Exhibit 99.1
Gabelli Reports Record First Quarter Revenues;
Earnings increase 68% to $0.52 per share vs. a
depressed $0.31 per diluted share
RYE, N.Y.--(BUSINESS WIRE)--April 27, 2004--Gabelli Asset
Management Inc. (NYSE: GBL) today reported record revenues of $63.5
million for the quarter ended March 31, 2004, up 38.0% from the $46.1
million generated in the first quarter of 2003. Net income for the
quarter was $16.1 million or $0.52 per diluted share versus $9.3
million or $0.31 per diluted share in the prior year's quarter.
Pre-tax profits surged 70% to $25.5 million from $15.0 million in
the first quarter of 2003. This increase is traceable to higher
revenues, improved returns from our corporate investment portfolio and
lower variable expenses offset by compensation, stock option, interest
and other operating expenses.
Financial Results
Assets under management rose to a record $28.2 billion on March
31, 2004, up 2.4% from the December 31, 2003 level of $27.6 billion
and 40.7% from the $20.1 billion on March 31, 2003. Average total
assets under management were $28.2 billion in the quarter, up 36.1%
from average total assets of $20.7 billion in the first quarter of
2003.
Our equity products generated positive net cash flows of $317
million during the first quarter while our fixed income portfolios
experienced outflows of $137 million. Assets under management in our
separately managed equity accounts were $13.4 billion on March 31,
2004, up 2.7% from $13.0 billion on December 31, 2003, and 44.7%
higher than the $9.2 billion at March 31, 2003. Our open-end equity
mutual funds and closed-end funds had assets under management of $11.8
billion at quarter end, an increase of 2.0% from year-end 2003 and
52.7% ahead of the $7.8 billion at the end of the first quarter 2003.
Our alternative investment assets increased to $901 million, up 30.2%
from December 31, 2003 assets of $692 million.
Investment advisory fees totaled $53.9 million during the quarter,
an increase of 36.5% from the first quarter of 2003, driven by higher
assets under management, which included the addition of our new
closed-end fund, The Gabelli Dividend & Income Trust, during the
fourth quarter of 2003. Commission revenues for Gabelli & Company,
Inc., driven mostly by institutional research, increased $1.9 million
during the first quarter of 2004 to $4.3 million from the depressed
$2.4 million in the comparable 2003 quarter. Distribution fees
generated from our open-end mutual funds increased to $5.3 million
from $4.1 million as a result of an increase in average assets under
management from the prior year's quarter.
First quarter 2004 variable expenses decreased to 41.2% of
revenues from 43.4% in the first quarter of 2003. Compensation costs
and other operating expenses, as a percent of revenues, declined to
30.8% and 10.4% respectively in the 2004 quarter versus 32.4% and
11.0% in the first quarter of 2003. The decline in other operating
expenses, as a percent of revenues, resulted from an increase in
closed-end fund revenues and a decrease in distribution expenses since
assets gathered through our direct sales channel represented a larger
percentage of our assets at the end of the first quarter 2004 as
compared to the prior year's quarter-end.
Expenses not directly tied to revenues increased 14.9% or $1.2
million over the prior year's quarter with the majority of this
increase attributable to higher accruals for incentive compensation of
$417,000, stock option expense of $146,000 and other operating
expenses including insurance, legal and accounting costs of $393,000.
Management fee expense, a totally variable cost based on pre-tax
profits, was $2.8 million for the first quarter of 2004 versus $1.7
million in the prior year's quarter.
Our net investment income was $244,000 versus a loss of $1.3
million in the 2003 quarter as the return on our portfolio of
marketable securities rose to $4.3 million from $1.7 million the year
earlier more than offsetting the $1 million increase in interest
expense. Interest expense rose to $4.0 million during the quarter
compared to $3.0 million in the comparable prior year's quarter due
mostly to the May 2003 issuance of $100 million of 5.5% senior notes.
This increase was offset in part by a one-percentage point decrease in
the interest rate on our $100 million convertible note from 6% to 5%
in August 2003.
The effective tax rate for 2004 was 36.4% versus 37.6% in 2003.
The increase in minority interest expense for the three months ended
March 31, 2004 versus the prior year period is largely the result of
increased earnings from our alternative investment products and income
from our investments at Gabelli Securities, Inc.
Investment and Business Highlights
-- The Gabelli Dividend & Income Trust (NYSE: GDV), our new
closed-end fund that invests primarily in dividend paying
securities, which we launched in November 2003, raised an
additional $194 million in gross proceeds from the exercise of
the underwriters' overallotment option in early January 2004,
bringing total proceeds from the initial public offering to
$1.65 billion.
-- The Gabelli Utilities Fund and The Gabelli Global
Telecommunications Fund each received the 2004 Lipper Fund
Award for their respective categories for consistent
performance relative to their peers. The Lipper Fund Award is
presented annually to the fund, within each Lipper
classification, that has achieved the highest consistent
return scores. A fund's consistent return score evaluates its
risk-adjusted returns and the strength of its performance
trend, relative to other funds in its category.
-- The Gabelli ABC Fund re-opened to new investors on March 1,
2004. The Fund's investment strategy focuses on merger and
acquisition arbitrage to achieve total returns that are
attractive to investors seeking positive returns in various
market conditions without excessive risk of capital loss. The
Gabelli ABC Fund has achieved positive total returns each
calendar year since its inception on May 14, 1993.
-- During the first quarter, our alternative investment
portfolios generated net cash inflows of over $200 million.
- Our merger arbitrage portfolios benefited from increased
investor interest and allocations to this strategy as the
dollar volume of announced global merger transactions
doubled versus the first quarter of 2003.
- Our US long/short equity strategy products experienced
strong demand principally through our global distribution
relationships with major European financial institutions.
-- Gabelli & Company, Inc. hosted its 1st Annual Smallcap
Orthopedic Symposium in San Francisco during March. Portfolio
managers and securities analysts met with senior management
from suppliers and manufacturers of orthopedic products and
devices. A myriad of companies shared their views on the
industry, competition, regulatory issues and the challenges
and opportunities for their firms. Aging demographics, active
lifestyles, and the prevalence of age-related health
conditions are driving growth in the orthopedic market.
Shareholder Initiatives
We are overcapitalized. We are looking to add to our skill sets
through acquisitions. In the absence of transactions, we would like to
return our earnings to shareholders. During the first quarter of 2004,
we bought back 29,927 shares at an average cost of $39.57 per share.
We intend to be more aggressive in our efforts to repurchase our stock
as a way of returning excess cash to our shareholders. We initiated a
stock buyback program in March of 1999. Since that time, 1,207,276
Class A shares have been repurchased through March 2004 at an average
cost of $26.00 per share, including 29,927 shares in 2004. As of March
31, 2004, $11.0 million remained available for future share purchases.
During the second quarter of 2004, we repurchased 105,600 shares at an
average price of $39.12 per share through a Rule 10b5-1 Purchase Plan.
We will also revisit our dividend policy during the year.
Gabelli Securities, Inc., our 92% owned subsidiary, paid a cash
dividend of $50 per share on March 15, 2004.
Financial Strength and Flexibility
Our balance sheet strengthened again during the quarter. Overall,
we ended the quarter with roughly $626.3 million in cash and
marketable securities and debt of $283.8 million. Expressed another
way, we had $11.39 per share of net cash and marketable securities on
March 31, 2004. Our debt consists of a $100 million 5% convertible
note, $100 million of 5.5% senior notes, and $83.8 million of
mandatory convertible securities which will be exchanged in February
2005 for approximately two million Class A common shares. We
repurchased 8,200 shares of our mandatory convertible securities
during the first quarter of 2004, bringing the total shares
repurchased since May 2002 to 247,000 at a total cost of $5.4 million.
At March 31, 2004 there are 3,353,000 shares of mandatory convertible
securities outstanding and there remains 453,000 shares authorized for
repurchase under our program.
Stockholders' equity, on a GAAP basis, was $394 million on March
31, 2004 compared with $378 million on December 31, 2003 and $334
million on March 31, 2003.
Looking Ahead
We continue to look for 4% U.S. real GDP growth, higher corporate
profits and higher interest rates in 2004. Stock market gains are
likely to moderate this year and be more in line with the 6-8% average
annual increases we expect over the balance of this decade. Our stock
selection process, for our value products, based on our proprietary
Private Market Value (PMV) with a Catalyst research, is currently
focused on new investment opportunities related to trade with China,
industrial and agricultural commodities, human aging (such as dental
care and orthopedics), and the rapidly growing U.S. Hispanic
population.
We believe 2004 will be the Year of the Deal. Conditions
supporting increased domestic and cross-border transactions, friendly
and hostile - financing liquidity, low interest rates, cheaper to buy
than build valuations, global competition, the elimination of goodwill
amortization, and a cheap U.S. dollar - are in place. This will
accelerate the surfacing of intrinsic value across a broad range of
our clients' portfolio holdings. It will also benefit fund flow into
our products, particularly our alternative investment products.
The effect of unprecedented fiscal and monetary stimulus will
begin to fade, so we are keeping an eye on the developing investment
backdrop for 2005. Terrorism and high energy prices remain significant
concerns.
To achieve our objective of enhancing client returns on a
risk-adjusted basis, thereby increasing assets under management and
profitability, our business strategy targets international growth of
the Gabelli franchise through the leveraging of our corporate
strengths including the Gabelli brand name, outstanding long-term
investment performance, diverse product offerings and experienced
portfolio, research and client service professionals. We are
competitively positioned to achieve our strategy and continue to
selectively add to our investment and research teams in order to
uncover more values in the global marketplace, and are expanding our
marketing and client servicing capabilities to enhance our already
strong position in many of the markets we serve.
In the first quarter of 2004, we have begun to realize the
benefits of our strategy through increased revenues and improved
operating margins. We look forward to the challenge of creating wealth
for our clients and shareholders in today's complex financial markets.
NOTES ON NON-GAAP FINANCIAL MEASURES
A. Cash and investments as adjusted have been computed as follows:
(in millions)
12/31/03 3/31/03 3/31/04
-------------------------
Cash and cash equivalents $386.5 $327.1 $371.4
Investments (marketable securities) 228.0 204.5 260.7
-------------------------
Total cash and investments (marketable
securities) 614.5 531.6 632.1
Amounts payable to brokers (5.7) (6.5) (5.8)
-------------------------
Adjusted cash and investments (marketable
securities) 608.8 525.1 626.3
Investments (available for sale) 67.4 6.1 67.3
-------------------------
Total adjusted cash and investments $676.2 $531.2 $693.6
=========================
We believe cash and investments as adjusted is a more useful
measure of the company's liquidity for analytical purposes.
Amounts payable to broker reflects 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 INFORMATION
Our disclosure and analysis in this press release 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; 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. We
also direct your attention to any more specific discussions of risk
contained in our Form 10-K 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.
Assets Under Management
The company reported assets under management as follows:
Table I:
Assets Under Management
(in millions)
------------------------
March 31
---------------- %
Inc.
2003 2004 (Dec.)
------------------------
Mutual Funds:
Open End $6,213 $8,106 30.5%
Closed End 1,545 3,739 142.0
Fixed Income 1,916 1,717 (10.4)
----------------
Total Mutual Funds 9,674 13,562 40.2
----------------
Institutional & High Net Worth Separate
Accounts:
Equities 9,247 13,383 44.7
Fixed Income 547 369 (32.5)
----------------
Total Institutional & High Net Worth Separate
Accounts 9,794 13,752 40.4
----------------
Alternative Investments 585 901 54.0
----------------
Total Assets Under Management $20,053 $28,215 40.7
================
Table II: Fund Flows - 1st Quarter 2004 (in millions)
December Net Market March
31, Cash Appreciation / 31,
2003 Flows (Depreciation) 2004
-------- --------- --------------- --------
Mutual Funds:
Equities $11,618 $60 $167 $11,845
Fixed Income 1,714 - 3 1,717
-------- --------- --------------- --------
Total Mutual Funds 13,332 60 170 13,562
-------- --------- --------------- --------
Institutional & HNW
Separate Accounts
Equities 13,031 53 299 13,383
Fixed Income 504 (137) 2 369
-------- --------- --------------- --------
Total Institutional & HNW
Separate Accounts 13,535 (84) 301 13,752
-------- --------- --------------- --------
Alternative Investments 692 204 5 901
-------- --------- --------------- --------
Total Assets Under
Management $27,559 $180 $476 $28,215
======== ========= =============== ========
Assets Under Management (in millions)
- ----------------------------------------------------------------------
Table III:
3/03 6/03 9/03 12/03
-----------------------------------
Mutual Funds
Open end $6,213 $7,118 $7,280 $8,088
Closed end 1,545 1,646 1,761 3,530
Fixed income 1,916 1,880 1,783 1,714
-----------------------------------
Total Mutual Funds 9,674 10,644 10,824 13,332
-----------------------------------
Institutional & HNW Separate
Accounts:
Equities 9,247 10,820 11,304 13,031
Fixed Income 547 404 391 504
-----------------------------------
Total Institutional & HNW Separate
Accounts 9,794 11,224 11,695 13,535
-----------------------------------
Alternative Investments 585 625 687 692
-----------------------------------
Total Assets Under Management $20,053 $22,493 $23,206 $27,559
===================================
%
Increase/(decrease)
3/04 12/03 3/03
----------------------------
Mutual Funds
Open end $8,106 0.2% 30.5%
Closed end 3,739 5.9 142.0
Fixed income 1,717 0.2 (10.4)
--------
Total Mutual Funds 13,562 1.7 40.2
--------
Institutional & HNW Separate Accounts:
Equities 13,383 2.7 44.7
Fixed Income 369 (26.8) (32.5)
--------
Total Institutional & HNW Separate
Accounts 13,752 1.6 40.4
--------
Alternative Investments 901 30.2 54.0
--------
Total Assets Under Management $28,215 2.4 40.7
========
Table IV
GABELLI ASSET MANAGEMENT INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
For the Three Months
Ended
March 31,
-----------------------
% Inc.
2003 2004 (Dec.)
-----------------------
Revenues $46,053 $63,539 38.0%
Expenses 28,044 35,426 26.3
-----------------
Operating income before management fee 18,009 28,113 56.1
Investment income 1,690 4,290 153.8
Interest expense (3,011) (4,046) 34.4
-----------------
Other income (expense), net (1,321) 244 118.5
-----------------
Income before management fee, income taxes and
minority interest 16,688 28,357 69.9
Management fee 1,669 2,836
-----------------
Income before income taxes and minority
interest 15,019 25,521
Income taxes 5,647 9,296
Minority interest 45 154
-----------------
Net income $9,327 $16,071 72.3
=================
Net income per share:
Basic $0.31 $0.53 71.0
=================
Diluted $0.31 $0.52 67.7
=================
Weighted average shares outstanding:
Basic 29,918 30,064 0.5
=================
Diluted 30,031 32,202 7.2
=================
Reconciliation of Non-GAAP Financial Measures
to GAAP:
Operating income before management fee $18,009 $28,113 56.1
Deduct: management fee 1,669 2,836
-----------------
Operating income $16,340 $25,277 54.7
-----------------
Operating margin before management fee 39.1% 44.2%
-----------------
Operating margin after management fee 35.5% 39.8%
-----------------
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
Quarter
----------
Income Statement Data:
Revenues $63,539
Expenses 35,426
----------
Operating income before
management fee 28,113
Investment income 4,290
Interest expense (4,046)
----------
Other income (expense), net 244
----------
Income before
management fee,
income taxes and
minority interest 28,357
Management fee 2,836
----------
Income before income
taxes and minority interest 25,521
Income taxes 9,296
Minority interest 154
----------
Net income $16,071
==========
Net income per share:
Basic $0.53
==========
Diluted $0.52
==========
Weighted average shares outstanding:
Basic 30,064
==========
Diluted 32,202
==========
Reconciliation of Non-GAAP
Financial Measures to GAAP:
Operating income before
management fee $ 28,113
Deduct: management fee 2,836
----------
Operating income $25,277
----------
Operating margin before
management fee 44.2%
----------
Operating margin after
Management fee 39.8%
----------
Table VI
GABELLI ASSET MANAGEMENT INC.
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(In thousands)
December March March
31, 31, 31,
2003 2003 2004
-------------------------------
ASSETS (unaudited)(unaudited)
Cash and cash equivalents $386,511 $327,099 $371,355
Investments 295,411 210,613 328,063
Receivables 39,667 28,533 46,370
Other assets 14,922 15,607 16,022
-------------------------------
Total assets $736,511 $581,852 $761,810
===============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Compensation payable $25,552 $20,554 $26,964
Income taxes payable 12,323 8,457 15,688
Accrued expenses and other liabilities 27,900 26,832 35,903
-------------------------------
Total operating liabilities 65,775 55,843 78,555
5.5% Senior notes 100,000 - 100,000
5% Convertible note 100,000 100,000 100,000
Mandatory convertible securities 84,030 84,163 83,825
-------------------------------
Total liabilities 349,805 240,006 362,380
Minority interest 8,395 7,607 5,831
Stockholders' equity 378,311 334,239 393,599
-------------------------------
Total liabilities and stockholders'
equity $736,511 $581,852 $761,810
===============================
CONTACT: Gabelli Asset Management Inc.
Michael R. Anastasio, 914-921-5147
www.gabelli.com