10-Q 1 form10q0616.htm FORM10Q22016  
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 June 30, 2016
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 July 31, 2016
Class A Common Stock, .001 par value
  (Including 549,700 restricted stock awards)
-
Class B Common Stock, .001 par value
 
-


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 June 30, 2016 and 2015
 
- Six Months Ended June 30, 2016 and 2015
   
 
Condensed Consolidated Statements of Comprehensive Income:
 
- Three Months Ended June 30, 2016 and 2015
 
- Six Months Ended June 30, 2016 and 2015
   
 
Condensed Consolidated Statements of Financial Condition:
 
- June 30, 2016
 
- December 31, 2015
 
- June 30, 2015
   
 
Condensed Consolidated Statements of Equity:
 
- Six Months Ended June 30, 2016 and 2015
   
 
Condensed Consolidated Statements of Cash Flows:
 
- Six Months Ended June 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
 

2

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

   
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
 
   
2016
   
2015
   
2016
   
2015
 
Revenues
                       
Investment advisory and incentive fees
 
$
72,794
   
$
85,301
   
$
143,642
   
$
171,369
 
Distribution fees and other income
   
11,150
     
13,392
     
21,687
     
27,130
 
Total revenues
   
83,944
     
98,693
     
165,329
     
198,499
 
Expenses
                               
Compensation
   
20,623
     
37,178
     
40,897
     
75,155
 
Management fee
   
1,133
     
4,194
     
2,213
     
8,329
 
Distribution costs
   
10,501
     
13,289
     
21,218
     
27,730
 
Other operating expenses
   
4,940
     
5,051
     
9,312
     
9,714
 
Total expenses
   
37,197
     
59,712
     
73,640
     
120,928
 
                                 
Operating income
   
46,747
     
38,981
     
91,689
     
77,571
 
Other income (expense)
                               
Net gain/(loss) from investments
   
240
     
135
     
463
     
148
 
Interest and dividend income
   
365
     
503
     
733
     
1,031
 
Interest expense
   
(3,168
)
   
(1,855
)
   
(6,574
)
   
(3,760
)
Total other income/(expense), net
   
(2,563
)
   
(1,217
)
   
(5,378
)
   
(2,581
)
Income before income taxes
   
44,184
     
37,764
     
86,311
     
74,990
 
Income tax provision
   
16,641
     
13,989
     
32,743
     
28,067
 
Income from continuing operations
   
27,543
     
23,775
     
53,568
     
46,923
 
Income from discontinued operations, net of taxes
   
-
     
326
     
-
     
1,954
 
Net income attributable to GAMCO Investors, Inc.'s shareholders
 
$
27,543
   
$
24,101
   
$
53,568
   
$
48,877
 
                                 
Net income attributable to GAMCO Investors, Inc.'s shareholders
                               
per share:
                               
Basic - Continuing operations
 
$
0.94
   
$
0.95
   
$
1.83
   
$
1.87
 
Basic - Discontinued operations
   
-
     
0.01
     
-
     
0.08
 
Basic - Total
 
$
0.94
   
$
0.96
   
$
1.83
   
$
1.95
 
                                 
Diluted - Continuing operations
 
$
0.93
   
$
0.94
   
$
1.82
   
$
1.85
 
Diluted - Discontinued operations
   
-
     
0.01
     
-
     
0.08
 
Diluted - Total
 
$
0.93
   
$
0.95
   
$
1.82
   
$
1.93
 
                                 
Weighted average shares outstanding:
                               
Basic
   
29,234
     
25,065
     
29,241
     
25,098
 
                                 
Diluted
   
29,522
     
25,358
     
29,510
     
25,386
 
                                 
Dividends declared:
 
$
0.02
   
$
0.07
   
$
0.04
   
$
0.14
 

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
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2016
 
2015
 
2016
 
2015
 
                 
Net income
 
$
27,543
   
$
24,101
   
$
53,568
   
$
48,877
 
Other comprehensive gain/(loss), net of tax:
                               
Foreign currency translation
   
(65
)
   
55
     
(93
)
   
13
 
Net unrealized losses on securities available for sale (a)
   
(2,766
)
   
(255
)
   
(183
)
   
(722
)
Other comprehensive income / (loss)
   
(2,831
)
   
(200
)
   
(276
)
   
(709
)
                                 
Comprehensive income attributable to GAMCO Investors, Inc.
 
$
24,712
   
$
23,901
   
$
53,292
   
$
48,168
 

(a) Net of income tax benefit of ($1,624), ($150),($107) and ($424),respectively.

See accompanying notes.

4

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

   
June 30,
   
December 31,
   
June 30,
 
   
2016
   
2015
   
2015
 
ASSETS
                 
Cash and cash equivalents
 
$
24,224
   
$
13,719
   
$
11,202
 
Investments in securities
   
32,079
     
32,975
     
37,429
 
Receivable from brokers
   
230
     
1,091
     
1,490
 
Investment advisory fees receivable
   
31,811
     
31,048
     
31,171
 
Receivable from affiliates
   
-
     
5,041
     
28,219
 
Income tax receivable
   
11,905
     
6,787
     
2,303
 
Other assets
   
13,665
     
13,238
     
11,648
 
Assets of discontinued operations
   
-
     
-
     
741,946
 
Total assets
 
$
113,914
   
$
103,899
   
$
865,408
 
                         
LIABILITIES AND EQUITY
                       
Payable to brokers
 
$
45
   
$
12
   
$
1,257
 
Income taxes payable and deferred tax liabilities
   
822
     
4,823
     
11,033
 
Capital lease obligation
   
5,120
     
5,170
     
5,213
 
Compensation payable
   
25,592
     
24,426
     
62,811
 
Securities sold, not yet purchased
   
-
     
129
     
-
 
Payable to affiliates
   
1,226
     
7,687
     
204
 
Accrued expenses and other liabilities
   
30,483
     
28,882
     
29,263
 
Liabilities of discontinued operations
   
-
     
-
     
76,515
 
Sub-total
   
63,288
     
71,129
     
186,296
 
                         
AC 4% PIK Note (due November 30, 2020) (Note F)
   
250,000
     
250,000
     
-
 
Loan from GGCP (due December 28, 2016) (Note F)
   
-
     
35,000
     
-
 
5.875% Senior notes (due June 1, 2021)
   
24,109
     
24,097
     
99,422
 
Zero coupon subordinated debentures, Face value: $0.0 million at June 30, 2016,
                       
  $0.0 million at December 31, 2015 and $6.9 million at June 30, 2015,
                       
  respectively (due December 31, 2015)
   
-
     
-
     
6,628
 
Total liabilities
   
337,397
     
380,226
     
292,346
 
                         
Redeemable noncontrolling interests from discontinued operations
   
-
     
-
     
5,943
 
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;
                       
  15,482,982, 15,422,901 and 15,381,179 issued, respectively;10,681,153,
                       
  10,664,107 and 6,506,477 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 19,218,814 shares
                       
  outstanding, respectively
   
19
     
19
     
19
 
Additional paid-in capital
   
2,417
     
345
     
297,494
 
Retained earnings (deficit)
   
18,155
     
(34,224
)
   
648,231
 
Accumulated other comprehensive income
   
8,839
     
9,115
     
24,305
 
Treasury stock, at cost (4,801,829, 4,758,794 and 8,874,702 shares, respectively)
   
(252,927
)
   
(251,596
)
   
(405,633
)
Total GAMCO Investors, Inc. stockholders' equity (deficit)
   
(223,483
)
   
(276,327
)
   
564,430
 
Noncontrolling interests from discontinued operations
   
-
     
-
     
2,689
 
Total equity (deficit)
   
(223,483
)
   
(276,327
)
   
567,119
 
                         
Total liabilities and equity (deficit)
 
$
113,914
   
$
103,899
   
$
865,408
 

See accompanying notes.

5

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

For the Six Months Ended June 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
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(441
)
Contributions from redeemable
                                                               
noncontrolling interest
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
336
 
Consolidation of a consolidated
                                                               
feeder fund
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
996
 
Deconsolidation of offshore
                                                               
  fund
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
(63,256
)
Net income (loss)
   
(45
)
   
-
     
-
     
48,877
     
-
     
-
     
48,832
     
(26
)
Net unrealized losses on
                                                               
securities available for sale,
                                                               
net of income tax benefit ($400)
   
-
     
-
     
-
     
-
     
(681
)
   
-
     
(681
)
   
-
 
Amount reclassed from
                                                               
accumulated other
                                                               
comprehensive income,
                                                               
net of income tax benefit ($24)
   
-
     
-
     
-
     
-
     
(41
)
   
-
     
(41
)
   
-
 
Foreign currency translation
   
-
     
-
     
-
     
-
     
13
     
-
     
13
     
-
 
Dividends declared
                                                               
($0.14 per share)
   
-
     
-
     
-
     
(3,596
)
   
-
     
-
     
(3,596
)
   
-
 
Stock based compensation
                                                               
expense
   
-
     
-
     
4,544
     
-
     
-
     
-
     
4,544
     
-
 
Exercise of stock options
                                                               
including tax benefit ($102)
   
-
     
-
     
1,269
     
-
     
-
     
-
     
1,269
     
-
 
Purchase of treasury stock
   
-
     
-
     
-
     
-
     
-
     
(11,016
)
   
(11,016
)
   
-
 
Balance at June 30, 2015
 
$
2,689
   
$
33
   
$
297,494
   
$
648,231
   
$
24,305
   
$
(405,633
)
 
$
567,119
   
$
5,943
 

See accompanying notes.

6

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

For the Six Months Ended June 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
   
-
     
-
     
53,568
     
-
     
-
     
53,568
 
Net unrealized losses on
                                               
securities available for sale,
                                               
net of income tax benefit $(49)
   
-
     
-
     
-
     
(85
)
   
-
     
(85
)
Amounts reclassified from
                                               
accumulated other
                                               
comprehensive income,
                                               
net of income tax expense ($58)
   
-
     
-
     
-
     
(98
)
   
-
     
(98
)
Foreign currency translation
   
-
     
-
     
-
     
(93
)
   
-
     
(93
)
Dividends declared
                                               
($0.04 per share)
   
-
     
-
     
(1,189
)
   
-
     
-
     
(1,189
)
Stock based compensation
                                               
expense
   
-
     
2,072
     
-
     
-
     
-
     
2,072
 
Purchase of treasury stock
   
-
     
-
     
-
     
-
     
(1,331
)
   
(1,331
)
Balance at June 30, 2016
 
$
33
   
$
2,417
   
$
18,155
   
$
8,839
   
$
(252,927
)
 
$
(223,483
)

See accompanying notes.


7

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

   
Six Months Ended
 
   
June 30,
 
   
2016
   
2015
 
Operating activities
           
Net income
 
$
53,568
   
$
48,877
 
Less: Income from discontinued operations, net of taxes
   
-
     
(1,954
)
Income from continuing operations
   
53,568
     
46,923
 
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
   
313
     
311
 
Stock based compensation expense
   
2,072
     
3,279
 
Deferred income taxes
   
(2,016
)
   
(1,902
)
Tax benefit from exercise of stock options
   
-
     
102
 
Foreign currency translation gain/(loss)
   
(93
)
   
13
 
Other-than-temporary loss on available for sale securities
               
Cost basis of donated securities
   
65
     
14
 
Net gains on sales of available for sale securities
   
(4
)
   
(5
)
Accretion of zero coupon debentures
   
-
     
376
 
Loss on extinguishment of zero coupon debentures
   
-
     
310
 
(Increase) decrease in assets:
               
Investments in trading securities
   
223
     
-
 
Receivable from affiliates
   
5,036
     
(1,769
)
Receivable from brokers
   
861
     
193
 
Investment advisory fees receivable
   
(762
)
   
6,556
 
Income tax receivable and deferred tax assets
   
(5,118
)
   
130
 
Other assets
   
(769
)
   
910
 
Increase (decrease) in liabilities:
               
Payable to affiliates
   
(6,461
)
   
(150
)
Payable to brokers
   
32
     
1,245
 
Income taxes payable and deferred tax liabilities
   
(1,875
)
   
(4,508
)
Compensation payable
   
1,172
     
32,006
 
Accrued expenses and other liabilities
   
1,533
     
1,331
 
Total adjustments
   
(5,791
)
   
38,442
 
Net cash provided by operating activities from continuing operations
 
$
47,777
   
$
85,365
 

8

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

   
Six Months Ended
 
   
June 30,
 
   
2016
   
2015
 
Investing activities
           
Purchases of available for sale securities
 
$
(213
)
 
$
-
 
Proceeds from sales of available for sale securities
   
408
     
51
 
Net cash provided by investing activities from continuing operations
   
195
     
51
 
                 
Financing activities
               
Net cash transferred from AC
   
-
     
75,529
 
Proceeds from exercise of stock options
   
-
     
1,167
 
Dividends paid
   
(1,170
)
   
(3,510
)
Repurchase of Zero coupon subordinated debentures
   
-
     
(6,221
)
Purchase of treasury stock
   
(1,331
)
   
(11,016
)
Repayment of loan from GGCP
   
(35,000
)
   
-
 
Amortization of debt issuance costs
   
12
     
49
 
Net cash (used in) provided by financing activities from continuing operations
   
(37,489
)
   
55,998
 
Cash flows of discontinued operations
               
Net cash provided by operating activities
   
-
     
48,650
 
Net cash used in investing activities
   
-
     
(40,338
)
Net cash used in financing activities
   
-
     
(151,214
)
Net cash used in discontinued operations
   
-
     
(142,902
)
Effect of exchange rates on cash and cash equivalents
   
22
     
(4
)
Net increase/(decrease) in cash and cash equivalents
   
10,505
     
(1,492
)
Cash and cash equivalents at beginning of period
   
13,719
     
12,694
 
Cash and cash equivalents at end of period
 
$
24,224
   
$
11,202
 
Supplemental disclosures of cash flow information:
               
Cash paid for interest
 
$
1,089
   
$
3,334
 
Cash paid for taxes
 
$
39,354
   
$
34,833
 

Non-cash activity:
- For the six months ended June 30, 2016 and June 30, 2015, the Company accrued dividends on restricted stock awards of $19 and $86, respectively.

See accompanying notes.

9

GAMCO INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 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 are consistent with and 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 June 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 six months ended June 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.
10

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.  Entities should apply the guidance retrospectively to all prior periods.  The Company adopted this guidance on January 1, 2016 without a material impact to the consolidated financial statements.

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.

B.  Investment in Securities

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

   
June 30, 2016
   
December 31, 2015
   
June 30, 2015
 
   
Cost
   
Fair Value
   
Cost
   
Fair Value
   
Cost
   
Fair Value
 
   
(In thousands)
 
Trading securities:
                                   
Common stocks
 
$
16
   
$
17
   
$
385
   
$
368
   
$
-
   
$
-
 
Total trading securities
   
16
     
17
     
385
     
368
     
-
     
-
 
                                                 
Available for sale securities:
                                               
Common stocks
   
17,642
     
32,062
     
17,898
     
32,607
     
13,578
     
37,429
 
Total available for sale securities
   
17,642
     
32,062
     
17,898
     
32,607
     
13,578
     
37,429
 
                                                 
Total investments in securities
 
$
17,658
   
$
32,079
   
$
18,283
   
$
32,975
   
$
13,578
   
$
37,429
 

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

 
June 30, 2016
 
December 31, 2015
 
June 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.
11


The following table identifies all reclassifications out of accumulated other comprehensive income ("AOCI") into income for the three and six months ended June 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 June 30,
      
2016
 
2015
      
 
$
2
   
$
2
 
Net gain from investments
Realized gain on sale of AFS securities
   
152
     
35
 
Other operating expenses/net gain from investments
Realized gain on donation of AFS securities
   
154
     
37
 
Income before income taxes
 
   
(57
)
   
(14
)
Income tax provision
 
 
$
97
   
$
23
 
Net income
 

Amount
 
Affected Line Items
Reason for
Reclassified
 
in the Statements
Reclassification
from AOCI
 
Of Income
from AOCI
Six Months Ended June 30,
      
2016
 
2015
      
 
$
4
   
$
5
 
Net gain from investments
Realized gain on sale of AFS securities
   
152
     
35
 
Other operating expenses/net gain from investments
Realized gain on donation of AFS securities
   
156
     
40
 
Income before income taxes
 
   
(58
)
   
(15
)
Income tax provision
 
 
$
98
   
$
25
 
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 June 30, 2016, December 31, 2015 and June 30, 2015:

 
June 30, 2016
 
     
Gross
 
Gross
     
     
Unrealized
 
Unrealized
     
 
Cost
 
Gains
 
Losses
 
Fair Value
 
 
(In thousands)
 
Common stocks
 
$
17,642
   
$
14,420
   
$
-
   
$
32,062
 
Total available for sale securities
 
$
17,642
   
$
14,420
   
$
-
   
$
32,062
 

 
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
 

 
June 30, 2015
 
     
Gross
 
Gross
     
     
Unrealized
 
Unrealized
     
 
Cost
 
Gains
 
Losses
 
Fair Value
 
 
(In thousands)
 
Common stocks
 
$
13,578
   
$
23,851
   
$
-
   
$
37,429
 
Total available for sale securities
 
$
13,578
   
$
23,851
   
$
-
   
$
37,429
 

12

Changes in net unrealized loss, net of taxes, for the three months ended June 30, 2016 and June 30, 2015 of $2.8 million  and $0.3 million, respectively, have been included in other comprehensive income, a component of equity, at June 30, 2016 and June 30, 2015.  During the three months ended June 30, 2016 and June 30, 2015, proceeds from the sales of investments available for sale were approximately $100,000 and $19,000, respectively.  For the three months ended June 30, 2016 and June 30, 2015, gross gains on the sale of investments available for sale amounted to $2,000 and $2,000, 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 three months ended June 30, 2016 or June 30, 2015.  Changes in net unrealized loss, net of taxes, for the six months ended June 30, 2016 and June 30, 2015 of $0.2 million and $0.7 million, respectively, have been included in other comprehensive income, a component of equity, at June 30, 2016 and June 30, 2015.  During the six months ended June 30, 2016 and June 30, 2015, proceeds from the sales of investments available for sale were approximately $408,000 and $51,000, respectively.  For the six months ended June 30, 2016 and June 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 six months ended June 30, 2016 or June 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 June 30, 2016, December 31, 2015 or June 30, 2015.

For the three and six months ended June 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 June 30, 2016, December 31, 2015 and June 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 June 30, 2016 (in thousands)

   
Quoted Prices in Active
   
Significant Other
   
Significant
   
Balance as of
 
   
Markets for Identical
   
Observable
   
Unobservable
   
June 30,
 
Assets
 
Assets (Level 1)
   
Inputs (Level 2)
   
Inputs (Level 3)
   
2016
 
Cash equivalents
 
$
23,988
   
$
-
   
$
-
   
$
23,988
 
Investments in securities:
                               
AFS - Common stocks
   
32,062
     
-
     
-
     
32,062
 
Trading - Common stocks
   
17
     
-
     
-
     
17
 
Total investments in securities
   
32,079
     
-
     
-
     
32,079
 
Total assets at fair value
 
$
56,067
   
$
-
   
$
-
   
$
56,067
 
Liabilities
                               
Securities sold, not yet purchased:
                               
Trading - Common stocks
 
$
-
   
$
-
   
$
-
   
$
-
 
Total securities sold, not yet purchased
 
$
-
   
$
-
   
$
-
   
$
-
 

 
13

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 June 30, 2015 (in thousands)

   
Quoted Prices in Active
   
Significant Other
   
Significant
   
Balance as of
 
   
Markets for Identical
   
Observable
   
Unobservable
   
June 30,
 
Assets
 
Assets (Level 1)
   
Inputs (Level 2)
   
Inputs (Level 3)
   
2015
 
Cash equivalents
 
$
11,043
   
$
-
   
$
-
   
$
11,043
 
Investments in securities:
                               
AFS - Common stocks
   
37,429
     
-
     
-
     
37,429
 
Trading - Common stocks
   
-
     
-
     
-
     
-
 
Total investments in securities
   
37,429
     
-
     
-
     
37,429
 
Total assets at fair value
 
$
48,472
   
$
-
   
$
-
   
$
48,472
 
Liabilities
                               
Securities sold, not yet purchased:
                               
Trading - Common stocks
 
$
-
   
$
-
   
$
-
   
$
-
 
Total securities sold, not yet purchased
 
$
-
   
$
-
   
$
-
   
$
-
 


During the quarters ended June 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 either June 30, 2016, December 31, 2015 or June 30, 2015.

D. Income Taxes

The effective tax rate ("ETR) for the three months ended June 30, 2016 and June 30, 2015 was 37.7% and 37.0%, respectively.  The ETR for the six months ended June 30, 2016 and June 30, 2015 was 37.9% and 37.4%, respectively.
14

E. Earnings Per Share

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

   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
(in thousands, except per share amounts)
 
2016
   
2015
   
2016
   
2015
 
Basic:
                       
Income from continuing operations
 
$
27,543
   
$
23,775
   
$
53,568
   
$
46,923
 
Income from discontinued operations, net of taxes 
   
-
     
326
     
-
     
1,954
 
Net income attributable to GAMCO Investors, Inc.'s shareholders
 
$
27,543
   
$
24,101
   
$
53,568
   
$
48,877
 
                                 
Weighted average shares outstanding
   
29,234
     
25,065
     
29,241
     
25,098
 
                                 
Basic net income per share attributable to GAMCO
                               
Investors, Inc.'s shareholders:
                               
Continuing operations
 
$
0.94
   
$
0.95
   
$
1.83
   
$
1.87
 
Discontinued operations
   
-
     
0.01
     
-
     
0.08
 
Total
 
$
0.94
   
$
0.96
   
$
1.83
   
$
1.95
 
                                 
Diluted:
                               
Income from continuing operations
 
$
27,543
   
$
23,775
   
$
53,568
   
$
46,923
 
Income from discontinued operations, net of taxes
   
-
     
326
     
-
     
1,954
 
Net income attributable to GAMCO Investors, Inc.'s shareholders
 
$
27,543
   
$
24,101
   
$
53,568
   
$
48,877
 
                                 
Weighted average share outstanding
   
29,234
     
25,065
     
29,241
     
25,098
 
Dilutive stock options and restricted stock awards
   
288
     
293
     
269
     
288
 
Total
   
29,522
     
25,358
     
29,510
     
25,386
 
                                 
Diluted net income per share attributable to GAMCO
                               
Investors, Inc.'s shareholders:
                               
Continuing operations
 
$
0.93
   
$
0.94
   
$
1.82
   
$
1.85
 
Discontinued operations
   
-
     
0.01
     
-
     
0.08
 
Total
 
$
0.93
   
$
0.95
   
$
1.82
   
$
1.93
 
                                 

F. Debt

Debt consists of the following:

 
June 30, 2016
 
December 31, 2015
 
June 30, 2015
 
 
Carrying
 
Fair Value
 
Carrying
 
Fair Value
 
Carrying
 
Fair Value
 
 
Value
 
Level 2
 
Value
 
Level 2
 
Value
 
Level 2
 
(In thousands)
                       
AC 4% PIK Note
 
$
250,000
   
$
251,909
   
$
250,000
   
$
250,000
   
$
-
   
$
-
 
Loan from GGCP
   
-
     
-
     
35,000
     
35,000
     
-
     
-
 
5.875% Senior notes
   
24,109
     
24,483
     
24,097
     
24,437
     
99,422
     
107,361
 
0% Subordinated debentures
   
-
     
-
     
-
     
-
     
6,628
     
6,835
 
Total
 
$
274,109
   
$
276,392
   
$
309,097
   
$
309,437
   
$
106,050
   
$
114,196
 

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. The Company will repay the original principal amount of the AC 4% PIK Note to AC in five equal annual installments of $50 million on each interest payment date up to and including the maturity date.  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.
15

 
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 June 30, 2016, December 31, 2015 and June 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 six month periods ended June 30, 2015 the Company repurchased 36,269 Debentures and 62,226 Debentures, respectively, having a face value of $3.6 million and $6.2 million, respectively.  The redemptions were accounted for as extinguishments of debt and resulted in losses of $154,000 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 June 30, 2015, the debt was recorded at its accreted value of  $6.6 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 June 30, 2016, $500 million is available on the shelf.

G. Stockholders' Equity
 
Shares outstanding were 29.8 million, 29.8 million and 25.7 million on June 30, 2016, December 31, 2015 and June 30, 2015, respectively.
16


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
             
Six months ended June 30, 2016
        
$
0.04
 
               
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
             
Six months ended June 30, 2015
        
$
0.14
 

Voting Rights

The holders of Class A Common stock ("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 June 30, 2016, December 31, 2015 and June 30, 2015, there were 549,700 RSA shares, 553,100 RSA shares and 704,050 RSA shares outstanding, respectively, that were previously issued at an average weighted grant price of $63.99, $64.02 and $67.39, 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 June 30, 2016 and June 30, 2015, we recognized stock-based compensation expense of $1.0 million and $1.6 million, respectively.  For the six months ended June 30, 2016 and June 30, 2015, we recognized stock-based compensation expense of $2.1 million and $3.3 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
     
806
     
602
     
402
     
323
     
169
     
114
     
66
     
24
     
5
 
 
Q4
     
4,945
     
691
     
520
     
366
     
295
     
145
     
93
     
48
     
7
     
-
 
Full Year
   
$
9,868
   
$
3,570
   
$
2,492
   
$
1,685
   
$
1,348
   
737
   
497
   
300
   
127
   
19
 
 
17

The total compensation cost related to non-vested RSAs not yet recognized is approximately $8.7 million as of June 30, 2016.  There were no options exercised for the three or six months ended June 30, 2016.  For both the three and six months ended June 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.  On August 4, 2015, our Board of Directors authorized an incremental 500,000 shares to be added to the current buyback authorization.  For the three months ended June 30, 2016 and June 30, 2015, the Company repurchased 12,532 shares and 108,088 shares, respectively, at an average price per share of $34.61 and $72.34, respectively.  For the six months ended June 30, 2016 and June 30, 2015, the Company repurchased 43,035 shares and 149,481 shares, respectively, at an average price per share of $30.93 and $73.68, respectively.  From the inception of the program through June 30, 2016, 9,595,688 shares have been repurchased at an average price of $44.75 per share.  At June 30, 2016, the total shares available under the program to be repurchased in the future were 539,120.

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 June 30, 2016, December 31, 2015 and June 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 June 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 June 30, 2016 or June 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 June 30, 2016.
18

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 six months ended June 30, 2015 results include $0.6 million 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 June 30, 2015 is summarized below:

   
Three Months ended
   
Six Months ended
 
 
 
June 30, 2015
   
June 30, 2015
 
Revenues
           
Investment advisory and incentive fees
 
$
2,275
   
$
4,394
 
Distribution fees and other income
   
101
     
235
 
Institutional research services
   
2,385
     
4,832
 
Total revenues
   
4,761
     
9,461
 
Expenses
               
Compensation
   
5,597
     
11,476
 
Stock based compensation
   
627
     
1,265
 
Management fee
   
47
     
349
 
Distribution costs
   
(34
)
   
(63
)
Other operating expenses
   
2,556
     
5,111
 
Total expenses
   
8,793
     
18,138
 
Operating loss
   
(4,032
)
   
(8,677
)
Other income (expense)
               
Net gain from investments
   
3,760
     
10,705
 
Interest and dividend income
   
1,006
     
1,752
 
Interest expense
   
(328
)
   
(662
)
Total other income (expense), net
   
4,438
     
11,795
 
Income from discontinued operations before income taxes
   
406
     
3,118
 
Income tax provision
   
134
     
1,235
 
Income from discontinued operations, net of taxes
   
272
     
1,883
 
Net loss attributable to noncontrolling interests
   
(54
)
   
(71
)
Net income attributable to GAMCO Investors, Inc.'s discontinued operations, net of taxes
 
$
326
   
$
1,954
 

19


The assets and liabilities of AC have been classified in the consolidated statement of financial condition as of June 30, 2015 as assets and liabilities of discontinued operations and consist of the following:

 
 
June 30, 2015
 
Cash and cash equivalents
 
$
361,082
 
Investments in securities
   
106,579
 
Investments in sponsored registered investment companies
   
126,305
 
Investments in partnerships
   
108,950
 
Receivable from brokers
   
55,089
 
Investment advisory fees receivable
   
1,595
 
Receivable from affiliates
   
(28,219
)
Income tax receivable
   
-
 
Other assets
   
10,565
 
Total assets of discontinued operations
   
741,946
 
         
Payable to brokers
   
47,601
 
Income taxes payable and deferred tax liabilities
   
10,233
 
Compensation payable
   
6,078
 
Securities sold, not yet purchased
   
9,825
 
Payable to affiliates
   
(204
)
Mandatorily redeemable noncontrolling interests
   
1,281
 
Accrued expenses and other liabilities
   
1,701
 
Total liabilities of discontinued operations
   
76,515
 
 
       
Redeemable noncontrolling interests from discontinued
       
operations
   
5,943
 
 
       
Noncontrolling interests from discontinued operations
   
2,689
 
 
       
Net assets of discontinued operations
 
$
656,799
 

K. Subsequent Events
 
On June 30, 2016, we reached a tentative settlement with a tax jurisdiction for several prior tax years.  We are awaiting the final audit closing agreement which is expected in the third quarter. Once it is received and if the terms concur with the tentative settlement, we would, in the third quarter, record an income tax benefit related to this matter, including the reversal of accrued interest.  At this time, we cannot assess the likelihood of realization of this tax benefit.

On August 2, 2016, the Board of Directors declared its regular quarterly dividend of $0.02 per share to all of its shareholders, payable on September 27, 2016 to shareholders of record on September 13, 2016.

From July 1, 2016 to August 2, 2016, the Company repurchased 26,277 shares at $34.15 per share.