ASSOCIATED CAPITAL GROUP, INC. Reports Third Quarter Results

·	Successful completion of spin-off from GAMCO Investors, Inc.

·	Strong balance sheet gives flexibility to invest in external and internal growth opportunities

·	Pro Forma book value per share of $30.53

·	Adjusted Economic book valuea per share of $40.32

·	Pro Forma Third Quarter Loss of $0.28 per diluted share

·	Assets Under Management at $1.085 billion

·	Board authorizes repurchase of 500,000 shares

Rye, New York, December 15, 2015 – Associated Capital Group, Inc. (“AC Group” or “the Company”) (NYSE: AC) reported financial results for the third quarter ended September 30, 2015. AC Group consists of the alternative asset management and institutional brokerage businesses that were formerly part of GAMCO Investors, Inc. (“GAMCO”), as well as cash and other assets. The financial results are the first quarterly filing for the Company since its successful spin-off from GAMCO.

On November 30, 2015, GAMCO distributed all the outstanding shares of each class of common stock of AC Group on a pro rata one-for-one basis to the holders of each class of GAMCO’s common stock.  Prior to the distribution, GAMCO contributed the 93.9% interest it held in Gabelli Securities, Inc. (“GSI”) and certain cash and other assets to AC Group. GSI and its wholly owned subsidiary, Gabelli & Partners, LLC ("Gabelli & Partners"), collectively serve as general partners or investment managers to investment funds including limited partnerships, offshore companies and separate accounts. The Company operates its institutional research services business through G.research, LLC ("G.research"), a wholly owned subsidiary of GSI. G.research is a broker-dealer registered under the Securities Exchange Act of 1934, as amended. Through G.research, the Company provides institutional research services and acts as an underwriter.

^a See definition of Adjusted Economic book value included in the discussion of non-GAAP financial measures on page 5 of this earnings release.

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Results of Operations

AC Group had 2015 third quarter revenues of $4.7 million, a Pro Forma net loss of $7.0 million, resulting in a Pro Forma net loss per share of $0.28 per diluted share.  On a comparable basis, revenues were $4.9 million, and the Pro Forma net loss was $3.0 million, resulting in a Pro Forma net loss per share of $0.12 per diluted share in the third quarter of 2014.

(a) Shares outstanding consist of 24,849 non-RSA shares and 689 RSA shares.  554 RSAs are outstanding at November 30, 2015.

Assets Under Management

														% Change From
		September 30,				June 30,				September 30,				June 30,				September 30,
		2015				2015				2014				2015				2014
Event Merger Arbitrage (a)		$	860			$	855			$	806				0.6				6.7
Event-Driven Value			159				133				136				19.5				16.9
Other			66				76				77				(13.2	)			(14.3	)
Total AUM		$	1,085			$	1,064			$	1,019				2.0				6.5

 

(a)  Includes $39 million, $40 million and $70 million of seed capital at September 30, 2015, June 30, 2015 and September 30, 2014, respectively.

 

Business and Investment Highlights

 

About AC Group

AC Group owns a 93.9% interest in GSI. GSI and its wholly owned subsidiary, Gabelli & Partners, collectively serve as general partners or investment managers to investment funds including limited partnerships, offshore companies  and separate accounts. The Company primarily manages assets in equity event-driven value strategies, across a range of risk and event arbitrage portfolios. The business earns fees from its advisory assets, and income (loss) from proprietary trading and investment portfolio activities. The advisory fees include management and incentive fees. Management fees are largely based on a percentage of the portfolios assets under management. Incentive fees are based on the percentage of profits derived from the investment performance delivered to clients' invested assets.

The Company operates its institutional research services business through G.research, a wholly owned subsidiary of GSI. G.research is a broker-dealer registered under the Securities Exchange Act of 1934, as amended. Through G.research, it provides institutional research services and acts as an underwriter. G.research is regulated by the Financial Industry Regulatory Authority.

The Company also manages proprietary capital in the form of cash and cash equivalents, investments in securities, registered investment companies, and partnerships.

NOTES ON NON-GAAP FINANCIAL MEASURES

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Table I

 

The following unaudited pro forma financial information as of September 30, 2015 is based on AC Group’s historical financial statements as adjusted to reflect the impact of certain transactions that were undertaken as part of the spin-off from GAMCO, including the sale of 4,393,055 shares of GAMCO Class A stock to GSI in return for the $150 million GSI Note; the subsequent contribution by GAMCO of the GSI Note to AC Group; and the issuance of the $250 million GAMCO Note to AC Group.

ASSOCIATED CAPITAL GROUP, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENTS OF FINANCIAL CONDITION
As of September 30, 2015
(Dollars in thousands, except per share data)
						Pro Forma
		Historical				Adjustments					Pro Forma
ASSETS
Cash and cash equivalents		$	363,055			$	-				$	363,055
Investments			308,890				150,000		(a)			458,890
Receivable from brokers			52,595				-					52,595
Other receivables			2,193				-					2,193
Other assets			4,136				-					4,136
Total assets		$	730,869			$	150,000				$	880,869
LIABILITIES AND EQUITY
Payable to brokers		$	49,365			$	-				$	49,365
Income taxes payable and deferred tax liabilities			8,832				-					8,832
Compensation payable			5,046				-					5,046
Securities sold short, not yet purchased			5,577				-					5,577
Accrued expenses and other liabilities			26,472				-					26,472
Sub-total			95,292				-					95,292
Redeemable noncontrolling interests			6,018				-					6,018
Equity			624,792				400,000		(b) (c)			1,024,792
Note receivable from GAMCO			-				(250,000	)	(c)			(250,000	)
Accumulated comprehensive income			4,767				-					4,767
Total equity			629,559				150,000					779,559
Total liabilities and equity		$	730,869			$	150,000				$	880,869

(a)	The sale of 4,393,055 shares of GAMCO Class A stock to GSI in return for the $150 million GSI Note.

(b)	The subsequent contribution by GAMCO of the GSI Note to AC Group.

(c)	The issuance of the $250 million GAMCO Note to AC Group.

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Table III

(a)	Compensation expenses for increased personnel costs in relation to being a stand-alone public company.

(b)	Additional costs of being a stand-alone public company including board of director expenses, transfer agent fees, stock exchange listing fees and increased legal and audit fees.

(c)	Interest income on the $250 million GAMCO Note that was issued to AC Group in connection with the spin-off.

(d)	Dividend income on the 4,393,055 shares of GAMCO that were sold to GSI as part of the spin-off.

(e)	Elimination of the management fee contra-expense which will not exist when the Company is a stand-alone public company.

(f)	Tax adjustments based on the adjustments above using the applicable statutory tax rate.

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(a)	Compensation expenses for increased personnel costs in relation to being a stand-alone public company.

(b)	Additional costs of being a stand-alone public company including board of director expenses, transfer agent fees, stock exchange listing fees and increased legal and audit fees.

(c)	Interest income on the $250 million GAMCO Note that was issued to AC Group in connection with the spin-off.

(d)	Dividend income on the 4,393,055 shares of GAMCO that were sold to GSI as part of the spin-off.

(e)	Elimination of the management fee contra-expense which will not exist when the Company is a stand-alone public company.

(f)	Tax adjustments based on the adjustments above using the applicable statutory tax rate.

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SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

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

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

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