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| GBL > SEC Filings for GBL > Form 10-Q on 6-Nov-2009 | All Recent SEC Filings |
6-Nov-2009
Quarterly Report
Overview
GAMCO through the Gabelli brand, well known for its Private Market Value (PMV) with a CatalystTM investment approach, is a widely-recognized provider of investment advisory services to mutual funds, institutional and high net worth investors, and investment partnerships, principally in the United States. Through Gabelli & Company, Inc., we provide institutional research and brokerage services to institutional clients and investment partnerships and mutual fund distribution. We generally manage assets on a discretionary basis and invest in a variety of U.S. and international securities through various investment styles. Our revenues are based primarily on the firm's levels of assets under management and fees associated with our various investment products.
Since 1977, we have been identified with and have enhanced the "value" style approach to investing. Our investment objective is to earn a superior risk-adjusted return for our clients over the long-term through our proprietary fundamental research. In addition to our value portfolios, we offer our clients a broad array of investment strategies that include global, growth, international and convertible products. We also offer a series of investment partnership (performance fee-based) vehicles that provide a series of long-short investment opportunities in market and sector specific opportunities, including offerings of non-market correlated investments in merger arbitrage, as well as fixed income strategies.
Our revenues are highly correlated to the level of assets under management and fees associated with our various investment products, rather than our own corporate assets. Assets under management, which are directly influenced by the level and changes of the overall equity markets, can also fluctuate through acquisitions, the creation of new products, the addition of new accounts or the loss of existing accounts. Since various equity products have different fees, changes in our business mix may also affect revenues. At times, the performance of our equity products may differ markedly from popular market indices, and this can also impact our revenues. General stock market trends will have the greatest impact on our level of assets under management and hence, revenues.
We conduct our investment advisory business principally through: GAMCO Asset Management Inc. (Separate Accounts), Gabelli Funds, LLC (Mutual Funds) and Gabelli Securities, Inc. (Investment Partnerships). We also act as an underwriter, are a distributor of our open-end funds and provide institutional research through Gabelli & Company, Inc. ("Gabelli & Company"), our broker-dealer subsidiary.
On March 20, 2009, the Company completed its spin-off of its ownership of Teton Advisors, Inc. ("Teton") to its shareholders. The condensed consolidated financial statements include the results of Teton up to March 20, 2009. Prior period results have not been restated. However, Assets Under Management ("AUM") have been presented for prior periods excluding Teton for comparability. Such Teton AUM were $450 million at December 31, 2008 and $418 million at September 30, 2008.
AUM were $24.5 billion as of September 30, 2009, 14.5% higher than June 30, 2009 AUM of $21.4 billion but 2.8% below September 30, 2008 AUM of $25.2 billion. Equity AUM were $22.8 billion on September 30, 2009, 16.3% above the June 30, 2009 equity AUM of $19.6 billion and 5.8% below the $24.2 billion on September 30, 2008. Highlights are as follows:
- Our institutional and private wealth management business ended the quarter with $10.3 billion in separately managed accounts, up 17.0% from the June 30, 2009 level of $8.8 billion but 5.5% lower than the $10.9 billion on September 30, 2008.
- Our closed-end equity funds had AUM of $4.4 billion on September 30, 2009, rising 15.8% from the $3.8 billion on June 30, 2009 but 10.2% below the $4.9 billion on September 30, 2008.
- Our open-end equity funds AUM were $7.9 billion on September 30, 2009, 17.9% more than the $6.7 billion on June 30, 2009 nearly matching the $8.0 billion on September 30, 2008.
- We have the opportunity to earn base fees and incentive fees for certain institutional client assets, assets attributable to preferred issues for our closed-end funds, assets of the Gabelli Global Deal Fund (NYSE: GDL) and Investment Partnership assets. As of September 30, 2009, assets with incentive based fees were $2.7 billion, in line with the $2.7 billion on June 30, 2009 and 12.9% below the $3.1 billion on September 30, 2008. At September 30, 2009, we have unearned incentive fee revenues of $16.7 million on these assets representing approximately $0.20 per diluted share after direct expenses (compensation) and taxes. These fees, which vary with the market value of the related AUM, are not recorded as revenues until the contract period has ended, which for the majority of these arrangements is December 31, 2009.
- Our Investment Partnerships AUM were $291 million on September 30, 2009 versus $266 million on June 30, 2009 and $340 million on September 30, 2008.
- AUM in The Gabelli U.S. Treasury Money Market Fund, our 100% U.S. Treasury money market fund, was down slightly at $1.6 billion on September 30, 2009 from $1.8 billion on June 30, 2009 and higher than the September 30, 2008 AUM of $1.0 billion.
The Company reported Assets Under Management as follows:
Table I: Fund Flows - 3rd Quarter 2009 (in
millions)
Closed-end fund
distributions,
June 30, net of Net Cash Market September 30,
2009 reinvestments Flows (a) Appreciation 2009
Equities:
Open-end Funds $ 6,684 $ - $ 188 $ 1,034 $ 7,906
Closed-end Funds 3,822 (70 ) 66 551 4,369
Institutional & PWM - direct 7,332 - (107 ) 1,266 8,491
Institutional & PWM -
sub-advisory 1,476 - (7 ) 308 1,777
Investment Partnerships 266 - 13 12 291
Total Equities 19,580 (70 ) 153 3,171 22,834
Fixed Income:
Money-Market Fund 1,765 - (150 ) 1 1,616
Institutional & PWM 21 - 5 - 26
Total Fixed Income 1,786 - (145 ) 1 1,642
Total Assets Under
Management $ 21,366 $ (70 ) $ 8 $ 3,172 $ 24,476
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(a) Includes $66 million of shares issued by closed-end funds.
Table II: September 30, September 30, % Equities: 2008 2009 Inc.(Dec.) Open-end Funds $ 8,015 $ 7,906 (1.4 %) Closed-end Funds 4,869 4,369 (10.3 ) Institutional & PWM - direct 8,964 8,491 (5.3 ) Institutional & PWM - sub-advisory 1,964 1,777 (9.5 ) Investment Partnerships 340 291 (14.4 ) Total Equities 24,152 22,834 (5.5 ) Fixed Income: Money-Market Fund 1,003 1,616 61.1 Institutional & PWM 19 26 36.8 Total Fixed Income 1,022 1,642 60.7 Total Assets Under Management $ 25,174 $ 24,476 (2.8 %) |
Note: Teton's AUM at September 30, 2008 were $418 million and have been excluded from Table II.
Table III: Assets Under Management By Quarter (millions)
% Increase/
(decrease) from
Equities: 9/08 12/08 3/09 6/09 9/09 9/08 6/09
Open-end Funds $ 8,015 $ 6,139 $ 5,627 $ 6,684 $ 7,906 (1.4 %) 18.3 %
Closed-end Funds 4,869 3,792 3,359 3,822 4,369 (10.3 ) 14.3
Institutional & PWM - direct 8,964 6,861 6,227 7,332 8,491 (5.3 ) 15.8
Institutional & PWM - sub-advisory 1,964 1,585 1,202 1,476 1,777 (9.5 ) 20.4
Investment Partnerships 340 295 265 266 291 (14.4 ) 9.4
Total Equities 24,152 18,672 16,680 19,580 22,834 (5.5 ) 16.6
Fixed Income:
Money-Market Fund 1,003 1,507 1,794 1,765 1,616 61.1 (8.4 )
Institutional & PWM 19 22 21 21 26 36.8 23.8
Total Fixed Income 1,022 1,529 1,815 1,786 1,642 60.7 (8.1 )
Total Assets Under Management $ 25,174 $ 20,201 $ 18,495 $ 21,366 $ 24,476 (2.8 %) 14.6 %
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Note: Teton's AUM at September 30, 2008 and December 31, 2008 were $418 million and $450 million, respectively, and have been excluded from Table III.
Relative long-term investment performance remains strong. Over half of all firm mutual funds performed in the top half of their Lipper categories on a one-, three-, five-, and ten-year total return basis, respectively as of September 30, 2009. Also, 57% of the firm's mutual funds have a 4- or 5-star 3 year Morningstar RatingTM.
Gabelli Funds Morningstar Ratings Based on Risk Adjusted returns as of September 30, 2009 for funds that we
distribute
Overall Rating 3 Year Rating 5 Year Rating 10 Year Rating
Morningstar Stars # of Funds Stars # of Funds Stars # of Funds Stars # of Funds
FUND Category
Gabelli ABC AAA Mid-Cap Blend κκκκκ 387 κκκκκ 387 κκκκκ 306 κκκκ 146
Gabelli Asset AAA Mid-Cap Blend κκκκ 387 κκκκ 387 κκκκ 306 κκκ 146
Gabelli Blue Chip Large Value κκκ 1133 κκκκ 1133 κκκκ 933 κκ 453
Value AAA
Gabelli Equity Large Value κκκκκ 1133 κκκκκ 1133 κκκκκ 933 κκκκκ 453
Income AAA
Gabelli Small Cap Small Blend κκκκκ 560 κκκκκ 560 κκκκκ 452 κκκκ 234
Growth AAA
Gabelli SRI Green Mid-Cap Blend n/a n/a n/a n/a n/a n/a n/a n/a
AAA
Gabelli Utilities Specialty - κκκκκ 95 κκκκ 95 κκκκ 80 κκκκκ 52
AAA Utilities
Gabelli Value A Mid-Cap Blend κκ 387 κκ 387 κκ 306 κκ 146
Gabelli Woodland Small Blend κκκ 560 κκκκ 560 κκκ 452 n/a 234
Small Cap Value AAA
GAMCO Global Convertibles κ 66 κ 66 κ 61 κ 44
Convertible Secs AAA
GAMCO Global Growth World Stock κκ 536 κκκ 536 κκκ 440 κ 253
AAA
GAMCO Global World Stock κκκ 536 κκκ 536 κκκ 440 κκκ 253
Opportunity AAA
GAMCO Global Specialty - κκκκ 33 κκκκ 33 κκκκ 32 κκκ 13
Telecommunications Communications
AAA
GAMCO Gold AAA Specialty - κκκ 61 κκκ 61 κκκ 61 κκκ 36
Precious Metals
GAMCO Growth AAA Large Growth κκκ 1515 κκκ 1515 κκκ 1255 κκ 653
GAMCO International Foreign Large κκκ 202 κκκ 202 κκκ 153 κκκ 81
Growth AAA Growth
GAMCO Mathers Conservative κκ 499 κκκκ 499 κκ 332 κ 139
Allocation
GAMCO Westwood Moderate κκκκ 956 κκκκ 956 κκκκ 795 κκκκ 455
Balanced AAA (a) Allocation
GAMCO Westwood Large Value κκκκ 1133 κκκκ 1133 κκκκ 933 κκκκ 453
Equity AAA (a)
GAMCO Westwood Moderate κκ 956 κ 956 κκ 795 κκκκκ 455
Income AAA (a) Allocation
GAMCO Westwood Intermediate-Term κκκ 954 κκκ 954 κκκ 836 κκκ 480
Intermediate AAA (a) Bond
GAMCO Westwood Small Blend κκκκκ 560 κκκκκ 560 κκκκκ 452 κκκκκ 234
Mighty Mites AAA (a)
GAMCO Westwood Small Blend κκ 560 κκκ 560 κκκκ 452 κ 234
SmallCap Equity AAA
(a)
Gabelli Enterprise Mid-Cap Blend κκκκ 387 κκκκ 387 κκκκ 306 n/a 146
Mergers &
Acquisitions Y
Comstock Capital Bear Market n/a n/a n/a n/a n/a n/a n/a n/a
Value AAA
Percent of Rated 43.48% 56.52% 52.17% 38.10%
funds rated 4 or 5
stars
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The Overall Morningstar Rating™ is derived from a weighted average of the
performance figures associated with its three, five and ten year (if applicable)
Morningstar Rating metrics. Data presented reflects past performance, which is
no guarantee of future results. Ratings are for Class AAA, A or Y shares only,
other classes may have different performance characteristics. For each fund with
at least a three year history, Morningstar calculates a Morningstar Rating based
on a Morningstar Risk-Adjusted Return measure that accounts for variation in a
fund's monthly performance (including the effects of sales charges, loads, and
redemption fees), placing more emphasis on downward variations and rewarding
consistent performance. The top 10% of the funds in each category receive 5
stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next
22.5% receive 2 stars, and the bottom 10% receive 1 star. (Each share class is
counted as a fraction of one fund within this scale and rated separately, which
may cause slight variations in the distribution percentages.) Strong relative
performance is not indicative of positive fund returns. 2008 absolute
performance for most funds was negative. © 2009 Morningstar, Inc. All rights
reserved. The information contained herein: (1) is proprietary to Morningstar
and/or its content providers; (2) may not be copied or distributed; and (3) is
not warranted to be accurate, complete or timely. Neither Morningstar nor its
content providers are responsible for any damages or losses arising from any use
of this information. Investors should consider the investment objectives,
risks, sales charges and expenses of the fund carefully before investing. The
prospectus contains more information about this and other matters. The
prospectus should be read carefully before investing. Distributed by Gabelli &
Company, One Corporate Center, Rye, NY 10580 Call 1-800-GABELLI (422-3554) for a
prospectus.
The inception date for the Gabelli SRI Green Fund was June 1, 2007. The
inception date for the Gabelli Woodland Small Cap Value Fund was December 31,
2002. The inception date for the Gabelli Enterprise Mergers & Acquisitions Fund
was February 28, 2001. The inception date for the Comstock Capital Value Fund
was October 10, 1985.
(a) Managed by Teton Advisors, Inc. not Gabelli Funds, LLC.
GABELLI/GAMCO FUNDS Gabelli Funds Lipper Rankings as of September 30, 2009
1 Yr - 09/30/08- 3 Yrs - 09/30/06- 5 Yrs - 09/30/04- 10 Yrs - 09/30/99-
09/30/09 09/30/09 09/30/09 09/30/09
Fund Name Lipper Category Percentile Rank / Percentile Rank / Percentile Rank / Percentile Rank /
Rank Total Funds Rank Total Funds Rank Total Funds Rank Total Funds
Gabelli Asset; Multi-Cap Core Funds 47 366/785 12 76/641 9 42/489 21 41/197
AAA
Gabelli Value Multi-Cap Core Funds 41 315/785 65 412/641 62 303/489 44 87/197
Fund; A
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Gabelli SRI; AAA Multi-Cap Core Funds 2 12/785 - - - - - - Gabelli Eq:Eq Equity Income Funds 18 52/303 17 39/233 13 24/184 11 11/104 Inc; AAA GAMCO Ww:Income; Equity Income Funds 61 183/303 66 153/233 - - - - AAA GAMCO Growth; Large-Cap Growth Funds 31 254/830 41 293/717 32 190/598 71 217/307 AAA GAMCO Ww:SmCp Small-Cap Core Funds 28 207/742 22 134/614 16 79/496 99 254/256 Eq; AAA Gabelli Eq:SC Small-Cap Core Funds 25 180/742 9 51/614 10 49/496 21 53/256 Gro; AAA GAMCO Ww:Mhty M; Small-Cap Core Funds 11 75/742 2 12/614 2 9/496 19 48/256 AAA Gabelli Eq:Wd Small-Cap Core Funds 59 438/742 18 107/614 41 203/496 - - SCV; AAA GAMCO Gl:Oppty; Global Multi-Cap Growth 9 8/95 26 17/65 37 19/51 31 11/35 AAA GAMCO Gl:Growth; Global Large-Cap Core 32 30/95 11 7/65 27 14/51 84 30/35 AAA GAMCO Gold; AAA Gold Oriented Funds 39 27/69 38 20/53 36 18/50 24 7/29 GAMCO Intl Gro; International Large-Cap 14 22/160 50 64/127 78 70/89 48 25/52 AAA Growth GAMCO Ww:Eqty; Large-Cap Value Funds 97 524/542 22 101/472 10 36/388 25 45/185 AAA Gabelli Bl Chp Large-Cap Core Funds 16 145/907 33 245/761 21 126/628 8 26/368 Val; AAA Gabelli Inv:ABC; Specialty Diversified 40 16/40 16 5/32 14 2/14 30 3/9 AAA Equity Funds GAMCO Mathers; Specialty Diversified 52 21/40 40 13/32 40 6/14 50 5/9 AAA Equity Funds Comstock Cap Specialty Diversified 57 23/40 19 6/32 80 12/14 70 7/9 Val; A Equity Funds GAMCO Telecommunications Funds 59 23/38 20 6/29 22 6/27 20 2/9 Gl:Telecom; AAA GAMCO Convertible Securities 90 63/69 95 56/58 93 52/55 98 41/41 Gl:Convert; AAA Funds Gabelli Utility Funds 20 19/98 12 10/85 53 37/70 11 5/45 Utilities; AAA GAMCO Ww:Bal - Mixed-Asset Target 96 487/511 49 191/396 19 58/305 20 29/147 AAA Alloc. Moderate Funds 787:Gabelli Mid-Cap Core Funds 18 69/386 18 53/307 39 97/249 - - Merg&Acq; Y Gabelli Capital Distributed through 44 155/354 41 117/289 28 60/216 15 12/80 Asset Fund Insurance Channel % of funds in 68.0% 87.5% 78.3% 76.2% top half |
Data presented reflects past performance, which is no guarantee of future results. Strong rankings are not indicative of positive fund performance. Absolute performance for some funds was negative.
Lipper, a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments including mutual funds, retirement funds, hedge funds, fund fees and expenses to the asset management and media communities. Lipper ranks the performance of mutual funds within a classification of funds that have similar investment objectives. Rankings are historical with capital gains and dividends reinvested and do not include the effect of loads. If an expense waiver was in effect, it may have had a material effect on the total return or yield for the period.
Relative long-term investment performance remained strong with approximately 68%, 88%, 78% and 76% of firmwide mutual funds in the top half of their Lipper categories on a one-, three-, five-, and ten-year total-return basis, respectively, as of September 30, 2009.
Investors should consider carefully the investment objective, risks, charges and expenses of a fund before investing. The Prospectus which contains more information about this and other matters, should be read carefully before investing. You can obtain a prospectus by calling 1-800 GABELLI. Distributed by Gabelli & Company. Other share classes are available that have different performance characteristics.
The inception date for the Gabelli SRI Green Fund was June 1, 2007. The inception date for the Gabelli Woodland Small Cap Value Fund was December 31, 2002. The inception date for the Gabelli Enterprise Mergers & Acquisitions Fund was February 28, 2001.
The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements and the notes thereto included in Item 1 to this report.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2009 Compared To Three Months Ended September
30, 2008
(Unaudited; in thousands, except per share data)
2009 2008
Revenues
Investment advisory and incentive fees $ 40,957 $ 52,297
Institutional research services 4,588 4,098
Distribution fees and other income 6,037 6,585
Total revenues 51,582 62,980
Expenses
Compensation and related costs 21,590 26,233
Management fee 2,638 1,740
Distribution costs 6,089 6,658
Other operating expenses 4,405 7,076
Total expenses 34,722 41,707
Operating income 16,860 21,273
Other income (expense)
Net gain from investments 9,659 (4,786 )
Interest and dividend income 598 1,340
Interest expense (3,296 ) (2,091 )
Total other income / (expense), net 6,961 (5,537 )
Income before taxes 23,821 15,736
Income tax provision 8,913 3,837
Net income 14,908 11,899
Net income / (loss) attributable to
noncontrolling interests 257 (86 )
Net income attributable to GAMCO
Investors, Inc.'s shareholders $ 14,651 $ 11,985
Net income attributable to GAMCO
Investors, Inc.'s shareholders per
share:
Basic $ 0.54 $ 0.43
Diluted $ 0.53 $ 0.43
Reconciliation of net income
attributable to GAMCO Investors, Inc.'s
shareholders
to Adjusted EBITDA:
Net income attributable to GAMCO
Investors, Inc.'s shareholders $ 14,651 $ 11,985
Interest expense 3,296 2,091
Income tax provision and net income
attributable to noncontrolling interests 9,170 3,751
Depreciation and amortization 160 263
Adjusted EBITDA (a) $ 27,277 $ 18,090
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(a) Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, and noncontrolling interests. Adjusted EBITDA is a non-GAAP measure and should not be considered as an alternative to any measure of performance as promulgated under accounting principles generally accepted in the United States nor should it be considered as an indicator of our overall financial performance. We use Adjusted EBITDA as a supplemental measure of performance as we believe it gives investors a more complete understanding of our operating results before the impact of financing activities as a tool for determining the private market value of an enterprise.
Total revenues were $51.6 million in the third quarter of 2009, 18.1% below the $63.0 million reported in the third quarter of 2008. Operating income was $16.9 million, a decrease of $4.4 million or 20.7% from the $21.3 million in the third quarter of 2008. Total other income/expense, net of interest expense, was income of $7.0 million for the third quarter 2009 versus expense of $5.5 million in the prior year's quarter. In the short-run, our results remain sensitive to changes in the equity market. Net income attributable to GAMCO Investors, Inc.'s shareholders for the quarter was $14.7 million or $0.53 per fully diluted share . . .
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