FORM 10-K/A GAMCO Investors, Inc. - Gabelli

The table below represents for various prices, the weighted average characteristics of outstanding employee stock options at December 31, 2006.
Exercise Price Options Outstanding
Weighted average
remaining contractual life
Options currently
exercisable
Exercise Price of options
currently exercisable
$ 16.00 6,000 3.08 6,000 $ 16.00
$ 16.28 10,025 2.08 10,025 $ 16.28
$ 28.95 74,800 6.17 74,800 $ 28.95
$ 29.00 22,000 6.42 22,000 $ 29.00
$ 31.62 20,250 4.08 20,250 $ 31.62
$ 39.55 10,000 9.33 - N/A
$ 39.65 40,000 7.42 40,000 $ 39.65
$ 44.90 10,000 8.83 - N/A
The weighted average estimated fair value of the options granted at their grant date using the Black-Scholes option-pricing model was as follows:
2004 2005 2006
Weighted average fair value of
options granted: $ 13.04 $ 11.99 $ 11.64
Assumptions made:
Expected volatility 33% 23% 23%
Risk free interest rate 2.50% 3.50% 4.89%
Expected life 5 years 5 years 5 years
Dividend yield 0.20% 0.27% 0.30%
The expected volatility reflects the volatility of GBL stock over a period of approximately four years, prior to each respective grant date, based on month-end prices. The expected
life reflected an estimate of the length of time the employees are expected to hold the options, including the vesting period, and is based, in part, on actual experience with other
grants. The dividend yield for the May 11, 2004 grant reflected the assumption that we would continue our current policy of a $0.02 per share quarterly dividend. The dividend
yield for the November 11, 2005 grant and May 8, 2006 grant reflected the assumption of an increase to $0.03 per share quarterly dividend. The weighted average remaining
contractual life of the outstanding options at December 31, 2006 was 6.23 years.
Prior to January 1, 2003, we applied APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for our stock option
plan. Accordingly, no compensation expense was recognized where the exercise price equals or exceeds the market price of the underlying stock on the date of grant.
Effective January 1, 2003, we adopted the fair value recognition provisions of SFAS No. 123 in accordance with the transition and disclosure provisions of SFAS No. 148,
“Accounting for Stock Based Compensation – Transition and Disclosure”.
We adopted Statement 123 (R) on January 1, 2005. In light of our modified prospective adoption of the fair value recognition provisions of Statement 123 (R) for all grants of
employee stock options, the adoption of Statement 123 (R) did not have a material impact on our consolidated financial statements. During June 2005, the Board of Directors
authorized the accelerated vesting of all unvested stock options as of July 1, 2005. This resulted in the expensing of an additional $1.8 million in stock option expense during the
second quarter of 2005. The total compensation costs related to non-vested awards not yet recognized is approximately $151,000 as of December 31, 2006. This will be
recognized as expense in the following periods:
2007 2008 2009 2010
$ 67,000 $ 62,000 $ 20,000 $ 2,000
In August 2005, the Company commenced a tender offer to repurchase all outstanding options to purchase its class A common stock. The tender offer was completed in October
2005 and approximately 110 option holders elected to tender options to purchase an aggregate of approximately 522,000 shares of its class A common stock. These option
holders received an aggregate of approximately $9.7 million in cash (less any withholding taxes). For 2006, we recognized a tax benefit from previously exercised stock options of
$1.8 million. As a result of the completion of the tender offer, there was a reduction in fully diluted shares outstanding of approximately 130,000 shares.
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