RYE, N.Y.--(BUSINESS WIRE)--GAMCO Investors, Inc. (“GAMCO” or the “Company”) (NYSE:GBL) today reported financial results for the third quarter including revenues of $87.7 million, net income of $30.9 million and earnings of $1.03 per diluted share. On a comparable continuing operations basis, revenues were $92.2 million, net income was $22.5 million, and earnings were $0.89 per diluted share in the third quarter of 2015.
| Financial Highlights | ||||||||||||||||||||||||||||||
| Third Quarter | YTD | |||||||||||||||||||||||||||||
| ($'s in 000's except AUM and per share data) | 2016 (a) | 2015 (b) | 2016 (a) | 2015 (b) | ||||||||||||||||||||||||||
| AUM - end of period (in millions) | $ | 39,581 | $ | 38,490 | $ | 39,581 | $ | 38,490 | ||||||||||||||||||||||
| AUM - average (in millions) | 39,883 | 41,586 | 38,727 | 44,231 | ||||||||||||||||||||||||||
| Revenues | 87,721 | 92,160 | 253,050 | 290,659 | ||||||||||||||||||||||||||
| Operating income | 48,076 | 37,276 | 139,765 | 114,847 | ||||||||||||||||||||||||||
| Operating margin | 54.8 | % | 40.4 | % | 55.2 | % | 39.5 | % | ||||||||||||||||||||||
| Other expense, net | (2,729 | ) | (1,190 | ) | (8,107 | ) | (3,771 | ) | ||||||||||||||||||||||
| Income before income taxes | 45,347 | 36,086 | 131,658 | 111,076 | ||||||||||||||||||||||||||
| Effective tax rate | 31.9 | % | 37.8 | % | 35.9 | % | 37.5 | % | ||||||||||||||||||||||
| Income from continuing operations | 30,861 | 22,451 | 84,429 | 69,374 | ||||||||||||||||||||||||||
| Loss from discontinued operations | - | (7,482 | ) | - | (5,528 | ) | ||||||||||||||||||||||||
| Net income | 30,861 | 14,969 | 84,429 | 63,846 | ||||||||||||||||||||||||||
| Income per share - continuing operations | $ | 1.03 | $ | 0.89 | $ | 2.85 | $ | 2.74 | ||||||||||||||||||||||
| Loss per share - discontinued operations | $ | - | (0.30 | ) | $ | - | (0.23 | ) | ||||||||||||||||||||||
| Net income per share | $ | 1.03 | $ | 0.59 | $ | 2.85 | $ | 2.51 | ||||||||||||||||||||||
| Shares outstanding at September 30 (c) | 29,548 | 25,538 | 29,548 | 25,538 | ||||||||||||||||||||||||||
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| (a) | See page 3 for discussion of deferred compensation impact. | |
| (b) | Adjusted for spin-off of AC. | |
| (c) | Shares outstanding consist of 29,121 non-RSA shares and 427 RSA shares at September 30, 2016 and 24,849 non-RSA shares and 689 RSA shares at September 30, 2015. | |
Assets Under Management
| % Change From | |||||||||||||||||
| September 30, | December 31, | September 30, | December 31, | September 30, | |||||||||||||
| 2016 | 2015 | 2015 | 2015 | 2015 | |||||||||||||
| Equities: | |||||||||||||||||
| Open-end Funds | $ | 13,799 | $ | 13,811 | $ | 14,075 | (0.1 | %) | (2.0 | %) | |||||||
| Closed-end Funds | 7,178 | 6,492 | 6,205 | 10.6 | 15.7 | ||||||||||||
| Institutional & PWM - direct | 13,245 | 13,366 | 13,190 | (0.9 | ) | 0.4 | |||||||||||
| Institutional & PWM - sub-advisory | 3,542 | 3,401 | 3,302 | 4.1 | 7.3 | ||||||||||||
| SICAV | 42 | 37 | 36 | 13.5 | 16.7 | ||||||||||||
| Total Equities | 37,806 | 37,107 | 36,808 | 1.9 | 2.7 | ||||||||||||
| Fixed Income: | |||||||||||||||||
| Money-Market Fund | 1,738 | 1,514 | 1,637 | 14.8 | 6.2 | ||||||||||||
| Institutional & PWM | 37 | 38 | 45 | (2.6 | ) | (17.8 | ) | ||||||||||
| Total Fixed Income | 1,775 | 1,552 | 1,682 | 14.4 | 5.5 | ||||||||||||
| Total Assets Under Management | $ | 39,581 | $ | 38,659 | $ | 38,490 | 2.4 | 2.8 | |||||||||
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| Institutional & PWM - direct includes $286 million, $226 million and $227 million of Money Market Fund AUM at September 30, 2016, December 31, 2015 and September 30, 2015, respectively. |
Average AUM were $39.9 billion for the third quarter of 2016 versus $38.9 billion for the second quarter of 2016 and $41.6 billion for the third quarter of 2015.
Our third quarter 2016 increase in AUM versus June 30, 2016 AUM of $39.3 billion was due to market appreciation of $1.0 billion partially offset by net outflows of $0.5 billion and distributions of $0.2 billion.
Revenues
- Total revenues for the third quarter of 2016 were $87.7 million, compared with $92.2 million in the prior year, reflecting investment advisory fees based on a lower level of assets and a decline in distribution and other income.
- Investment advisory fees were $76.0 million in the third quarter of 2016 versus $79.9 million in the third quarter of 2015. Revenues from our open-end and closed-end funds tracked our average AUM in the funds. Lower billable assets at June 30, 2016 in Institutional and Private Wealth Management accounted for $26.2 million of the revenues.
- Distribution fees from our open-end equity funds and other income were $11.8 million for the third quarter 2016, down from $12.3 million in the prior year quarter.
Operating Income – Third Quarter – Operating margin 54.8% vs. 40.4%
Operating income, which is net of management fee expense, increased 29.0% or $10.8 million, to $48.1 million in the third quarter of 2016 versus $37.3 million in the prior year period. Lower revenues of $4.4 million in the third quarter were offset by reduced variable compensation expense of $12.5 million. The December 2015 Restricted Stock Units (“RSU”) agreement with Mr. Gabelli reduced variable compensation by $13.3 million in the 2016 third quarter. There were $0.6 million of launch costs incurred during the third quarter of 2016 and $0.5 million of incremental RSA expense in the third quarter of 2015. After adjusting for removal of these items in the 2016 and 2015 periods, operating income was $35.4 million in the third quarter of 2016 versus $37.7 million, $2.3 million less than the comparable prior year period. Operating margin after these adjustments decreased to 40.4% versus 40.9% in the prior year period. See Notes to Non-GAAP measures on page 7 for further information.
Operating income before management fee was $49.2 million in the third quarter 2016 versus $41.3 million in the third quarter 2015. Operating margin before management fee was 56.1% versus 44.8% in the third quarter of 2015. After adjusting for the removal of the items in both the 2016 and 2015 periods, operating income before management fee was $38.4 million in the third quarter of 2016 as compared to $41.8 million in the third quarter of 2015 while operating margins before management fee was 43.7% vs. 45.3% in the prior year quarter. See Notes on Non-GAAP measures on page 7 for further information. Further information regarding Non-GAAP measures is included in Notes on Non-GAAP Financial Measures and Table V included elsewhere herein.
Other expense
We recognized $2.7 million in net other expenses in the 2016 quarter versus net other expenses of $1.2 million in the third quarter of 2015, principally due to the higher interest expense of $3.2 million in the 2016 quarter versus $1.8 million in the third quarter of 2015. In 2016, the AC 4% PIK Note issued in November 2015 was outstanding as was the 4.5% convertible note issued in August 2016, offset in part by the tender of $78 million of the Senior Notes in December 2015. Investment income for 2016 decreased $0.2 million to $0.4 million in 2016 vs. $0.6 million in 2015.
Income Taxes
The Company’s effective tax rate (“ETR”) for the quarter ended September 30, 2016 was 31.9% versus 37.8% for the quarter ended September 30, 2015. The current quarter benefited from the reversal of tax accruals related to the closing out of a state audit.
Deferred compensation
The GAAP-mandated treatment of the December 2015 deferred compensation agreement materially contributed to the year over year third quarter 2016 results. In 2016, certain variable compensation will be in the form of RSUs determined by the volume-weighted average price of the Company’s Class A Stock. Margins for the third quarter 2016 therefore are not comparable with prior year periods. Under GAAP, only 25% of this deferred compensation expense is being recognized in the current year with the remainder amortized as expense in 2017, 2018, and 2019. Expressed another way, and assuming no renewal of the deferred compensation agreement, the 2016 third quarter (as well as the balance of 2016) benefit from a reduction of 75% of the compensation, and 2017, 2018, and 2019 will, in turn, be impacted by an additional 25% of the compensation from 2016 in each year. The Board’s decision to grant these RSUs in December 2015 and thereby defer the cash payment of certain 2016 variable compensation until January 1, 2020 was to provide the Company with greater financial flexibility.
The balance sheet is also impacted; the compensation payable at September 30, 2016 and in each future period-end of 2016 is only 25% of the full amount of the 2016 compensation that will be due once the RSUs are fully vested. At September 30, 2016, the amount of unrecognized compensation was $38.9 million.
On an economic basis, there was $18.1 million of compensation subject to the deferred compensation agreement for the third quarter of 2016. Of this amount, only $4.8 million was recorded under GAAP, with the remaining $13.3 million to be expensed over the vesting period. Absent the deferred compensation arrangement during the third quarter of 2016, total compensation costs were $32.1 million, management fee expense was $3.6 million, income tax expense was $9.6 million, net income was $22.4 million and earnings per fully diluted share was $0.75.
The following tables show a reconciliation of our results for the third quarter of 2016 and our balance sheet at September 30, 2016 between the GAAP basis and the non-GAAP adjusted basis of the deferred compensation (the RSU grant) described above. We believe this adjusted measure, which removes the impact of the deferred compensation agreement, is useful in evaluating the ongoing operating results of the Company and increases the comparability of the results with prior periods.
| For the three months ended September 30, 2016 | ||||||||||||||
| Impact of | ||||||||||||||
| Reported | Deferred | |||||||||||||
| GAAP | Compensation | Non-GAAP | ||||||||||||
| Total revenues | $ | 87,721 | $ | - | $ | 87,721 | ||||||||
| Compensation costs | 21,233 | 10,885 | 32,118 | |||||||||||
| Distribution costs | 11,568 | - | 11,568 | |||||||||||
| Other operating expenses | 5,681 | - | 5,681 | |||||||||||
| Total expenses | 38,482 | 10,885 | 49,367 | |||||||||||
| Operating income before management fee | 49,239 | (10,885 | ) | 38,354 | ||||||||||
| Other expense, net | (2,729 | ) | - | (2,729 | ) | |||||||||
| Income before management fee and income taxes | 46,510 | (10,885 | ) | 35,625 | ||||||||||
| Management fee expense | 1,163 | 2,400 | 3,563 | |||||||||||
| Income before income taxes | 45,347 | (13,285 | ) | 32,062 | ||||||||||
| Income tax expense | 14,486 | (5,075 | ) | 9,411 | ||||||||||
| Net income attributable to GAMCO Investors, Inc. | $ | 30,861 | $ | (8,210 | ) | $ | 22,651 | |||||||
| Net income per share attributable to GAMCO Investors, Inc.: | ||||||||||||||
| Basic | $ | 1.06 | $ | (0.28 | ) | $ | 0.78 | |||||||
| Diluted | $ | 1.03 | $ | (0.27 | ) | $ | 0.76 | |||||||
| September 30, 2016 | ||||||||||||||
| Impact of | ||||||||||||||
| Reported | Deferred | |||||||||||||
| GAAP | Compensation | Non-GAAP | ||||||||||||
| ASSETS | ||||||||||||||
| Other assets | $ | 110,013 | $ | - | $ | 110,013 | ||||||||
| Income tax receivable | 11,293 | 14,811 | 26,104 | |||||||||||
| Total assets | $ | 121,306 | $ | 14,811 | $ | 136,117 | ||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| Compensation payable | $ | 31,469 | $ | 38,942 | $ | 70,411 | ||||||||
| Accrued expenses and other liabilities | 54,979 | - | 54,979 | |||||||||||
| Sub-total | 86,448 | 38,942 | 125,390 | |||||||||||
| 5.875% Senior notes (due June 1, 2021) | 24,115 | - | 24,115 | |||||||||||
| 4.5% Convertible note (due August 15, 2021) | 109,826 | - | 109,826 | |||||||||||
| 4% PIK note (due November 30, 2020) | 100,000 | - | 100,000 | |||||||||||
| Total debt | 233,941 | - | 233,941 | |||||||||||
| Total liabilities | 320,389 | 38,942 | 359,331 | |||||||||||
| GAMCO Investors, Inc.'s stockholders' equity (deficit) | (199,083 | ) | (24,131 | ) | (223,214 | ) | ||||||||
| Total liabilities and equity | $ | 121,306 | $ | 14,811 | $ | 136,117 | ||||||||
The following table further illustrates the effect that the GAAP accounting for the compensation deferral will have on our results for 2016 through 2019 under certain assumptions. For simplicity in arriving at the 2016 through 2019 illustrative effects, we have assumed that the third quarter RSU expense is predictive of the full year results but there is no assurance that this will be the case. Please see the note regarding forward-looking information on page 13 of this release.
Effect of recording RSU on a GAAP basis:
| 2016 | 2017 | 2018 | 2019 | ||||||
| RSU expense | (52,228 | ) | 17,409 | 17,409 | 17,409 | ||||
Business and Investment Highlights
- On August 15, 2016, the Company issued a $110 million five year convertible note to Cascade Investment, L.L.C. in a private transaction. The note has a coupon of 4.5% and is convertible into GBL Class A common stock at $55 per share.
- On July 1, 2016, Gabelli Dividend & Income Trust completed the offering of $100 million of 5.25% Series G Cumulative Preferred Stock. The preferred stock is perpetual, non-callable for five years, and was issued at $25 per share.
- On August 9, 2016, the Bancroft Fund Ltd. completed the offering of $30 million of 5.375% Series A Cumulative Preferred Stock. The preferred stock is perpetual, non-callable for five years, and was issued at $25 per share.
- On September 2, 2016, GAMCO completed the initial public offering of The Gabelli Go Anywhere Trust, the Company’s 15th closed-end fund. This newly organized closed-end fund initially traded on the NYSE MKT as a $100 combination consisting of one preferred share at $40 and three common shares at $20 each under the symbol GGO.C. This innovative offering demonstrates the flexibility of the closed-end fund structure. Separate trading on the NYSE MKT for the common shares (“GGO”) and the Series A Preferred shares (“GGO.A”) commenced on November 2, 2016.
Balance Sheet
During the quarter, we issued $110 million of five year 4.5% convertible notes and paid down $150 million of the $250 million PIK Note due November 30, 2020. We ended the quarter with cash and investments of $66.7 million and debt of $233.9 million. We have $500 million available on our universal shelf registration. Together with earnings from operations, the shelf provides us with flexibility to do acquisitions, lift-outs, seed new investment strategies, and co-invest, as well as to fund shareholder compensation, including share repurchases and dividends.
Shareholder Compensation
During the quarter ended September 30, 2016, we returned $7.6 million of our earnings to shareholders through dividends and stock repurchases. We repurchased 223,811 shares at an average price of $31.50 per share for a total investment of $7.0 million and distributed $0.6 million in dividends. Since our IPO, in February 1999, we have returned $1.9 billion in total to shareholders comprised of $1.0 billion of spin-offs, $488 million in the form of dividends and $436 million through stock buybacks of 9,819,499 shares.
On November 4, 2016, GAMCO’s Board of Directors declared a regular quarterly dividend of $0.02 per share payable on December 27, 2016 to its Class A and Class B shareholders of record on December 13, 2016.
About GAMCO Investors, Inc.
GAMCO Investors, Inc., through its subsidiaries, manages private advisory accounts (GAMCO Asset Management Inc.) and open-end funds and closed-end funds (Gabelli Funds, LLC).
NOTES ON NON-GAAP FINANCIAL MEASURES
| A. | Operating income before management fee expense is used by management to evaluate its business operations. We believe this measure is useful in illustrating the operating results of GAMCO Investors, Inc. (the “Company”) as management fee expense is based on pre-tax income before management fee expense, which includes non-operating items including investment gains and losses from the Company’s proprietary investment portfolio and interest expense. The reconciliation of operating income before management fee expense to operating income is provided in Table V. | ||
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B. |
Adjusted operating income and adjusted operating income before management fee expense are used by management to evaluate its ongoing business operations. We believe these adjusted measures, which remove these items, are useful in evaluating the ongoing operating results of the Company as the nature of these items reduces the comparability of the results with prior periods and is not indicative of results for future periods. |
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| 3rd Quarter | YTD September | |||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||
|
Operating income before management fee |
$ | 49,239 | $ | 41,332 | $ | 143,141 | $ | 127,232 | ||||||||||||
|
Adjustments: |
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Add back: |
Incremental RSA expense |
- | 458 | - | 1,665 | |||||||||||||||
|
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Costs to launch Closed-end fund | 638 | - | 638 | 1,000 | |||||||||||||||
|
Deduct: |
Variable compensation reduction from RSU |
(10,886 | ) | - | (32,016 | ) | - | |||||||||||||
|
Adjusted operating income before management fee |
38,991 | 41,790 | 111,763 | 129,897 | ||||||||||||||||
| Adjusted operating margin before management fee | 44.4 | % | 45.3 | % | 44.2 | % | 44.7 | % | ||||||||||||
| 3rd Quarter | YTD September | |||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||
| Operating income | $ | 48,076 | $ | 37,276 | $ | 139,765 | $ | 114,847 | ||||||||||||
| Adjustments: | ||||||||||||||||||||
|
Add back: |
Incremental RSA expense |
- | 458 | - | 1,665 | |||||||||||||||
| Costs to launch Closed-end fund | 638 | - | 638 | 1,000 | ||||||||||||||||
|
Deduct: |
Variable compensation reduction from RSU |
(13,285 | ) | - | (38,942 | ) | - | |||||||||||||
| Adjusted operating income | 35,429 | 37,734 | 101,461 | 117,512 | ||||||||||||||||
| Adjusted operating margin | 40.4 | % | 40.9 | % | 40.1 | % | 40.4 | % | ||||||||||||
| The Company reported Assets Under Management as follows (in millions): | |||||||||||||||||||
| Table I: Fund Flows - 3rd Quarter 2016 | |||||||||||||||||||
| Fund | |||||||||||||||||||
| Market | distributions, | ||||||||||||||||||
| June 30, | appreciation/ | Net cash | net of | September 30, | |||||||||||||||
| 2016 | (depreciation) | flows | reinvestments | 2016 | |||||||||||||||
| Equities: | |||||||||||||||||||
| Open-end Funds | $ | 13,981 | $ | 259 | $ | (416 | ) | $ | (25 | ) | $ | 13,799 | |||||||
| Closed-end Funds | 6,917 | 131 | 257 | (127 | ) | 7,178 | |||||||||||||
| Institutional & PWM - direct | 13,326 | 429 | (510 | ) | - | 13,245 | |||||||||||||
| Institutional & PWM - sub-advisory | 3,459 | 186 | (103 | ) | - | 3,542 | |||||||||||||
| SICAV | 40 | 1 | 1 | - | 42 | ||||||||||||||
| Total Equities | 37,723 | 1,006 | (771 | ) | (152 | ) | 37,806 | ||||||||||||
| Fixed Income: | |||||||||||||||||||
| Money-Market Fund | 1,518 | 1 | 219 | - | 1,738 | ||||||||||||||
| Institutional & PWM | 32 | - | 5 | - | 37 | ||||||||||||||
| Total Fixed Income | 1,550 | 1 | 224 | - | 1,775 | ||||||||||||||
| Total Assets Under Management | $ | 39,273 | $ | 1,007 | $ | (547 | ) | $ | (152 | ) | $ | 39,581 | |||||||
| Table II: Fund Flows - Year to date September 2016 | |||||||||||||||||||
| Fund | |||||||||||||||||||
| Market | distributions, | ||||||||||||||||||
| December 31, | appreciation/ | Net cash | net of | September 30, | |||||||||||||||
| 2015 | (depreciation) | flows | reinvestments | 2016 | |||||||||||||||
| Equities: | |||||||||||||||||||
| Open-end Funds | $ | 13,811 | $ | 1,204 | $ | (1,170 | ) | $ | (46 | ) | $ | 13,799 | |||||||
| Closed-end Funds | 6,492 | 619 | 437 | (370 | ) | 7,178 | |||||||||||||
| Institutional & PWM - direct | 13,366 | 904 | (1,025 | ) | - | 13,245 | |||||||||||||
| Institutional & PWM - sub-advisory | 3,401 | 314 | (173 | ) | - | 3,542 | |||||||||||||
| SICAV | 37 | 3 | 2 | - | 42 | ||||||||||||||
| Total Equities | 37,107 | 3,044 | (1,929 | ) | (416 | ) | 37,806 | ||||||||||||
| Fixed Income: | |||||||||||||||||||
| Money-Market Fund | 1,514 | 2 | 222 | - | 1,738 | ||||||||||||||
| Institutional & PWM | 38 | - | (1 | ) | - | 37 | |||||||||||||
| Total Fixed Income | 1,552 | 2 | 221 | - | 1,775 | ||||||||||||||
| Total Assets Under Management | $ | 38,659 | $ | 3,046 | $ | (1,708 | ) | $ | (416 | ) | $ | 39,581 | |||||||
| Table III | ||||||||||
| GAMCO INVESTORS, INC. | ||||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||
| (Dollars in thousands, except per share data) | ||||||||||
| For the Quarter Ended | ||||||||||
| September 30, | ||||||||||
| 2016 | 2015 | |||||||||
| Investment advisory and incentive fees | $ | 75,952 | $ | 79,900 | ||||||
| Distribution fees and other income | 11,769 | 12,260 | ||||||||
| Total revenues | 87,721 | 92,160 | ||||||||
| Compensation costs | 21,233 | 34,022 | ||||||||
| Distribution costs | 11,568 | 12,363 | ||||||||
| Other operating expenses | 5,681 | 4,443 | ||||||||
| Total expenses | 38,482 | 50,828 | ||||||||
| Operating income before management fee | 49,239 | 41,332 | ||||||||
| Investment income | 426 | 625 | ||||||||
| Interest expense | (3,155 | ) | (1,815 | ) | ||||||
| Other expense, net | (2,729 | ) | (1,190 | ) | ||||||
| Income before management fee and income taxes | 46,510 | 40,142 | ||||||||
| Management fee expense | 1,163 | 4,056 | ||||||||
| Income before income taxes | 45,347 | 36,086 | ||||||||
| Income tax expense | 14,486 | 13,635 | ||||||||
| Income from continuing operations | 30,861 | 22,451 | ||||||||
| Loss from discontinued operations, net of taxes | - | (7,482 | ) | |||||||
| Net income attributable to GAMCO Investors, Inc. | $ | 30,861 | $ | 14,969 | ||||||
| Net income/(loss) per share attributable to GAMCO Investors, Inc.: | ||||||||||
| Basic - Continuing operations | $ | 1.06 | $ | 0.90 | ||||||
| Basic - Discontinued operations | - | (0.30 | ) | |||||||
| Basic - Total | $ | 1.06 | $ | 0.60 | ||||||
| Diluted - Continuing operations | $ | 1.03 | $ | 0.89 | ||||||
| Diluted - Discontinued operations | - | (0.30 | ) | |||||||
| Diluted - Total | $ | 1.03 | $ | 0.59 | ||||||
| Weighted average shares outstanding: | ||||||||||
| Basic | 29,185 | 24,947 | ||||||||
| Diluted | 30,406 | 25,241 | ||||||||
| Actual shares outstanding (a) | 29,548 | 25,538 | ||||||||
| Notes: |
| (a) Includes 427,290 and 688,550 of RSAs, respectively. |
| See GAAP to non-GAAP reconciliation on page 11. |
| Table IV | ||||||||||
| GAMCO INVESTORS, INC. | ||||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||
| (Dollars in thousands, except per share data) | ||||||||||
| For the Nine Months Ended | ||||||||||
| September 30, | ||||||||||
| 2016 | 2015 | |||||||||
| Investment advisory and incentive fees | $ | 219,594 | $ | 251,269 | ||||||
| Distribution fees and other income | 33,456 | 39,390 | ||||||||
| Total revenues | 253,050 | 290,659 | ||||||||
| Compensation costs | 62,130 | 109,177 | ||||||||
| Distribution costs | 32,786 | 40,093 | ||||||||
| Other operating expenses | 14,993 | 14,157 | ||||||||
| Total expenses | 109,909 | 163,427 | ||||||||
| Operating income before management fee | 143,141 | 127,232 | ||||||||
| Investment income | 1,622 | 1,804 | ||||||||
| Interest expense | (9,729 | ) | (5,575 | ) | ||||||
| Other expense, net | (8,107 | ) | (3,771 | ) | ||||||
| Income before management fee and income taxes | 135,034 | 123,461 | ||||||||
| Management fee expense | 3,376 | 12,385 | ||||||||
| Income before income taxes | 131,658 | 111,076 | ||||||||
| Income tax expense | 47,229 | 41,702 | ||||||||
| Income from continuing operations | 84,429 | 69,374 | ||||||||
| Loss from discontinued operations, net of taxes | - | (5,528 | ) | |||||||
| Net income attributable to GAMCO Investors, Inc. | $ | 84,429 | $ | 63,846 | ||||||
| Net income/(loss) per share attributable to GAMCO Investors, Inc.: | ||||||||||
| Basic - Continuing operations | $ | 2.89 | $ | 2.77 | ||||||
| Basic - Discontinued operations | - | (0.22 | ) | |||||||
| Basic - Total | $ | 2.89 | $ | 2.55 | ||||||
| Diluted - Continuing operations | $ | 2.85 | $ | 2.74 | ||||||
| Diluted - Discontinued operations | - | (0.23 | ) | |||||||
| Diluted - Total | $ | 2.85 | $ | 2.51 | ||||||
| Weighted average shares outstanding: | ||||||||||
| Basic | 29,222 | 25,047 | ||||||||
| Diluted | 29,811 | 25,337 | ||||||||
| Actual shares outstanding (a) | 29,548 | 25,538 | ||||||||
| Notes: |
| (a) Includes 427,290 and 688,550 of RSAs, respectively. |
| See GAAP to non-GAAP reconciliation on page 11. |
| Table V | ||||||||||||||||||||||||||||||||||||||
| GAMCO INVESTORS, INC. | ||||||||||||||||||||||||||||||||||||||
| UNAUDITED QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||||||||||||||||||||||||
| 2016 | 2015 | |||||||||||||||||||||||||||||||||||||
| 1st | 2nd | 3rd | 1st | 2nd | 3rd | 4th | ||||||||||||||||||||||||||||||||
| Quarter | Quarter | Quarter | YTD | Quarter | Quarter | Quarter | Quarter | Full Year | ||||||||||||||||||||||||||||||
| Income Statement Data: | ||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 81,385 | $ | 83,944 | $ | 87,721 | $ | 253,050 | $ | 99,806 | $ | 98,693 | $ | 92,160 | $ | 90,317 | $ | 380,976 | ||||||||||||||||||||
| Expenses | 35,363 | 36,064 | 38,482 | 109,909 | 57,081 | 55,518 | 50,828 | 54,097 | 217,524 | |||||||||||||||||||||||||||||
| Operating income before | ||||||||||||||||||||||||||||||||||||||
| management fee | 46,022 | 47,880 | 49,239 | 143,141 | 42,725 | 43,175 | 41,332 | 36,220 | 163,452 | |||||||||||||||||||||||||||||
| Investment income | 591 | 605 | 426 | 1,622 | 541 | 638 | 625 | 4,304 | 6,108 | |||||||||||||||||||||||||||||
| Interest expense | (3,406 | ) | (3,168 | ) | (3,155 | ) | (9,729 | ) | (1,905 | ) | (1,855 | ) | (1,815 | ) | (3,061 | ) | (8,636 | ) | ||||||||||||||||||||
| Shareholder-designated contribution | - | - | - | - | - | - | - | (6,396 | ) | (6,396 | ) | |||||||||||||||||||||||||||
| Other expense, net | (2,815 | ) | (2,563 | ) | (2,729 | ) | (8,107 | ) | (1,364 | ) | (1,217 | ) | (1,190 | ) | (5,153 | ) | (8,924 | ) | ||||||||||||||||||||
| Income before management | ||||||||||||||||||||||||||||||||||||||
| fee and income taxes | 43,207 | 45,317 | 46,510 | 135,034 | 41,361 | 41,958 | 40,142 | 31,067 | 154,528 | |||||||||||||||||||||||||||||
| Management fee expense | 1,080 | 1,133 | 1,163 | 3,376 | 4,135 | 4,194 | 4,056 | 3,118 | 15,503 | |||||||||||||||||||||||||||||
| Income before income taxes | 42,127 | 44,184 | 45,347 | 131,658 | 37,226 | 37,764 | 36,086 | 27,949 | 139,025 | |||||||||||||||||||||||||||||
| Income tax expense | 16,102 | 16,641 | 14,486 | 47,229 | 14,078 | 13,989 | 13,635 | 10,024 | 51,726 | |||||||||||||||||||||||||||||
| Income from continuing operations | 26,025 | 27,543 | 30,861 | 84,429 | 23,148 | 23,775 | 22,451 | 17,925 | 87,299 | |||||||||||||||||||||||||||||
| Income/(loss) from discontinued | ||||||||||||||||||||||||||||||||||||||
| operations, net of taxes | - | - | - | - | 1,628 | 326 | (7,482 | ) | 1,641 | (3,887 | ) | |||||||||||||||||||||||||||
| Net income attributable to | ||||||||||||||||||||||||||||||||||||||
| GAMCO Investors, Inc. | $ | 26,025 | $ | 27,543 | $ | 30,861 | $ | 84,429 | $ | 24,776 | $ | 24,101 | $ | 14,969 | $ | 19,566 | $ | 83,412 | ||||||||||||||||||||
| Net income per share | ||||||||||||||||||||||||||||||||||||||
| attributable to GAMCO | ||||||||||||||||||||||||||||||||||||||
| Investors, Inc.: | ||||||||||||||||||||||||||||||||||||||
| Basic - Continuing operations | $ | 0.89 | $ | 0.94 | $ | 1.06 | $ | 2.89 | $ | 0.92 | $ | 0.95 | $ | 0.90 | $ | 0.68 | $ | 3.43 | ||||||||||||||||||||
| Basic - Discontinued operations | - | - | - | - | 0.07 | 0.01 | (0.30 | ) | 0.06 | (0.15 | ) | |||||||||||||||||||||||||||
| Basic - Total | $ | 0.89 | $ | 0.94 | $ | 1.06 | $ | 2.89 | $ | 0.99 | $ | 0.96 | $ | 0.60 | $ | 0.74 | $ | 3.28 | ||||||||||||||||||||
| Diluted - Continuing operations | $ | 0.88 | $ | 0.93 | $ | 1.03 | $ | 2.85 | $ | 0.91 | $ | 0.94 | $ | 0.89 | $ | 0.67 | $ | 3.40 | ||||||||||||||||||||
| Diluted - Discontinued operations | - | - | - | - | 0.06 | 0.01 | (0.30 | ) | 0.06 | (0.15 | ) | |||||||||||||||||||||||||||
| Diluted - Total | $ | 0.88 | $ | 0.93 | $ | 1.03 | $ | 2.85 | $ | 0.97 | $ | 0.95 | $ | 0.59 | $ | 0.73 | $ | 3.24 | ||||||||||||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||||||||||||||||||||||
| Basic | 29,247 | 29,234 | 29,185 | 29,222 | 25,132 | 25,065 | 24,947 | 26,547 | 25,425 | |||||||||||||||||||||||||||||
| Diluted | 29,684 | 29,522 | 30,406 | 29,811 | 25,414 | 25,358 | 25,241 | 26,813 | 25,711 | |||||||||||||||||||||||||||||
| Reconciliation of non-GAAP | ||||||||||||||||||||||||||||||||||||||
| financial measures to GAAP: | ||||||||||||||||||||||||||||||||||||||
| Operating income before | ||||||||||||||||||||||||||||||||||||||
| management fee | 46,022 | 47,880 | 49,239 | 143,141 | 42,725 | 43,175 | 41,332 | 36,220 | 163,452 | |||||||||||||||||||||||||||||
| Deduct: management fee expense | 1,080 | 1,133 | 1,163 | 3,376 | 4,135 | 4,194 | 4,056 | 3,118 | 15,503 | |||||||||||||||||||||||||||||
| Operating income | $ | 44,942 | $ | 46,747 | $ | 48,076 | $ | 139,765 | $ | 38,590 | $ | 38,981 | $ | 37,276 | $ | 33,102 | $ | 147,949 | ||||||||||||||||||||
| Operating margin before | ||||||||||||||||||||||||||||||||||||||
| management fee | 56.5 | % | 57.0 | % | 56.1 | % | 56.6 | % | 42.8 | % | 43.7 | % | 44.8 | % | 40.1 | % | 42.9 | % | ||||||||||||||||||||
| Operating margin after | ||||||||||||||||||||||||||||||||||||||
| management fee | 55.2 | % | 55.7 | % | 54.8 | % | 55.2 | % | 38.7 | % | 39.5 | % | 40.4 | % | 36.7 | % | 38.8 | % | ||||||||||||||||||||
| Table VI | |||||||||||||
| GAMCO INVESTORS, INC. | |||||||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | |||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||
| September 30, | December 31, | September 30, | |||||||||||
| 2016 | 2015 | 2015 | |||||||||||
| ASSETS | |||||||||||||
| Cash and cash equivalents | $ | 33,852 | $ | 13,719 | $ | 62,561 | |||||||
| Investments | 32,889 | 32,979 | 34,098 | ||||||||||
| Receivable from brokers | 344 | 1,091 | 1,157 | ||||||||||
| Other receivables | 32,429 | 37,252 | 55,577 | ||||||||||
| Income tax receivable | 10,634 | 6,787 | 2,409 | ||||||||||
| Other assets | 11,120 | 12,071 | 9,791 | ||||||||||
| Assets of discontinued operations | - | - | 706,523 | ||||||||||
| Total assets | $ | 121,268 | $ | 103,899 | $ | 872,116 | |||||||
| LIABILITIES AND EQUITY | |||||||||||||
| Payable to brokers | $ | 10,203 | $ | 12 | $ | 533 | |||||||
| Income taxes payable and deferred tax liabilities | 164 | 4,823 | 5,963 | ||||||||||
| Compensation payable | 31,469 | 24,426 | 83,700 | ||||||||||
| Securities sold short, not yet purchased | - | 129 | - | ||||||||||
| Accrued expenses and other liabilities | 44,574 | 41,739 | 37,811 | ||||||||||
| Liabilities of discontinued operations | - | - | 66,614 | ||||||||||
| Sub-total | 86,410 | 71,129 | 194,621 | ||||||||||
| 5.875% Senior notes (due June 1, 2021) | 24,115 | 24,097 | 99,447 | ||||||||||
| 4.5% Convertible note (due August 15, 2021) | 109,826 | - | - | ||||||||||
| 4% PIK note (due November 30, 2020) | 100,000 | 250,000 | - | ||||||||||
| Loan from GGCP (due December 28, 2016) | - | 35,000 | - | ||||||||||
| 0% Subordinated Debentures (due December 31, 2015) (a) | - | - | 6,750 | ||||||||||
| Total debt | 233,941 | 309,097 | 106,197 | ||||||||||
| Total liabilities | 320,351 | 380,226 | 300,818 | ||||||||||
| Redeemable noncontrolling interests of discontinued operations | - | - | 6,018 | ||||||||||
| GAMCO Investors, Inc.'s stockholders' equity (deficit) | (199,083 | ) | (276,327 | ) | 562,645 | ||||||||
| Noncontrolling interests | - | - | 2,635 | ||||||||||
| Total equity (deficit) | (199,083 | ) | (276,327 | ) | 565,280 | ||||||||
| Total liabilities and equity | $ | 121,268 | $ | 103,899 | $ | 872,116 | |||||||
| (a) The 0% Subordinated Debentures due December 31, 2015 have a face value of $0.0 million, $0.0 million and $6.9 million, respectively. |
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
The financial results set forth in this press release are preliminary. Our disclosure and analysis in this press release, which do not present historical information, contain “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements convey our current expectations or forecasts of future events. You can identify these statements because they do not relate strictly to historical or current facts. They use words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning. They also appear in any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance of our products, expenses, the outcome of any legal proceedings, and financial results. Although we believe that we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know about our business and operations, the economy and other conditions, there can be no assurance that our actual results will not differ materially from what we expect or believe. Therefore, you should proceed with caution in relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance.
Forward-looking statements involve a number of known and unknown risks, uncertainties and other important factors, some of which are listed below, that are difficult to predict and could cause actual results and outcomes to differ materially from any future results or outcomes expressed or implied by such forward-looking statements. Some of the factors that could cause our actual results to differ from our expectations or beliefs include a decline in the securities markets that adversely affect our assets under management, negative performance of our products, the failure to perform as required under our investment management agreements, a general downturn in the economy that negatively impacts our operations. We also direct your attention to the more specific discussions of these and other risks, uncertainties and other important factors contained in our Form 10-K and other public filings. Other factors that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We do not undertake to update publicly any forward-looking statements if we subsequently learn that we are unlikely to achieve our expectations whether as a result of new information, future developments or otherwise, except as may be required by law.