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

(Mark One)

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

For the quarterly period ended September 30, 2017March 31, 2019
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.)
   
140 Greenwich Ave., Greenwich, CT
One Corporate Center, Rye, NY
 
06830
10580-1422
(Address of principle executive offices) (Zip Code)

(914) 921-3700(203) 629-2726
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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☐
Accelerated filer ☒
  
Non-accelerated filer ☐
Smaller reporting company o Emerging growth company ☐
  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes    No 
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Class A Common Stock, par value $0.001GBLNew York Stock Exchange

Indicate the number of shares outstanding of each of the Registrant'sRegistrant’s classes of Common Stock, as of the latest practical date.
Class Outstanding at October 31, 2017April 30, 2019
Class A Common Stock, .001 par value  (Including 164,050425,150 restricted stock awards)10,089,8448,586,327
Class B Common Stock, .001 par value 19,062,16819,024,117


INDEX
 
GAMCO INVESTORS, INC. AND SUBSIDIARIES
  
PART I.FINANCIAL INFORMATION
  
Item 1.Unaudited Condensed Consolidated Financial Statements
  
 Condensed Consolidated Statements of Income:
 - Three months ended September 30, 2017March 31, 2019 and 2016
- Nine months ended September 30, 2017 and 20162018
  
 Condensed Consolidated Statements of Comprehensive Income:
 - Three months ended September 30, 2017March 31, 2019 and 2016
- Nine months ended September 30, 2017 and 20162018
  
 Condensed Consolidated Statements of Financial Condition:
 - September 30, 2017March 31, 2019
 - December 31, 20162018
 - September 30, 2016March 31, 2018
  
 Condensed Consolidated Statements of Equity:
 - NineThree months ended September 30, 2017March 31, 2019 and 20162018
  
 Condensed Consolidated Statements of Cash Flows:
 - NineThree months ended September 30, 2017March 31, 2019 and 20162018
  
 Notes to Unaudited Condensed Consolidated Financial Statements
  
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
  
Item 3.Quantitative and Qualitative Disclosures About Market Risk (Included in Item 2)
  
Item 4.Controls and Procedures
  
PART II.OTHER INFORMATION
  
Item 1.Legal Proceedings
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 6.Exhibits
  
SIGNATURES 

2
GAMCO INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
(Dollars in thousands, except per share data)

 Three Months Ended  Nine Months Ended  Three Months Ended 
 September 30,  September 30,  March 31, 
 2017  2016  2017  2016  2019  2018 
Revenues                  
Investment advisory and incentive fees $77,328  $75,952  $228,942  $219,594  $65,888  $77,348 
Distribution fees and other income  11,013   11,769   32,916   33,456   8,448   10,149 
Total revenues  88,341   87,721   261,858   253,050   74,336   87,497 
Expenses                        
Compensation  42,919   21,233   97,634   62,130   30,347   25,950 
Management fee  4,935   1,163   9,455   3,376   1,449   4,634 
Distribution costs  11,665   11,568   33,373   32,786   8,670   10,204 
Other operating expenses  5,429   5,681   15,900   14,993   5,257   5,453 
Total expenses  64,948   39,645   156,362   113,285   45,723   46,241 
                        
Operating income  23,393   48,076   105,496   139,765   28,613   41,256 
Other income (expense)                        
Net gain from investments  2,841   55   2,867   518 
Net gain (loss) from investments  (1,895)  (5,347)
Interest and dividend income  745   371   1,765   1,104   724   492 
Interest expense  (2,688)  (3,155)  (8,269)  (9,729)  (655)  (1,200)
Shareholder-designated contribution  (3,857)  -   (3,857)  - 
Total other expense, net  (2,959)  (2,729)  (7,494)  (8,107)  (1,826)  (6,055)
Income before income taxes  20,434   45,347   98,002   131,658   26,787   35,201 
Income tax provision  3,834   14,486   33,688   47,229   6,895   7,940 
Net income attributable to GAMCO Investors, Inc.'s shareholders $16,600  $30,861  $64,314  $84,429 
Net income $19,892  $27,261 
                        
Net income attributable to GAMCO Investors, Inc.'s shareholders                
per share:                
Net income:        
Basic $0.57  $1.06  $2.22  $2.89  $0.70  $0.94 
                        
Diluted $0.55  $1.03  $2.14  $2.85  $0.70  $0.94 
                        
Weighted average shares outstanding:                        
Basic  28,926   29,185   28,930   29,222   28,507   28,916 
                        
Diluted  31,173   30,406   31,144   29,811   28,539   28,916 
                
Dividends declared: $0.02  $0.02  $0.06  $0.06 

See accompanying notes.

3
GAMCO INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
UNAUDITED
(Dollars in thousands, except per share data)

Three Months Ended Nine Months Ended Three Months Ended 
September 30, September 30, March 31, 
2017 2016 2017 2016 2019 2018 
            
Net income $16,600  $30,861  $64,314  $84,429  $19,892  $27,261 
Other comprehensive gain/(loss), net of tax:                
Other comprehensive gain, net of tax:        
Foreign currency translation  28   (28)  75   (121)  20   89 
Net unrealized gains on securities available for sale (a)  2,321   506   1,019   323 
Other comprehensive gain  2,349   478   1,094   202   20   89 
                        
Comprehensive income attributable to GAMCO Investors, Inc. $18,949  $31,339  $65,408  $84,631 
Comprehensive income $19,912  $27,350 

(a) Net of income tax expense of $1,363, $297, $599 and $190, respectively.

See accompanying notes.

4
GAMCO INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
UNAUDITED
(Dollars in thousands, except per share data)

 September 30,  December 31,  September 30,  March 31,  December 31,  March 31, 
 2017  2016  2016  2019  2018  2018 
ASSETS                  
Cash and cash equivalents, including restricted cash of $95, $0 and $0, respectively $61,097  $39,812  $33,852 
Investments in securities, including restricted investments in securities             
of $59,954, $0 and $0, respectively  101,425   37,285   32,889 
Cash and cash equivalents $64,389  $41,202  $27,383 
Investments in securities  31,623   33,789   31,407 
Receivable from brokers  1,342   453   344   3,529   3,423   1,876 
Investment advisory fees receivable  25,549   43,736   26,606   23,058   25,677   27,150 
Receivable from affiliates  4,784   5,960   4,745   4,435   4,194   4,794 
Income tax receivable and deferred tax asset  24,941   9,349   10,634 
Deferred tax asset and income tax receivable  15,661   15,001   12,878 
Other assets  11,888   12,634   12,198   11,534   11,326   11,505 
Total assets $231,026  $149,229  $121,268  $154,229  $134,612  $116,993 
                        
LIABILITIES AND EQUITY                        
Payable to brokers $13,311  $66  $10,203  $478  $112  $164 
Income taxes payable and deferred tax liabilities  3,215   3,815   164   8,068   2,388   7,491 
Capital lease obligation  4,976   5,066   5,094 
Lease liability obligations  5,300   4,794   4,908 
Compensation payable  82,896   42,384   31,469   59,142   60,408   84,333 
Payable to affiliates  2,981   1,412   7,679   -   1,041   864 
Accrued expenses and other liabilities  24,134   29,178   31,801   30,196   32,091   27,706 
Sub-total  131,513   81,921   86,410   103,184   100,834   125,466 
                        
4.5% Convertible note (net of issuance costs of $138, $165 and $174, respectively)            
(due August 15, 2021) (Note F)  109,862   109,835   109,826 
AC 4% PIK Note (due November 30, 2020) (Note F)  70,000   100,000   100,000 
5.875% Senior notes (net of issuance costs of $87, $105 and $110, respectively)            
(due June 1, 2021) (Note F)  24,138   24,120   24,115 
AC 4% PIK Note (due November 30, 2020) (Note G)  -   -   40,000 
5.875% Senior notes (net of issuance costs of $51, $57 and $75, respectively)            
(due June 1, 2021) (Note G)  24,174   24,168   24,150 
Total liabilities  335,513   315,876   320,351   127,358   125,002   189,616 
                        
Commitments and contingencies (Note I)  -   -   - 
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;                        
15,473,725, 15,477,082 and 15,480,032 issued, respectively;10,075,944,            
10,369,601 and 10,454,392 outstanding, respectively  14   14   14 
15,966,926, 15,969,303 and 15,541,489 issued, respectively;9,828,570,            
9,957,301 and 9,830,148 outstanding, respectively  14   14   14 
Class B Common Stock, $0.001 par value; 100,000,000 shares authorized;                        
24,000,000 shares issued; 19,092,168, 19,093,311 and 19,093,311 shares            
24,000,000 shares issued; 19,024,117, 19,024,240 and 19,024,404 shares            
outstanding, respectively  19   19   19   19   19   19 
Additional paid-in capital  11,084   3,903   3,135   14,769   14,192   12,759 
Retained earnings  143,026   80,515   48,412   302,139   282,928   194,732 
Accumulated other comprehensive income  12,365   11,271   9,317   (220)  (240)  (145)
Treasury stock, at cost (5,397,781, 5,107,481 and 5,025,640 shares, respectively)  (270,995)  (262,369)  (259,980)
Treasury stock, at cost (6,138,356, 6,012,002 and 5,711,341 shares, respectively)  (289,850)  (287,303)  (280,002)
Total GAMCO Investors, Inc. stockholders' equity (deficit)  (104,487)  (166,647)  (199,083)  26,871   9,610   (72,623)
                        
Total liabilities and equity $231,026  $149,229  $121,268  $154,229  $134,612  $116,993 

See accompanying notes.

5
GAMCO INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
UNAUDITED
(In thousands)

For the NineThree Months Ended September 30, 2017March 31, 2019

  GAMCO Investors, Inc. stockholders 
           Accumulated       
     Additional     Other       
  Common  Paid-in  Retained  Comprehensive  Treasury    
  Stock  Capital  Earnings  Income  Stock  Total 
Balance at December 31, 2016 $33  $3,903  $80,515  $11,271  $(262,369) $(166,647)
Net income  -   -   64,314   -   -   64,314 
Net unrealized gains on                        
securities available for sale,                        
net of income tax expense ($1,663)  -   -   -   2,830   -   2,830 
Amounts reclassified from                        
  accumulated other                        
  comprehensive income,                        
  net of income tax benefit ($1,064)  -   -   -   (1,811)  -   (1,811)
Foreign currency translation  -   -   -   75   -   75 
Dividends declared ($0.06 per                        
share)  -   -   (1,803)  -   -   (1,803)
Stock based compensation                        
expense  -   7,181   -   -   -   7,181 
Purchase of treasury stock  -   -   -   -   (8,626)  (8,626)
Balance at September 30, 2017 $33  $11,084  $143,026  $12,365  $(270,995) $(104,487)
  GAMCO Investors, Inc. stockholders 
           Accumulated       
     Additional     Other       
  Common  Paid-in  Retained  Comprehensive  Treasury    
  Stock  Capital  Earnings  Income  Stock  Total 
Balance at December 31, 2018 $33  $14,192  $282,928  $(240) $(287,303) $9,610 
Net income  -   -   19,892   -   -   19,892 
Adoption of ASU 2016-02  -   -   (106)  -   -   (106)
Foreign currency translation  -   -   -   20   -   20 
Dividends declared ($0.02 per                        
share)  -   -   (575)  -   -   (575)
Stock based compensation                        
expense  -   577   -   -   -   577 
Purchase of treasury stock  -   -   -   -   (2,547)  (2,547)
Balance at March 31, 2019 $33  $14,769  $302,139  $(220) $(289,850) $26,871 

See accompanying notes.

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

For the NineThree Months Ended September 30, 2016March 31, 2018

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

  GAMCO Investors, Inc. stockholders 
           Accumulated       
     Additional     Other       
  Common  Paid-in  Retained  Comprehensive  Treasury    
  Stock  Capital  Earnings  Income  Stock  Total 
Balance at December 31, 2017 $33  $12,572  $155,939  $11,876  $(276,693) $(96,273)
Net income  -   -   27,261   -   -   27,261 
Reclassification pursuant to                        
adoption of ASU 2016-01,                        
net of tax  -   -   12,110   (12,110)  -   - 
Foreign currency translation  -   -   -   89   -   89 
Dividends declared ($0.02 per                        
share)  -   -   (578)  -   -   (578)
Stock based compensation                        
expense  -   187   -   -   -   187 
Purchase of treasury stock  -   -   -   -   (3,309)  (3,309)
Balance at March 31, 2018 $33  $12,759  $194,732  $(145) $(280,002) $(72,623)

See accompanying notes.


7
GAMCO INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(In thousands)

 Nine Months Ended  Three Months Ended 
 September 30,  March 31, 
 2017  2016  2019  2018 
Operating activities            
Net income $64,314  $84,429  $19,892  $27,261 
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization  439   470   313   146 
Stock based compensation expense  7,181   3,258   577   187 
Deferred income taxes  (9,229)  (3,930)  4,015   (1,409)
Foreign currency translation loss  75   (121)  20   89 
Cost basis of donated securities  1,051   68   1,691   - 
Net gains on sales of available for sale securities  (20)  (4)
Unrealized (gain)/loss on available for sale securities  920   - 
Net realized (gain)/loss on available for sale securities  6   - 
(Increase) decrease in assets:                
Investments in trading securities  (59,943)  223 
Investments in securities  2,686   5,384 
Receivable from affiliates  1,179   290   (239)  935 
Receivable from brokers  (889)  747   (106)  (298)
Investment advisory fees receivable  18,188   4,442   2,619   11,562 
Income taxes receivable and deferred tax assets  (15,592)  (3,847)  (660)  2,738 
Other assets  325   534   (623)  490 
Increase (decrease) in liabilities:                
Payable to affiliates  1,569   (8)  (1,041)  9 
Payable to brokers  13,245   10,190   366   (282)
Income taxes payable and deferred tax liabilities  8,029   (1,384)  1,664   5,772 
Compensation payable  40,506   7,051   (1,267)  1,424 
Accrued expenses and other liabilities  (5,199)  2,804   (1,393)  (988)
Total adjustments  915   20,783   9,548   25,759 
Net cash provided by operating activities $65,229  $105,212  $29,440  $53,020 

8
GAMCO INVESTORS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED (continued)
(In thousands)

 Nine Months Ended  Three Months Ended 
 September 30,  March 31, 
 2017  2016  2019  2018 
Investing activities            
Purchases of available for sale securities $(3,932) $(223) $(3,393) $- 
Proceeds from sales of available for sale securities  321   408   252   - 
Net cash (used in) provided by investing activities  (3,611)  185 
Return of capital on available for sale securities  5   - 
Net cash used in investing activities  (3,136)  - 
                
Financing activities                
Issuance of 4.5% Convertible note  -   109,826 
Dividends paid  (1,737)  (1,752)  (571)  (578)
Purchase of treasury stock  (8,626)  (8,384)  (2,547)  (3,309)
Repayment of AC 4% PIK Note  (30,000)  (150,000)  -   (10,000)
Repayment of loan from GGCP  -   (35,000)
Repayment of AC 1.6% Note  -   (15,000)
Margin loan borrowings  -   5,000 
Margin loan payments  -   (19,479)
Amortization of debt issuance costs  45   18   6   6 
Net cash used in financing activities  (40,318)  (85,292)  (3,112)  (43,360)
Effect of exchange rates on cash and cash equivalents  (15)  28   (5)  (98)
Net increase in cash and cash equivalents  21,285   20,133   23,187   9,562 
Cash and cash equivalents at beginning of period  39,812   13,719   41,202   17,821 
Cash and cash equivalents at end of period $61,097  $33,852  $64,389  $27,383 
Supplemental disclosures of cash flow information:                
Cash paid for interest $6,621  $4,561  $279  $384 
Cash paid for taxes $52,628  $55,216  $764  $960 

Non-cash activity:
-For the ninethree months ended September 30, 2017March 31, 2019 and September 30, 2016,March 31, 2018, the Company accrued dividends on restricted stock awards of $66$8 and $41,$0, respectively.
-For the nine months ended September 30, 2016, the Company recorded $468 as a reduction to its deferred tax asset and additional paid-in capital for the excess of the recorded restricted stock award tax benefit over the actual tax benefit.

See accompanying notes.

9
GAMCO INVESTORS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2017March 31, 2019
(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, 2016.2018.

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.  In March 2016, the FASB issued revised guidance which clarifies the guidance related to (a) determining the appropriate unit of account under the revenue standard’s principal versus agent guidance and (b) applying the indicators of whether an entity is a principal or an agent in accordance with the revenue standard’s control principle. In April 2016, the FASB issued an amendment to provide more detailed guidance including additional implementation guidance and examples related to a) identifying performance obligations and b) licenses of intellectual property. In May 2016, the FASB amended the standard to clarify the guidance on assessing collectability, presenting sales taxes, measuring noncash consideration, and certain transition matters. This new guidance will be effective for the Company's first quarter of 2018 and requires either a full retrospective or a modified retrospective approach to adoption. The Company’s implementation analysis is nearing completion, and the Company does not expect the adoption of the guidance to have a significant effect on the timing of the recognition of revenue.  The Company has also been reviewing and preparing for the enhanced disclosure requirements of the standard, which will have an effect on the disclosures in the consolidated financial statements and accompanying notes.  The overall effect upon adoption may change based on further analysis and implementation efforts. Finally, the Company has not yet determined which transition method it will use.

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. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. 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. This new guidance will be effective for the Company’s first quarter of 2018. Upon adoption of this guidance, changes in the fair value of the Company’s available-for-sale investments will be reported through earnings rather than through other comprehensive income.



10
In February 2016, the FASB issued ASUAccounting Standards Update (“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. It requires these operating leases to be recorded on the balance sheet as right of use assets and offsetting lease liability obligations.  This new guidance will be effective for the Company’s first quarter of 2019. The Company is currently evaluating this guidance and the impact it will have on its consolidated financial statements and related disclosures.

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 without2019.  We have elected the transition method allowed under ASU 2018-11, which does not require restatement of comparative periods but instead requires a material impactcumulative adjustment to opening retained earnings at the consolidated financial statements.  Please see Note D.

In August 2016,January 1, 2019 adoption date.  The Company has performed the FASB issued ASU 2016-15, which adds and clarifies guidanceanalysis on the classification of certain cash receipts and payments in the consolidated statements of cash flows.  This guidance is intendedtransition to unify the currently diverse presentations and classifications, which address eight classification issues related to the statement of cash flows, including debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. This new guidance will be effective for the Company’s first quarter of 2018 and requires a retrospective approach to adoption. The Company is currently evaluating the potential effect of this new guidance on its condensed consolidated financial statements and the related disclosures.

In November 2016, the FASB issued ASU 2016-18, which amends ASC 230recorded a $106,000 reduction to clarify guidance on the classificationretained earnings, a $650,000 increase to other assets and presentation of restricted cash in the statement of cash flows.  Key requirements are that an entity should include in its cash and cash equivalent balances in the statement of cash flow those amounts that are deemeda $756,000 increase to be restricted cash and restricted cash equivalents and thatlease liability obligations as a reconciliation between the statement of financial position and the statement of cash flows must be disclosed when the statement of financial position includes more than one line item for cash, cash equivalents, restricted cash, and restricted cash equivalents.  The ASU also mandates that changes in restricted cash and restricted cash equivalents that result from transfers between cash, cash equivalents, restricted cash, and restricted cash equivalents should not be presented as cash flow activities in the statement of cash flows and that an entity with a material amount of restricted cash and restricted cash equivalents must disclose information about the nature of the restrictions.  This new guidance was to be effective for the Company’s first quarter of 2018, but the Company has elected to early adopt in the third quarter of 2017.  There was no material impact to the consolidated financial statements.result.

In January 2017, the FASB issued ASU 2017-04 to simplify the process used to test for goodwill impairment.  A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.  This new guidance will be effective for the Company’s first quarter of 2020.  The Company is currently evaluating the potential effect of this new guidance on its condensed consolidated financial statements and related disclosures.

On May
10 2017,
B.  Revenue Recognition

The revenue streams in the FASB issued ASU 2017-09, which amendsdiscussion below and in the table at the end of this Note include those that are within the scope of modification accountingASU 2014-09.  In all cases for share-based payment arrangements.all revenue streams discussed below, the revenue generated is from a single transaction price, and there is no need to allocate the amounts across more than a single revenue stream.  The customer for all revenues derived from open-end and closed-end funds described in detail below has been determined to be the fund itself and not the ultimate underlying investor in the fund.  The Company has identified similar performance obligations under ASU provides2014-09 as compared with ASC Topic 605.  As a result, the timing of the recognition of our revenue remains the same under this new guidance as it was under ASC Topic 605.

Significant judgments that affect the amounts and timing of revenue recognition:

The Company’s analysis of the timing of revenue recognition for each revenue stream is based upon an analysis of current contract terms.  Performance obligations could, however, change from time to time if and when existing contracts are modified or new contracts are entered into.  These changes could potentially affect the timing of satisfaction of performance obligations, the determination of the transaction price, and the allocation of the price to performance obligations.  In the case of the revenue streams discussed below, the performance obligation is satisfied either at a point in time or over time.  For performance correlated and conditional revenues, the performance obligation (advising a client portfolio) is satisfied over time, while recognition of revenues effectively occurs at the end of the measurement period as defined within the contract, as such amounts are subject to reduction to zero on the types of changes todate where the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718.  Specifically, an entity would not apply modification accountingmeasurement period ends even if the fair value, vesting conditions,performance benchmarks were exceeded during the intervening period.  The judgments outlined below, where the determination as to these factors is discussed in detail, are continually reviewed and classificationmonitored by the Company when new contracts or contract modifications occur.  Transaction price is in all instances formulaic and not subject to significant (or any) judgment at the current time.  The allowance for doubtful accounts is subject to judgment.  There were no impairment losses (allowance for doubtful accounts) on any receivables from any revenue stream at the end of the awardsthree months ended March 31, 2019.

Advisory Fee Revenues

Advisory fees for open-end funds, closed-end funds, sub-advisory accounts, SICAVs, and Exchange Traded Managed Funds (“ETMFs”) are earned based on predetermined percentages of the same immediately beforeaverage net assets of the individual funds and are recognized as revenues as the related services are performed.  Fees for open-end funds, one non-U.S. closed-end fund, sub-advisory accounts, SICAVs, and ETMFs are computed on a daily basis on average net assets under management (“AUM”).  Fees for U.S. closed-end funds are computed on average weekly net AUM, and fees for one non-U.S. closed-end fund are computed on a daily basis based on market value.  These fees are received in cash after the modification.  For all entities,end of each monthly period within 30 days.  The revenue recognition occurs ratably as the ASUperformance obligation (advising the fund) is effectivemet continuously over time.  There is a risk of non-payment, and therefore an impairment loss on these receivables is possible at each reporting date.  There were no such impairment losses for annualthe current period.

Advisory fees for Institutional & Private Wealth Management accounts are earned based on predetermined percentages of the AUM and are generally computed quarterly based on account values at the end of the preceding quarter.  The revenue recognition occurs daily as the performance obligation (advising the client portfolio) is met continuously.  These fees are received in cash, typically within 60 days of the client being billed.  There is a risk of non-payment, and therefore an impairment loss on these receivables is possible at each reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2017.  Early adoption is permitted, including adoption indate.  There were no such impairment losses for the current period.

Performance Correlated and Conditional Revenues

Investment advisory fees earned on a portion of the closed-end funds' preferred shares are earned at year-end if the total return to common shareholders of the closed-end fund for the calendar year exceeds the dividend rate of the preferred shares.  These fees are recognized at the end of the measurement period which coincides with the calendar year.  The fee would also be earned and the contract period ended at any interim period.  This ASU,point in time that the preferred shares are redeemed.  These fees are received in cash after the end of the measurement period, within 30 days.

We also receive incentive fees from certain institutional clients which we did not early adopt, would not have impactedare based upon exceeding a specific benchmark index.  These fees are recognized at the accountingend of the stipulated contract period, which is generally annually, for the accelerationrespective account.  The fee would also be earned and the contract period ended at any interim point in time that the client terminated its relationship with us.  These fees are received in cash after the end of vesting of restricted stock awards during the nine months ended September 30, 2017.

measurement period, typically within 60 days.

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One fund within the SICAV structure charges a performance fee.  That fee is recognized at the end of the measurement period which coincides with the calendar year.  The fee would also be earned and the measurement period ended at any interim point in time that the client redeemed their shares.  That fee is received in cash after the end of the measurement period, within 30 days.

B.We also receive conditional fees from certain institutional clients which are based upon exceeding a defined return for these accounts.  These fees are recognized at the end of the stipulated contract period, which is generally annually, for the respective account.  The fee would also be earned and the contract period ended at any interim point in time that the client terminated its relationship with us.  These fees are received in cash after the end of the measurement period, typically within 60 days.

In all cases of the performance correlated and conditional revenue, because of the variable nature of the consideration, revenue recognition is delayed until it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur, which is generally when the uncertainty associated with the variable consideration is subsequently resolved (for example, the measurement period has concluded and the hurdle has been exceeded).  There is a risk of non-payment, and therefore an impairment loss on these receivables is possible at each reporting date.  There were no such impairment losses for the current period.

Distribution Fees and Other Income

Distribution fees and other income primarily includes distribution fee revenue earned in accordance with Rule 12b-1 of the Company Act, as amended, along with sales charges and underwriting fees associated with the sale of the mutual funds.  Distribution plan fees are computed based on average daily net assets of each fund and are accrued for during the period in which they are earned.  These fees are received in cash after the end of each monthly period within 30 days.  In evaluating the appropriate timing of the recognition of these fees, we applied the guidance on up-front fees to determine whether such fees are related to the transfer of a promised service (a distinct performance obligation).  Our conclusion is that the service being provided by G.distributors to the customer in exchange for the fee is for the initial distribution of the funds and is completed at the time of the sale.  Any fixed amounts are recognized on the trade date, and variable amounts are recognized to the extent it is probable that a significant revenue reversal will not occur once the uncertainty is resolved. For variable amounts, as the uncertainty is dependent on the value of the shares at future points in time as well as the length of time the investor remains in the fund, both of which are highly susceptible to factors outside the Company’s influence, the Company does not believe that it can overcome this constraint until the market value of the fund and the investor activities are known, which are usually monthly.  Sales charges and underwriting fees associated with the sale of the mutual funds are recognized on the trade date of the sale of the shares.  There is a risk of non-payment, and therefore an impairment loss on these receivables is possible at each reporting date.  There were no such impairment losses for the current period.

Revenue Disaggregated

The following table presents our revenue disaggregated by account type:

  Three Months Ended March 31, 
  2019  2018 
Advisory Fees:      
Open-end Funds $26,925  $31,834 
Closed-end Funds  15,789   17,145 
Sub-advisory accounts  935   1,092 
Institutional & Private Wealth Management  20,726   25,965 
SICAVs  1,335   1,289 
Performance-based  178   23 
Distribution and other income  8,448   10,149 
Total revenues $74,336  $87,497 

C.  Investment in Securities

Effective with the Company’s adoption of ASU 2016-01 on January 1, 2018, the Company carries all investments in equity securities at fair value through net income (“FVTNI”) which approximates market value.  The Company has no securities that qualify for the equity method or for consolidation of the investee for which the Company has elected the practicality exception to fair value measurement.

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Investments in securities at September 30, 2017,March 31, 2019, December 31, 20162018 and September 30, 2016March 31, 2018 consisted of the following:

  September 30, 2017  December 31, 2016  September 30, 2016 
  Cost  Fair Value  Cost  Fair Value  Cost  Fair Value 
  (In thousands) 
Trading securities:                  
US Government Obligations $59,905  $59,954  $-  $-  $-  $- 
Common stocks  24   31   51   54   16   16 
Mutual Funds  11   11   -   -   -   - 
Total trading securities  59,940   59,996   51   54   16   16 
                         
Available for sale securities:                        
Common stocks  21,319   41,315   18,739   37,131   17,649   32,873 
Closed-end funds  99   114   99   100   -   - 
Total available for sale securities  21,418   41,429   18,838   37,231   17,649   32,873 
                         
Total investments in securities $81,358  $101,425  $18,889  $37,285  $17,665  $32,889 
  March 31, 2019  December 31, 2018  March 31, 2018 
     Estimated     Estimated     Estimated 
  Cost  Market Value  Cost  Market Value  Cost  Market Value 
  (In thousands) 
Securities carried at FVTNI:             
Common stocks $40,562  $30,408  $38,865  $32,414  $17,467  $31,291 
Closed-end funds  1,181   1,173   1,414   1,337   99   105 
Mutual funds  44   42   44   38   12   11 
Total securities carried at FVTNI $41,787  $31,623  $40,323  $33,789  $17,578  $31,407 

There were no securities sold, not yet purchased at September 30, 2017,March 31, 2019, December 31, 20162018 and September 30, 2016.March 31, 2018.

$59.9 million of U.S. Government Obligations are held in an escrow account for the benefit of the Convertible Note holder.

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 heldSecurities carried at FVTNI for resale in anticipation of short-term market movements are classified as trading securities.  Trading securitiesthe March 31, 2019, December 31, 2018, and March 31, 2018 period-end are stated at fair value, with any unrealized gains or losses reported in current period earnings.  Available for sale (“AFS”) investments are stated at fair value, with any unrealized gains or losses, net of taxes, reported as a component of equity except for losses deemed to be other than temporary (“OTT”) which are recorded as realized losses in the condensed consolidated statements of income.

The following table identifies all reclassifications out of accumulated other comprehensive income (“AOCI”) into income for the three and nine months ended September 30, 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 September 30,     
2017 2016     
 $20  $- Net gain from investments Realized gain on sale of AFS securities
  2,821   7 Other operating expenses/net gains from investments Realized gain on donations of AFS securities
  2,841   7 Income before income taxes  
  (1,051)  (3)Income tax provision  
 $1,790  $4 Net income  

Amount Affected Line Items Reason for
Reclassified in the Statements Reclassification
from AOCI Of Income from AOCI
Nine Months Ended September 30,     
2017 2016     
 $20  $4 Net gain from investments Realized gain on sale of AFS securities
  2,855   159 Other operating expenses/net gains from investments Realized gain on donations of AFS securities
  2,875   163 Income before income taxes  
  (1,064)  (61)Income tax provision  
 $1,811  $102 Net income  


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The following is a summary of the cost, gross unrealized gains, gross unrealized losses and fair value of available for sale investments as of September 30, 2017, December 31, 2016 and September 30, 2016:

 September 30, 2017 
   Gross Gross   
   Unrealized Unrealized   
 Cost Gains Losses Fair Value 
 (In thousands) 
Common stocks $21,319  $19,996  $-  $41,315 
Closed-end funds  99   15   -   114 
Total available for sale securities $21,418  $20,011  $-  $41,429 

 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 

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

A net unrealized gain, net of taxes, for the three months ended September 30, 2017 and 2016 of $2.3 million and $0.5 million, respectively, has been included in other comprehensive income, a component of equity, at September 30, 2017 and 2016.  During the three months ended September 30, 2017, proceeds from the sales of investments available for sale were approximately $321,000 and gross gains on the sale of investments available for sale amounted to $20,000 and were reclassified from other comprehensive income into net gain from investments in the condensed consolidated statements of income.  There were no sales of investments available for sale for the three months ended September 30, 2016. There were no realized losses on the sale of investments available for sale for the three months ended September 30, 2017 or September 30, 2016.  A net unrealized gain, net of taxes, for the nine months ended September 30, 2017 and 2016 of $1.0 million and $0.3 million, respectively, has been included in other comprehensive income, a component of equity, at September 30, 2017 and 2016, respectively.  During the nine months ended September 30, 2017 and 2016, proceeds from the sales of investments available for sale were approximately $321,000 and $408,000, respectively, and gross gains on the sale of investments available for sale amounted to $20,000 and $4,000, respectively, and were reclassified from other comprehensive income into net gain from investments in the condensed consolidated statements of income.  There were no realized losses on the sale of investments available for sale for the nine months ended September 30, 2017 or September 30, 2016.  The basis on which the cost of a security sold is determined using specific identification.  Accumulated other comprehensive income on the condensed consolidated statements of equity is primarily comprised of unrealized gains/losses, net of taxes, for AFS securities.

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

There were no investments classified as available for sale that were in an unrealized loss position at September 30, 2017, December 31, 2016 or September 30, 2016.

For the three and nine months ended September 30, 2017 and 2016, there were no losses on available for sale securities that were deemed to be other than temporary.


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C.D. Fair Value

The following tables present information about the Company’s assets and liabilities by major categories measured at fair value on a recurring basis as of September 30, 2017,March 31, 2019, December 31, 20162018 and September 30, 2016March 31, 2018 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:

Assets and Liabilities Measured at Fair Value on a Recurring Basis as of September 30, 2017March 31, 2019 (in thousands)

 Quoted Prices in Active  Significant Other  Significant  Balance as of  Quoted Prices in Active  Significant Other  Significant  Balance as of 
 Markets for Identical  Observable  Unobservable  September 30,  Markets for Identical  Observable  Unobservable  March 31, 
Assets Assets (Level 1)  Inputs (Level 2)  Inputs (Level 3)  2017  Assets (Level 1)  Inputs (Level 2)  Inputs (Level 3)  2019 
Cash equivalents $60,702  $-  $-  $60,702  $63,985  $-  $-  $63,985 
Investments in securities:                                
AFS - Common stocks  41,315   -   -   41,315 
AFS - Closed-end Funds  114   -   -   114 
US Government Obligations  59,954   -   -   59,954 
Trading - Common stocks  31   -   -   31 
Trading - Mutual Funds  11   -   -   11 
Common stocks  30,408   -   -   30,408 
Closed-end Funds  1,173   -   -   1,173 
Mutual Funds  42   -   -   42 
Total investments in securities  101,425   -   -   101,425   31,623   -   -   31,623 
Total assets at fair value $162,127  $-  $-  $162,127  $95,608  $-  $-  $95,608 


Assets and Liabilities Measured at Fair Value on a Recurring Basis as of December 31, 20162018 (in thousands)

 Quoted Prices in Active  Significant Other  Significant  Balance as of  Quoted Prices in Active  Significant Other  Significant  Balance as of 
 Markets for Identical  Observable  Unobservable  December 31,  Markets for Identical  Observable  Unobservable  December 31, 
Assets Assets (Level 1)  Inputs (Level 2)  Inputs (Level 3)  2016  Assets (Level 1)  Inputs (Level 2)  Inputs (Level 3)  2018 
Cash equivalents $39,638  $-  $-  $39,638  $40,905  $-  $-  $40,905 
Investments in securities:                                
AFS - Common stocks  37,131   -   -   37,131 
AFS - Closed-end Funds  100   -   -   100 
Trading - Common stocks  54   -   -   54 
Common stocks  32,414   -   -   32,414 
Closed-end Funds  1,337   -   -   1,337 
Mutual Funds  38   -   -   38 
Total investments in securities  37,285   -   -   37,285   33,789   -   -   33,789 
Total assets at fair value $76,923  $-  $-  $76,923  $74,694  $-  $-  $74,694 


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Assets and Liabilities Measured at Fair Value on a Recurring Basis as of September 30, 2016March 31, 2018 (in thousands)

 Quoted Prices in Active  Significant Other  Significant  Balance as of  Quoted Prices in Active  Significant Other  Significant  Balance as of 
 Markets for Identical  Observable  Unobservable  September 30,  Markets for Identical  Observable  Unobservable  March 31, 
Assets Assets (Level 1)  Inputs (Level 2)  Inputs (Level 3)  2016  Assets (Level 1)  Inputs (Level 2)  Inputs (Level 3)  2018 
Cash equivalents $33,576  $-  $-  $33,576  $27,034  $-  $-  $27,034 
Investments in securities:                                
AFS - Common stocks  32,873   -   -   32,873 
Trading - Common stocks  16   -   -   16 
Common stocks  31,291   -   -   31,291 
Closed-end Funds  105   -   -   105 
Mutual Funds  11   -   -   11 
Total investments in securities  32,889   -   -   32,889   31,407   -   -   31,407 
Total assets at fair value $66,465  $-  $-  $66,465  $58,441  $-  $-  $58,441 

During the quarters ended September 30, 2017March 31, 2019 and 2016,2018, there were no transfers between any Level 1 and Level 2 holdings, or between Level 1 and Level 3 holdings.

D.
E. Income Taxes

The effective tax rate (“ETR”(“ETR”) for the three months ended September 30, 2017March 31, 2019 and September 30, 2016March 31, 2018 was 18.8% 25.7% and 31.9%22.6%, respectively.respectively.  The ETR for the nine months ended September 30, 2017 and September 30, 2016 was 34.4% and 35.9%, respectively. The current year quarter’s ETR benefited from the reversalfirst quarter of certain tax accruals totaling $3.62019 included an accrual of $1.5 million due to a change in accounting estimate as well as a $1.0 million tax benefit related to the charitable contribution while the prior year quarter benefited from a reversal of $2.6 millionan adjustment in an uncertain tax accruals due to the conclusion of a state audit.position.  The ETR absent this accrual was 20.4%.


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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 or tax deficiencies against income tax expenses rather than additional paid-in capital.  During the three and nine months ended September 30, 2017, the ETR was higher by 3.6% and 1.0%, respectively, as a result of a reduction to previously recorded stock compensation tax benefits.

E.F. Earnings Per Share

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

  Three Months Ended September 30,  Nine Months Ended September 30, 
(in thousands, except per share amounts) 2017  2016  2017  2016 
Basic:            
Net income attributable to GAMCO Investors, Inc.'s            
shareholders $16,600  $30,861  $64,314  $84,429 
Weighted average shares outstanding  28,926   29,185   28,930   29,222 
                 
Basic net income per share attributable to GAMCO                
Investors, Inc.'s shareholders $0.57  $1.06  $2.22  $2.89 
                 
Diluted:                
Net income attributable to GAMCO Investors, Inc.'s shareholders $16,600  $30,861  $64,314  $84,429 
Add interest on convertible note, net of management fee and taxes  696   387   2,192   387 
Total income attributable to GAMCO Investors, Inc.'s shareholders $17,296  $31,248  $66,506  $84,816 
                 
Weighted average share outstanding  28,926   29,185   28,930   29,222 
Restricted stock awards  247   221   214   253 
Assumed conversion of convertible note  2,000   1,000   2,000   336 
Total  31,173   30,406   31,144   29,811 
                 
Diluted net income per share attributable to GAMCO                
Investors, Inc.'s shareholders $0.55  $1.03  $2.14  $2.85 
  Three Months Ended March 31, 
(In thousands, except per share amounts) 2019  2018 
Basic:      
Net income $19,892  $27,261 
Weighted average shares outstanding  28,507   28,916 
         
Basic net income $0.70  $0.94 
         
Diluted:        
Net income $19,892  $27,261 
         
Weighted average shares outstanding  28,507   28,916 
Restricted stock awards  32   - 
Total  28,539   28,916 
         
Diluted net income $0.70  $0.94 

F.
G. Debt

Debt consists of the following:

September 30, 2017 December 31, 2016 September 30, 2016  March 31, 2019  December 31, 2018  March 31, 2018 
Carrying Fair Value Carrying Fair Value Carrying Fair Value  Carrying  Fair Value  Carrying  Fair Value  Carrying  Fair Value 
Value Level 2 Value Level 2 Value Level 2  Value  Level 2  Value  Level 2  Value  Level 2 
(In thousands)                              
4.5 % Convertible note $109,862   111,574  $109,835  $111,525  $109,826  $112,172 
AC 4% PIK Note  70,000   71,755   100,000   100,930   100,000   101,347  $-  $-  $-  $-  $40,000  $39,860 
5.875% Senior notes  24,138   24,748   24,120   24,558   24,115   25,073   24,174   24,020   24,168   23,061   24,150   23,742 
Total $204,000  $208,077  $233,955  $237,013  $233,941  $238,592  $24,174  $24,020  $24,168  $23,061  $64,150  $63,602 

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.


1514
A portion of the proceeds from the sale of the Convertible Note are now held in an escrow account established pursuant to an escrow agreement dated August 15, 2016 by and among the Company, GGCP and its related parties, Cascade and JP Morgan Chase Bank, National Association, as escrow agent (the “Escrow Agreement”).  On September 30, 2017, in connection with an amendment to the Escrow Agreement and in exchange for approximately 53% of the assets in the escrow account, the Company paid GGCP $60 million. The $60 million is disclosed as restricted cash and restricted investment in securities of $0.1 million and $59.9 million, respectively, on the statement of financial condition. The Escrow Agreement provides for the release to the Company of a pro rata portion of the escrowed funds upon repayment of the Convertible Note or conversion of the Convertible Note, based upon the principal amount of the Convertible Note that is converted into Class A Stock.  Under the Convertible Note, Cascade has the right to claim the escrowed funds upon a payment default by the Company.  It is the Company’s current plan to redeem the Convertible Note no later than February 15, 2019.

AC 4% PIK Note

In connection with the spin-offSpin-off of ACAssociated Capital Group, Inc. (“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 bearsbore interest at 4.0% per annum.  The original principal amount hashad a maturity date of November 30, 2020.  Interest onThe Company was, under the AC 4% PIK Note will accrue from the dateterms 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 addednote, able 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 and nine months ended September 30, 2017,March 31, 2018, the Company prepaid $10 million and $30 million, respectively, of principal of the AC 4% PIK Note against the principal amount due on November 30, 2018.  Of the $70 million principal amount outstanding after this payment, $20 million is due on November 30, 2019, and $50 million is due on November 30, 2020.  During the three and nine months ended September 30, 2016, the Company prepaid $150 million of principal of theThe AC 4% PIK Note.  SubsequentNote was fully repaid on August 28, 2018 prior to quarter end, the Company paid an additional $20 million of principal, thereby reducing the amount outstanding to $50 million, all of which is due on November 30, 2020.maturity without penalty.

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 Notesnotes at 101% of their principal amount.

At September 30, 2017,March 31, 2019, December 31, 20162018 and September 30, 2016,March 31, 2018, the debt was recorded at its face value, net of issuance costs, of $24.1$24.2 million, $24.1$24.2 million and $24.1$24.2 million, respectively.

The fair value of the Company’sCompany’s debt, which is a Level 2 valuation, is estimated based on either quoted market prices for the same or similar issues orcarried at amortized cost on the current rates offered tocondensed consolidated statements of financial position.  The Company has not elected the fair value option for its debt, and, therefore, the provisions of ASU 2016-01 (adopted by the Company for debt of the same remaining maturities or using market standard models.  Inputs in these standard models includeon January 1, 2018) related to instrument-specific credit rating, maturity and interest rate.risk are not applicable.

G.
H. Stockholders’ Equity
 
Shares outstanding were 29.228.9 million, 29.529.0 million and 29.528.9 million on September 30, 2017,March 31, 2019, December 31, 20162018 and September 30, 2016,March 31, 2018, respectively.


16
Dividends

  Record Payment   
  Date Date Amount 
        
Three months ended March 31, 2017 March 14, 2017 March 28, 2017 $0.02 
Three months ended June 30, 2017 June 27, 2017 July 11, 2017  0.02 
Three months ended September 30, 2017 September 12, 2017 September 26, 2017  0.02 
Nine months ended September 30, 2017      $0.06 
  Record Payment  
  Date Date Amount
       
Three months ended March 31, 2019 April 16, 2019 April 30, 2019 $0.02
Three months ended March 31, 2018 March 13, 2018 March 27, 2018 $0.02

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

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 Plansone Plan approved by the shareholders, which areis 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 PlansPlan 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 7.5 million shares of Class A Stock have been reserved for issuance under the PlansPlan by a committee of the Board of Directors responsible for administering the PlansPlan (“Compensation Committee”). Under the Plans,Plan, the committee may grant RSAsrestricted stock awards (“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.

On January 5, 2018, the Compensation Committee of GBL accelerated the vesting relating to the remaining 19,400 RSAs outstanding at that time.  As a result, GBL recorded an incremental $0.2 million of stock-based compensation expense during the first quarter of 2018.

15
On April 4, 2018, 270,500 RSAs were issued at a grant price of $24.77.  On August 7, 2018, 162,450 RSAs were issued at a grant price of $25.16.  On September 17, 2018, 5,000 RSAs were issued at a grant price of $25.74.  As of September 30, 2017, DecemberMarch 31, 2016 and September 30, 2016,2019, there were 164,050 RSA shares, 424,340 RSA shares and 427,290425,150 of these RSA shares outstanding respectively, that were previously issued at anwith a weighted average weighted grant price of $66.84, $65.74 and $65.72, respectively. These RSA grants occurred prior to the spin-off$24.93.There were no RSAs outstanding as of Associated Capital (“AC”). On November 30, 2015, pursuant to the spin-off, all RSA grant holders received shares of AC’s Class A common stock as a result of their ownership of their GAMCO unvested RSAs (one share of AC for each share of GBL).March 31, 2018. 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.

On June 1, 2017, the Compensation Committee of AC accelerated the vesting of all 420,240 AC RSAs outstanding effective June 15, 2017.  As a result, GBL recorded an incremental $3.7 million of stock-based compensation expense for the nine months ended September 30, 2017.  This amount related to GBL teammates who held AC RSAs.  There will be no further expense related to these AC RSAs recorded by GBL after the second quarter ended June 30, 2017.

On August 7, 2017, the Compensation Committee of GBL accelerated the vesting relating to 201,120 of GBL RSAs outstanding effective August 31, 2017.  As a result, GBL recorded an incremental $1.8 million of stock-based compensation expense for the three and nine months ended September 30, 2017.  There continue to be 164,050 GBL RSAs outstanding that were not vested as part of this acceleration which will result in recognition of expense as these RSAs continue to vest.  See table below for impact by quarter.

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.  The Company’s accounting treatment for excess tax benefits or tax deficiencies also changed with the adoption of ASU 2016-09 on January 1, 2017. Excess tax benefits or tax deficiencies are now required to be recorded within the income tax expense line in the consolidated statement of income rather than to additional paid-in capital within the condensed consolidated statement of financial condition. During the three and nine months ended September 30, 2017,March 31, 2018, the Company reduced previously recorded tax benefits relating to RSA expense by $0.7$0.1 million and $1.0 million, respectively, on RSAs that vested.  There were no RSAs that vested for the three months ended March 31, 2019.


17
For the three months ended September 30, 2017March 31, 2019 and September 30, 2016,March 31, 2018, we recognized stock-based compensation expense of $2.1$0.6 million and $1.2$0.2 million, respectively.  For the nine months ended September 30, 2017 and September 30, 2016, we recognized stock-based compensation expense of $7.2 million and $3.3 million, respectively.  The three month amount for 2017 includes the $1.8 million related to the GBL RSA accelerated vesting mentioned above.  The nine month amount for 2017 includes the $1.8 million related to the GBL RSAs’ accelerated vesting and the $3.7 million related to the AC RSAs’ accelerated vesting both mentioned above.  All stock-based compensation expense in future periods for grants currently outstanding will relate to GBL RSAs only.

Actual and projected stock-based compensation expense for RSA shares for the years ended December 31, 20162018 through December 31, 20242023 is as follows (in thousands):

   2016  2017  2018  2019  2020  2021  2022  2023  2024 
 Q1  $1,037  $699  $144  $113  $72  $49  $32  $17  $4 
 Q2   1,036   4,381   141   113   68   49   32   17   4 
 Q3   1,186   2,103   126   101   57   39   24   10   2 
 Q4   691   157   113   90   49   32   17   4   - 
Full Year  $3,950  $7,340  $524  $417  $246  $169  $105  $48  $10 
   2018  2019  2020  2021  2022  2023 
 Q1  $187  $577  $577  $577  $330  $329 
 Q2   354   577   577   426   330   128 
 Q3   501   577   577   362   329   43 
 Q4   577   577   577   330   329   - 
Full Year  $1,619  $2,308  $2,308  $1,695  $1,318  $500 

The total compensation costcosts related to non-vested RSAs not yet recognized is approximately $1.7$7.6 million as of September 30, 2017.March 31, 2019.

Stock Repurchase Program
 
In March 1999, GAMCO'sGAMCO’s Board of Directors established the Stock Repurchase Program to grant management the authority to repurchase shares of our Class A Common Stock.  On May 3, 2017, our Board of Directors authorized an incremental 500,000 shares to be added to the current buyback authorization. On August 3, 2017, our Board of Directors authorized an incremental 425,352 shares to be added to the current buy back authorization. For the three months ended September 30, 2017 and September 30, 2016,March 31, 2019, the Company repurchased 131,480126,354 shares and 223,811 shares, respectively, at an average price per share of $29.42 and $31.50, respectively.  For the nine months ended September 30, 2017 and September 30, 2016, the Company repurchased 290,300 shares and 266,846 shares, respectively, at an average price per share of $29.71 and $31.41, respectively.  From the inception of the program through September 30, 2017, 10,191,640 shares have been repurchased at an average price of $43.90 per share.$20.15.  At September 30, 2017,March 31, 2019, the total shares available under the program to be repurchased in the future were 868,520.738,456.

Shelf Registration
On May 4, 2015,
In April 2018, the Securities and Exchange Commission (“SEC”)SEC declared effective the Company’s “shelf” registration statement filed by the Company. The “shelf” provideson Form S-3 giving the Company with the flexibility of issuingto sell any combination of senior and subordinatedsubordinate debt securities, convertible debt securities and equity securities (including common and preferred securitiessecurities) up to a total amount of $500 million and replaced the existingmillion.  The shelf registration which expired in May 2015.  As of September 30, 2017, $500 million is available on the shelf.through April 2021, at which time it may be renewed.

H. Related Party Transactions

In connection with the issuance of the Convertible Note in August 2016, GGCP deposited cash of approximately $112.5 million, equal to the principal amount of the Convertible Note and six months interest, into an escrow account established pursuant to an escrow agreement by and among GGCP, the Company, the Convertible Note holder and the escrow agent.  The Company paid the annual costs of setting up the escrow account in the amount of $55,000 and will continue to pay them as long as the escrow account is open.  The Company did not pay any fees to GGCP in connection with the funding of the escrow account.  On September 30, 2017, in connection with an amendment to the Escrow Agreement and in exchange for approximately 53% of the assets in the escrow account, the Company paid GGCP $60 million.  See Note F. Debt for additional details.


18
I. 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 onin the condensed consolidated statements of financial condition at September 30, 2017,March 31, 2019, December 31, 20162018 and September 30, 2016.March 31, 2018. 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, as2020. 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 onin the condensed consolidated statement of financial condition at September 30, 2017,March 31, 2019, December 31, 20162018 and September 30, 2016.March 31, 2018.  The advisory contracts for the Bancroft Fund Ltd. and the Ellsworth Growth and Income Fund Ltd. are both next up for renewal in August 2018.2019. The Company assesses the recoverability of this intangible asset at least annually, or more often should events warrant. There were no indicators of impairment for the three months ended September 30, 2017March 31, 2019 or September 30, 2016,March 31, 2018, and as such there was no impairment analysis performed or charge recorded.

16
J. 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 existexists losses which may be reasonably possible and will, if material, make the necessary disclosures.  However, management believes such amounts, both those that are probable and those that are reasonably possible, are not material to the Company’s financial condition, operations or cash flows at September 30, 2017.March 31, 2019.

K. Related Party Transactions

K.On February 23, 2018, the Chief Executive Officer of the Company elected to waive all of his compensation that he would have otherwise been entitled to for the period of March 1, 2018 through December 31, 2018.  On December 26, 2018, the CEO elected to continue to waive all of his compensation that he would otherwise have been entitled to for the period from January 1, 2019 to March 31, 2019.  For the three months ended March 31, 2019 and March 31, 2018, the waiver reduced compensation by $12.2 million and $4.9 million, respectively, and management fee by $1.7 million and $1.7 million, respectively.

L. Subsequent Events

On September 30, 2017,April 1, 2019, GAMCO entered intoand AC agreed to extend AC’s lease agreement, that expired on March 31, 2019, on the same terms and conditions on a third deferred compensation agreement with Mr. Gabelli for the period of October 1, 2017 to December 31, 2017.  Mr. Gabelli’s variable cash compensation for that period will vestmonth-to-month basis commencing on April 1, 2019.  For GAAP accounting purposes, the compensation earned from October 1, 2017 to December 31, 2017 will be expensed ratably from October 1, 2017 to March 31, 2019.

On October 3,April 1, 2019, the deferred cash compensation agreement (“DCCA”) with the CEO covering compensation from the fourth quarter of 2017 vested in accordance with the terms of the agreement.  The CEO earned $15.5 million during the fourth quarter of 2017 resulting in the issuance of 530,662 RSUs based on the volume weighted average price (“VWAP”) of GBL stock over the fourth quarter of 2017.

Under the terms of the agreement, if the RSUs were settled in cash, the amount paid to the CEO upon vesting would be capped and calculated as the number of net RSUs vesting (530,662) valued at the lesser of the VWAP over the fourth quarter of 2017 or the VWAP on the date of vesting.  The Company elected to settle the DCCA in cash, as had been the stated intention at the time the DCCA was entered into, notwithstanding the Compensation Committee’s ability to settle it by issuing stock. This resulted in a cash payment of $11.0 million by the Company paid an additional $20in April 2019, which, because of the cap, was $4.5 million of principal relatingless than what he had been entitled to receive absent the AC 4% PIK Note, thereby reducing the amount outstanding to $50 million, all of which is due on November 30, 2020.DCCA.

On NovemberApril 16, 2019, GAMCO repurchased 1.2 million shares of GBL class A stock at $21.00 per share in a private transaction.  This transaction resulted in a 12.4% reduction in Class A shares outstanding from 9.8 million to 8.6 million and a 4.2% reduction in total shares outstanding from 28.8 million to 27.6 million.

From April 1, 2019 to May 7, 2017,2019, and excluding the private transaction, the Company repurchased 29,484 shares at $20.90 per share.

On May 7, 2019, the Board of Directors declared its regular quarterly dividend of $0.02 per share to all of its shareholders, payable on January 10, 2018June 25, 2019 to shareholders of record on December 27, 2017.June 11, 2019.

From October 1, 2017 to November 7, 2017, the Company repurchased 31,100 shares at $29.11 per share.

1917
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (INCLUDING QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK)

Overview
 
GAMCO, through the Gabelli brand, well known for its Private Market Value (PMV) with a CatalystTM investment approach, is a widely-recognized provider of investment advisory services to open-end funds, closed-end funds, and institutional and private wealth management investors principally in the United States.  Through G.distributors, LLC (“G.distributors”), we provide distribution for open-end fund distribution.funds.  We generally manage assets on a fully discretionary basis and invest in a variety of U.S. and international securities through various investment styles.styles including value, growth, non-market correlated, and convertible securities.  Our revenues are based primarily on the Company’s levels of assets under management and fees associated with our various investment products.
 
Our revenues are highly correlated to the level of assets under management and fees associated with our various investment products, rather than our own corporate assets.  Assets under management, which are directly influenced by the level and changes of the overall equity markets, can also fluctuate through acquisitions, the creation of new products, the addition of new accounts, or the loss of existing accounts.  Since various equity products have different fees, changes in our business mix may also affect revenues.  At times, the performance of our equity products may differ markedly from popular market indices, and this can also impact our revenues.  General stock market trends will have the greatestan impact on our level of assets under management and hence, on revenues.

We conduct our investment advisory business principally through the following subsidiaries: GAMCO Asset Management Inc. (Institutional and Private Wealth Management) and Gabelli Funds, LLC (Funds).  The distribution of our open-end funds is conducted through G.distributors, our broker-dealer subsidiary.

Assets under management (“AUM”) were $43.1$37.3 billion as of September 30, 2017,March 31, 2019, an increase of $1.8$2.9 billion, or 4.3%8.4%, from June 30, 2017the December 31, 2018 AUM of $41.3$34.4 billion and an increasea decrease of $3.5$3.6 billion, or 8.9%8.8%, from the September 30, 2016March 31, 2018 AUM of $39.6$40.9 billion.  The thirdfirst quarter 20172019 activity consisted of $3.7 billion of market appreciation partially reduced by net cash outflows of $213$685 million $1.8 billion of market appreciation and recurring distributions, net of reinvestments, from open-end and closed-end funds of $140$136 million.  Average total AUM was $42.3$36.8 billion in the 20172019 quarter versus $39.9$42.5 billion in the prior year period, an increasea decrease of 6.0%13.4%.

In addition to management fees, we earn incentive fees for certain institutional client assets, certain assets attributable to preferred issues of our closed-end funds, two closed-end funds, and our GDL Fund (NYSE: GDL).one SICAV.  As of September 30, 2017,March 31, 2019, assets under management with incentive based fees were $3.0$1.8 billion, $0.2$0.9 billion higherless than the $2.8$2.7 billion on June 30, 2017 and $0.6 billion higher than the $2.4 billion on September 30, 2016.March 31, 2018. 
2018
The Company reported Assets Under Management as follows (in millions):

Table I: Fund Flows - 3rd1st Quarter 20172019

           Fund    
     Market     distributions,    
  June 30,  appreciation/  Net cash  net of  September 30, 
  2017  (depreciation)  flows  reinvestments  2017 
Equities:               
Open-end Funds $13,574  $517  $(305) $(24) $13,762 
Closed-end Funds  7,359   249   176   (116)  7,668 
Institutional & PWM - direct  13,437   613   (157)  -   13,893 
Institutional & PWM - sub-advisory  5,048   368   (70)  -   5,346 
SICAV (a)  421   10   73   -   504 
Total Equities  39,839   1,757   (283)  (140)  41,173 
Fixed Income:                    
Money-Market Fund  1,813   4   73   -   1,890 
Institutional & PWM  29   -   (3)  -   26 
Total Fixed Income  1,842   4   70   -   1,916 
Total Assets Under Management $41,681  $1,761  $(213) $(140) $43,089 
(a) Adjusted to include Merger Arbitrage of $371 million at June 30, 2017.
           Fund    
     Market     distributions,    
  December 31,  appreciation/  Net cash  net of  March 31, 
  2018  (depreciation)  flows  reinvestments  2019 
Equities:               
Open-end Funds $10,589  $1,190  $(319) $(8) $11,452 
Closed-end Funds  6,959   725   (6)  (128)  7,550 
Institutional & PWM  14,078   1,803   (638)  -   15,243 
SICAV  507   8   7   -   522 
Total Equities  32,133   3,726   (956)  (136)  34,767 
Fixed Income:                    
100% U.S. Treasury Fund  2,195   14   278   -   2,487 
Institutional & PWM  26   -   (7)  -   19 
Total Fixed Income  2,221   14   271   -   2,506 
Total Assets Under Management $34,354  $3,740  $(685) $(136) $37,273 

Table II: Fund Flows - Year to date September 2017

            Fund    
     Market       distributions,    
  December 31,  appreciation/  Net cash   net of  September 30, 
  2016  (depreciation)  flows   reinvestments  2017 
Equities:                
Open-end Funds $13,462  $1,354  $(1,009)  $(45) $13,762 
Closed-end Funds  7,150   712   162    (356)  7,668 
Institutional & PWM - direct  13,441   1,523   (1,071)   -   13,893 
Institutional & PWM - sub-advisory  3,783   522   1,041 (b)  -   5,346 
SICAV (a)  320   29   155    -   504 
Total Equities  38,156   4,140   (722)   (401)  41,173 
Fixed Income:                     
Money-Market Fund  1,767   9   114    -   1,890 
Institutional & PWM  31   -   (5)   -   26 
Total Fixed Income  1,798   9   109    -   1,916 
Total Assets Under Management $39,954  $4,149  $(613)  $(401) $43,089 
(a) Adjusted to include Merger Arbitrage of $270 million at December 31, 2016.
(b) Includes $1.2 billion from being approved as the sub-advisor on two sub-advisory entities as of February 27, 2017.
21
Table III: Assets Under Management by Quarter

          % Change From           % Change From 
 September 30,  June 30,  September 30,  June 30,  September 30,  March 31,  December 31,  March 31,  December 31,  March 31, 
 2017  2017  2016  2017  2016  2019  2018  2018  2018  2018 
Equities:                              
Open-end Funds $13,762  $13,574  $13,799   1.4%  (0.3%) $11,452  $10,589  $12,964   8.2%  (11.7%)
Closed-end Funds  7,669   7,359   7,178   4.2   6.8   7,550   6,959   7,768   8.5   (2.8)
Institutional & PWM - direct  13,893   13,437   13,245   3.4   4.9 
Institutional & PWM - sub-advisory  5,346   5,048   3,542   5.9   50.9 
SICAV (a)  504   50   42   908.0   1,100.0 
Institutional & PWM  15,243   14,078   17,643   8.3   (13.6)
SICAV
  522   507   527   3.0   (0.9)
Total Equities  41,174   39,468   37,806   4.3   8.9   34,767   32,133   38,902   8.2   (10.6)
Fixed Income:                                        
Money-Market Fund  1,890   1,813   1,738   4.2   8.7 
100% U.S. Treasury Fund  2,487   2,195   1,922   13.3   29.4 
Institutional & PWM  26   29   37   (10.3)  (29.7)  19   26   30   (26.9)  (36.7)
Total Fixed Income  1,916   1,842   1,775   4.0   7.9   2,506   2,221   1,952   12.8   28.4 
Total Assets Under Management $43,090  $41,310  $39,581   4.3%  8.9% $37,273  $34,354  $40,854   8.5   (8.8)
Institutional & PWM - direct includes $280$251 million, $300$247 million and $286$212 million of Money Market Fund AUM at September 30, 2017, June 30, 2017March 31, 2019,
December 31, 2018 and September 30, 2016,March 31, 2018, respectively.
(a) Adjusted to include Merger Arbitrage of $371 million and $225 million at June 30, 2017 and September 30, 2016, respectively.


2219
DEFERRED COMPENSATION

As previously disclosed, the Company has deferred the cash compensation of the Chief Executive Officer relating to all of 2016 (“2016 DCCA”) and, the first half of 2017 (“First Half 2017 DCCA”), and the fourth quarter of 2017 (“Fourth Quarter 2017 DCCA”) to provide the Company with flexibility to pay down debt.debt and enhance our ability to execute lift-outs, make acquisitions, and seed new products.  We have made substantial progress toward this objective, having reduced our debt since the November 2015 spin-off of AC, resulting in Standard & Poor’s recent revision of its outlook to stable from negative andJuly 2018 reaffirmation of our debtinvestment grade rating of BBB-.  In furtherance of this strategic objective, we entered into a third DCCA agreement (“Fourth Quarter 2017 DCCA”) with our Chief Executive Officer on September 30, 2017 deferring his cash compensation for the fourth quarter of 2017 until April 2019 under terms that are similar to the prior two DCCAs.  This new Fourth Quarter 2017 DCCA had no effect on the third quarter results but will impact our results in future quarters as his fourth quarter 2017’s compensation expense is amortized over the DCCA vesting period.BBB- and stable outlook.

Notwithstanding its ability to settle these agreements in stock, GAMCO currently intends to make a cash paymentspayment to Mr. Gabelli on the respective vesting dates.date.  While the agreements did not change Mr. Gabelli’s compensation, GAAPgenerally accepted accounting principles (“GAAP”) reporting for his compensation did change due to the ratable vesting.

The DCCAs defer the Chief Executive Officer’s compensation expense by amortizing it over each DCCA’s respective vesting period.  The Chief Executive Officer is not entitled to receive the compensation until the end of the vesting period, so generally accepted accounting principles (“GAAP”)GAAP specify this treatment of the expense.  The 2016 DCCA is expensed ratably over 4 years, the First Half 2017 DCCA iswas expensed ratably over 18 months, and the Fourth Quarter 2017 DCCA will bewas expensed ratably over 18 months beginning October 1, 2017.months.

Because the GAAP reporting of the DCCAs granted to the CEO tracks vesting, compensation expense and management fee expense in the year of grant is lower than compensation expense and management fee expense in future periods to the extent that future periods contain the vesting of the prior year’s DCCA compensation on top of thein addition to normal non-deferred compensation for the current year period which has not been deferred.period.  In 2016, the full amount of the compensation was deferred, and expense was recorded for the 25% vesting in that year.  In the first six months of 2017, the ratable vesting continued for the 2016 compensation, and the new First Half 2017 DCCA grant resulted in compensation for the first six months of 2017 being deferred and expense being recorded for 33% vesting in that period.  The CEO'sCEO’s third quarter 2017 compensation was not deferred so 100% of the CEO’s compensation for that period was recorded together with the ratable portions of the vestings of the 2016 DCCA and the First Half 2017 DCCA.  So there isThis results in a compounding effect in future periods when there are bothnon-deferred current period compensation that has not been deferred and prior period deferred compensation that is being ratably vested.  On May 23, 2018, the CEO waived receipt of $6 million of the First Half 2017 DCCA, and a reduction in expense was recognized. On July 2, 2018, the First Half 2017 DCCA vested in accordance with the terms of the agreement and a cash payment in the amount of $28.3 million was made to the CEO.  On April 1, 2019, the Fourth Quarter 2017 DCCA vested in accordance with the terms of the agreement, and a cash payment in the amount of $11.0 million was made to the CEO.

Accordingly, this vesting schedule resulted in a $19.1 million and a $26.8$13.0 million increase in compensation expense in the thirdfirst quarter 2017 and first nine months of 2017, respectively,2019 versus the comparable 2016 periods’2018 period’s amounts as well as a $4.0$1.4 million and $6.4 million increasedecrease in management fee expense in the thirdfirst quarter 2017 and first nine months 2017, respectively,2019 as compared to the 2016 periods’2018 period’s amounts.

The following tables show the amortization and EPS impact of the DCCAs by quarter.  The amortization amount of future periods assumes that the stock price of GBL of $20.50 is unchanged from March 31, 2019.  For every $1.00 change in the GBL stock price, up to a GBL stock price of $32.8187, the 2016 DCCA would increase by $2,314,695.

Amortization by quarter (increase / (decrease)):  EPS impact by quarter: 
  2017  2018  2019  2020    2017  2018  2019  2020 
  (amounts in thousands)         
 Q1  $(8,126) $979  $12,615  $-   Q1  $0.16  $(0.03) $(0.34) $- 
 Q2   (7,389)  11,232   2,966   -   Q2   0.15   (0.29)  (0.07)  - 
 Q3   9,805   183   2,966   -   Q3   (0.20)  -   (0.07)  - 
 Q4   (1,857)  (8,764)  2,966   -   Q4   0.04   0.23   (0.07)  - 
Year  $(7,567) $3,630  $21,513  $-  Year  $0.15  $(0.09) $(0.55) $- 

The GAAP based balance sheets are also impacted; the compensation payable at September 30, 2017impacted as only includes the vested portion of the compensation subject to the DCCAs.DCCAs is included in compensation payable.  At September 30, 2017,March 31, 2019, the amount of unrecognized compensation was $57.2$8.9 million.

The following tables show a reconciliation of our results for the third quartersthree months ended March 31, 2019 and first nine months of 2017 and 2016,2018 and our balance sheet at September 30, 2017March 31, 2019 between the GAAP basis and a non-GAAP adjusted basis as if all of the 2016 DCCA was recognized in 2016, and the First Half 2017 DCCA and the Fourth Quarter 2017 DCCA expense were recognized in 2016 and 2017 respectively, without regard to the vesting schedule.  We believe the non-GAAP financial measures below provide relevant and meaningful information to investors about our core operating results.  These measures have been established in order to increase transparency for the purpose of evaluating our core business, for comparing results with prior period results, and to enable more appropriate comparisons with industry peers.  However, non-GAAP financial measures should not be considered a substitute for financial measures calculated in accordance with U.S. GAAP and may be calculated differently by other companies.  The following schedules reconcile U.S. GAAP financial measures to non-GAAP measures for the three and nine months ended September 30, 2017March 31, 2019 and 20162018 as well as at September 30, 2017.March 31, 2019.

2320
  Three Months Ended March 31, 2019 
     Impact of       
  Reported  Fourth Quarter  Impact of    
  GAAP  2017 DCCA  2016 DCCA  Non-GAAP 
Revenues            
Investment advisory and incentive fees $65,888  $-  $-  $65,888 
Distribution fees and other income  8,448   -   -   8,448 
Total revenues  74,336   -   -   74,336 
Expenses                
Compensation  30,347   (2,983)  (8,184)  19,180 
Management fee  1,449   (419)  (1,030)  - 
Distribution costs  8,670   -   -   8,670 
Other operating expenses  5,257   -   -   5,257 
Total expenses  45,723   (3,402)  (9,214)  33,107 
                 
Operating income  28,613   3,402   9,214   41,229 
Other income (expense)                
Net gain (loss) from investments  (1,895)  -   -   (1,895)
Interest and dividend income  724   -   -   724 
Interest expense  (655)  -   -   (655)
Total other expense, net  (1,826)  -   -   (1,826)
Income before income taxes  26,787   3,402   9,214   39,403 
Income tax provision  6,895   816   2,211   9,922 
Net income $19,892  $2,586  $7,003  $29,481 
                 
Net income:                
Basic $0.70  $0.09  $0.25  $1.03 
Diluted  0.70   0.09   0.25   1.03 


  Three Months Ended March 31, 2018 
     Impact of  Impact of       
  Reported  Fourth Quarter  First Half  Impact of    
  GAAP  2017 DCCA  2017 DCCA  2016 DCCA  Non-GAAP 
Revenues               
Investment advisory and incentive fees $77,348  $-  $-  $-  $77,348 
Distribution fees and other income  10,149   -   -   -   10,149 
Total revenues  87,497   -   -   -   87,497 
Expenses                    
Compensation  25,950   (1,391)  213   3,016   27,788 
Management fee  4,634   (419)  (1,368)  (1,030)  1,817 
Distribution costs  10,204   -   -   -   10,204 
Other operating expenses  5,453   -   -   -   5,453 
Total expenses  46,241   (1,810)  (1,155)  1,986   45,262 
                     
Operating income  41,256   1,810   1,155   (1,986)  42,235 
Other income (expense)                    
Net gain (loss) from investments  (5,347)  -   -   -   (5,347)
Interest and dividend income  492   -   -   -   492 
Interest expense  (1,200)  -   -   -   (1,200)
Total other expense, net  (6,055)  -   -   -   (6,055)
Income before income taxes  35,201   1,810   1,155   (1,986)  36,180 
Income tax provision  7,940   453   289   (497)  8,185 
Net income $27,261  $1,357  $866  $(1,489) $27,995 
                     
Net income:                    
Basic $0.94  $0.05  $0.03  $(0.05) $0.97 
Diluted $0.94  $0.05  $0.03  $(0.05) $0.97 

21

  Three Months Ended September 30, 2017 
     Impact of       
  Reported  First Half  Impact of    
  GAAP  2017 DCCA  2016 DCCA  Non-GAAP 
Revenues            
Investment advisory and incentive fees $77,328  $-  $-  $77,328 
Distribution fees and other income  11,013   -   -   11,013 
Total revenues  88,341   -   -   88,341 
Expenses                
Compensation  42,919   (4,816)  (3,415)  34,688 
Management fee  4,935   (886)  (688)  3,361 
Distribution costs  11,665   -   -   11,665 
Other operating expenses  5,429   -   -   5,429 
Total expenses  64,948   (5,702)  (4,103)  55,143 
                 
Operating income  23,393   5,702   4,103   33,198 
Other income (expense)                
Net gain (loss) from investments  2,841   -   -   2,841 
Interest and dividend income  745   -   -   745 
Interest expense  (2,688)  -   -   (2,688)
Shareholder-designated contribution  (3,857)  -   -   (3,857)
Total other expense, net  (2,959)  -   -   (2,959)
Income before income taxes  20,434   5,702   4,103   30,239 
Income tax provision  3,834   2,167   1,559   7,560 
Net income attributable to GAMCO Investors, Inc.'s shareholders $16,600  $3,535  $2,544  $22,679 
                 
Net income attributable to GAMCO Investors, Inc.'s shareholders                
per share:                
Basic $0.57  $0.12  $0.09  $0.78 
Diluted $0.55  $0.11  $0.08  $0.75 
  March 31, 2019 
          
  Reported  Impact of    
  GAAP  2016 DCCA  Non-GAAP 
ASSETS         
Cash and cash equivalents $64,389  $-  $64,389 
Investments in securities  31,623   -   31,623 
Receivable from brokers  3,529   -   3,529 
Investment advisory fees receivable  23,058   -   23,058 
Receivable from affiliates  4,435   -   4,435 
Deferred tax asset and income tax receivable  15,661   2,135   17,796 
Other assets  11,534   -   11,534 
Total assets $154,229  $2,135  $156,364 
             
LIABILITIES AND EQUITY            
Payable to brokers  478   -   478 
Income taxes payable and deferred tax liabilities  8,068   -   8,068 
Lease liability obligations  5,300   -   5,300 
Compensation payable  59,142   8,897   68,039 
Payable to affiliates  -   -   - 
Accrued expenses and other liabilities  30,196   -   30,196 
Sub-total  103,184   8,897   112,081 
             
5.875% Senior notes (due June 1, 2021)  24,174   -   24,174 
Total liabilities  127,358   8,897   136,255 
             
Equity            
GAMCO Investors, Inc. stockholders' equity            
Class A Common Stock  14   -   14 
Class B Common Stock  19   -   19 
Additional paid-in capital  14,769   -   14,769 
Retained earnings  302,139   (6,762)  295,377 
Accumulated other comprehensive income  (220)  -   (220)
Treasury stock, at cost  (289,850)  -   (289,850)
Total GAMCO Investors, Inc. stockholders' equity  26,871   (6,762)  20,109 
Total liabilities and equity $154,229  $2,135  $156,364 

  Nine Months Ended September 30, 2017 
     Impact of       
  Reported  First Half  Impact of    
  GAAP  2017 DCCA  2016 DCCA  Non-GAAP 
Revenues            
Investment advisory and incentive fees $228,942  $-  $-  $228,942 
Distribution fees and other income  32,916   -   -   32,916 
Total revenues  261,858   -   -   261,858 
Expenses                
Compensation  97,634   14,390   (9,174)  102,850 
Management fee  9,455   2,666   (2,172)  9,949 
Distribution costs  33,373   -   -   33,373 
Other operating expenses  15,900   -   -   15,900 
Total expenses  156,362   17,056   (11,346)  162,072 
                 
Operating income  105,496   (17,056)  11,346   99,786 
Other income (expense)                
Net gain (loss) from investments  2,867   -   -   2,867 
Interest and dividend income  1,765   -   -   1,765 
Interest expense  (8,269)  -   -   (8,269)
Shareholder-designated contribution  (3,857)  -   -   (3,857)
Total other expense, net  (7,494)  -   -   (7,494)
Income before income taxes  98,002   (17,056)  11,346   92,292 
Income tax provision  33,688   (6,594)  4,350   31,444 
Net income attributable to GAMCO Investors, Inc.'s shareholders $64,314  $(10,462) $6,996  $60,848 
                 
Net income attributable to GAMCO Investors, Inc.'s shareholders                
per share:                
Basic $2.22  $(0.36) $0.24  $2.10 
Diluted $2.14  $(0.34) $0.22  $2.02 
24
  Three Months Ended September 30, 2016 
          
  Reported  Impact of    
  GAAP  2016 DCCA  Non-GAAP 
Revenues         
  Investment advisory and incentive fees $75,952  $-  $75,952 
  Distribution fees and other income  11,769   -   11,769 
Total revenues  87,721   -   87,721 
Expenses            
  Compensation  21,233   10,885   32,118 
  Management fee  1,163   2,400   3,563 
  Distribution costs  11,568   -   11,568 
  Other operating expenses  5,681   -   5,681 
Total expenses  39,645   13,285   52,930 
             
Operating income  48,076   (13,285)  34,791 
Other income (expense)            
  Net gain from investments  55   -   55 
  Interest and dividend income  371   -   371 
  Interest expense  (3,155)  -   (3,155)
Total other expense, net  (2,729)  -   (2,729)
Income before income taxes  45,347   (13,285)  32,062 
Income tax provision  14,486   (5,075)  9,411 
Net income attributable to GAMCO Investors, Inc.'s shareholders $30,861  $(8,210) $22,651 
             
Net income attributable to GAMCO Investors, Inc.'s shareholders            
  per share:            
Basic $1.06  $(0.28) $0.78��
Diluted $1.03  $(0.27) $0.76 

  Nine Months Ended September 30, 2016 
          
  Reported  Impact of    
  GAAP  2016 DCCA  Non-GAAP 
Revenues         
  Investment advisory and incentive fees $219,594  $-  $219,594 
  Distribution fees and other income  33,456   -   33,456 
Total revenues  253,050   -   253,050 
Expenses            
  Compensation  62,130   32,016   94,146 
  Management fee  3,376   6,926   10,302 
  Distribution costs  32,786   -   32,786 
  Other operating expenses  14,993   -   14,993 
Total expenses  113,285   38,942   152,227 
             
Operating income  139,765   (38,942)  100,823 
Other income (expense)            
  Net gain from investments  518   -   518 
  Interest and dividend income  1,104   -   1,104 
  Interest expense  (9,729)  -   (9,729)
Total other expense, net  (8,107)  -   (8,107)
Income before income taxes  131,658   (38,942)  92,716 
Income tax provision  47,229   (14,811)  32,418 
Net income attributable to GAMCO Investors, Inc.'s shareholders $84,429  $(24,131) $60,298 
             
Net income attributable to GAMCO Investors, Inc.'s shareholders            
  per share:            
Basic $2.89  $(0.83) $2.06 
Diluted $2.85  $(0.81) $2.04 
25


  September 30, 2017 
        Impact of    
  Reported  Impact of  First Half    
  GAAP  2016 DCCA  2017 DCCA  Non-GAAP 
ASSETS            
Cash and cash equivalents $61,097  $-  $-  $61,097 
Investments in securities  101,425   -   -   101,425 
Receivable from brokers  1,342   -   -   1,342 
Investment advisory fees receivable  25,549   -   -   25,549 
Receivable from affiliates  4,784   -   -   4,784 
Income tax receivable  24,941   14,724   7,017   46,682 
Other assets  11,888    -   -   11,888 
Total assets $231,026  $14,724  $7,017  $252,767 
                 
LIABILITIES AND EQUITY                
Payable to brokers  13,311   -   -   13,311 
Income taxes payable and deferred tax liabilities  3,215   -   -   3,215 
Capital lease obligation  4,976   -   -   4,976 
Compensation payable  82,896   38,748   18,467   140,111 
Payable to affiliates  2,981   -   -   2,981 
Accrued expenses and other liabilities  24,134   -   -   24,134 
Sub-total  131,513   38,748   18,467   188,728 
                 
4.5% Convertible note (due August 15, 2021)  109,862   -   -   109,862 
AC 4% PIK Note (due November 30, 2020)  70,000   -   -   70,000 
5.875% Senior notes (due June 1, 2021)  24,138   -   -   24,138 
Total liabilities  335,513   38,748   18,467   392,728 
                 
Equity                
GAMCO Investors, Inc. stockholders' equity                
Class A Common Stock  14   -   -   14 
Class B Common Stock  19   -   -   19 
Additional paid-in capital  11,084   -   -   11,084 
Retained earnings (deficit)  143,026   (24,024)  (11,450)  107,552 
Accumulated other comprehensive income  12,365   -   -   12,365 
Treasury stock, at cost  (270,995)  -   -   (270,995)
Total GAMCO Investors, Inc. stockholders' equity (deficit)  (104,487)  (24,024)  (11,450)  (139,961)
Total liabilities and equity (deficit) $231,026  $14,724  $7,017  $252,767 

2622

The following discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and the notes thereto included in Item 1 to this report.

RESULTS OF OPERATIONS
 
Three Months Ended September 30, 2017March 31, 2019 Compared To Three Months Ended September 30, 2016March 31, 2018

(Unaudited; in thousands, except per share data)      
 2017  2016  2019  2018 
Revenues            
Investment advisory and incentive fees $77,328  $75,952  $65,888  $77,348 
Distribution fees and other income  11,013   11,769   8,448   10,149 
Total revenues  88,341   87,721   74,336   87,497 
Expenses                
Compensation  42,919   21,233   30,347   25,950 
Management fee  4,935   1,163   1,449   4,634 
Distribution costs  11,665   11,568   8,670   10,204 
Other operating expenses  5,429   5,681   5,257   5,453 
Total expenses  64,948   39,645   45,723   46,241 
Operating income  23,393   48,076   28,613   41,256 
Other income (expense)                
Net gain from trading securities  2,841   55 
Net loss from investments  (1,895)  (5,347)
Interest and dividend income  745   371   724   492 
Interest expense  (2,688)  (3,155)  (655)  (1,200)
Shareholder-designated contribution  (3,857)  - 
Total other expense, net  (2,959)  (2,729)  (1,826)  (6,055)
Income before income taxes  20,434   45,347   26,787   35,201 
Income tax provision  3,834   14,486   6,895   7,940 
Net income attributable to GAMCO Investors, Inc.'s shareholders $16,600  $30,861 
Net income $19,892  $27,261 
                
Net income attributable to GAMCO Investors, Inc.'s shareholders per share:        
Net income:        
Basic $0.57  $1.06  $0.70  $0.94 
                
Diluted $0.55  $1.03  $0.70  $0.94 

Overview

Net income for the quarter was $16.6$19.9 million, or $0.55$0.70 per fully diluted share, versus $30.9$27.3 million, or $1.03$0.94 per fully diluted share, in the prior year’s quarter.  There were several distinct items in both quarters thatThe quarter to quarter comparison was impacted results.  During the third quarter of 2017, we recorded an additional $1.7 million of stockby lower revenues and higher variable compensation partially offset by lower other expense, net of tax, $0.6 million of launch costs, net of tax, for a closed-end fund, $2.2 million of charitable contributions, net of tax, and an additional $6.1 million of expense, net of tax, for the 2016 DCCA and the First Half 2017 DCCA.  The 2017 quarter also included the recognition of $2.6 million in gains on securities donated, net of tax, and a $3.4 million income tax accrual reversal.  The 2016 third quarter included $8.2 million less in expense, net of tax, relating to the 2016 DCCA, an income tax reversal of $2.6 million and $0.3 million of expense, net of tax, from the launch of a closed-end fund.  Absent these distinct items, net income for 2017 was $21.2 million versus $20.4 million in 2016.net.

Revenues
 
Investment advisory and incentive fees for the thirdfirst quarter 20172019 were $77.3$65.9 million, 1.7% higher14.7% lower than the 20162018 comparative figure of $76.0$77.3 million.  Open-end fund revenues increaseddecreased by 0.6%15.2% to $33.8$27.9 million from $33.6$32.9 million in the thirdfirst quarter of 2016.2018.  Our closed-end fund revenues increased 5.2%decreased 7.6% to $16.2$15.8 million in the thirdfirst quarter 20172019 from $15.4$17.1 million in 2016 due to a 5.3% increase in non-performance fee based average AUM.2018.  Institutional and private wealth management account revenues, excluding incentive fees, which are generally based on beginning of quarter AUM, fell $0.2declined $5.3 million to $26.0$20.7 million from $26.2$26.0 million in the thirdfirst quarter of 2016.2018.  There were no incentive fees earned during the thirdfirst quarters of 20172019 or 2016.2018.  We recognize incentive fees only when the earning period for them is complete.  Revenues relating to the SICAV were $1.5 million in the first quarter of 2019 versus $1.3 million in the thirdfirst quarter of 2017 versus $0.8 million in the third quarter of 2016.2018.
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Open-end fund distribution fees and other income were $11.0$8.4 million for the thirdfirst quarter 2017,2019, a decrease of $0.8$1.7 million or 6.8%16.8% from $11.8$10.1 million in the prior year period, primarily due to lower average AUM in open-end equity funds that generate distribution fees.

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Expenses
 
Compensation costs, which are largely variable, were $42.9$30.3 million, or 102.4%16.5%, higher than prior year compensation costs of $21.2$26.0 million.  This is primarily due to the accounting for the vesting of the DCCAs.

Because the GAAP reportingThe amortization of the DCCAs granted to the CEO tracks vesting, compensation expense in the year of grant is lower than compensation expense in future periods to the extent that future periods contain the vesting of the prior year’s DCCA compensation on top of the normal compensation for the current year period which has not been deferred.  In 2016, the full amount of the compensation was deferred, and expense was recorded for the 25% vesting in that year.  In the first half of 2017, the ratable vesting continued for the 2016 compensation, and the new First Half 2017 DCCA grant resulted in compensation for the first six months of 2017 being deferred and expense being recorded for 33% vesting in that period.  In the third quarter 2017, there was no DCCA so 100% of the CEO’s compensation for that period was recorded together with the ratable portions of the vestings of the 2016 DCCA and the First Half 2017 DCCA.  So there is a compounding effect in future periods when there are both current period compensation that has not been deferred and prior period compensation that is being ratably vested.  Accordingly, this vesting schedule resulted in a $19.1$13.0 million increase in compensation year over year.  The CEO’s waiver of his compensation for January 1, 2019 through March 31, 2019 and March 1, 2018 through March 31, 2018 reduced compensation by $12.2 million and $4.9 million in thirdthe first quarter 2017 versus third quarter 2016.of 2019 and 2018, respectively.

The remainder of the quarter over quarter increase was comprised of a $1.1$0.4 million increase in variable compensation related to the increased levels of AUM, a $0.6 million increase in fixed compensation, and a $0.9 million net increase in stock compensation expense, inclusive of the $1.8a $2.9 million incurreddecrease in the third quarter of 2017 for the acceleration of the GBL RSAs.variable compensation and a $1.1 million increase in fixed compensation.

Management fee expense, which is wholly variable and based on pretax income, increaseddecreased to $4.9$1.4 million in the thirdfirst quarter of 20172019 from $1.2$4.6 million in the 20162018 period.  Once again,$1.8 million of this increase is primarilydecrease was due to the accountingCEO waiver for 2018 only being in effect for March 2018 while the waiver for 2019 was in effect for the vesting of the DCCAs.entire first quarter.  The DCCAs affected management fee expense, which is part of the CEO’s DCCAs, in a fashion similar fashion to the compensation expense with the vesting schedule resulting in a $4.0$1.4 million increasedecrease in management fee expense in the thirdfirst quarter 20172019 as compared with the thirdfirst quarter 2016.  The remaining $0.3 decline in the year-over-year comparison is due to the decline in pre-tax income on which the management fee is based.2018.

Distribution costs were $11.7$8.7 million, an increasea decrease of $0.1$1.5 million or 0.9%14.7% from $11.6$10.2 million in the prior year’s period.

Other operating expenses were $5.4$5.3 million in the thirdfirst quarter of 2017,2019, a decrease of $0.3$0.2 million, or 5.3%3.6%, from $5.7$5.5 million in the thirdfirst quarter of 2016. The research fee paid to G.research increased to $0.8 million in the third quarter of 2017 from $0.4 million in the prior year quarter. Legal expense was lower by $0.7 million in the 2017 period.2018.

Operating income for the thirdfirst quarter of 20172019 was $23.4$28.6 million, a decrease of $24.7$12.7 million, or 51.4%30.8%, from the $48.1$41.3 million in the thirdfirst quarter of 2016.2018.  Operating income, as a percentage of revenues, was 26.5%38.5% in the 20172019 quarter as compared to 54.8%47.2% in the 20162018 quarter.

Other expenseincome (expense)
 
Total other expense,income (expense), net was an expense of $3.0$1.8 million for the thirdfirst quarter 20172019 versus an expense of $2.7$6.1 million in the prior year’s quarter.  Net gainslosses from trading securitiesinvestments were $2.8$1.9 million in the thirdfirst quarter of 20172019 versus gainslosses of $55,000$5.3 million in the thirdfirst quarter of 2016.2018.  Interest and dividend income increased to $0.7 million in the third quarter 2017 from $0.4$0.5 million in the third quarter 2016.2018 quarter.  Interest expense decreased $0.5 million to $2.7was $0.7 million in the thirdfirst quarter of 2017 from $3.22019 versus $1.2 million in the thirdfirst quarter of 2016 as gross debt at September 30, 2017 was $29.9 million lower as debt fell from $233.9 million at September 30, 2016 to $204.0 million at September 30, 2017.2018.
 
The effective tax rates (“ETR”) for the three months ended September 30, 2017March 31, 2019 and September 30, 2016March 31, 2018 were 18.8%25.7% and 31.9%22.6%, respectively.  The ETR for the three months ended September 30, 2017 was higher by 3.6% than it would have otherwise been as a resultfirst quarter of a reduction to previously recorded stock compensation tax benefits. The current year quarter’s ETR benefited from the reversal2019 included an accrual of certain tax accruals totaling $3.4$1.5 million as well as a $1.0 million tax benefit related to charitable contributions while the prior year quarter benefited from a reversal of $2.6 millionan adjustment in an uncertain tax accruals due to the conclusion of a state audit.position.  The ETR absent this accrual was 20.4%.

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Nine Months Ended September 30, 2017 Compared To Nine Months Ended September 30, 2016

(Unaudited; in thousands, except per share data)   
  2017  2016 
Revenues      
Investment advisory and incentive fees $228,942  $219,594 
Distribution fees and other income  32,916   33,456 
Total revenues  261,858   253,050 
Expenses        
Compensation  97,634   62,130 
Management fee  9,455   3,376 
Distribution costs  33,373   32,786 
Other operating expenses  15,900   14,993 
Total expenses  156,362   113,285 
Operating income  105,496   139,765 
Other income (expense)        
Net gain from trading securities  2,867   518 
Interest and dividend income  1,765   1,104 
Interest expense  (8,269)  (9,729)
Shareholder-designated contribution  (3,857)  - 
Total other expense, net  (7,494)  (8,107)
Income before income taxes  98,002   131,658 
Income tax provision  33,688   47,229 
Net income attributable to GAMCO Investors, Inc.'s shareholders $64,314  $84,429 
         
Net income attributable to GAMCO Investors, Inc.'s shareholders per share:        
Basic $2.22  $2.89 
         
Diluted $2.14  $2.85 

Overview

Net income for the first nine months was $64.3 million, or $2.14 per fully diluted share, versus $84.4 million, or $2.85 per fully diluted share, in the prior year’s first nine months.  There were several distinct items in both periods that impacted results.  During 2017, we recorded an additional $4.0 million of stock compensation expense, net of tax, $0.6 million of launch costs, net of tax, for a closed-end fund, and $2.2 million of charitable contributions, net of tax.  The 2017 quarter also included a $3.4 million reduction of expense, net of tax, for the 2016 DCCA and the First Half 2017 DCCA, the recognition of $2.6 million in gains on securities donated, net of tax, and a $3.4 million income tax accrual reversal.  The 2016 third quarter included $24.1 million less in expense, net of tax benefit, relating to the 2016 DCCA, a tax reversal of $2.6 million and $0.3 million of expense, net of tax benefit, from the launch of a closed-end fund.  Absent these distinct items, net income for 2017 was $61.7 million versus $58.0 million in 2016.

Revenues
Investment advisory and incentive fees for the nine months ended September 2017 were $228.9 million, 4.2% higher than the 2016 comparative figure of $219.6 million.  Open-end fund revenues increased by 2.2% to $99.7 million from $97.6 million in the first nine months of 2017.  Our closed-end fund revenues increased 11.0% to $47.4 million in the nine months ended September 2017 from $42.7 million in 2016 due to a 7.4% increase in non-performance fee based average AUM.  Institutional and private wealth management account revenues, excluding incentive fees, which are generally based on beginning of quarter AUM, rose $1.3 million to $78.6 million from $77.3 million in the first nine months of 2016.  There were no incentive fees earned during the first nine months of 2017 or 2016.  We recognize incentive fees only when the earning period for them is complete.  Revenues relating to the SICAV were $3.2 million in the nine months ended September 2017 versus $1.9 million in the nine months ended September 2016.
Open-end fund distribution fees and other income were $32.9 million for the first nine months of 2017, a decrease of $0.6 million or 1.8% from $33.5 million in the prior year period, primarily due to lower average AUM in open-end equity funds that generate distribution fees.

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Expenses
Compensation costs, which are largely variable, were $97.6 million or 57.2% higher than prior year compensation costs of $62.1 million.  This is primarily due to the accounting for the vesting of the DCCAs.

Because the GAAP reporting of the DCCAs granted to the CEO tracks vesting, compensation expense in the year of grant is lower than compensation expense in future periods to the extent that future periods contain the vesting of the prior year’s DCCA compensation on top of the normal compensation for the current year period which has not been deferred.  In 2016, the full amount of the compensation was deferred, and expense was recorded for the 25% vesting in that year.  In the first six months of 2017, the ratable vesting continued for the 2016 compensation, and the new First Half 2017 DCCA grant resulted in compensation for the first six months of 2017 being deferred and expense being recorded for 33% vesting in that period.  In the third quarter 2017, there was no DCCA, so 100% of the CEO’s compensation for that period was recorded together with the ratable portions of the vestings of the 2016 DCCA and the First Half 2017 DCCA.  So there is a compounding effect in future periods when there are both current period compensation that has not been deferred and prior period compensation that is being ratably vested.  Accordingly, this vesting schedule resulted in a $26.8 million increase in compensation expense in the first nine months of 2017 versus the comparable 2016 period.

The remainder of the period over period increase was comprised of a $4.2 million increase in variable compensation related to the increased levels of AUM, a $0.6 million increase in fixed compensation, and a $3.9 million net increase in stock compensation expense, inclusive of the $5.5 million incurred in 2017 for the acceleration of the GBL and AC RSAs.

Management fee expense, which is wholly variable and based on pretax income, increased to $9.5 million in the nine months ended September 30, 2017 from $3.4 million in the 2016 period.  Once again, this increase is primarily due to the accounting for the vesting of the DCCAs.  The DCCAs affected management fee expense, which is part of the CEO’s DCCAs, in a similar fashion to the compensation expense with the vesting schedule resulting in a $6.4 million increase in management fee expense in the first nine months of 2017 as compared with the comparable period in 2016.  The remaining $0.3 decline in the year-over-year comparison is due to the decline in pre-tax income on which the management fee is based.
Distribution costs were $33.4 million, an increase of $0.6 million or 1.8% from $32.8 million in the prior year’s period.
Other operating expenses were $15.9 million in the first nine months of 2017, an increase of $0.9 million, or 6%, from $15.0 million in the first nine months of 2016. The research fee paid to G.research increased to $2.3 million in the nine months ending September 30, 2017 from $1.1 million in the prior year period.

Operating income for the first nine months of 2017 was $105.5 million, a decrease of $34.3 million, or 24.5%, from the $139.8 million in the first nine months of 2016.  Operating income, as a percentage of revenues, was 40.3% in the 2017 period as compared to 55.2% in the 2016 period.

Other expense
Total other expense, net was an expense of $7.5 million for the nine months ended September 30, 2017 versus an expense of $8.1 million in the prior year’s period.  Net gains from trading securities increased to $2.9 million in the first nine months of 2017 from $0.5 million in the prior year period.  Interest and dividend income increased to $1.8 million in the first nine months of 2017 from $1.1 million in the first nine months of 2016.  Interest expense decreased $1.4 million to $8.3 million in the first nine months of 2017 from $9.7 million in the first nine months of 2016 as gross debt at September 30, 2017 was $204.0 million down from the $233.9 million at September 30, 2016.
The ETR for the nine months ended September 30, 2017 and September 30, 2016 were 34.4% and 35.9%, respectively.  The ETR for the nine months ended September 30, 2017 was higher by 1.0% than it would have otherwise been as a result of a reduction to previously recorded stock compensation tax benefits. The current year quarter’s ETR benefited from the reversal of certain tax accruals totaling $3.6 million as well as a $1.0 million tax benefit related to charitable contributions while the prior year quarter benefited from a reversal of $2.6 million in tax accruals due to the conclusion of a state audit.


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LIQUIDITY AND CAPITAL RESOURCES

Our principal assets are highly liquid in nature and consist of cash and cash equivalents, short-term investments and securities held for investment purposes.  Cash and cash equivalents are comprised primarily of 100% U.S. Treasury money market funds managed by GAMCO.

Summary cash flow data is as follows:

 Nine months ended  Three months ended 
 September 30,  March 31, 
 2017  2016  2019  2018 
Cash flows provided by / (used in) operations : (in thousands) 
Cash flows provided by/(used in) continuing operations : (in thousands) 
Operating activities $65,229  $105,212  $29,440  $53,020 
Investing activities  (3,611)  185   (3,136)  - 
Financing activities  (40,318)  (85,292)  (3,112)  (43,360)
Increase in cash and cash equivalents from operations  21,300   20,105 
Increase in cash and cash equivalents from continuing operations  23,192   9,660 
Effect of exchange rates on cash and cash equivalents  (15)  28   (5)  (98)
Net increase  21,285   20,133   23,187   9,562 
Cash and cash equivalents at beginning of period  39,812   13,719   41,202   17,821 
Cash and cash equivalents at end of period $61,097  $33,852  $64,389  $27,383 

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Cash and liquidity requirements have historically been met through cash generated by operating income and our borrowing capacity.  We filed a “shelf” registration statement with the SEC that was declared effective in 2015 which, among other things,April 2018.  The shelf provides us opportunistic flexibility to sell any combination of senior and subordinate debt securities, convertible debt securities, equity securities (including common and preferred stock), and other securities up to a total amount of $500 million.  The shelf is available through April 2018,2021, at which time it may be renewed.

On February 23, 2018, the Company announced that its CEO elected to waive all of his compensation that he would otherwise have been entitled to for the period from March 1, 2018 through December 31, 2018.  On December 26, 2018, the Company announced that the CEO elected to continue to waive all of his compensation that he would otherwise have been entitled to for the period from January 1, 2019 to March 31, 2019.  As a result of this waiver, there was $13.9 million and $6.6 million of compensation and management fee waived by the CEO for the three months ended March 31, 2019 and March 31, 2018, respectively.  On July 2, 2018, the First Half 2017 DCCA vested in accordance with the terms of the agreement and a cash payment in the amount of $28.3 million was made to the CEO.  On April 1, 2019, the Fourth Quarter 2017 DCCA vested in accordance with the terms of the agreement and a cash payment in the amount of $11.0 million was made to the CEO.

At September 30, 2017,March 31, 2019, we had total unrestricted cash and cash equivalents of $61.0$64.4 million, an increase of $21.2$23.2 million from December 31, 20162018 primarily due to the Company’s operating activities described below.  We also held $0.1 million of cash equivalents and $59.9 million of investments in securities in an escrow account for the benefit of the Convertible Note holder.  Total debt outstanding at September 30, 2017March 31, 2019 was $204$24.2 million, consisting of $70 million of a 4% PIK Note due November 30, 2020, $110 million of a 4.5% convertible note due August 15, 2021, and $24.2 million of 5.875% senior notes due 2021.  It is anticipated that the majority of our free cash flow will go towards servicing our debt andthe deferred compensation payable foras well as share buybacks in the next few years.near future.
 
For the ninethree months ended September 30, 2017,March 31, 2019, cash provided by operating activities was $65.2$29.4 million, a decrease of $40.0$23.6 million from cash provided in the prior year period of $105.2$53.0 million.  Cash was provided through an increase in deferred income taxes of $5.4 million, an increase of $0.4 million in stock based compensation payable of $33.5expense, and $0.9 million a decreasefrom all other sources.   Reducing cash was an increase in investment advisory fees receivable of $13.7$8.9 million, an increasea decrease in net income of $7.4 million, a decrease income taxes payable and deferred tax liabilities of $9.4 million, an increase of $3.9 million in stock based compensation expense, an increase in payable to brokers of $3.1 million, an increase in payable to affiliates of $1.6 million and $1.7 million from other sources.  Reducing cash was an increase in investments in trade securities of $60.2$4.1 million, a decrease in net incomecompensation payable of $20.1$2.7 million, an increase in income tax receivable and deferred tax assets of $11.7$3.4 million, an increase in deferred income taxesinvestments in trading securities of $5.3$2.7 million, and a decrease in payables to accrued expenses and other liabilities of $8.0 million and an increase in receivable from brokers of $1.6affiliates $1.1 million. Cash used in investing activities in the first three months of 2019 was $3.6$3.1 million, including $3.4 million in purchased of available for sale securities offset by $0.3 million in proceeds from the sale of available for sale securities.  Cash used in financing activities in the first three months of 2019 was $3.1 million, including $2.5 million paid for the purchase of treasury stock and $0.6 million paid in dividends.

For the three months ended March 31, 2018, cash provided by operating activities was $53.0 million.  Cash used in financing activities in the first ninethree months of 20172018 was $40.3 million, including $8.6 million paid for the purchase of treasury stock, and $1.7 million paid in dividends and $30.0 million for the partial repayment for the 4% PIK Note.

For the nine months ended September 30, 2016,$43.4 million.  There was no cash provided by operating activities was $105.2 million. Cash provided byor used in investing activities related to proceeds from sales of available for sale securities was $0.2 million in the first ninethree months of 2016.  Cash used in financing activities in the first nine months of 2016 was $85.3 million.2018.

Based upon our current level of operations and anticipated growth, we expect that our current cash balances plus cash flows from operating activities and our borrowing capacity will be sufficient to finance our working capital needs for the foreseeable future.  We have no material commitments for capital expenditures.

We have one broker-dealer, G.distributors, which is subject to certain net capital requirements.  G.distributors computes itits net capital under the alternative method permitted, which requires minimum net capital of the greater of $250,000 or 2% of the aggregate debit items in the reserve formula for those broker-dealers subject to Rule 15c3-3 promulgated under the Securities Exchange Act of 1934.  The requirement was $250,000 for the broker-dealer at September 30, 2017.March 31, 2019.  At September 30, 2017,March 31, 2019, G.distributors had net capital, as defined, of approximately $3.8 million, exceeding the regulatory requirement by approximately $3.5 million.  Net capital requirements for our affiliated broker-dealer may increase in accordance with rules and regulations to the extent they engage in other business activities.
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Market Risk
 
Our primary market risk exposure is to changes in equity prices and interest rates.  Since approximately 96%95% of our AUM are equities, our financial results are subject to equity market risk as revenues from our investment management services are sensitive to stock market dynamics.  In addition, returns from our proprietary investment portfolio are exposed to interest rate and equity market risk.

The Company’s Chief Investment Officer oversees the proprietary investment portfolios and allocations of proprietary capital among the various strategies.  The Chief Investment Officer and the Board of Directors review the proprietary investment portfolios throughout the year.  Additionally, the Company monitors its proprietary investment portfolios to ensure that they are in compliance with the Company’s guidelines.

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Equity Price Risk
 
The Company earns substantially all of its revenue as advisory and distribution fees from affiliated open-end and closed-end funds and Institutional and Private Wealth Management assets.  Such fees represent a percentage of AUM, and the majority of these assets are in equity investments.  Accordingly, since revenues are proportionate to the value of those investments, a substantial increase or decrease in equity markets overall will have a corresponding effect on the Company's revenues.

With respect to our proprietary investment activities, investments in securities of $101.4$31.6 million, $37.3$33.8 million and $32.9$31.4 million at September 30, 2017,March 31, 2019, December 31, 20162018 and September 30, 2016,March 31, 2018, respectively, included investments in common stocks of $41.3$30.4 million, $37.2$32.4 million and $32.9$31.3 million, respectively, and investments in closed-end funds of $0.1 million, $0.1$30,000, $1.3 million and $0,$0.1 million, respectively.  Of the $41.3$30.4 million, $37.2$32.4 million and $32.9$31.3 million, invested in common stocks at September 30, 2017,March 31, 2019, December 31, 20162018 and September 30, 2016,March 31, 2018, respectively, $41.3$19.9 million, $37.1$18.8 million and $32.9$31.3 million, respectively, was related to our investment in Westwood Holdings Group Inc.  Securities sold, not yet purchased are financial instruments purchased under agreements to resell and financial instruments sold under agreement to repurchase.  These financial instruments are stated at fair value and are subject to market risks resulting from changes in price and volatility.  At September 30, 2017,March 31, 2019, December 31, 20162018 and September 30, 2016,March 31, 2018, there were no securities sold, not yet purchased.

The following table provides a sensitivity analysis for our investments in equity securities as of September 30, 2017March 31, 2019 and December 31, 2016.2018.  The sensitivity analysis assumes a 10% increase or decrease in the value of these investments (in thousands):

  Fair Value Fair Value   Fair Value Fair Value 
  assuming assuming   assuming assuming 
  10% decrease in 10% increase in   10% decrease in 10% increase in 
(unaudited)Fair Value equity prices equity prices Fair Value equity prices equity prices 
At September 30, 2017:      
At March 31, 2019      
Equity price sensitive investments, at fair value $101,425  $91,282  $111,567  $31,623  $28,460  $34,785 
At December 31, 2016:            
At December 31, 2018            
Equity price sensitive investments, at fair value $37,285  $33,557  $41,014  $33,789  $30,410  $37,168 

Interest Rate Risk
 
Our exposure to interest rate risk results, principally, from our investment of excess cash in a sponsored money market fund that holds U.S. Government securities.  These investments are primarily short term in nature, and the carrying value of these investments generally approximates fair value.  Based on September 30, 2017,the March 31, 2019 cash and cash equivalent balance of $61.1$64.3 million, a 1% increase in interest rates would increase our interest income by $0.6 million annually.  Given that our current return on these cash equivalent investments in this low interest rate environment is approximately 0.98% annually an analysis ofwhile a 1% decrease is not meaningful.would reduce our interest income by $0.6 million annually

Critical Accounting Policies and Estimates
 
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.  Actual results could differ significantly from those estimates.  See Note A and the Company’s Critical Accounting Policies in Management’s Discussion and Analysis of Financial Condition and Results of Operations in GAMCO’s 20162018 Annual Report on Form 10-K filed with the SEC on March 7, 201711, 2019 for details on Critical Accounting Policies.


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Item 3.  Quantitative and Qualitative Disclosures About Market Risk
 
In the normal course of its business, GAMCO is exposed to risk of loss due to fluctuations in the securities market and general economy. Management is responsible for identifying, assessing and managing market and other risks. 

Our exposure to pricing risk in equity securities is directly related to our role as financial intermediary and advisor for AUM in our affiliated open-end and closed-end funds, institutional and private wealth management accounts, and investment partnerships as well as our proprietary investment and trading activities.  At September 30, 2017,March 31, 2019, we had equity investments of $101.4$31.6 million.  We may alter our investment holdings from time to time in response to changes in market risks and other factors considered appropriate by management.  The equity securities investment portfolio is at fair value and will move in line with the equity markets.  The tradingequity securities investment portfolio changes are recorded as net gain (loss) from investments in the condensed consolidated statements of income while the available for sale portfolio changes are recorded in accumulated other comprehensive income in the condensed consolidated statements of financial condition.income.

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Item 4.  Controls and Procedures
 
We evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2017.March 31, 2019.  Disclosure controls and procedures as defined under the Exchange Act Rule 13a-15(e), are designed to ensure that the information we are required to disclose in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time period specified in SEC rules and regulations.  Disclosure controls and procedures include, without limitation, controls and procedures accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Co-Chief AccountingCo-Principal Financial Officers (“CAOs”PFOs”), to allow timely decisions regarding required disclosure.  Our CEO and CAOsPFOs participated in this evaluation and concluded that, as of the date of September 30, 2017,March 31, 2019, our disclosure controls and procedures were effective.
 
There have been no changes in our internal control over financial reporting as defined by Rule 13a-15(f) that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
Forward-Looking Information

Our disclosure and analysis in this report contain some forward-looking statements.  Forward-looking statements give 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, there can be no assurance that our actual results will not differ materially from what we expect or believe. Some of the factors that could cause our actual results to differ from our expectations or beliefs include, without limitation: the adverse effect from a decline in the securities markets;markets that adversely affect our assets under management; a decline in the performance of our products; a general downturn in the economy; changes in government policy or regulation; changes in our ability to attract or retain key employees; and unforeseen costs and other effects related to legal proceedings or investigations of governmental and self-regulatory organizations.organizations; and the ongoing impacts of the Tax Cuts and Jobs Act with respect to tax rates and the non-deductibility of certain portions of NEO compensation. We also direct your attention to any more specific discussions of risk contained in our FormForms 10-K and 10-Q and other public filings.  We are providing these statements as permitted by the Private Litigation Reform Act of 1995. We do not undertake to update publicly any forward-looking statements if we subsequently learn that we are unlikely to achieve our expectations or if we receive any additional information relating to the subject matters of our forward-looking statements.


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Part II:  Other Information

Item 1.Legal Proceedings

From time to time, the Company may be named in legal actions and proceedings.  These actions may seek substantial or indeterminate compensatory as well as punitive damages or injunctive relief.  The Company is also subject to governmental or regulatory examinations or investigations.  The examinations or investigations could result in adverse judgments, settlements, fines, injunctions, restitutions or other relief.  For any such matters, the condensed consolidated financial statements include the necessary provisions for losses that the Company believes are probable and estimable.  Furthermore, the Company evaluates whether there exist losses which may be reasonably possible and will, if material, make the necessary disclosures.  However, management believes such amounts, both those that are probable and those that are reasonably possible, are not material to the Company’s financial condition, operations or cash flows at September 30, 2017.March 31, 2019.



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Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information with respect to the repurchase of Class A Common Stock of GAMCO during the three months ended September 30, 2017:March 31, 2019:

       (c) Total Number of  (d) Maximum 
  (a) Total (b) Average  Shares Repurchased as  Number of Shares 
  Number of Price Paid Per  Part of Publicly  That May Yet Be 
  Shares Share, net of  Announced Plans  Purchased Under 
Period Repurchased Commissions  or Programs  the Plans or Programs 
7/01/17 - 7/31/17  -  $-   -   574,648 
8/01/17 - 8/31/17  113,121   29.53   113,121   886,879 
9/01/17 - 9/30/17  18,359   28.74   18,359   868,520 
Totals  131,480  $29.42   131,480     
        (c) Total Number of  (d) Maximum 
  (a) Total  (b) Average  Shares Repurchased as  Number of Shares 
  Number of  Price Paid Per  Part of Publicly  That May Yet Be 
  Shares  Share, net of  Announced Plans  Purchased Under 
Period Repurchased  Commissions  or Programs  the Plans or Programs 
1/01/19 - 1/31/19  13,926  $18.61   13,926   850,884 
2/01/19 - 2/28/19  49,154   20.64   49,154   801,730 
3/01/19 - 3/31/19  63,274   20.11   63,274   738,456 
Totals  126,354  $20.15   126,354     

In August 2017, the Board of Directors increased the buyback authorization by 425,352 shares of GBL Class A stock.  Our stock repurchase program is not subject to an expiration date.
Item 6.(a) Exhibits


 10.20
Restricted Stock Unit Agreement, dated September 30, 2017, by and between GAMCO Investors, Inc. and Mario J. Gabelli. (Incorporated by reference to Exhibit 99.1 to the Company’s Report on Form 8-K dated September 30, 2017 filed with the Securities and Exchange Commission on October 5, 2017).

 31.1 31.1
Certification of CEO pursuant to Rule 13a-14(a).

 31.2
Certification of co-CAOco-PFO pursuant to Rule 13a-14(a).
   
 31.3
Certification of co-CAOco-PFO pursuant to Rule 13a-14(a).

 32.1
Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 32.2
Certification of co-CAOsco-PFOs pursuant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.

101.INS 
XBRL Instance Document
   
101.SCH 
XBRL Taxonomy Extension Schema Document
   
101.CAL 
XBRL Taxonomy Extension Calculation Linkbase Document
   
101.DEF 
XBRL Taxonomy Extension Definition Linkbase Document
   
101.LAB 
XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE 
XBRL Taxonomy Extension Presentation Linkbase Document


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

GAMCO INVESTORS, INC.
(Registrant)

By: /s/ Kieran Caterina By: /s/ Diane M. LaPointe 
Name: Kieran CaterinaName: Diane M. LaPointe
Title: Co-Chief AccountingCo-Principal Financial OfficerTitle: Co-Chief AccountingCo-Principal Financial Officer
  
Date: NovemberMay 7, 20172019Date: NovemberMay 7, 20172019

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