Gabelli Reports Third Quarter Earnings of $0.43 vs. $0.41 Per Diluted Share; Operating Income Rises 13.1% to $22.0 Million from $19.4 Million Last Year; Earnings Per Share Impacted by Lower Other Income.RYE, N.Y. -- Gabelli Asset Management Inc. (NYSE NYSE See: New York Stock Exchange : GBL GBL Gamma-Butyrolactone GBL government bill of lading (US DoD) GBL Ground-Based Laser GBL Game Boy Light GBL General Bearing Line GBL Generation Breakdown List GBL Ground-Based Laboratory GBL Green Bus Lines, Inc. ) reported revenues of $57.2 million for the third quarter ended September September: see month. 30, 2004, up 10.4% from the $51.8 million generated in the comparable year earlier period. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. increased 13.1% to $22.0 million from $19.4 million reported in last year's third quarter, principally due to higher revenues and lower variable expenses as a percent of revenues. Our operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: rose to 38.4% in the 2004 quarter versus 37.4% in the prior year's quarter. Net income for the quarter was $13.0 million or $0.43 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share versus $12.3 million or $0.41 per diluted share in the prior year's quarter. Our earnings per share, despite improved operating results, were impacted by lower other income causing a negative swing of $1.7 million on a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta basis (approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $0.03 per diluted share). For the nine months ended September 30, 2004, revenues increased 24.1% to $181.0 million, from the prior year's $145.8 million. Operating income surged 37.4% to $71.7 million from $52.1 million in the first nine months of 2003 reflecting both higher revenues as well as the effect of lower variable compensation costs as a percent of revenues. Net income for the first nine months of 2004 was $43.0 million or $1.41 per diluted share versus $33.2 million or $1.10 per diluted share in the comparable 2003 period. Financial Results Assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. (AUM Aum (ä·ōōmˑ), n.pr 1. in Ayurveda, the subtle, noiseless cosmic vibration in which consciousness existed in the beginning, before the elements appeared. ) were $27.2 billion on September 30, 2004, up 17.4% from third quarter end 2003 assets, but below the record $28.2 billion in AUM on June June: see month. 30, 2004. Average AUM were $27.2 billion in the quarter, up 22.8% from average total assets of $22.2 billion in the third quarter of 2003. Average total AUM were $27.8 billion in the first nine months, up 29.9% from average total assets of $21.4 billion in the prior year period. GAMCO GAMCO Gulf Aircraft Maintenance Company (Abu Dhabi, UAE) , the institutional and high net worth segment of our business, had AUM of $13.2 billion on September 30, 2004, up 16.6% from the $11.3 billion on September 30, 2003 but 3.3% below the $13.6 billion on June 30, 2004. AUM in our equity mutual funds were $11.3 billion at quarter end, 24.6% ahead of the $9.0 billion at the end of the third quarter 2003 but 3.1% under the $11.6 billion on June 30, 2004. Fixed income assets totaled $1.87 billion on September 30, 2004, down 14.1% from the prior year's quarter end assets of $2.17 billion and 2.6% lower than assets of $1.92 billion on June 30, 2004. Our alternative investment assets were $934 million, up 36.0% from third quarter end 2003 assets of $687 million but 12.0% below the record assets of $1.06 billion on June 30, 2004. Investment advisory fees totaled $49.7 million during the third quarter 2004, an increase of 12.4% from the third quarter of 2003. For the first nine months of 2004, investment advisory fees were $154.9 million, up 24.5% from the prior year period. The growth in investment advisory fees was driven by higher assets under management in our institutional and high net worth separately managed equity accounts, open-end o·pen-end adj. 1. Having no definite limit of duration or amount: an open-end contract. 2. equity mutual funds and closed-end funds Closed-end fund An investment company that issues shares like any other corporation and usually does not redeem its shares. A publicly traded fund sold on stock exchanges or over the counter that may trade above or below its net asset value. Related: Open-end fund. . Advisory fees from alternative investments had a clawback Clawback 1. Previously given monies or benefits that are taken back due to specially arising circumstances. 2. A retraction of stock prices or of the market in general. Notes: 1. in incentive fees during the third quarter 2004 which led to a negative swing in revenues totaling $2 million or approximately $0.02 per share on a year-to-year basis. Commission revenues for our institutional research affiliate Affiliate Relationship between two companies when one company owns substantial interest, but less than a majority of the voting stock of another company, or when two companies are both subsidiaries of a third company. See: Subsidiaries, parent company. , Gabelli & Company, Inc. were $3.0 million during the third quarter of 2004 down from $3.3 million in the prior year's quarter but were up 32.8% to $11.3 million for the first nine months of 2004 as compared to $8.5 million in the 2003 period. Distribution fees were $4.6 million in the third quarter 2004 versus $4.3 million in the 2003 quarter and rose to $14.7 million during the first nine months of 2004 from $12.8 million in the comparable 2003 period. The increase in fees is traceable to higher average assets under management in open-end equity mutual funds in the 2004 periods as compared to the prior year. Variable compensation costs, as a percent of revenues, decreased to 30.0% in the third quarter 2004 versus 31.3% in the 2003 quarter and 29.6% versus 31.8% for the nine month period. This decrease is traceable to a shift in revenue mix from alternative investments to separately managed accounts and lower overall variable compensation costs related to separately managed accounts compared to the prior year's periods. Other variable operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. , as a percent of revenues, fell to 10.7% in the 2004 quarter versus 11.7% in the third quarter of 2003 and to 10.9% for the first nine months of 2004 versus 11.8% in the comparable prior year period. Other variable operating expenses included distribution costs distribution costs distribute npl → Vertriebskosten pl of $1.0 million in the third quarter 2004 and $3.3 million during the first nine months of 2004 which were due to the initial inclusion of our two new closed-end funds, The Gabelli Dividend & Income Trust ("GDV GDV gastric dilatation/volvulus. ") in November November: see month. 2003 and The Gabelli Global Utility & Income Trust ("GLU (language) GLU - A practical coarse grain implementation of the Lucid dataflow language for networks. ") in May 2004. Expenses not directly tied to revenues increased to $9.7 million in the third quarter 2004, up 22.5% from $7.9 million in the prior year's quarter and up 18.1% to $28.4 million for the nine months of 2004 from $24.1 million in the comparable prior year period. The increases from the comparable periods include costs related to the expensing of stock options, higher insurance expenses, compliance with Sarbanes-Oxley as well as other regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. and corporate governance Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. initiatives. For the third quarter, we experienced a loss of $1.4 million from our investments and net interest expense versus a net benefit of $0.3 million in the 2003 quarter. The net return from our corporate investment portfolio declined to $2.6 million in the 2004 third quarter from $4.5 million in the prior year's quarter. For the first nine months of 2004, investment income totaled $8.5 million versus $12.3 million in the comparable 2003 period. In future periods, our highly liquid investment portfolio will be influenced by changes in short-term interest rates Short-term interest rates Interest rates on loan contracts-or debt instruments such as Treasury bills, bank certificates of deposit or commerical paper-having maturities of less than one year. Often called money market rates. as a one hundred basis point increase in rates adds approximately $7 million to our other income on an annual basis. Interest expense fell 3.8% during the 2004 quarter to $4.0 million compared to $4.2 million in the prior year's quarter but increased 12.1% to $12.1 million for the nine month period, mostly due to the May 2003 issuance of $100 million of 5.5% senior notes, and offset in part by a one percentage point decrease in the interest rate on our convertible note from 6% to 5% in August 2003. Management fee expense was $2.3 million for the quarter and $7.6 million for the nine months of 2004 versus $2.2 million and $6.0 million, respectively for the comparable 2003 periods. The effective tax rate for the third quarter and nine months was 36.4% versus 37.6% in comparable periods in 2003, as we adjusted the tax rate in 2004 to reflect our estimate of the current year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. tax liability. On September 30, 2004 we had 29,557,853 shares outstanding, which is approximately 2% lower than our shares outstanding of 30,080,856 at the end of the third quarter 2003 and approximately 1% below shares outstanding of 29,822,853 on June 30, 2004. Investment and Business Highlights --Gabelli Asset Management Inc. announced several organizational changes to strengthen and broaden our management team: - Douglas Douglas, city, Isle of Man Douglas, city (1991 pop. 19,950), capital of the Isle of Man, Great Britain. It is a popular resort, connected by rail to Ramsey and Port Erin, on the Irish Sea. Tourism is the chief industry. R. Jamieson Jamieson may refer to: Surname
The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. , where he will oversee all of the company's business units and work closely with its mutual funds, administration operation and securities trading securities trading, financial activity involving transactions of property such as stocks, bonds, commodities, and currency (see securities). Although the trading of stocks and bonds dates back several centuries in many Western nations, the development of the . - Henry G. Van der Eb, CFA (Computer Fraud and Abuse Act of 1986) Signed into law in 1986, the CFA was a significant step forward in criminalizing unauthorized access to computer systems and networks. The Act applies to "federal interest computers" that include any system used by the U.S. was named as Senior Vice President and will serve as a Senior Advisor In some countries, a Senior Advisor is an appointed position by the Head of State to advise on the highest levels of national and government policy. Sometimes a junior position to this is called a National Policy Advisor. to management in all aspects of the firm's business. Mr. Van der Eb has over 30 years of registered investment advisor Registered Investment Advisor (RIA) is a designation obtainable in the United States by an individual who has registered with the U.S. Securities and Exchange Commission or state regulatory agency (where the primary business is situated or multiple States in some cases) in industry experience including regulatory, legal, compliance, operations, public relations public relations, activities and policies used to create public interest in a person, idea, product, institution, or business establishment. By its nature, public relations is devoted to serving particular interests by presenting them to the public in the most , personnel and acquisitions. - Michael R. Anastasio Michael Anastasio is the director of the Los Alamos National Laboratory and president of the Los Alamos National Security LLC, the company that operates the laboratory. He is the former director of Lawrence Livermore National Laboratory (LLNL). , Jr., CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. , was named Chief Financial Officer. Mr. Anastasio has served as the Chief Accounting Officer since September 2003 and was previously the CFO See Chief Financial Officer. of the Alternative Investment Group at Gabelli. - Christopher C. Desmarais, Senior Vice President of GAMCO, has been named the company's Director of Institutional Marketing. Mr. Desmarais, has been the Director of GAMCO's Socially Responsive Investments (SRI) since March 2003 -- where assets have grown to over half a billion dollars. His responsibilities will include marketing the firm's separate account products directly to Consultants, Corporate Plan Sponsors, Taft Hartley Plans, Foundations and Endowments. --Gabelli & Company, Inc. hosted its 10th Annual Aircraft Supplier Conference in September, at which portfolio managers and securities analysts met with senior management from public companies in the aerospace and defense industries. Precision Castparts, Honeywell In 1927, the Minneapolis Honeywell Regulator Company was formed as a merger of Alfred Butz' temperature control company (1885) and Mark Honeywell's water heater company (1906). In 1957, Honeywell, along with Ratheon, introduced one of the first computers in the U.S., the Datamatic 1000. , Airbus, and L-3 Communications
L-3 Communications Holdings, Inc. (NYSE: LLL) is a company that supplies command, control, communications, intelligence, surveillance and reconnaissance (C3ISR) systems and were among the 17 companies that shared with our clients their thoughts on the industry, competition, regulatory issues and the challenges and opportunities in their businesses. Subsequent to the end of the quarter: --The Delaware Delaware, state, United States Delaware (dĕl`əwâr, –wər), one of the Middle Atlantic states of the United States, the country's second smallest state (after Rhode Island). Chancery Court The Chancery Court of York is an ecclesiastical court for the Province of York of the Church of England. The presiding officer, the Official Principal and Auditor, has been the same person as the Dean of the Arches since the nineteenth century . decided in favor of upon the side of; favorable to; for the advantage of. See also: favor GAMCO clients in the Carter Wallace Wal·lace , Alfred Russel 1823-1913. British naturalist who developed a concept of evolution that paralleled the work of Charles Darwin. appraisal action. Over five hundred clients received nearly 45% over the merger price offered in September 2001. We are pleased with the outcome. We undertook this lengthy and time consuming process to underscore The underscore character (_) is often used to make file, field and variable names more readable when blank spaces are not allowed. For example, NOVEL_1A.DOC, FIRST_NAME and Start_Routine. (character) underscore - _, ASCII 95. our willingness to fight for clients, as well as underscore our conviction in our unique "private market value research with a catalyst catalyst, substance that can cause a change in the rate of a chemical reaction without itself being consumed in the reaction; the changing of the reaction rate by use of a catalyst is called catalysis. ." --In early October October: see month. , The Gabelli Dividend & Income Trust (NYSE:GDV) completed an offering of three series of Preferred Shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. valued at a total of $300 million. The issuance was comprised of $80 million of 5.875% Series A Cumulative Preferred Noun 1. cumulative preferred - preferred stock whose dividends if omitted accumulate until paid out cumulative preferred stock preference shares, preferred shares, preferred stock - stock whose holders are guaranteed priority in the payment of dividends but Shares, $100 million of Series B Auction Market Preferred Shares and $120 million of Series C Auction Market Preferred Shares. Merrill Lynch Merrill Lynch & Co., Inc. (NYSE: MER TYO: 8675 ), through its subsidiaries and affiliates, provides capital markets services, investment banking and advisory services, wealth management, asset management, insurance, banking and related products and services on a global basis. & Co., Citigroup Citigroup U.S. holding company formed in 1998 from the merger of Citicorp (itself a holding company incorporated in 1967) and Travelers Group, Inc. The $70 billion merger included one of the largest U.S. investment banks, Salomon Smith Barney Inc. , A.G. Edwards and Gabelli & Company, Inc. served as underwriters for the offering. --Our revenues will be impacted in the fourth quarter as a sub-advisory client will transfer out the management of one of its three portfolios. We were retained to manage this account four years ago. The sponsor was then taken over by a larger entity. --In November, Gabelli & Company, Inc. will host its 28th Annual Automotive Aftermarket Aftermarket See: Secondary market. aftermarket See secondary market. Symposium symposium In ancient Greece, an aristocratic banquet at which men met to discuss philosophical and political issues and recite poetry. It began as a warrior feast. Rooms were designed specifically for the proceedings. in Las Vegas Las Vegas (läs vā`gəs), city (1990 pop. 258,295), seat of Clark co., S Nev.; inc. 1911. It is the largest city in Nevada and the center of one of the fastest-growing urban areas in the United States. . Over 25 automotive suppliers, retailers, and dealers will present their investment theses to the firm's institutional clients at this interactive symposium. Presenting companies will include Genuine Parts, Dana Dāna almsgiving to poor, giftgiving to priests. [Hindu Rel.: Parrinder, 72] See : Generosity Corp., and Midas Inc. and all will address various strategies to take advantage of the aging of the car fleet. Shareholder Initiatives In our first quarter report we shared with you that our firm is overcapitalized. We would like to return part of our earnings to shareholders in the absence of strategic transactions. The Board of Directors has authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: a special dividend of $1.00 per share to be paid November 30, 2004 to all shareholders of record on November 15, 2004. The Board also established and declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. a quarterly dividend of $0.02 per share. Management will ask the Board of Directors to consider another special dividend at our upcoming meeting in November. During the third quarter of 2004, we bought back 287,900 shares at an average investment of $40.46 per share. Our stock buyback Stock buyback A corporation's purchase of its own outstanding stock, usually in order to raise the company's earnings per share. stock buyback See buyback. program was initiated in March 1999. Since that time, 1,750,076 Class A shares have been repurchased through September 30, 2004 at an average price of $30.30 per share, including 572,727 shares during the first nine months of 2004. The Board of Directors authorized the repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. of an additional $25 million of our Class A common stock during the third quarter and announced another increase to the buyback Buyback The buying back of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies will buyback shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may program of 1 million shares of Class A common stock during October 2004. This brings the total shares available to be repurchased under the program to approximately 1.5 million. The Board of Directors also authorized the repurchase of additional shares of our mandatory convertible securities mandatory convertible security A debt security that automatically converts to another security, generally shares of common stock, on a specified date. bringing the total authorization The right or permission to use a system resource; the process of granting access. See access control. up to $25 million. During the quarter, we repurchased 22,500 shares of our mandatory convertible securities bringing the total shares repurchased since May 2002 to 307,700 at a total outlay of $6.9 million. On September 30, 2004 there were 3,292,300 shares of mandatory convertible securities outstanding and there remains $25 million authorized for repurchase under our program. The mandatory convertible securities will be remarketed to new holders in November 2004 and current mandatory convertible Mandatory Convertible A type of convertible bond that has a required conversion or redemption feature. Either on or before a contractual conversion date, the holder must convert the mandatory convertible into the underlying common stock. shareholders will convert their holdings to our Class A Common Stock in February February: see month. 2005. Financial Strength and Flexibility We ended the quarter with roughly $701 million in cash, marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has and investments. This includes approximately $73 million of investments in The Gabelli Dividend & Income Trust, The Gabelli Global Utility & Income Trust, Gabelli mutual funds and other investments classified as available for sale securities. Our debt of $282.3 million consists of a $100 million 5% convertible note, $100 million of 5.5% senior notes, and $82.3 million of mandatory convertible securities. Expressed another way, we had $14.18 per share of net cash, marketable securities and investments on September 30, 2004. As further background, our mandatory convertible securities consist of (a) a purchase contract under which holders will purchase shares of our Class A common stock and (b) notes due February 17, 2007. The purchase contract obligates current holders to purchase, on February 17, 2005, newly issued shares of our Class A common stock. The notes that currently bear interest at 6% will be remarketed and the interest rate reset in November 2004. The total number of shares to be issued will be approximately 1.8 million if the market price of GBL is $46.50 or greater, approximately 2.1 million if the market price of GBL is $39.40 or less, and within this range if the market price of GBL is between $39.40 and $46.50. Following a successful remarketing and the satisfaction of the purchase contract in February 2005, we will have approximately $82 million of notes due in February 2007 based on the current amount of mandatory convertible securities outstanding. Also, the newly issued Class A shares will be included in our calculation of earnings per share. Assuming no further stock repurchases Stock repurchase A firm's repurchase of outstanding shares of its common stock. and further assuming that the maximum number of shares (approximately 2.1 million) are issued, the impact of the share issuance will be a reduction of approximately 6% on a per share basis. On our $100 million 5% Convertible Note purchased by Cascade A connected series of devices or images. It often implies that the second and subsequent device takes over after the previous one is used up. For example, cascading tapes in a dual-tape backup system means the second tape is written after the first one is full. Investment LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control in August 2001, the exercise date of the put option was extended to April 1, 2005. Stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. , on a GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). basis, was $396.1 million or $13.40 per share on September 30, 2004 compared with $378.3 million or $12.59 per share on December December: see month. 31, 2003 and $360.6 million or $11.99 per share on September 30, 2003.
NOTES ON NON-GAAP FINANCIAL MEASURES
A. Cash and investments as adjusted have been computed as follows:
(in millions)
12/31/03 9/30/03 9/30/04
-------------------------
Cash and cash equivalents $386.5 $425.8 $337.8
Investments (marketable securities) 228.0 225.5 267.9
-------------------------
Total cash and investments (marketable
securities) 614.5 651.3 605.7
Net amounts receivable/(payable) to brokers (4.5) (4.5) 22.6
-------------------------
Adjusted cash and investments (marketable
securities) 610.0 646.8 628.3
Investments (available for sale) 67.4 17.5 73.1
-------------------------
Total adjusted cash and investments $677.4 $664.3 $701.4
=========================
We believe cash and investments as adjusted is a more useful
measure of the company's liquidity for analytical purposes.
Net amounts receivable/(payable) to brokers reflects cash and cash
equivalents held with brokers and cash payable for securities
purchased and recorded on a trade date basis for which settlement
occurs subsequent to period end.
B. Operating income before management fee expense is used by
management for purposes of evaluating its business operations. We
believe this measure is useful in illustrating the operating
results of the Company as management fee expense is based on
pre-tax income and 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 to operating income is
provided in Table IV.
SPECIAL NOTE REGARDING FORWARD-LOOKING for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. INFORMATION Our disclosure and analysis in this press release contain some forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . 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 relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc future actions, future performance of our products, expenses, the outcome of any legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. , 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; a decline in the performance of our products; a general downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. 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 Self-regulatory organization (SRO) Organizations that enforce fair, ethical, and efficient practices in the securities and commodity futures industries, including all national securities and commodities exchanges and the NASD. . We also direct your attention to any more specific discussions of risk contained in our Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and other public filings. We are providing these statements as permitted by the Private Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called 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.
Assets Under Management
The company reported assets under management as follows:
Table I:
Assets Under Management
(in millions)
--------------------------
September 30 % Inc.
2003 2004 (Dec.)
--------------------------
Mutual Funds:
Open End $7,280 $7,534 3.5%
Closed End 1,761 3,727 111.6
Fixed Income 1,783 1,524 (14.5)
------------------
Total Mutual Funds 10,824 12,785 18.1
------------------
Institutional & High Net Worth Separate
Accounts:
Equities 11,304 13,185 16.6
Fixed Income 391 344 (12.0)
------------------
Total Institutional & High Net Worth
Separate Accounts 11,695 13,529 15.7
------------------
Alternative Investments 687 934 36.0
------------------
Total Assets Under Management $23,206 $27,248 17.4
==================
Table II: Fund Flows - 3rd Quarter 2004 (in millions)
Market
June 30, Net Cash Appreciation/ September
2004 Flows (Depreciation) 30, 2004
-------- --------- --------------- ---------
Mutual Funds:
Equities 11,616 (197) (158) 11,261
Fixed Income 1,563 (43) 4 1,524
-------- --------- --------------- ---------
Total Mutual Funds 13,179 (240) (154) 12,785
-------- --------- --------------- ---------
Institutional & HNW
Separate Accounts
Equities 13,628 (139) (304) 13,185
Fixed Income 354 (15) 5 344
-------- --------- --------------- ---------
Total Institutional & HNW
Separate Accounts 13,982 (154) (299) 13,529
-------- --------- --------------- ---------
Alternative Investments 1,061 (118) (9) 934
-------- --------- --------------- ---------
Total Assets Under
Management $28,222 (512) (462) $27,248
======== ========= =============== =========
Assets Under Management (in millions)
---------------------------------------------
Table III:
9/03 12/03 3/04 6/04 9/04
----------------------------------------
Mutual Funds
Open end $7,280 $8,088 $8,106 $7,852 $7,534
Closed end 1,761 3,530 3,739 3,764 3,727
Fixed income 1,783 1,714 1,717 1,563 1,524
----------------------------------------
Total Mutual Funds 10,824 13,332 13,562 13,179 12,785
----------------------------------------
Institutional & HNW Separate
Accounts:
Equities 11,304 13,031 13,383 13,628 13,185
Fixed Income 391 504 369 354 344
----------------------------------------
Total Institutional & HNW
Separate Accounts 11,695 13,535 13,752 13,982 13,529
----------------------------------------
Alternative Investments 687 692 901 1,061 934
----------------------------------------
Total Assets Under Management $23,206 $27,559 $28,215 $28,222 $27,248
========================================
Table III:
% Increase/(decrease)
6/04 9/03
----------------------
Mutual Funds
Open end (4.0%) 3.5%
Closed end (1.0) 111.6
Fixed income (2.5) (14.5)
Total Mutual Funds (3.0) 18.1
Institutional & HNW Separate Accounts:
Equities (3.3) 16.6
Fixed Income (2.8) (12.0)
Total Institutional & HNW Separate
Accounts (3.2) 15.7
Alternative Investments (12.0) 36.0
Total Assets Under Management (3.5) 17.4
Table IV
GABELLI ASSET MANAGEMENT INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
For the Three Months For the Nine Months
Ended Ended
September 30, September 30,
------------------------------------------------
% Inc. % Inc.
2003 2004 (Dec.) 2003 2004 (Dec.)
------------------------------------------------
Revenues $51,823 $57,237 10.4% $145,832 $180,980 24.1%
Expenses 30,227 33,002 9.2 87,725 101,760 16.0
---------------- ------------------
Operating income
before management 21,596 24,235 12.2 58,107 79,220 36.3
fee
Investment income 4,508 2,620 (41.9) 12,277 8,459 (31.1)
Interest expense (4,174) (4,014) (3.8) (10,790) (12,095) 12.1
---------------- ------------------
Other income
(expense), net 334 (1,394)(517.4) 1,487 (3,636) (344.5)
---------------- ------------------
Income before
management fee,
income taxes and
minority interest 21,930 22,841 4.2 59,594 75,584 26.8
Management fee 2,193 2,284 5,959 7,558
---------------- ------------------
Income before income
taxes and minority
interest 19,737 20,557 53,635 68,026
Income taxes 7,298 7,483 20,044 24,768
Minority interest 137 43 405 238
---------------- ------------------
Net income $12,302 $13,031 5.9 $33,186 $43,020 29.6
================ ==================
Net income per share:
Basic $0.41 $0.44 7.3 $1.11 $1.44 29.7
================ ==================
Diluted $0.41 $0.43 4.9 $1.10 $1.41 28.2
================ ==================
Weighted average
shares outstanding:
Basic 30,061 29,707 (1.2) 30,002 29,886 (0.4)
================ ==================
Diluted 32,170 31,820 (1.1) 30,134 32,011 6.2
================ ==================
Reconciliation of Non-
GAAP Financial
Measures
to GAAP:
Operating income
before management $21,596 $24,235 12.2 $58,107 $79,220 36.3
fee
Deduct: management
fee 2,193 2,284 5,959 7,558
---------------- ------------------
Operating income $19,403 $21,951 13.1 $52,148 $71,662 37.4
---------------- ------------------
Operating margin
before management fee 41.7% 42.3% 39.8% 43.8%
---------------- ------------------
Operating margin after
management fee 37.4% 38.4% 35.8% 39.6%
---------------- ------------------
Table V
GABELLI ASSET MANAGEMENT INC.
UNAUDITED QUARTERLY CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
2003
----------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
-----------------------------------------
Income Statement Data:
Revenues $46,053 $47,956 $51,823 $61,605 $207,437
Expenses 28,044 29,454 30,227 35,996 123,721
-----------------------------------------
Operating income before
management fee 18,009 18,502 21,596 25,609 83,716
Investment income 1,690 6,079 4,508 8,863 21,140
Interest expense (3,011) (3,605) (4,174) (4,048) (14,838)
-----------------------------------------
Other income (expense),
net (1,321) 2,474 334 4,815 6,302
-----------------------------------------
Income before
management fee,
income taxes and
minority interest 16,688 20,976 21,930 30,424 90,018
Management fee 1,669 2,097 2,193 3,043 9,002
-----------------------------------------
Income before income
taxes and minority
interest 15,019 18,879 19,737 27,381 81,016
Income taxes 5,647 7,099 7,298 10,295 30,339
Minority interest 45 223 137 428 833
-----------------------------------------
Net income $9,327 $11,557 $12,302 $16,658 $49,844
=========================================
Net income per share:
Basic $0.31 $0.38 $0.41 $0.55 $1.66
=========================================
Diluted $0.31 $0.38 $0.41 $0.54 $1.65
=========================================
Weighted average shares
outstanding:
Basic 29,918 30,025 30,061 30,065 30,018
=========================================
Diluted 30,031 30,139 32,170 32,155 32,081
=========================================
Reconciliation of Non-GAAP
Financial Measures to GAAP:
Operating income before
management fee $18,009 $18,502 $21,596 $25,609 $83,716
Deduct: management fee 1,669 2,097 2,193 3,043 9,002
-----------------------------------------
Operating income $16,340 $16,405 $19,403 $22,566 $74,714
-----------------------------------------
Operating margin before
management fee 39.1% 38.6% 41.7% 41.6% 40.4%
-----------------------------------------
Operating margin after
Management fee 35.5% 34.2% 37.4% 36.6% 36.0%
-----------------------------------------
2004
-----------------------------------
1st 2nd 3rd
Quarter Quarter Quarter Total
---------------------------------
Income Statement Data:
Revenues $63,539 $60,204 $57,237 $180,980
Expenses 35,426 33,332 33,002 101,760
---------------------------------
Operating income before
management fee 28,113 26,872 24,235 79,220
Investment income 4,290 1,549 2,620 8,459
Interest expense (4,046) (4,035) (4,014) (12,095)
---------------------------------
Other income (expense), net 244 (2,486) (1,394) (3,636)
---------------------------------
Income before
management fee,
income taxes and
minority interest 28,357 24,386 22,841 75,584
Management fee 2,836 2,438 2,284 7,558
---------------------------------
Income before income
taxes and minority interest 25,521 21,948 20,557 68,026
Income taxes 9,296 7,989 7,483 24,768
Minority interest 154 41 43 238
---------------------------------
Net income $16,071 $13,918 $13,031 $43,020
=================================
Net income per share:
Basic $0.53 $0.47 $0.44 $1.44
=================================
Diluted $0.52 $0.46 $0.43 $1.41
=================================
Weighted average shares outstanding:
Basic 30,064 29,890 29,707 29,886
=================================
Diluted 32,202 32,010 31,820 32,011
=================================
Reconciliation of Non-GAAP
Financial Measures to GAAP:
Operating income before
management fee $28,113 $26,872 $24,235 $79,220
Deduct: management fee 2,836 2,438 2,284 7,558
---------------------------------
Operating income $25,277 $24,434 $21,951 $71,662
---------------------------------
Operating margin before
management fee 44.2% 44.6% 42.3% 43.8%
---------------------------------
Operating margin after
Management fee 39.8% 40.6% 38.4% 39.6%
---------------------------------
Table VI
GABELLI ASSET MANAGEMENT INC.
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(In thousands)
December September September
31, 2003 30, 2003 30, 2004
--------------------------------------------
ASSETS (unaudited) (unaudited)
Cash and cash equivalents $386,511 $425,849 $337,830
Investments 295,411 243,010 340,928
Receivables 39,667 31,386 51,369
Other assets 14,922 15,439 14,196
--------------------------------------------
Total assets $736,511 $715,684 $744,323
============================================
LIABILITIES AND
STOCKHOLDERS' EQUITY
Compensation payable $25,552 $27,291 $33,871
Income taxes payable 12,323 8,603 5,608
Accrued expenses and other
liabilities 27,900 27,042 20,504
--------------------------------------------
Total operating
liabilities 65,775 62,936 59,983
5.5% Senior notes (due May
15, 2013) 100,000 100,000 100,000
5% Convertible note
(conversion price, $52
per share; note due
August 14, 2011) 100,000 100,000 100,000
Mandatory convertible
securities (purchase
contract settlement date,
February 17, 2005; notes
due February 17, 2007) 84,030 84,163 82,308
--------------------------------------------
Total liabilities 349,805 347,099 342,291
Minority interest 8,395 7,967 5,916
Stockholders' equity 378,311 360,618 396,116
--------------------------------------------
Total liabilities and
stockholders' equity $736,511 $715,684 $744,323
============================================
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