(a) Net of income tax expense/(benefit) of ($1,504) and $1,517, respectively.
GAMCO INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2017
(Unaudited)
A. Significant Accounting Policies
Basis of Presentation
Unless we have indicated otherwise, or the context otherwise requires, references in this report to “GAMCO Investors, Inc.,” “GAMCO,” “the Company,” “GBL,” “we,” “us” and “our” or similar terms are to GAMCO Investors, Inc., its predecessors and its subsidiaries.
The unaudited interim condensed consolidated financial statements of GAMCO included herein have been prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by U.S. GAAP in the United States for complete financial statements. In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of financial position, results of operations and cash flows of GAMCO for the interim periods presented and are not necessarily indicative of a full year’s results.
The interim condensed consolidated financial statements include the accounts of GAMCO and its subsidiaries. Intercompany accounts and transactions are eliminated.
These interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016.
Use of Estimates
The preparation of the interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported on the interim condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Recent Accounting Developments
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, "Revenue from Contracts with Customers," which supersedes the revenue recognition requirements in the Accounting Standards Codification ("Codification") Topic 605, Revenue Recognition, and most industry-specific guidance throughout the industry topics of the Codification. The core principle of the new ASU No. 2014-09 is for companies to recognize revenue from the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard provides a five-step approach to be applied to all contracts with customers and also requires expanded disclosures about revenue recognition. The ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods and is to be retrospectively applied. Early adoption is not permitted. The Company is currently evaluating this guidance and the impact it will have on its consolidated financial statements.
In 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. The Company adopted this guidance on January 1, 2017 without a material impact to the consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, which adds and clarifies guidance on the classification of certain cash receipts and payments in the consolidated statements of cash flows. For public companies, the ASU is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating this guidance and the impact it will have on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04 to simplify the process used to test for goodwill. Under the new standard, if “the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.” For public companies, the ASU is effective for annual and any interim impairment tests for periods beginning after December 15, 2019. Early adoption is permitted for impairment tests that occur after January 1, 2017. The Company is currently evaluating this guidance and the impact it will have on its condensed consolidated financial statements.
B. Investment in Securities
Investments in securities at March 31, 2017, December 31, 2016 and March 31, 2016 consisted of the following:
|
|
March 31, 2017
|
|
|
December 31, 2016
|
|
|
March 31, 2016
|
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
|
Cost
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
|
Trading securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stocks
|
|
$
|
20
|
|
|
$
|
24
|
|
|
$
|
51
|
|
|
$
|
54
|
|
|
$
|
15
|
|
|
$
|
17
|
|
Total trading securities
|
|
|
20
|
|
|
|
24
|
|
|
|
51
|
|
|
|
54
|
|
|
|
15
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stocks
|
|
|
18,739
|
|
|
|
33,058
|
|
|
|
18,739
|
|
|
|
37,131
|
|
|
|
17,592
|
|
|
|
36,402
|
|
Closed-end funds
|
|
|
99
|
|
|
|
108
|
|
|
|
99
|
|
|
|
100
|
|
|
|
-
|
|
|
|
-
|
|
Total available for sale securities
|
|
|
18,838
|
|
|
|
33,166
|
|
|
|
18,838
|
|
|
|
37,231
|
|
|
|
17,592
|
|
|
|
36,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments in securities
|
|
$
|
18,858
|
|
|
$
|
33,190
|
|
|
$
|
18,889
|
|
|
$
|
37,285
|
|
|
$
|
17,607
|
|
|
$
|
36,419
|
|
There were no securities sold, not yet purchased at March 31, 2017, December 31, 2016 and March 31, 2016.
Management determines the appropriate classification of debt and equity securities at the time of purchase and reevaluates such designation as of the date of each condensed consolidated statement of financial condition. Investments in United States Treasury Bills and Notes with maturities of greater than three months at the time of purchase are classified as investments in securities, and those with maturities of three months or less at the time of purchase are classified as cash equivalents. The portion of investments in securities held for resale in anticipation of short-term market movements are classified as trading securities. Trading securities are stated at fair value, with any unrealized gains or losses reported in current period earnings. Available for sale (“AFS”) investments are stated at fair value, with any unrealized gains or losses, net of taxes, reported as a component of equity except for losses deemed to be other than temporary (“OTT”) which are recorded as realized losses in the condensed consolidated statements of income.
The following table identifies all reclassifications out of accumulated other comprehensive income ("AOCI") into income for the three months ended March 31, 2017 and 2016 (in thousands):
Amount
|
|
Affected Line Items
|
|
Reason for
|
Reclassified
|
|
in the Statements
|
|
Reclassification
|
from AOCI
|
|
Of Income
|
|
from AOCI
|
Three months ended March 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
-
|
|
|
$
|
2
|
|
Net gain from investments
|
|
Realized gain on sale of AFS securities
|
|
-
|
|
|
|
2
|
|
Income before income taxes
|
|
|
|
-
|
|
|
|
(1
|
)
|
Income tax provision
|
|
|
$
|
-
|
|
|
$
|
1
|
|
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 March 31, 2017, December 31, 2016 and March 31, 2016:
|
|
March 31, 2017
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
|
Common stocks
|
|
$
|
18,739
|
|
|
$
|
14,319
|
|
|
$
|
-
|
|
|
$
|
33,058
|
|
Closed-end funds
|
|
|
99
|
|
|
|
9
|
|
|
|
-
|
|
|
|
108
|
|
Total available for sale securities
|
|
$
|
18,838
|
|
|
$
|
14,328
|
|
|
$
|
-
|
|
|
$
|
33,166
|
|
|
|
December 31, 2016
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
|
Common stocks
|
|
$
|
18,739
|
|
|
$
|
18,392
|
|
|
$
|
-
|
|
|
$
|
37,131
|
|
Closed-end funds
|
|
|
99
|
|
|
|
1
|
|
|
|
-
|
|
|
|
100
|
|
Total available for sale securities
|
|
$
|
18,838
|
|
|
$
|
18,393
|
|
|
$
|
-
|
|
|
$
|
37,231
|
|
|
|
March 31, 2016
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
|
|
(In thousands)
|
|
Common stocks
|
|
$
|
17,592
|
|
|
$
|
18,810
|
|
|
$
|
-
|
|
|
$
|
36,402
|
|
Total available for sale securities
|
|
$
|
17,592
|
|
|
$
|
18,810
|
|
|
$
|
-
|
|
|
$
|
36,402
|
|
A net unrealized loss, net of taxes, for the three months ended March 31, 2017 of $2.6 million has been included in other comprehensive income, a component of equity, at March 31, 2017. A net unrealized gain, net of taxes, for the three months ended March 31, 2016 of $2.6 million has been included in other comprehensive income, a component of equity, at March 31, 2016. There were no sales of investments available for sale for the three months ended March 31, 2017. During the three months ended March 31, 2016, proceeds from the sales of investments available for sale were approximately $308,000 and gross gains on the sale of investments available for sale amounted to $2,000 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 March 31, 2017 or March 31, 2016. 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 March 31, 2017, December 31, 2016 or March 31, 2016.
For the three months ended March 31, 2017 and 2016 there were no losses on available for sale securities that were deemed to be other than temporary.
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 March 31, 2017, December 31, 2016 and March 31, 2016 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 March 31, 2017 (in thousands)
|
|
Quoted Prices in Active
|
|
|
Significant Other
|
|
|
Significant
|
|
|
Balance as of
|
|
|
|
Markets for Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
March 31,
|
|
Assets
|
|
Assets (Level 1)
|
|
|
Inputs (Level 2)
|
|
|
Inputs (Level 3)
|
|
|
2017
|
|
Cash equivalents
|
|
$
|
88,082
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
88,082
|
|
Investments in securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AFS - Common stocks
|
|
|
33,058
|
|
|
|
-
|
|
|
|
-
|
|
|
|
33,058
|
|
AFS - Closed-end Funds
|
|
|
108
|
|
|
|
-
|
|
|
|
-
|
|
|
|
108
|
|
Trading - Common stocks
|
|
|
24
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24
|
|
Total investments in securities
|
|
|
33,190
|
|
|
|
-
|
|
|
|
-
|
|
|
|
33,190
|
|
Total assets at fair value
|
|
$
|
121,272
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
121,272
|
|
Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 2016 (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)
|
|
|
2016
|
|
Cash equivalents
|
|
$
|
39,638
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
39,638
|
|
Investments in securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AFS - Common stocks
|
|
|
37,131
|
|
|
|
-
|
|
|
|
-
|
|
|
|
37,131
|
|
AFS - Closed-end Funds
|
|
|
100
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100
|
|
Trading - Common stocks
|
|
|
54
|
|
|
|
-
|
|
|
|
-
|
|
|
|
54
|
|
Total investments in securities
|
|
|
37,285
|
|
|
|
-
|
|
|
|
-
|
|
|
|
37,285
|
|
Total assets at fair value
|
|
$
|
76,923
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
76,923
|
|
Assets and Liabilities Measured at Fair Value on a Recurring Basis as of March 31, 2016 (in thousands)
|
|
Quoted Prices in Active
|
|
|
Significant Other
|
|
|
Significant
|
|
|
Balance as of
|
|
|
|
Markets for Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
March 31,
|
|
Assets
|
|
Assets (Level 1)
|
|
|
Inputs (Level 2)
|
|
|
Inputs (Level 3)
|
|
|
2016
|
|
Cash equivalents
|
|
$
|
27,909
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
27,909
|
|
Investments in securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AFS - Common stocks
|
|
|
36,402
|
|
|
|
-
|
|
|
|
-
|
|
|
|
36,402
|
|
Trading - Common stocks
|
|
|
17
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17
|
|
Total investments in securities
|
|
|
36,419
|
|
|
|
-
|
|
|
|
-
|
|
|
|
36,419
|
|
Total assets at fair value
|
|
$
|
64,328
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
64,328
|
|
During the quarters ended March 31, 2017 and 2016, there were no transfers between any Level 1 and Level 2 holdings, or between Level 1 and Level 3 holdings.
D. Income Taxes
The effective tax rate ("ETR") for the three months ended March 31, 2017 and March 31, 2016 was 38.1% and 38.2%, respectively.
ASU 2016-09, which was issued in March 2016 and became effective for interim and annual reporting periods beginning after December 15, 2016, simplifies several aspects of accounting for employee share-based payment transactions. Upon adoption of ASU 2016-09 on January 1, 2017, our accounting for excess tax benefits has changed and adopted prospectively, resulting in recognition of excess tax benefits against income tax expenses rather than additional paid-in capital.
E. Earnings Per Share
The
computations of basic and diluted net income per share are as follows:
|
|
Three Months Ended March 31,
|
|
(In thousands, except per share amounts)
|
|
2017
|
|
|
2016
|
|
Basic:
|
|
|
|
|
|
|
Net income attributable to GAMCO Investors, Inc.'s shareholders
|
|
$
|
24,820
|
|
|
$
|
26,025
|
|
Weighted average shares outstanding
|
|
|
28,970
|
|
|
|
29,247
|
|
Basic net income per share attributable to GAMCO
|
|
|
|
|
|
|
|
|
Investors, Inc.'s shareholders
|
|
$
|
0.86
|
|
|
$
|
0.89
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
Net income attributable to GAMCO Investors, Inc.'s shareholders
|
|
$
|
24,820
|
|
|
$
|
26,025
|
|
Add interest on convertible notes, net of management fee and taxes
|
|
|
748
|
|
|
|
-
|
|
Total income attributable to GAMCO Investors, Inc.'s shareholders
|
|
$
|
25,568
|
|
|
$
|
26,025
|
|
|
|
|
|
|
|
|
|
|
Weighted average share outstanding
|
|
|
28,970
|
|
|
|
29,247
|
|
Dilutive stock options and restricted stock awards
|
|
|
190
|
|
|
|
437
|
|
Assumed conversion of convertible notes
|
|
|
2,000
|
|
|
|
-
|
|
Total
|
|
|
31,160
|
|
|
|
29,684
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share attributable to GAMCO
|
|
|
|
|
|
|
|
|
Investors, Inc.'s shareholders
|
|
$
|
0.82
|
|
|
$
|
0.88
|
|
F. Debt
Debt consists of the following:
|
March 31, 2017
|
|
December 31, 2016
|
|
March 31, 2016
|
|
|
Carrying
|
|
Fair Value
|
|
Carrying
|
|
Fair Value
|
|
Carrying
|
|
Fair Value
|
|
|
Value
|
|
Level 2
|
|
Value
|
|
Level 2
|
|
Value
|
|
Level 2
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
4.5 % Convertible note
|
|
$
|
109,844
|
|
|
|
111,634
|
|
|
$
|
109,835
|
|
|
$
|
111,525
|
|
|
$
|
-
|
|
|
$
|
-
|
|
AC 4% PIK Note
|
|
|
90,000
|
|
|
|
90,932
|
|
|
|
100,000
|
|
|
|
100,930
|
|
|
|
250,000
|
|
|
|
249,183
|
|
Loan from GGCP
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,000
|
|
|
|
20,161
|
|
5.875% Senior notes
|
|
|
24,126
|
|
|
|
24,558
|
|
|
|
24,120
|
|
|
|
24,558
|
|
|
|
24,103
|
|
|
|
23,741
|
|
Total
|
|
$
|
223,970
|
|
|
$
|
227,124
|
|
|
$
|
233,955
|
|
|
$
|
237,013
|
|
|
$
|
294,103
|
|
|
$
|
293,085
|
|
4.5% Convertible Note
On August 15, 2016, the Company issued and sold a 5-year, $110 million convertible note (“Convertible Note”). The note bears interest at a rate of 4.5% per annum and is convertible into shares of the Company’s Class A Common stock (“Class A Stock”) at an initial conversion price of $55.00 per share. The Convertible Note is initially convertible into two million shares of the Company’s Class A Stock, subject to adjustment pursuant to the terms of the Convertible Note. The Company is required to repurchase the Convertible Note at the request of the holder on specified dates or after certain circumstances involving a Fundamental Change (as defined in the Convertible Note). The Company recorded $174,000 of costs in connection with the issuance of the Convertible Note. GGCP, Inc. (“GGCP”), which owns approximately 63% of the equity interest of the Company, has deposited cash equal to the principal amount of the Note and six months interest (“Initial Deposit”) into an escrow account established pursuant to an escrow agreement by and among GGCP, the Company, the Convertible Note holder and the escrow agent. In connection with the Initial Deposit made by GGCP, the Company has agreed that GGCP has a right to demand payment in an amount equal to any funds withdrawn from the escrow account by the Convertible Note holder.
AC 4% PIK Note
In connection with the Spin-off of AC on November 30, 2015, the Company issued a $250 million promissory note (the “AC 4% PIK Note”) payable to AC. The AC 4% PIK Note bears interest at 4.0% per annum. The original principal amount has a maturity date of November 30, 2020. Interest on the AC 4% PIK Note will accrue from the date of the last interest payment, or if no interest has been paid, from the effective date of the AC 4% PIK Note. At the election of the Company, payment of interest on the AC 4% PIK Note may be paid in kind (in whole or in part) on the then-outstanding principal amount (a “PIK Amount”) in lieu of cash. All PIK Amounts added to the outstanding principal amount of the AC 4% PIK Note will mature on the fifth anniversary from the date the PIK Amount was added to the outstanding principal of the AC 4% PIK Note. In no event may any interest be paid in kind subsequent to November 30, 2019. The Company may prepay the AC 4% PIK Note (in whole or in part) prior to maturity without penalty.
During the three months ended March 31, 2017, the Company prepaid $10 million of principal of the AC 4% PIK Note against the principal amount due on November 30, 2017. Of the $90 million principal amount outstanding at March 31, 2017, $20 million is due on November 30, 2018, $20 million is due on November 30, 2019, and $50 million is due on November 30, 2020.
5.875% Senior notes
On May 31, 2011, the Company issued 10-year, $100 million senior notes ("Senior Notes"). The Senior Notes mature on June 1, 2021 and bear interest at 5.875% per annum, payable semi-annually on June 1 and December 1 of each year and commenced on December 1, 2011. Upon the occurrence of a change of control triggering event, as defined in the indenture, the Company would be required to offer to repurchase the Senior Notes at 101% of their principal amount.
At March 31, 2017, December 31, 2016 and March 31, 2016, the debt was recorded at its face value, net of issuance costs, of $24.1 million, $24.1 million and $24.1 million, respectively.
Loan from GGCP
In connection with the Offer, the Company borrowed $35.0 million from GGCP. The loan had a term of one year and bore 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 March 31, 2016, the debt was recorded at its face value of $20.0 million.
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.
G. Stockholders' Equity
Shares outstanding were 29.3 million, 29.5 million and 29.8 million on March 31, 2017, December 31, 2016 and March 31, 2016, respectively.
Dividends
|
|
Payment
|
|
Record
|
|
|
|
|
|
Date
|
|
Date
|
|
Amount
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2017
|
|
March 28, 2017
|
|
March 14, 2017
|
|
$
|
0.02
|
|
Three months ended March 31, 2016
|
|
March 29, 2016
|
|
March 15, 2016
|
|
$
|
0.02
|
|
Voting Rights
The holders of Class A Stock and Class B Common stock ("Class B Stock") have identical rights except that (i) holders of Class A Stock are entitled to one vote per share, while holders of Class B Stock are entitled to ten votes per share on all matters to be voted on by shareholders in general, and (ii) holders of Class A Stock are not eligible to vote on matters relating exclusively to Class B Stock and vice versa.
Stock Award and Incentive Plan
The Company maintains two Plans approved by the shareholders, which are designed to provide incentives which will attract and retain individuals key to the success of GBL through direct or indirect ownership of our common stock. Benefits under the Plans may be granted in any one or a combination of stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, dividend equivalents and other stock or cash based awards. A maximum of 4.0 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 March 31, 2017, December 31, 2016 and March 31, 2016, there were 420,240 RSA shares, 424,340 RSA shares and 553,100 RSA shares outstanding, respectively, that were previously issued at an average weighted grant price of $65.59, $65.74 and $64.02, 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.
ASU 2016-09, which was issued in March 2016 and became effective for interim and annual reporting periods beginning after December 15, 2016, simplifies several aspects of accounting for employee share-based payment transactions. Upon adoption of ASU 2016-09 on January 1, 2017, the Company elected not to change its accounting policy on forfeitures and continue to estimate forfeitures rather than accounting for forfeitures as they occur, an alternative allowed under ASU 2016-09.
For the three months ended March 31, 2017 and March 31, 2016, we recognized stock-based compensation expense of $0.7 million and $1.0 million, respectively. Actual and projected stock-based compensation expense for RSA shares for the years ended December 31, 2016 through December 31, 2024 (based on awards currently issued or granted) is as follows (in thousands):
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
Q1
|
|
|
$
|
1,037
|
|
|
$
|
699
|
|
|
$
|
473
|
|
|
$
|
373
|
|
|
$
|
223
|
|
|
Q2
|
|
|
|
1,036
|
|
|
|
698
|
|
|
|
461
|
|
|
|
373
|
|
|
|
207
|
|
|
Q3
|
|
|
|
1,186
|
|
|
|
614
|
|
|
|
410
|
|
|
|
331
|
|
|
|
171
|
|
|
Q4
|
|
|
|
691
|
|
|
|
531
|
|
|
|
374
|
|
|
|
302
|
|
|
|
147
|
|
Full Year
|
|
|
$
|
3,950
|
|
|
$
|
2,542
|
|
|
$
|
1,718
|
|
|
$
|
1,379
|
|
|
$
|
748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
|
|
2022
|
|
|
|
2023
|
|
|
|
2024
|
|
|
|
|
|
|
Q1
|
|
|
$
|
147
|
|
|
|
95
|
|
|
$
|
49
|
|
|
$
|
8
|
|
|
|
|
|
|
Q2
|
|
|
|
147
|
|
|
|
95
|
|
|
|
49
|
|
|
|
8
|
|
|
|
|
|
|
Q3
|
|
|
|
116
|
|
|
|
67
|
|
|
|
24
|
|
|
|
5
|
|
|
|
|
|
|
Q4
|
|
|
|
95
|
|
|
|
49
|
|
|
|
8
|
|
|
|
-
|
|
|
|
|
|
Full Year
|
|
|
$
|
505
|
|
|
|
306
|
|
|
$
|
130
|
|
|
$
|
21
|
|
|
|
|
|
The total compensation cost related to non-vested RSAs not yet recognized is approximately $6.7 million as of March 31, 2017.
Stock Repurchase Program
In March 1999, GAMCO's Board of Directors established the Stock Repurchase Program to grant management the authority to repurchase shares of our Class A Common Stock. For the three months ended March 31, 2017 and March 31, 2016, the Company repurchased 125,410 shares and 30,503 shares, respectively, at an average price per share of $30.25 and $29.42, respectively. From the inception of the program through March 31, 2017, 10,026,750 shares have been repurchased at an average price of $44.14 per share. At March 31, 2017, the total shares available under the program to be repurchased in the future were 108,058.
Shelf Registration
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 March 31, 2017, $500 million is available on the shelf.
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 March 31, 2017, December 31, 2016 and March 31, 2016. 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 2018. 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 March 31, 2017, December 31, 2016 and March 31, 2016. The advisory contracts for the Bancroft Fund Ltd. and the Ellsworth Growth and Income Fund Ltd. are both next up for renewal in August 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 March 31, 2017 or March 31, 2016, 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 March 31, 2017.
J. Subsequent Events
On May 1, 2017, GAMCO pre-paid $10 million of the AC 4% PIK Note, which was applied to the $10 million payment due on November 30, 2018. Of the $80 million principal amount outstanding after this payment, $10 million is due on November 30, 2018, $20 million is due on November 30, 2019, and $50 million is due on November 30, 2020.
On May 3, 2017, the Board of Directors declared its regular quarterly dividend of $0.02 per share to all of its shareholders, payable on July 11, 2017 to shareholders of record on June 27, 2017.
From April 1, 2017 to May 3, 2017, the Company repurchased 12,487 shares at $28.21 per share. On May 3, 2017, the Board of Directors increased the authorization under the Stock Repurchase Program by an additional 500,000 shares. As a result, there are 595,571 shares available to be repurchased under this existing buyback plan at May 3, 2017.