-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DfrIX+BtGCwIkQki1n0NQ3cEBjkOrdP32NRc0rtwkXc0YTM/LcReVVIVSF4mX9DX n0ZsrP4QguvL7hyo+7v3fA== 0001072613-03-001835.txt : 20031114 0001072613-03-001835.hdr.sgml : 20031114 20031114150655 ACCESSION NUMBER: 0001072613-03-001835 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GABELLI ASSET MANAGEMENT INC CENTRAL INDEX KEY: 0001060349 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 134007862 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14761 FILM NUMBER: 031003727 BUSINESS ADDRESS: STREET 1: ONE CORPORATE CENTER CITY: RYE STATE: NY ZIP: 10580 BUSINESS PHONE: 9149213700 MAIL ADDRESS: STREET 1: ONE CORPORATE CENTER CITY: RYE STATE: NY ZIP: 10580 FORMER COMPANY: FORMER CONFORMED NAME: ALPHA G INC DATE OF NAME CHANGE: 19980423 10-Q 1 form10-q_12296.txt FORM 10-Q (SEPTEMBER 30, 2003) ================================================================================ SECURITIES & EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q --------- (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2003 ------------------ or [_] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------- ---------- Commission File No. 1-106 GABELLI ASSET MANAGEMENT INC. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) New York 13-4007862 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Corporate Center, Rye, New York 10580 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (914)921-3700 - -------------------------------------------------------------------------------- Registrant's telephone number, including area code Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [X] No [_] Indicate the number of shares outstanding of each of the Registrant's classes of Common Stock, as of the latest practical date. Class Outstanding at October 31, 2003 ----- ------------------------------- Class A Common Stock, .001 par value 6,947,856 Class B Common Stock, .001 par value 23,130,000 ================================================================================ INDEX ----- GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES PART I. FINANCIAL INFORMATION - -------------------------------- Item 1. Financial Statements (Unaudited) 3 Condensed Consolidated Statements of Operations: 3-4 - Three months ended September 30, 2003 and 2002 - Nine months ended September 30, 2003 and 2002 Condensed Consolidated Statements of Financial Condition: 5 - September 30, 2003 - September 30, 2002 - December 31, 2002 (Audited) Condensed Consolidated Statements of Cash Flows: 6 - Three months ended September 30, 2003 and 2002 - Nine months ended September 30, 2003 and 2002 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Including Quantitative and Qualitative Disclosures about Market Risk) 11 Item 4. Controls and Procedures 17 PART II. OTHER INFORMATION - ---------------------------- Item 6. Exhibits and Reports on Form 8-K 19 SIGNATURES 19 - ---------- 2 GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED (In thousands, except per share data)
THREE MONTHS ENDED SEPTEMBER 30, ------------------------------ 2003 2002 ------------ ------------ REVENUES Investment advisory and incentive fees .................. $ 44,207 $ 39,707 Commission revenue ...................................... 3,327 3,199 Distribution fees and other income ...................... 4,289 4,414 ------------ ------------ Total revenues ...................................... 51,823 47,320 EXPENSES Compensation and related costs .......................... 21,792 17,474 Management fee .......................................... 2,193 2,055 Other operating expenses ................................ 8,435 7,571 ------------ ------------ Total expenses ...................................... 32,420 27,100 Operating income .......................................... 19,403 20,220 OTHER INCOME (EXPENSE) Net gain (loss) from investments ........................ 2,804 (390) Interest and dividend income ............................ 1,704 1,720 Interest expense ........................................ (4,174) (3,057) ------------ ------------ Total other income (expense), net ................... 334 (1,727) ------------ ------------ Income before income taxes and minority interest .......... 19,737 18,493 Income tax provision .................................... 7,298 6,954 Minority interest ....................................... 137 46 ------------ ------------ Net income .......................................... $ 12,302 $ 11,493 ============ ============ Net income per share: Basic ................................................... $ 0.41 $ 0.38 ============ ============ Diluted ................................................. $ 0.41 $ 0.38 ============ ============ Weighted average shares outstanding: Basic ................................................... 30,061 30,141 ============ ============ Diluted ................................................. 32,170 30,296 ============ ============
See accompanying notes. 3 GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS UNAUDITED (In thousands, except per share data)
NINE MONTHS ENDED SEPTEMBER 30, ------------------------------ 2003 2002 ------------ ------------ REVENUES Investment advisory and incentive fees .................. $ 124,467 $ 136,923 Commission revenue ...................................... 8,518 10,812 Distribution fees and other income ...................... 12,847 15,019 ------------ ------------ Total revenues ...................................... 145,832 162,754 EXPENSES Compensation and related costs .......................... 63,191 62,195 Management fee .......................................... 5,959 7,286 Other operating expenses ................................ 24,534 23,298 ------------ ------------ Total expenses ...................................... 93,684 92,779 Operating income .......................................... 52,148 69,975 OTHER INCOME (EXPENSE) Net gain (loss) from investments ........................ 7,949 (312) Interest and dividend income ............................ 4,328 4,879 Interest expense ........................................ (10,790) (8,971) ------------ ------------ Total other income (expense), net ................... 1,487 (4,404) ------------ ------------ Income before income taxes and minority interest .......... 53,635 65,571 Income tax provision .................................... 20,044 24,655 Minority interest ....................................... 405 93 ------------ ------------ Net income .......................................... $ 33,186 $ 40,823 ============ ============ Net income per share: Basic ................................................... $ 1.11 $ 1.36 ============ ============ Diluted ................................................. $ 1.10 $ 1.35 ============ ============ Weighted average shares outstanding: Basic ................................................... 30,002 30,102 ============ ============ Diluted ................................................. 30,134 30,337 ============ ============
See accompanying notes. 4 GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (In thousands)
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, 2003 2002 2002 ------------ ------------ ------------ (Unaudited) ASSETS Cash and cash equivalents .................. $ 425,849 $ 316,351 $ 311,430 Investments in securities .................. 182,874 152,709 175,466 Investments in partnerships and affiliates.. 60,136 52,894 47,932 Receivables from affiliates ................ 11,842 10,053 10,340 Receivable from brokers .................... 1,216 1,052 4,919 Investment advisory fees receivable ........ 15,821 13,767 15,603 Income tax receivable ...................... -- 939 -- Other assets ............................... 17,946 16,218 17,041 ------------ ------------ ------------ Total assets ......................... $ 715,684 $ 563,983 $ 582,731 ============ ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Payable to brokers ......................... $ 5,726 $ 4,245 $ 17,138 Income taxes payable ....................... 8,603 4,153 9,196 Compensation payable ....................... 27,291 28,395 18,459 Capital lease obligation ................... 3,154 3,449 3,433 Securities sold, not yet purchased ......... 669 782 5,022 Accrued expenses and other liabilities ..... 17,493 14,232 15,583 ------------ ------------ ------------ Total operating liabilities .......... 62,936 55,256 68,831 5.5% Senior notes .......................... 100,000 -- -- 5% Convertible note (a) .................... 100,000 100,000 100,000 Mandatory convertible securities ........... 84,163 84,748 84,545 ------------ ------------ ------------ Total liabilities .................... 347,099 240,004 253,376 Minority interest .......................... 7,967 7,432 7,562 Stockholders' equity ....................... 360,618 316,547 321,793 ------------ ------------ ------------ Total liabilities and stockholders' equity.. $ 715,684 $ 563,983 $ 582,731 ============ ============ ============
(a) Terms of note changed from 6% to 5% in mid-August 2003. See accompanying notes. 5 GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED (In thousands)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------------ ------------------------------ 2003 2002 2003 2002 ------------ ------------ ------------ ------------ OPERATING ACTIVITIES Net income .................................................. $ 12,302 $ 11,493 $ 33,186 $ 40,823 Adjustments to reconcile net income to net cash provided by (used in)operating activities: Equity in gains from partnerships and affiliates ............ (1,513) (94) (4,157) (439) Depreciation and amortization ............................... 242 242 727 670 Stock-based compensation expense ............................ 434 -- 1,071 -- Deferred income taxes ....................................... -- -- -- 18,661 Tax benefit from exercise of stock options .................. 320 34 1,084 4,116 Minority interest in net income of consolidated subsidiaries. 137 46 405 93 Market value of donated securities .......................... -- -- -- 412 Realized gains on available for sale securities ............. (83) -- (97) (40) (Increase) decrease in operating assets: Investments in securities ................................. 13,027 (99,323) 337 (97,436) Investment advisory fees receivable ....................... (1,976) 1,527 (218) 884 Receivables from affiliates ............................... (1,265) 924 (2,323) 1,690 Other receivables ......................................... 113 272 (309) 530 Receivable from brokers ................................... (760) (952) 3,702 (1,017) Income tax receivable ..................................... -- 2,313 -- (939) Other assets .............................................. 369 459 (499) (3,694) Increase (decrease) in operating liabilities: Payable to brokers ........................................ (469) (1,088) (11,412) (4,309) Income taxes payable ...................................... 1,740 4,080 (652) (297) Compensation payable ...................................... 5,951 (561) 8,814 7,297 Accrued expenses and other liabilities .................... (229) (1,901) 1,629 (2,903) Securities sold, not yet purchased ........................ (73) 782 (4,353) -- ------------ ------------ ------------ ------------ Total adjustments ........................................... 15,965 (93,240) (6,251) (76,721) ------------ ------------ ------------ ------------ Net cash provided by (used in)operating activities .......... 28,267 (81,747) 26,935 (35,898) ------------ ------------ ------------ ------------ INVESTING ACTIVITIES Purchases of available for sale securities .................. (7,165) (243) (8,369) (801) Proceeds from sales of available for sale securities ........ 800 -- 900 602 Distributions from partnerships and affiliates .............. 3,093 8,039 12,942 20,497 Investments in partnerships and affiliates .................. (4,695) (745) (20,989) (7,113) ------------ ------------ ------------ ------------ Net cash provided by (used in) investing activities ......... (7,967) 7,051 (15,516) 13,185 ------------ ------------ ------------ ------------ FINANCING ACTIVITIES Purchase of minority stockholders' interest ................. -- -- -- (273) Issuance of mandatory convertible securities ................ -- (214) -- 87,738 Issuance of Senior notes .................................... -- -- 100,000 -- Repayment of note payable ................................... -- -- -- (50,000) Proceeds from exercise of stock options ..................... 703 109 3,580 9,172 Purchase of mandatory convertible securities ................ -- (2,693) (373) (5,115) Purchase of treasury stock .................................. (3) (2,083) (207) (7,905) ------------ ------------ ------------ ------------ Net cash provided by (used in) financing activities ......... 700 (4,881) 103,000 33,617 ------------ ------------ ------------ ------------ Net increase (decrease)in cash and cash equivalents ......... 21,000 (79,577) 114,419 10,904 Cash and cash equivalents at beginning of period ............ 404,849 395,928 311,430 305,447 ------------ ------------ ------------ ------------ Cash and cash equivalents at end of period .................. $ 425,849 $ 316,351 $ 425,849 $ 316,351 ============ ============ ============ ============ SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITY Net present value of forward purchase contract .............. $ -- $ 2,353 $ -- $ 2,353 ============ ============ ============ ============ Securities reclassified to available for sale ............... $ 3,788 $ -- $ 3,788 $ -- ============ ============ ============ ============
See accompanying notes. 6 GABELLI ASSET MANAGEMENT INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2003 (UNAUDITED) A. BASIS OF PRESENTATION The unaudited interim Condensed Consolidated Financial Statements of Gabelli Asset Management Inc. (the "Company") included herein have been prepared in conformity with accounting principles generally accepted in the United States for interim financial information and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of financial position, results of operations and cash flows of the Company for the interim periods presented and are not necessarily indicative of a full year's results. In preparing the unaudited interim condensed consolidated financial statements, management is required to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. These financial statements should be read in conjunction with the Company's audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002, from which the accompanying Condensed Consolidated Statement of Financial Condition was derived. Certain items previously reported have been reclassified to conform to the current period's financial statement presentation. B. INVESTMENT IN SECURITIES Management determines the appropriate classification of debt and equity securities at the time of purchase and reevaluates such designation as of each balance sheet date. A substantial portion of investments in securities are held for resale in anticipation of short-term market movements and classified as trading securities. Available for sale investments are stated at fair value, with any unrealized gains or losses, net of deferred taxes, reported as a component of stockholders' equity. At September 30, 2003 and 2002 the market value of investments available for sale was $17.5 million and $5.7 million, respectively. An unrealized loss in market value, net of taxes, of $538,000 and $646,000 has been included in stockholders' equity for September 30, 2003 and 2002, respectively. Proceeds from sales of investments available for sale were approximately $0.9 million for the nine month period ended September 30, 2003. Gross gains on the sale of investments available for sale amounted to $97,000; there were no gross losses on the sale of investments available for sale. Proceeds from sales of investments available for sale were approximately $0.6 million for the nine month period ended September 30, 2002. Gross gains on the sale of investments available for sale amounted to $58,000; gross losses on the sale of investments available for sale amounted to $19,000. 7 C. EARNINGS PER SHARE The computations of basic and diluted net income per share are as follows:
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------- ------------------------- (in thousands, except per share amounts) 2003 2002 2003 2002 ---------- ---------- ---------- ---------- Basic: Net income .............................. $ 12,302 $ 11,493 $ 33,186 $ 40,823 ========== ========== ========== ========== Average shares outstanding .............. 30,061 30,141 30,002 30,102 ========== ========== ========== ========== Basic net income per share .............. $ 0.41 $ 0.38 $ 1.11 $ 1.36 ========== ========== ========== ========== Diluted: Net income .............................. $ 12,302 $ 11,493 $ 33,186 $ 40,823 Add interest expense on convertible note, net of management fee and taxes ...... 770 -- -- -- ---------- ---------- ---------- ---------- Total ................................... $ 13,072 $ 11,493 $ 33,186 $ 40,823 ========== ========== ========== ========== Average shares outstanding .............. 30,061 30,141 30,002 30,102 Dilutive stock options .................. 186 155 132 235 Assumed conversion of convertible note .. 1,923 -- -- -- ---------- ---------- ---------- ---------- Total ................................... 32,170 30,296 30,134 30,337 ========== ========== ========== ========== Diluted net income per share ............ $ 0.41 $ 0.38 $ 1.10 $ 1.35 ========== ========== ========== ==========
For the nine months ended September 30, 2003 and 2002 and the three months ended September 30, 2002 the assumed conversion of the convertible note would not be dilutive and, accordingly, has not been used in the computations of the weighted average diluted shares. D. STOCKHOLDERS' EQUITY STOCK AWARD AND INCENTIVE PLAN On February 18, 2003 the Board of Directors approved stock option awards totaling 633,000 shares under the Company's Stock Award and Incentive Plan at an exercise price to be equal to the closing market price on the date of grant. Of these options 561,000 were granted on February 18 at an exercise price of $28.95 per share and 72,000 were granted on May 13, 2003 at an exercise price of $29.00 per share. These options will vest 75% after three years and 100% after four years from the date of grant and expire after ten years. The Company adopted SFAS 123, "Accounting for Stock-Based Compensation" ("SFAS 123") as of January 1, 2003 in accordance with SFAS 148, "Accounting for Stock-Based Compensation - Transition and Disclosure" ("SFAS 148") and will use the Prospective method for transition. Under SFAS 123 the Company records compensation expense equal to the fair value of the options on the date of grant based on the Black-Scholes option pricing model. This model utilizes a number of assumptions in arriving at its results, including an estimate of the life of the option, the risk-free interest rate at the date of grant and the volatility of the underlying common stock. The weighted average fair value of the options granted on the date of grant and the assumptions used were as follows: Weighted average fair value of Options granted: $10.98 Assumptions made: Expected volatility 38% Risk-free interest rate 3.04% Expected life 5 years Dividend yield 0% 8 D. STOCKHOLDERS' EQUITY (CONTINUED) 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 reflected the assumption that no payout will be made in the foreseeable future. In the third quarter of 2003 the Company recognized $434,000 in stock-based compensation expense and expect stock-based compensation expense for 2003 to total $1.5 million. Proceeds from the exercise of 40,389 and 6,250 stock options were $703,000 and $109,000 for the three months ended September 30, 2003 and 2002, respectively, resulting in a tax benefit to the Company of $320,000 and $34,000 for the three months ended September 30, 2003 and 2002, respectively. Proceeds from the exercise of 207,156 and 524,194 stock options were $3,580,000 and $9,172,000 for the nine months ended September 30, 2003 and 2002, respectively, resulting in a tax benefit to the Company of $1,084,000 and $4,116,000 for the nine months ended September 30, 2003 and 2002, respectively. STOCK REPURCHASE PROGRAM In March 1999 the Board of Directors established the Stock Repurchase Program through which the Company is authorized to repurchase shares of its Class A Common Stock from time to time in the open market. During the three months ended September 30, 2003, the Company repurchased 105 shares at an average cost of $31.75 per share. During the first nine months of 2003, the Company repurchased 7,522 shares at an average cost of $27.54 per share. Since the inception of the program the Company has repurchased 1,127,948 shares at an average cost of $25.23 per share. At September 30, 2003 the total amount available to repurchase shares under the program was $14.2 million. Since May 2002 the Board of Directors has also approved the repurchase of up to 700,000 shares of the Company's mandatory convertible securities from time to time in the open market. During the first quarter of 2003, the Company repurchased 15,300 shares at an average investment of $19.02 per share bringing the total shares repurchased to 233,500 at a total investment of $5.1 million. No shares were repurchased in the open market during the three month period ended September 30, 2003. A gain attributable to the debt component of the mandatory convertible securities totaling $87,000 has been included in other income (expense) for the nine months ended September 30, 2003. E. SUBSEQUENT EVENTS The Company announced that it has elected to defer the application of the implementation of Financial Accounting Standards Board ("FASB") Interpretation No. 46 "Consolidation of Variable Interest Entities". This decision was based on the recent FASB Staff Position issued on October 9, 2003 deferring the effective date for applying the provisions of FASB Interpretation No. 46 until the fourth quarter of 2003. During the fourth quarter of 2003, the Company repurchased 39,400 shares of its Class A Common Stock, under its Stock Repurchase Program, at an average cost of $34.82 per share. The Company also repurchased 5,300 shares of its mandatory convertible securities at an average investment of $24.49 per share. The Company announced a new closed-end fund, The Gabelli Dividend & Income Trust (the "Fund"), which it plans to offer in November 2003. The Fund will focus on investing primarily in dividend paying equity securities and will seek a high after-tax total return through an emphasis on qualified dividend income. The Fund's offering is being underwritten by Merrill Lynch & Co., Citigroup, A.G. Edwards & Sons, Inc., Gabelli & Company, Inc. and others. 9 During October 2003, the Company received a request from the New York Attorney General's office (NYAG) in the form of a subpoena for information relating to trading issues involving mutual fund shares. The Company also previously received and responded to a request from the Securities and Exchange Commission relating to the pricing and trading of shares of Gabelli mutual funds with significant foreign holdings. The Company is now in the process of gathering information requested by the NYAG's office and is fully cooperating with these inquiries. The Company expects to incur additional legal and administrative expenses in the fourth quarter of 2003 and in 2004 as a result of regulatory requests and internal reviews relating to these issues. The Company has determined that these additional costs are not estimable at this time. 10 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Gabelli Asset Management Inc. (the "Company") is a widely recognized provider of investment advisory and brokerage services to mutual fund, institutional and high net worth investors in the United States and internationally. The Company generally manages assets on a discretionary basis and invests in a wide variety of U.S. and international securities through various investment styles. The Company's revenues are largely based on the level of assets under management in its business as well as the level of fees associated with its various investment products. Growth in revenues generally depends on good investment performance and the ability to attract additional investors while maintaining current fee levels. The Company's largest source of revenues is investment advisory fees which are based on the amount of assets under management in its Mutual Funds, Separate Accounts and Alternative Investment products. Revenues derived from the equity oriented portfolios generally have higher management fee rates than fixed income portfolios. 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, 2003 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2002 Consolidated Results - Three Months Ended September 30: (Unaudited; in thousands, except per share data) ------------------------------------------------ 2003 2002 ---------- ---------- Revenues ....................................... $ 51,823 $ 47,320 Expenses ....................................... 32,420 27,100 ---------- ---------- Operating income ............................... 19,403 20,220 Investment income, net ......................... 4,508 1,330 Interest expense ............................... (4,174) (3,057) ---------- ---------- Total other income (expense), net .............. 334 (1,727) ---------- ---------- Income before taxes and minority interest ...... 19,737 18,493 Income tax provision ........................... 7,298 6,954 Minority interest .............................. 137 46 ---------- ---------- Net income ..................................... $ 12,302 $ 11,493 ========== ========== Net income per share: Basic ....................................... $ 0.41 $ 0.38 ========== ========== Diluted ..................................... $ 0.41 $ 0.38 ========== ========== Reconciliation of Net income to Adjusted EBITDA: Net income ..................................... $ 12,302 $ 11,493 Interest Expense ............................... 4,174 3,057 Income tax provision and minority interest ..... 7,435 7,000 Depreciation and amortization .................. 242 243 ---------- ---------- Adjusted EBITDA(a) ............................. $ 24,153 $ 21,793 ---------- ---------- (a) Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, and minority interest. 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 investing and financing activities as a tool for determining the private market value of an enterprise. 11 Total revenues were $51.8 million in the third quarter of 2003 up $4.5 million or 9.5% from total revenues of $47.3 million reported in the third quarter of 2002. Investment advisory and incentive fees, which comprise 85.3% of total revenues, were $44.2 million in the third quarter of 2003, $4.5 million or 11.3% higher than the $39.7 million reported in the third quarter of 2002. The increase in investment advisory and incentive fees was principally the result of higher levels of assets under management in our equity mutual funds and increased performance fees from our alternative investment products. Revenues from mutual funds increased $2.7 million or 13.4% from the prior year as assets under management in mutual funds increased to $10.8 billion at September 30, 2003, or 11.6% ahead of the September 30, 2002 assets under management of $9.7 billion. Revenues from our alternative investment products were 114.5% higher at $3.3 million resulting from both increased management and performance fees. GAMCO fees, which are generally billed based on asset levels at the beginning of a quarter, increased $0.1 million or 0.9% in the 2003 quarter as compared to the third quarter of 2002. Commissions were $3.3 million in the third quarter of 2003, up 4.0% from $3.2 million in the same period a year earlier largely due to an increase in overall trading volume. Revenues from distribution of mutual funds and other income were $4.3 million in the third quarter of 2003 versus $4.4 million in the third quarter of 2002. The decrease in distribution fees largely results from the refunding of 12b-1 fees totaling $0.4 million pertaining to the first nine months of 2003 to the shareholders of our Gabelli ABC Fund during the third quarter. Excluding the effect of this refund, revenue from distribution of mutual funds and other income increased 5.9%. This increase was a result of a 6.4% increase in average assets for open-end funds for the third quarter of 2003 versus the prior year third quarter, which generate distribution revenues under 12b-1 compensation plans. Total expenses were $32.4 million in the third quarter of 2003, a 19.6% increase from total expenses of $27.1 million reported in the third quarter of 2002. Compensation and related costs, which are largely variable, were $21.8 million, 24.7% higher than the same period a year earlier. The increase in compensation was due to increased variable compensation related to our Alternative Investment products of $1.4 million, the acquisition of Woodland Partners ("Woodland") and Grove Investment Advisors ("Grove") of $0.5 million (which we acquired in the 4th quarter of 2002), an increase in salaries and stock option expense totaling $0.8 million and the negative year-over-year effect of a reversal of incentive compensation in the 2002 quarter of $1.3 million. Management fee expense, which is totally variable and based on pretax income, was 6.7% higher at $2.2 million in the third quarter of 2003 versus $2.1 million in the third quarter of 2002. Other operating expenses were higher by $0.9 million, an 11.4% increase to $8.4 million in the third quarter of 2003 from the prior year third quarter of $7.6 million due to higher costs related to promotional activities, insurance premiums, and legal and accounting. Investment income was $4.5 million in the third quarter of 2003 higher by $3.2 million, or 239% from $1.3 million reported in the third quarter of 2002 as the rising equity markets resulted in increased earnings from our proprietary investment accounts. Interest expense increased $1.1 million to $4.2 million in the third quarter of 2003 from $3.1 million in the comparable prior year quarter. This increase is a result of the Company's issuance of $100 million of ten-year 5.5% non-callable senior notes due May 15, 2013 during the second quarter of 2003, offset in part by a one percent decrease in the interest rate on the $100 million convertible note from 6% to 5% effective August 2003. The estimated effective tax rate for the third quarter of 2003 decreased to 37.0% from 37.6% for the third quarter of 2002 due to the effect of a dividend received deduction from our Westwood Holdings Group, Inc. ("Westwood") investment. Westwood paid a special cash dividend of $1.00 per share on October 1, 2003 to shareholders of record on September 15, 2003. The Company owned 514,850 shares as of September 30, 2003. Minority interest was higher by $0.1 million over the prior year quarter. 12 NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2002 Consolidated Results - Nine Months Ended September 30: (Unaudited; in thousands, except per share data) ------------------------------------------------ 2003 2002 ---------- ---------- Revenues ....................................... $ 145,832 $ 162,754 Expenses ....................................... 93,684 92,779 ---------- ---------- Operating income ............................... 52,148 69,975 Investment income, net ......................... 12,277 4,567 Interest expense ............................... (10,790) (8,971) ---------- ---------- Total other income (expense), net .............. 1,487 (4,404) ---------- ---------- Income before taxes and minority interest ...... 53,635 65,571 Income tax provision ........................... 20,044 24,655 Minority interest .............................. 405 93 ---------- ---------- Net income ..................................... $ 33,186 $ 40,823 ========== ========== Net income per share: Basic ....................................... $ 1.11 $ 1.36 ========== ========== Diluted ..................................... $ 1.10 $ 1.35 ========== ========== Reconciliation of Net income to Adjusted EBITDA: Net income ..................................... $ 33,186 $ 40,823 Interest Expense ............................... 10,790 8,971 Income tax provision and minority interest ..... 20,449 24,748 Depreciation and amortization .................. 727 670 ---------- ---------- Adjusted EBITDA(a) ............................. $ 65,152 $ 75,212 ---------- ---------- (a) Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization and minority interest. 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 investing and financing activities as a tool for determining the private market value of an enterprise. Total revenues were $145.8 million for the first nine months of 2003 down $16.9 million or 10.4% from total revenues of $162.8 million reported for the first nine months of 2002. Investment advisory and incentive fees, which comprise 85.3% of total revenues, were $124.5 million in the first nine months of 2003, $12.5 million or 9.1% lower than the $136.9 million reported in the first nine months of 2002. The decrease in investment advisory and incentive fees was principally the result of lower levels of assets under management in our GAMCO institutional and high net worth business and in our open-end equity mutual funds during the first half of 2003. GAMCO fees, which are generally billed based on asset levels at the beginning of a quarter, declined $11.1 million or 18.5% in the first nine months of 2003 as compared to the first nine months of 2002. Revenues from open-end equity mutual funds decreased $6.1 million or 10.2% from the prior year as average assets under management in open-end equity funds declined to $6.9 billion, 11.0% below the prior year's first nine months average of $7.7 billion. Revenues from open-end mutual funds are based on average assets and should improve over the full year 2003 versus full year 2002 as September 30, 2003 assets in open-end equity funds were $7.3 billion, 17.4% higher than the prior year first nine months ending balance of $6.2 billion. Revenues from our alternative investment products were 68.7% higher at $8.7 million resulting from both increased management and performance fees. Commissions were $8.5 million in the first nine months of 2003, down 21.2% from $10.8 million in the same period a year earlier largely due to a decrease in overall trading volume. 13 Revenues from distribution of mutual funds and other income were $12.8 million in the first nine months of 2003 versus $15.0 million in the first nine months of 2002. The decrease in distribution fees results from the lower average assets under management in open-end equity mutual funds during 2003, which generate distribution revenues under 12b-1 compensation plans. Total expenses were $93.7 million in the first nine months of 2003, a 1.0% increase from total expenses of $92.8 million reported in the first nine months of 2002. Compensation and related costs, which are largely variable, were $63.2 million, 1.6% higher than the same period a year earlier. The increase in compensation was due to increased variable compensation related to our Alternative Investment products of $2.5 million, the acquisition of Woodland and Grove of $1.5 million, an increase in salaries of $1.7 million primarily attributable to the addition of research analysts, marketing and investment professionals, the negative year-over-year effect of a reversal of incentive compensation in the 2002 period of $0.9 million and an increase of $0.9 million in stock option expense offset in part by a decrease in variable compensation payouts of $6.6 million. Management fee expense, which is totally variable and based on pretax income, was 18.2% lower at $6.0 million in the first nine months of 2003 versus $7.3 million in the first nine months of 2002. Other operating expenses were higher by $1.2 million, a 5.3% increase over $23.3 million in the first nine months of 2003 from the prior year first nine months as higher costs related to promotional activities, insurance premiums, reimbursing clients for trading costs or losses, and legal and accounting were partially offset by lower mutual fund administration and distribution costs and brokerage costs. Investment income was $12.3 million in the first nine months of 2003 higher by $7.7 million, or 169% from $4.6 million reported in the first nine months of 2002 as the rising equity markets resulted in increased earnings from our proprietary investment accounts. Interest expense increased $1.8 million to $10.8 million in the first nine months of 2003 from $9.0 million in the comparable prior year quarter largely as a result of the Company's issuance of $100 million of ten-year 5.5% non-callable senior notes in May 2003. The estimated effective tax rate for the first nine months of 2003 was 37.4% and 37.6% the first nine months of 2002. Minority interest was higher by $0.3 million over the prior first nine months of the year. LIQUIDITY AND CAPITAL RESOURCES The Company's assets are primarily liquid, consisting mainly of cash, short term investments, securities held for investment purposes and investments in partnerships and affiliates in which the Company is a general partner, limited partner or investment manager. Investments in partnerships and affiliates are generally illiquid, however, the underlying investments in such entities are generally liquid and the valuations of the investment partnerships and affiliates reflect this underlying liquidity. Summary cash flow data is as follows: NINE MONTHS ENDED SEPTEMBER 30, -------------------------- 2003 2002 ---------- ---------- Cash flows provided by (used in): (in thousands) Operating activities $ 26,935 $ (35,898) Investing activities (15,516) 13,185 Financing activities 103,000 33,617 ---------- ---------- Increase 114,419 10,904 Cash and cash equivalents at beginning of period 311,430 305,447 ---------- ---------- Cash and cash equivalents at end of period $ 425,849 $ 316,351 ========== ========== Cash requirements and liquidity needs have historically been met through cash generated by operating activities and through the Company's borrowing capacity. The Company has received investment grade ratings from both Moody's Investors Services and Standard & Poor's Rating Services. These investment grade ratings expand our ability to attract both public and private capital. At September 30, 2003, the Company had total cash and cash equivalents of $425.8 million, an increase of $109.5 million from September 30, 2002 primarily the result of the Company's issuance of $100 million of ten year non-callable senior notes in May 2003. The Company has established a collateral account, consisting of cash and cash equivalents totaling $102.5 million, to 14 secure a letter of credit issued in favor of the holder of the $100 million convertible note. The letter of credit was extended and expires on August 14, 2004, which coincides with the date of a put option the note holder may exercise. Cash and cash equivalents held in the collateral account are restricted from other uses until the date of expiration. Total debt at September 30, 2003 was $284.2 million, consisting of a $100 million convertible note, $100 million of ten-year 5.5% non-callable senior notes due May 15, 2013 and $84.2 million in mandatory convertible securities. The mandatory convertible securities consist of two components, a forward exchange contract to purchase shares of Class A common stock in February 2005 and an equivalent amount of senior notes due in February 2007. At the time of the mandatory exercise of the forward contract and purchase of common stock in February 2005 the Company will receive additional proceeds equal to the amount required to repay the senior notes in 2007. The interest rate on the senior notes will be reset in November 2004 and will be based upon the rates for treasury bills maturing on or about February 2007. Cash provided by operating activities was $26.9 million in the first nine months of 2003 principally resulting from $33.2 million in net income and $8.8 million increase in compensation payable partially offset by a $11.4 million reduction in payable to brokers and $4.4 million reduction in securities sold, not yet purchased. Cash used by operating activities was $35.9 million in the first nine months of 2002 principally resulting from an increase in investments in securities of $97.4 million offset by $40.8 million in net income. Cash used by investing activities, related to investments in and distributions from partnerships and affiliates, was $15.5 million in the first nine months of 2003. Cash provided by investing activities, related to investments in and distributions from partnerships and affiliates, was $13.2 million in the first nine months of 2002. Cash provided by financing activities in the first nine months of 2003 was $103.0 million. The increase in cash primarily results from the $100 million issuance of ten-year, 5.5% non-callable and non-convertible senior notes and $3.6 million received from the exercise of non-qualified stock options that further generated cash tax savings of $1.1 million. Other significant financing activities which used cash included $0.6 million to repurchase shares of our Class A Common Stock and mandatory convertible securities under the Company's respective Stock Repurchase Programs. Cash provided by financing activities in the first nine months of 2002 was $33.6 million. The increase in cash primarily results from the issuance of $87.7 million, net of expenses, of mandatory convertible debt securities less the repayment of a $50 million note payable. Other significant financing activities which provided cash includes the $9.2 million received from the exercise of non-qualified stock options which further generated cash tax savings of $4.1 million. Other significant financing activities which used cash included $7.9 million to repurchase shares of our Class A Common Stock and $5.1 million to repurchase shares of the mandatory convertible securities under the Company's respective Stock Repurchase Programs. The Company would like to establish a history of paying dividends. Accordingly, management is planning to recommend a nominal initial dividend to its Board of Directors for consideration at its next meeting. If approved, the Company may pay its first dividend in 2003. The holders of the Company's Class B stock have, under certain conditions, waived their right to receive any cash dividend that may be payable in 2003. Based upon the Company's current level of operations and its anticipated growth, the Company expects that its current cash balances plus cash flows from operating activities and its borrowing capacity will be sufficient to finance its working capital needs for the foreseeable future. The Company has no material commitments for capital expenditures. Gabelli & Company, Inc., a subsidiary of the Company, is registered with the Securities and Exchange Commission as a broker-dealer and is a member of the National Association of Securities Dealers. As such, it is subject to the minimum net capital requirements promulgated by the Commission. Gabelli & Company's net capital has historically exceeded these minimum requirements. Gabelli & Company computes its net capital under the alternative method permitted by the Commission, which requires minimum net capital of $250,000. At September 30, 2003, Gabelli & Company had net capital, as defined, of approximately $14.6 million, exceeding the regulatory requirement by approximately $14.4 million. Regulatory net capital requirements increase when Gabelli & Company is involved in underwriting activities. 15 MARKET RISK The Company is subject to potential losses from certain market risks as a result of absolute and relative price movements in financial instruments due to changes in interest rates, equity prices and other factors. The Company's exposure to market risk is directly related to its role as financial intermediary, advisor and general partner for assets under management in its mutual funds, institutional and separate accounts business, alternative investment products and its proprietary investment activities. At September 30, 2003, the Company's primary market risk exposure was to changes in equity prices and interest rates. With respect to the Company's proprietary investment activities included in investments in securities of $182.9 million at September 30, 2003 were investments in Treasury Bills and Notes of $103.6 million, in mutual funds, largely invested in equity products, of $56.2 million, a selection of common and preferred stocks totaling $19.9 million and other investments of approximately $3.2 million. Investments in mutual funds generally lower market risk through the diversification of financial instruments within their portfolio. In addition, the Company may alter its investment holdings from time to time in response to changes in market risks and other factors considered appropriate by management. Of the approximately $19.9 million invested in common and preferred stocks at September 30, 2003, $8.7 million is related to our investment in Westwood and $3.6 million is invested in risk arbitrage opportunities in connection with mergers, consolidations, acquisitions, tender offers or other similar transactions. Investments in partnerships and affiliates totaled $60.1 million at September 30, 2003 and consisted principally of alternative investment products which invest in risk arbitrage opportunities. These transactions generally involve announced deals with agreed upon terms and conditions, including pricing, which typically involve less market risk than common stocks held in a trading portfolio. The principal risk associated with risk arbitrage transactions is the inability of the companies involved to complete the transaction. The Company's exposure to interest rate risk results, principally, from its investment of excess cash in U.S. Government obligations. These investments are primarily short term in nature and the carrying value of these investments generally approximates market value. The Company's revenues are largely driven by the market value of its assets under management and are therefore exposed to fluctuations in market prices. Investment advisory fees for mutual funds are based on average daily asset values. Management fees earned on institutional and high-net-worth separate accounts, for any given quarter, are generally determined based on asset values on the last day of the preceding quarter. Any significant increases or decreases in market value of institutional and high-net-worth separate accounts assets managed which occur on the last day of the quarter will generally result in a relative increase or decrease in revenues for the following quarter. RECENT ACCOUNTING DEVELOPMENTS In December 2002, the FASB issued SFAS 148 which provides alternative methods of transition to SFAS 123 and also amends its disclosure provisions. The Company elected to begin expensing options using the fair value recognition provisions of SFAS 123 effective January 1, 2003 using the Prospective method of transition. Under the Prospective transition method there are no changes to previously issued financial statements and only options granted subsequent to January 1, 2003 are expensed. In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others" ("FIN 45"), which provides accounting and disclosure requirements for certain guarantees. The Company indemnifies its clearing broker for losses it may sustain from the customer accounts introduced by the Company's broker dealer subsidiaries. In accordance with New York Stock Exchange rules, customer balances are typically collateralized by customer securities or supported by other recourse provisions. In addition, the Company further limits margin balances to a maximum of 25% versus 50% permitted under exchange regulations. At September 30, 2003 the total amount of customer balances subject to indemnification (i.e. margin debits) was immaterial. 16 In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" (the "Interpretation"), which provides new criteria for determining whether or not consolidation accounting is required for off-balance sheet activities conducted through certain types of entities. This interpretation focuses on financial interests in entities (i.e., variable interests) that indicate control despite the absence of clear control through voting interest. It concludes that a company's exposure (variable interest) to the economic risks and rewards from the entity's assets and activities are the best evidence of control. The interpretation requires that these variable interest entities (VIEs) be subject to consolidation if the company holding the variable interest is subject to a majority of the expected losses or will receive a majority of the expected residual returns of the VIE (the "primary beneficiary"). As the primary beneficiary it would be required to include the variable interest entity's assets, liabilities and results of operations in its own financial statements. During October 2003, the FASB issued a Staff Position deferring the effective date for applying the provisions of Interpretation No. 46 until the fourth quarter of 2003 for variable interests held by public companies in all entities that were acquired prior to February 1, 2003. The Interpretation remains effective for variable interests held by public companies in entities created after January 31, 2003. The Company has elected to defer the implementation of the Interpretation in accordance with this guidance. While the Company is generally not subject to a majority of the risks of the VIEs, the Company was determined, for certain entities, to receive a majority of the expected residual returns based on the methodology for determining the primary beneficiary primarily due to the necessary inclusion of the management and performance fees in these calculations. Therefore, when implemented, the Interpretation will require consolidation of certain of the investment in partnerships and affiliates' assets and liabilities and results of operations with minority interest recorded for the ownership share applicable to other investors. The difference between consolidation and the equity method will impact detailed line items reported within the consolidated financial statements but not overall consolidated net income or stockholders' equity. Where consolidation is not required additional disclosures may be required. We anticipate consolidating investments in partnerships and affiliates in the 10-K for the quarter ended December 31, 2003. Financial information pertaining to the investments in partnerships and affiliates which would have been classified as VIEs and consolidated if the Interpretation was adopted as of September 30, 2003 is as follows: SEPTEMBER 30, 2003 AS REPORTED ADJUSTMENT PRO FORMA ---------- ---------- ---------- Total assets .................... $ 715,684 $ 413,604 $1,129,288 Total liabilities ............... 347,099 101,134 448,233 Minority interest payable ....... 7,967 312,470 320,437 NINE MONTHS ENDED SEPTEMBER 30, 2003 AS REPORTED ADJUSTMENT PRO FORMA ---------- ---------- ---------- Revenue ......................... 145,832 (1,461) 144,371 Total other income, net ......... 1,487 7,740 9,227 Total expenses .................. 93,684 1,015 94,699 Minority interest expense ....... 405 5,263 5,668 The Company's investments in these VIEs represented approximately 11.6% of the combined equity of these VIEs at September 30, 2003. The Company serves as General Partner or co-General Partner for a number of partnerships classified as VIEs. As General Partner or co-General Partner, the Company is contingently liable for all of the partnerships' liabilities. The Company's exposure to the activities of VIEs which are not partnerships is limited to its investment in each respective VIE. 17 ITEM 4. CONTROLS AND PROCEDURES Management, including the Chief Executive Officer and the Chief Accounting Officer have conducted an evaluation of the effectiveness of disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based on the evaluation, the Chief Executive Officer and the Chief Accounting Officer concluded that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this quarterly report has been made known to them in a timely fashion. There have been no significant changes in internal controls, or in factors that could significantly affect internal controls, subsequent to the date the Chief Executive Officer and the Chief Accounting Officer completed their evaluation. FORWARD-LOOKING INFORMATION Our disclosure and analysis in this report 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. 18 PART II: OTHER INFORMATION ITEM 6. (a) Exhibits 31.1 Certification by Chief Executive Officer Pursuant to Rule 13a-14 (a) and 15d-14 (a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification by Chief Accounting Officer Pursuant to Rule 13a-14 (a) and 15d-14 (a) as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of Chief Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K. The Company filed the following Current Reports on Form 8-K during the three months ended September 30, 2003. 1. Current Report on Form 8-K dated July 8,2003 containing the press release disclosing the Company's final results of its modified Dutch Auction self-tender offer announced June 5, 2003. 2. Current Report on Form 8-K dated August 7,2003 containing the press release disclosing the Company's operating results for the second quarter ended June 30, 2003. 3. Current Report on Form 8-K dated September 13, 2003 containing the press release disclosing the Company's announcement that it will consolidate certain variable interest entities beginning with its September 30, 2003 quarterly report using the guidance provided by FASB Interpretation No. 46, "Consolidation of Variable Interest Entities". SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GABELLI ASSET MANAGEMENT INC. ----------------------------- (Registrant) NOVEMBER 14, 2003 /s/ Michael R. Anastasio - ------------------ ----------------------------- Date Michael R. Anastasio Chief Accounting Officer 19 EX-31.1 3 exh31-1_12296.txt 302 CERTIFICATION - C.E.0. EXHIBIT 31.1 ------------ CERTIFICATIONS I, Mario J. Gabelli, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Gabelli Asset Management Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. By: /s/ Mario J. Gabelli ----------------------- MARIO J. GABELLI Chief Executive Officer Date: November 14, 2003 EX-31.2 4 exh31-2_12296.txt 302 CERTIFICATION - C.A.0. EXHIBIT 31.2 ------------ CERTIFICATIONS I, Michael R. Anastasio, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Gabelli Asset Management Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls. By: /s/ Michael R. Anastasio ------------------------ MICHAEL R. ANASTASIO Chief Accounting Officer Date: November 14, 2003 EX-32.1 5 exh32-1_12296.txt 906 CERTIFICATION - C.E.0. EXHIBIT 32.1 ------------ CERTIFICATION OF CEO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of Gabelli Asset Management Inc. for the quarterly period ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Mario J. Gabelli, as Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Mario J. Gabelli - ------------------------------ Name: Mario J. Gabelli Title: Chief Executive Officer Date: November 14, 2003 This certification accompanies the Report pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of ss.18 of the Securities Exchange Act of 1934, as amended. EX-32.2 6 exh32-2_12296.txt 906 CERTIFICATION - C.A.0. EXHIBIT 32.2 ------------ CERTIFICATION OF CHIEF ACCOUNTING OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report on Form 10-Q of Gabelli Asset Management Inc. for the quarterly period ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Michael R. Anastasio, as Chief Accounting Officer of the Company, hereby certifies, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Michael R. Anastasio - -------------------------------- Name: Michael R. Anastasio Title: Chief Accounting Officer Date: November 14, 2003 This certification accompanies the Report pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of ss.18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----