
                        
Operating income before management fee
    
49,239
      
(10,885
)
    
38,354
  
 
                        
Other expense, net
    
(2,729
)
    
-
      
(2,729
)
 
                        
Income before management fee and income taxes
    
46,510
      
(10,885
)
    
35,625
  
Management fee expense
    
1,163
      
2,400
      
3,563
  
Income before income taxes
    
45,347
      
(13,285
)
    
32,062
  
Income tax expense
    
14,486
      
(5,075
)
    
9,411
  
Net income attributable to GAMCO Investors, Inc.
  
$
30,861
    
$
(8,210
)
  
$
22,651
  
 
                        
Net income per share attributable to GAMCO Investors, Inc.:
                
Basic
  
$
1.06
    
$
(0.28
)
  
$
0.78
  
Diluted
  
$
1.03
    
$
(0.27
)
  
$
0.76
  
 
                        
 
4
 
  
September 30, 2016
  
 
        
Impact of
        
 
  
Reported
    
Deferred
        
 
  
GAAP
    
Compensation
    
Non-GAAP
  
 
                  
ASSETS
                  
 
                  
Other assets
  
$
110,013
    
$
-
    
$
110,013
  
Income tax receivable
    
11,293
      
14,811
      
26,104
  
  Total assets
  
$
121,306
    
$
14,811
    
$
136,117
  
 
                        
LIABILITIES AND EQUITY
                        
 
                        
Compensation payable
  
$
31,469
    
$
38,942
    
$
70,411
  
Accrued expenses and other liabilities
    
54,979
      
-
      
54,979
  
  Sub-total
    
86,448
      
38,942
      
125,390
  
 
                        
5.875% Senior notes (due June 1, 2021)
    
24,115
      
-
      
24,115
  
4.5% Convertible note (due August 15, 2021)
    
109,826
      
-
      
109,826
  
4% PIK note (due November 30, 2020)
    
100,000
      
-
      
100,000
  
  Total debt
    
233,941
      
-
      
233,941
  
  Total liabilities
    
320,389
      
38,942
      
359,331
  
 
                        
GAMCO Investors, Inc.'s stockholders' equity (deficit)
    
(199,083
)
    
(24,131
)
    
(223,214
)
 
                        
Total liabilities and equity
  
$
121,306
    
$
14,811
    
$
136,117
  
 
                        

The following table further illustrates the effect that the GAAP accounting for the compensation deferral will have on our results for 2016 through 2019 under certain assumptions.  For simplicity in arriving at the 2016 through 2019 illustrative effects, we have assumed that the third quarter RSU expense is predictive of the full year results but there is no assurance that this will be the case.  Please see the note regarding forward-looking information on page 13 of this release.
Effect of recording RSU on a GAAP basis:
 
   
2016
  
2017
  
2018
  
2019
                 
RSU expense
  
          (52,228)
  
           17,409
  
           17,409
  
           17,409
                 
Business and Investment Highlights

-
On August 15, 2016, the Company issued a $110 million five year convertible note to Cascade Investment, L.L.C. in a private transaction.  The note has a coupon of 4.5% and is convertible into GBL Class A common stock at $55 per share.

-
On July 1, 2016, Gabelli Dividend & Income Trust completed the offering of $100 million of 5.25% Series G Cumulative Preferred Stock.  The preferred stock is perpetual, non-callable for five years, and was issued at $25 per share.
 
 
5
-
On August 9, 2016, the Bancroft Fund Ltd. completed the offering of $30 million of 5.375% Series A Cumulative Preferred Stock.   The preferred stock is perpetual, non-callable for five years, and was issued at $25 per share.

-
On September 2, 2016, GAMCO completed the initial public offering of The Gabelli Go Anywhere Trust, the Company’s 15th closed-end fund.  This newly organized closed-end fund initially traded on the NYSE MKT as a $100 combination consisting of one preferred share at $40 and three common shares at $20 each under the symbol GGO.C.  This innovative offering demonstrates the flexibility of the closed-end fund structure.  Separate trading on the NYSE MKT for the common shares (“GGO”) and the Series A Preferred shares (“GGO.A”) commenced on November 2, 2016.

Balance Sheet

During the quarter, we issued $110 million of five year 4.5% convertible notes and paid down $150 million of the $250 million PIK Note due November 30, 2020.  We ended the quarter with cash and investments of $66.7 million and debt of $233.9 million.  We have $500 million available on our universal shelf registration.  Together with earnings from operations, the shelf provides us with flexibility to do acquisitions, lift-outs, seed new investment strategies, and co-invest, as well as to fund shareholder compensation, including share repurchases and dividends.

Shareholder Compensation

During the quarter ended September 30, 2016, we returned $7.6 million of our earnings to shareholders through dividends and stock repurchases.  We repurchased 223,811 shares at an average price of $31.50 per share for a total investment of $7.0 million and distributed $0.6 million in dividends.  Since our IPO, in February 1999, we have returned $1.9 billion in total to shareholders comprised of $1.0 billion of spin-offs, $488 million in the form of dividends and $436 million through stock buybacks of 9,819,499 shares.

On November 4, 2016, GAMCO’s Board of Directors declared a regular quarterly dividend of $0.02 per share payable on December 27, 2016 to its Class A and Class B shareholders of record on December 13, 2016.

About GAMCO Investors, Inc.

GAMCO Investors, Inc., through its subsidiaries, manages private advisory accounts (GAMCO Asset Management Inc.) and open-end funds and closed-end funds (Gabelli Funds, LLC).

 
6

NOTES ON NON-GAAP FINANCIAL MEASURES

A.  
Operating income before management fee expense is used by management to evaluate its business operations.  We believe this measure is useful in illustrating the operating results of GAMCO Investors, Inc. (the “Company”) as management fee expense is based on pre-tax income before management fee expense, which includes non-operating items including investment gains and losses from the Company’s proprietary investment portfolio and interest expense.  The reconciliation of operating income before management fee expense to operating income is provided in Table V.
 

B.  
Adjusted operating income and adjusted operating income before management fee expense are used by management to evaluate its ongoing business operations.  We believe these adjusted measures, which remove these items, are useful in evaluating the ongoing operating results of the Company as the nature of these items reduces the comparability of the results with prior periods and is not indicative of results for future periods.

 
  
  
3rd Quarter
    
YTD September
  
 
 
  
2016
    
2015
    
2016
    
2015
  
Operating income before management fee
  
$
49,239
    
$
41,332
    
$
143,141
    
$
127,232
  
Adjustments:
                                
   Add back:
Incremental RSA expense
    
-
      
458
      
-
      
1,665
  
                Costs to launch Closed-end fund
    
638
      
-
      
638
      
1,000
  
   Deduct:
Variable compensation reduction from RSU
    
(10,886
)
    
-
      
(32,016
)
    
-
  
Adjusted operating income before management fee
    
38,991
      
41,790
      
111,763
      
129,897
  
Adjusted operating margin before management fee
    
44.4
%
    
45.3
%
    
44.2
%
    
44.7
%
 
 
                                
 
  
  
3rd Quarter
    
YTD September
  
 
 
  
2016
    
2015
    
2016
    
2015
  
Operating income
  
$
48,076
    
$
37,276
    
$
139,765
    
$
114,847
  
Adjustments:
                                
   Add back:
Incremental RSA expense
    
-
      
458
      
-
      
1,665
  
                Costs to launch Closed-end fund
    
638
      
-
      
638
      
1,000
  
   Deduct:
Variable compensation reduction from RSU
    
(13,285
)
    
-
      
(38,942
)
    
-
  
Adjusted operating income
    
35,429
      
37,734
      
101,461
      
117,512
  
Adjusted operating margin
    
40.4
%
    
40.9
%
    
40.1
%
    
40.4
%
 
 
                                
 
7
The Company reported Assets Under Management as follows (in millions):
 
Table I: Fund Flows - 3rd Quarter 2016
                          
 
                    
Fund
        
 
        
Market
          
distributions,
        
 
  
June 30,
    
appreciation/
    
Net cash
    
net of
    
September 30,
  
 
  
2016
    
(depreciation)
    
flows
    
reinvestments
    
2016
  
Equities:
                              
Open-end Funds
  
$
13,981
    
$
259
    
$
(416
)
  
$
(25
)
  
$
13,799
  
Closed-end Funds
    
6,917
      
131
      
257
      
(127
)
    
7,178
  
Institutional & PWM - direct
    
13,326
      
429
      
(510
)
    
-
      
13,245
  
Institutional & PWM - sub-advisory
    
3,459
      
186
      
(103
)
    
-
      
3,542
  
SICAV
    
40
      
1
      
1
      
-
      
42
  
Total Equities
    
37,723
      
1,006
      
(771
)
    
(152
)
    
37,806
  
Fixed Income:
                                        
Money-Market Fund
    
1,518
      
1
      
219
      
-
      
1,738
  
Institutional & PWM
    
32
      
-
      
5
      
-
      
37
  
Total Fixed Income
    
1,550
      
1
      
224
      
-
      
1,775
  
Total Assets Under Management
  
$
39,273
    
$
1,007
    
$
(547
)
  
$
(152
)
  
$
39,581
  

Table II: Fund Flows - Year to date September 2016
                    
 
                    
Fund
        
 
        
Market
          
distributions,
        
 
  
December 31,
    
appreciation/
    
Net cash
    
net of
    
September 30,
  
 
  
2015
    
(depreciation)
    
flows
    
reinvestments
    
2016
  
Equities:
                              
Open-end Funds
  
$
13,811
    
$
1,204
    
$
(1,170
)
  
$
(46
)
  
$
13,799
  
Closed-end Funds
    
6,492
      
619
      
437
      
(370
)
    
7,178
  
Institutional & PWM - direct
    
13,366
      
904
      
(1,025
)
    
-
      
13,245
  
Institutional & PWM - sub-advisory
    
3,401
      
314
      
(173
)
    
-
      
3,542
  
SICAV
    
37
      
3
      
2
      
-
      
42
  
Total Equities
    
37,107
      
3,044
      
(1,929
)
    
(416
)
    
37,806
  
Fixed Income:
                                        
Money-Market Fund
    
1,514
      
2
      
222
      
-
      
1,738
  
Institutional & PWM
    
38
      
-
      
(1
)
    
-
      
37
  
Total Fixed Income
    
1,552
      
2
      
221
      
-
      
1,775
  
Total Assets Under Management
  
$
38,659
    
$
3,046
    
$
(1,708
)
  
$
(416
)
  
$
39,581
  
 
                                        
 

8
Table III
            
 
            
GAMCO INVESTORS, INC.
  
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
  
(Dollars in thousands, except per share data)
  
 
            
 
  
For the Quarter Ended
  
 
  
September 30,
  
 
  
2016
    
2015
  
 
            
Investment advisory and incentive fees
  
$
75,952
    
$
79,900
  
Distribution fees and other income
    
11,769
      
12,260
  
Total revenues
    
87,721
      
92,160
  
 
                
Compensation costs
    
21,233
      
34,022
  
Distribution costs
    
11,568
      
12,363
  
Other operating expenses
    
5,681
      
4,443
  
Total expenses
    
38,482
      
50,828
  
 
                
Operating income before management fee
    
49,239
      
41,332
  
 
                
Investment income
    
426
      
625
  
Interest expense
    
(3,155
)
    
(1,815
)
Other expense, net
    
(2,729
)
    
(1,190
)
 
                
Income before management fee and income taxes
    
46,510
      
40,142
  
Management fee expense
    
1,163
      
4,056
  
Income before income taxes
    
45,347
      
36,086
  
Income tax expense
    
14,486
      
13,635
  
Income from continuing operations
    
30,861
      
22,451
  
Loss from discontinued operations, net of taxes
    
-
      
(7,482
)
Net income attributable to GAMCO Investors, Inc.
  
$
30,861
    
$
14,969
  
 
                
Net income/(loss) per share attributable to GAMCO Investors, Inc.:
          
Basic - Continuing operations
  
$
1.06
    
$
0.90
  
Basic - Discontinued operations
    
-
      
(0.30
)
Basic - Total
  
$
1.06
    
$
0.60
  
 
                
Diluted - Continuing operations
  
$
1.03
    
$
0.89
  
Diluted - Discontinued operations
    
-
      
(0.30
)
Diluted - Total
  
$
1.03
    
$
0.59
  
 
                
Weighted average shares outstanding:
                
Basic
    
29,185
      
24,947
  
 
                
Diluted
    
30,406
      
25,241
  
 
                
Actual shares outstanding (a)
    
29,548
      
25,538
  
 
                
Notes:
                
(a) Includes 427,290 and 688,550 of RSAs, respectively.
                
See GAAP to non-GAAP reconciliation on page 11.
                
 
9
Table IV
            
 
            
GAMCO INVESTORS, INC.
  
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
  
(Dollars in thousands, except per share data)
  
 
            
 
  
For the Nine Months Ended
  
 
  
September 30,
  
 
  
2016
    
2015
  
 
            
Investment advisory and incentive fees
  
$
219,594
    
$
251,269
  
Distribution fees and other income
    
33,456
      
39,390
  
Total revenues
    
253,050
      
290,659
  
 
                
Compensation costs
    
62,130
      
109,177
  
Distribution costs
    
32,786
      
40,093
  
Other operating expenses
    
14,993
      
14,157
  
Total expenses
    
109,909
      
163,427
  
 
                
Operating income before management fee
    
143,141
      
127,232
  
 
                
Investment income
    
1,622
      
1,804
  
Interest expense
    
(9,729
)
    
(5,575
)
Other expense, net
    
(8,107
)
    
(3,771
)
 
                
Income before management fee and income taxes
    
135,034
      
123,461
  
Management fee expense
    
3,376
      
12,385
  
Income before income taxes
    
131,658
      
111,076
  
Income tax expense
    
47,229
      
41,702
  
Income from continuing operations
    
84,429
      
69,374
  
Loss from discontinued operations, net of taxes
    
-
      
(5,528
)
Net income attributable to GAMCO Investors, Inc.
  
$
84,429
    
$
63,846
  
 
                
Net income/(loss) per share attributable to GAMCO Investors, Inc.:
          
Basic - Continuing operations
  
$
2.89
    
$
2.77
  
Basic - Discontinued operations
    
-
      
(0.22
)
Basic - Total
  
$
2.89
    
$
2.55
  
 
                
Diluted - Continuing operations
  
$
2.85
    
$
2.74
  
Diluted - Discontinued operations
    
-
      
(0.23
)
Diluted - Total
  
$
2.85
    
$
2.51
  
 
                
Weighted average shares outstanding:
                
Basic
    
29,222
      
25,047
  
 
                
Diluted
    
29,811
      
25,337
  
 
                
Actual shares outstanding (a)
    
29,548
      
25,538
  
 
                
Notes:
                
(a) Includes 427,290 and 688,550 of RSAs, respectively.
                
See GAAP to non-GAAP reconciliation on page 11.
                
 
10
Table V
                                                      
GAMCO INVESTORS, INC.
  
UNAUDITED QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF INCOME
  
(Dollars in thousands, except per share data)
  
 
                                                      
 
  
2016
    
2015
  
 
  
1st
    
2nd
    
3rd
          
1st
    
2nd
    
3rd
    
4th
        
 
  
Quarter
    
Quarter
    
Quarter
    
YTD
    
Quarter
    
Quarter
    
Quarter
    
Quarter
    
Full Year
  
Income Statement Data:
                                                      
 
                                                      
Revenues
  
$
81,385
    
$
83,944
    
$
87,721
    
$
253,050
    
$
99,806
    
$
98,693
    
$
92,160
    
$
90,317
    
$
380,976
  
 
                                                                        
Expenses
    
35,363
      
36,064
      
38,482
      
109,909
      
57,081
      
55,518
      
50,828
      
54,097
      
217,524
  
 
                                                                        
Operating income before
                                                                        
  management fee
    
46,022
      
47,880
      
49,239
      
143,141
      
42,725
      
43,175
      
41,332
      
36,220
      
163,452
  
 
                                                                        
Investment income
    
591
      
605
      
426
      
1,622
      
541
      
638
      
625
      
4,304
      
6,108
  
Interest expense
    
(3,406
)
    
(3,168
)
    
(3,155
)
    
(9,729
)
    
(1,905
)
    
(1,855
)
    
(1,815
)
    
(3,061
)
    
(8,636
)
Shareholder-designated contribution
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(6,396
)
    
(6,396
)
Other expense, net
    
(2,815
)
    
(2,563
)
    
(2,729
)
    
(8,107
)
    
(1,364
)
    
(1,217
)
    
(1,190
)
    
(5,153
)
    
(8,924
)
 
                                                                        
Income before management
                                                                        
  fee and income taxes
    
43,207
      
45,317
      
46,510
      
135,034
      
41,361
      
41,958
      
40,142
      
31,067
      
154,528
  
Management fee expense
    
1,080
      
1,133
      
1,163
      
3,376
      
4,135
      
4,194
      
4,056
      
3,118
      
15,503
  
Income before income taxes
    
42,127
      
44,184
      
45,347
      
131,658
      
37,226
      
37,764
      
36,086
      
27,949
      
139,025
  
Income tax expense
    
16,102
      
16,641
      
14,486
      
47,229
      
14,078
      
13,989
      
13,635
      
10,024
      
51,726
  
Income from continuing operations
    
26,025
      
27,543
      
30,861
      
84,429
      
23,148
      
23,775
      
22,451
      
17,925
      
87,299
  
Income/(loss) from discontinued
                                                                        
  operations, net of taxes
    
-
      
-
      
-
      
-
      
1,628
      
326
      
(7,482
)
    
1,641
      
(3,887
)
Net income attributable to
                                                                        
  GAMCO Investors, Inc.
  
$
26,025
    
$
27,543
    
$
30,861
    
$
84,429
    
$
24,776
    
$
24,101
    
$
14,969
    
$
19,566
    
$
83,412
  
 
                                                                        
Net income per share
                                                                        
  attributable to GAMCO
                                                                        
  Investors, Inc.:
                                                                        
Basic - Continuing operations
  
$
0.89
    
$
0.94
    
$
1.06
    
$
2.89
    
$
0.92
    
$
0.95
    
$
0.90
    
$
0.68
    
$
3.43
  
Basic - Discontinued operations
    
-
      
-
      
-
      
-
      
0.07
      
0.01
      
(0.30
)
    
0.06
      
(0.15
)
Basic - Total
  
$
0.89
    
$
0.94
    
$
1.06
    
$
2.89
    
$
0.99
    
$
0.96
    
$
0.60
    
$
0.74
    
$
3.28
  
 
                                                                        
Diluted - Continuing operations
  
$
0.88
    
$
0.93
    
$
1.03
    
$
2.85
    
$
0.91
    
$
0.94
    
$
0.89
    
$
0.67
    
$
3.40
  
Diluted - Discontinued operations
    
-
      
-
      
-
      
-
      
0.06
      
0.01
      
(0.30
)
    
0.06
      
(0.15
)
Diluted - Total
  
$
0.88
    
$
0.93
    
$
1.03
    
$
2.85
    
$
0.97
    
$
0.95
    
$
0.59
    
$
0.73
    
$
3.24
  
 
                                                                        
Weighted average shares outstanding:
                                                                        
Basic
    
29,247
      
29,234
      
29,185
      
29,222
      
25,132
      
25,065
      
24,947
      
26,547
      
25,425
  
 
                                                                        
Diluted
    
29,684
      
29,522
      
30,406
      
29,811
      
25,414
      
25,358
      
25,241
      
26,813
      
25,711
  
Reconciliation of non-GAAP
                                                                        
  financial measures to GAAP:
                                                                        
Operating income before
                                                                        
  management fee
    
46,022
      
47,880
      
49,239
      
143,141
      
42,725
      
43,175
      
41,332
      
36,220
      
163,452
  
Deduct: management fee expense
    
1,080
      
1,133
      
1,163
      
3,376
      
4,135
      
4,194
      
4,056
      
3,118
      
15,503
  
Operating income
  
$
44,942
    
$
46,747
    
$
48,076
    
$
139,765
    
$
38,590
    
$
38,981
    
$
37,276
    
$
33,102
    
$
147,949
  
 
                                                                        
Operating margin before
                                                                        
  management fee
    
56.5
%
    
57.0
%
    
56.1
%
    
56.6
%
    
42.8
%
    
43.7
%
    
44.8
%
    
40.1
%
    
42.9
%
Operating margin after
                                                                        
  management fee
    
55.2
%
    
55.7
%
    
54.8
%
    
55.2
%
    
38.7
%
    
39.5
%
    
40.4
%
    
36.7
%
    
38.8
%
 
                                                                        
 
11
Table VI
                  
GAMCO INVESTORS, INC.
  
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
  
(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
    
32,889
      
32,979
      
34,098
  
Receivable from brokers
    
344
      
1,091
      
1,157
  
Other receivables
    
32,429
      
37,252
      
55,577
  
Income tax receivable
    
10,634
      
6,787
      
2,409
  
Other assets
    
11,120
      
12,071
      
9,791
  
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
  
Compensation payable
    
31,469
      
24,426
      
83,700
  
Securities sold short, not yet purchased
    
-
      
129
      
-
  
Accrued expenses and other liabilities
    
44,574
      
41,739
      
37,811
  
Liabilities of discontinued operations
    
-
      
-
      
66,614
  
  Sub-total
    
86,410
      
71,129
      
194,621
  
 
                        
5.875% Senior notes (due June 1, 2021)
    
24,115
      
24,097
      
99,447
  
4.5% Convertible note (due August 15, 2021)
    
109,826
      
-
      
-
  
4% PIK note (due November 30, 2020)
    
100,000
      
250,000
      
-
  
Loan from GGCP (due December 28, 2016)
    
-
      
35,000
      
-
  
0% Subordinated Debentures (due December 31, 2015) (a)
    
-
      
-
      
6,750
  
  Total debt
    
233,941
      
309,097
      
106,197
  
  Total liabilities
    
320,351
      
380,226
      
300,818
  
 
                        
Redeemable noncontrolling interests of discontinued operations
    
-
      
-
      
6,018
  
 
                        
GAMCO Investors, Inc.'s stockholders' equity (deficit)
    
(199,083
)
    
(276,327
)
    
562,645
  
Noncontrolling interests
    
-
      
-
      
2,635
  
Total equity (deficit)
    
(199,083
)
    
(276,327
)
    
565,280
  
 
                        
Total liabilities and equity
  
$
121,268
    
$
103,899
    
$
872,116
  
 
                        
(a) The 0% Subordinated Debentures due December 31, 2015 have a face value of $0.0 million, $0.0 million and $6.9 million, respectively.
  
 
                        

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

The financial results set forth in this press release are preliminary. Our disclosure and analysis in this press release, which do not present historical information, contain “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.  Forward-looking statements convey our current expectations or forecasts of future events. You can identify these statements because they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning. They also appear in any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance of our products, expenses, the outcome of any legal proceedings, and financial results.  Although we believe that we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know about our business and operations, the economy and other conditions, there can be no assurance that our actual results will not differ materially from what we expect or believe.  Therefore, you should proceed with caution in relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance.

Forward-looking statements involve a number of known and unknown risks, uncertainties and other important factors, some of which are listed below, that are difficult to predict and could cause actual results and outcomes to differ materially from any future results or outcomes expressed or implied by such forward-looking statements.  Some of the factors that could cause our actual results to differ from our expectations or beliefs include a decline in the securities markets that adversely affect our assets under management, negative performance of our products, the failure to perform as required under our investment management agreements, a general downturn in the economy that negatively impacts our operations. We also direct your attention to the more specific discussions of these and other risks, uncertainties and other important factors  contained in our Form 10-K and other public filings.  Other factors that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We do not undertake to update publicly any forward-looking statements if we subsequently learn that we are unlikely to achieve our expectations whether as a result of new information, future developments or otherwise, except as may be required by law.
 
 
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GAMCO INVESTORS, INC. ET AL Reports