GAMCO Reports Record Results for 2007

GAMCO Investors, Inc. (GAMCO) (NYSE: GBL) announced full year results for 2007. Total revenues rose 11.8% to a record $292.4 million for 2007 from $261.5 million in 2006. Fully diluted earnings were a record $2.79 per share versus the restated $2.49 per share in 2006. Net income increased 10.6% to a record $79.6 million from $71.9 million in 2006. The fourth quarter ended December 31, 2007 also had record revenues of $89.0 million, or 7.9% higher than $82.5 million in the fourth quarter of 2006. Operating income before management fee was up 21.9% to $42.5 million from $34.8 million. Net income, exceeded only by the record 2006 fourth quarter, was $24.1 million or $0.84 per fully diluted share versus net income of $27.0 million or $0.94 per fully diluted share in the year ago quarter. Assets Under Management – Year-end Record $31.0 Billion at December 31st Assets Under Management (AUM) were $31.0 billion as of December 31, 2007, 10.4% higher than December 31, 2006 AUM of $28.1 billion and 2.0% lower than September 30, 2007 AUM of $31.6 billion. Our closed-end equity funds reached $6.3 billion at December 31, 2007, 9.2% above the $5.8 billion on December 31, 2006 and below September 30, 2007 AUM of $6.4 billion. There are currently nine closed-end funds including the Gabelli Global Deal Fund, which was launched in January 2007. The closed end assets under management are comprised of $5.1 billion common and $1.2 billion of preferred issues consisting of $548 million of fixed rate issues and $610 million of variable rate issues. Our open-end equity funds AUM at December 31, 2007 were $9.8 billion, 16.5% greater than the $8.4 billion on December 31, 2006 and about the same as the September 30, 2007 AUM of $9.9 billion. Several of our funds attained new benchmark levels at year-end. -- The Gabelli Equity Income Fund and the Gabelli Small Cap Growth Fund both exceeded $1.0 billion in AUM at December 31, 2007.   -- Our 100% US Treasury Money Market Fund(1), exceeded $1 billion as investors focused on U.S. Treasury instruments. Our fund ranked in the top tier in total return for the 12 months ended December 31, 2007 among 83 US Treasury money market funds tracked by Lipper Inc.(2) For the 5 year and 10 year periods ended December 31, 2007, the fund ranked 2nd out of 66 funds and 3rd out of 49 funds, respectively, within that category. Our institutional and private wealth management business had $13.3 billion in separately managed accounts on December 31, 2007, 5.1% over December 31, 2006 AUM of $12.7 billion versus $13.8 billion on September 30, 2007. Our investment partnership AUM were $460 million on December 31, 2007 down from $491 million on September 30, 2007 and December 31, 2006. As of December 31, 2007, assets generating performance-based fees were $3.5 billion, an increase of 10.5% from the $3.2 billion on December 31, 2006 and 3.2% below $3.7 billion on September 30, 2007. ¹Past performance is no guarantee of future results. An investment in any money market fund is not insured or guaranteed by the US government, the Federal Deposit Insurance Corporation or any government agency. Although the Fund seeks to maintain the value of an investment at $1.00 per share, it is possible to lose money by investing in the Fund. Dividend yields and returns have been enhanced due to expense limitations initiated by the Adviser. Equity funds involve the risk that the underlying investments may lose value. Accordingly, it is possible to lose money by investing in these funds. Small capitalization companies present greater risks than securities of larger more established companies. They trade less frequently and experience more abrupt price movements. Investors should consider the investment objectives, risks, sales charges and expense of the fund carefully before investing. The prospectus contains more complete information about this and other matters. The prospectus should be read carefully before investing. You can obtain a prospectus by calling Gabelli & Company, Inc. at 1-800-GABELLI (1-800-422-3554) or contacting your financial representative or by visiting http://www.gabelli.com. ² Lipper Inc. is a nationally-recognized independent provider of investment company data. Revenues For the year ended December 31, 2007, investment advisory fees were $250.4 million, an increase of $23.4 million or 10.3% compared to the year ago period: Our closed-end funds revenues were up 13.0% to $60.6 million versus the $53.6 million in 2006, as a result of investment returns and inclusion of the Gabelli Global Deal Fund from its inception in February 2007. Open-end mutual funds revenues grew 16.6% to $93.9 million from $80.6 million based on higher average AUM. Institutional and private wealth management revenues increased 9.8% to $88.6 million from $80.7 million reported in 2006. Investment Partnership revenues dipped $4.8 million to $7.2 million from $12.0 million. GBL earns incentive fees on certain assets based upon annual performance. Total incentive fees slipped $3.2 million, or 12.5% in 2007 from $25.7 million in 2006. Incentive fees from closed-end funds dropped $0.6 million to $10.1 million in 2007 from the prior year. Incentive fees from institutional and private wealth management increased $1.6 million, or 22.2% to $8.9 million from $7.3 million in 2006 due to performance and higher level of AUM. Investment Partnership incentive fees declined to $3.5 million from $7.7 million due to lower returns and lower AUM. Commission revenues from our institutional research business, Gabelli & Company, Inc., were $15.7 million for the year ended December 31, 2007, up 24.6% from the prior year amount of $12.6 million. The increase was primarily due to continued recognition of our growing institutional research and client service efforts. Mutual fund distribution fees and other income were $26.2 million for the year ended December 31, 2007, an increase of $4.4 million, or 20.1%, from the $21.8 million in the 2006 period. For the fourth quarter of 2007, investment advisory fees were $77.8 million, an increase of $4.5 million or 6.2% compared to the year ago quarter: Open-end mutual funds generated revenues of $25.1 million, 21.2% higher than the $20.7 million generated in the fourth quarter 2006. Our closed-end funds revenues climbed 5.8% to $23.2 million in the fourth quarter 2007 from $21.9 million, driven by investment returns and the initial inclusion of the Gabelli Global Deal Fund. Institutional and private wealth management revenues increased 15.6% to $25.8 million from $22.3 million. Investment Partnership revenues were $3.7 million, down 55.6%, or $4.6 million from the 2006 comparable quarter. In the fourth quarter, commission revenues from our institutional research business, Gabelli & Company, Inc., were $4.2 million, up 23.7% from the prior year. Mutual fund distribution fees and other income were $7.0 million for the fourth quarter 2007, an increase of $1.2 million, or 19.7%, from the $5.8 million in fourth quarter 2006. Operating Margin The operating margin before management fee was 40.2% for the year ended December 31, 2007 compared to 34.3% in the prior year period. For the fourth quarter 2007, the operating margin before management fee was 47.7% for the fourth quarter of 2007 compared to 46.8% in the prior year period. The prior year period operating margin is before inclusion of a prepayment of $4.1 million in distribution expenses, a $3.0 million litigation reserve and the reversal of $3.3 million in previously accrued partnership compensation. Other Income / Expense Total other income (which represents primarily investment income from our proprietary investments), net of interest expense, was $26.7 million for the year ended December 31, 2007 compared to $56.9 million in 2006. In 2006, we adopted FIN 46 and EITF 04-5 which lead to the consolidation of certain partnerships and offshore funds (as described in the notes included herein). These accounting changes resulted in $14.2 million of other income, absent in the 2007 full year results. Also contributing to the year over year decline was the fourth quarter 2007 impairment charge of $5.1 million from losses on available for sale securities deemed from an accounting point of view to be other than temporary. Total other income before interest expense was $0.4 million for the fourth quarter 2007 versus $18.9 million in the prior year’s quarter. Given the amount of our investments that are exposed to interest rate risk the following table shows the annualized impact on GBL’s interest income from a 100 basis point change ($ in millions): Investment   Value at December 31, 2007   1% Change in Interest Income   Money Market Funds $ 167.4 $ 1.7 US Treasury Bills 117.5 1.2 Total $ 284.9 $ 2.9 Business Highlights GAM GAMCO Equity Fund was awarded Standard & Poor's AAA Rating for the fourth consecutive year and was one of only four S&P AAA rated funds out of the 1,268 fund Mainstream Sector Group. GAM GAMCO Equity Fund has been sub-advised by GAMCO Asset Management Inc. for London UK based Global Asset Management (GAM), since the fund's launch in October 1987. We plan to enhance our position as a sub-advisor with other financial sponsors where we have investment capacity. 70% of our rated Equity Assets had four or five-start ratings from Morningstar, compared to 53% within the asset management industry, according to Merrill Lynch’s December fund flows report. The Board of Directors of the closed-end funds authorized the filing of shelf registrations for $1.7 billion of preferred and equity securities. In November, shareholders approved the three proposals presented at our Special Meeting of Shareholders. The three proposals were to (a) approve, subject to final action by GAMCO’s Board of Directors, the distribution to its shareholders of the shares of common stock of Gabelli Advisers, Inc. owned by GAMCO, (b) vote on whether GAMCO’s Board of Directors should consider the conversion and reclassification of its shares of Class B Common Stock into Class A Common Stock at a ratio of 1.15 shares of Class A Common Stock for each share of Class B Common Stock, and (c) approve the amended and restated Employment Agreement with GAMCO’s Chairman and Chief Executive Officer. Our Class A shareholders overwhelmingly voted in favor of each of these proposals including the referendum on whether GAMCO’s Board should consider the conversion and reclassification of the Class B shares into Class A shares at a ratio of 1.15 Class A shares for each Class B share. Our liquid balance sheet, coupled with investment grade credit ratings from both Moody's and Standard & Poor's, provides access to financial markets and the flexibility to opportunistically add operating resources to our firm, repurchase our stock and consider strategic initiatives. As a result of GAMCO Investors, Inc.'s shelf registration in the third quarter 2006, we have the right to issue any combination of senior and subordinate debt securities, convertible debt securities and equity securities (including common and preferred securities) up to a total amount of $520 million. Gabelli & Company, Inc, our institutional equity research firm, hosted its 31st Annual Automotive Aftermarket Symposium in October as part of the firm's institutional brokerage business. Held in Las Vegas, the three-day investment research meeting, which focused on emissions technology, fuel efficiency, and OEM supplier dynamics, featured presentations from senior management at 27 leading automotive parts suppliers, retailers, and dealers. Financial Highlights Statement of Financial Condition – Liquidity and Flexibility We ended the quarter with approximately $689.0 million in cash and investments, which is net of $5.3 million of cash and investments held by our consolidated investment partnerships. This included approximately $118.6 million of our investments in The Gabelli Dividend & Income Trust, The Gabelli Global Deal Fund and Westwood Holdings Group as well as other investments of $8.7 million classified as available for sale securities. We highlight selected data for our holdings classified as available for sale as of December 31, 2007:     Per Share     Investment Shares 12/31/07Price   Cost 2007 Dividend Income Book   Tax Market Gabelli Dividend & Income Trust (GDV) 2.6 mil $ 20.46 $ 17.91 $19.00 $52.9 mil $ 4.2 mil Gabelli Global Deal Fund (GDL) 1.3 mil 15.99 15.99 19.89 20.8 mil 1.5 mil Westwood Holdings (WHG) 1.2 mil 37.60 17.65 17.65 44.9 mil 1.3 mil Total $118.6 mil. $ 7.0 mil Our debt consisted of $100 million of 5.5% senior notes due May 2013 and a $50.0 million 6% convertible note due August 2011. We had cash and investments in securities, net of debt and minority interest, of $18.96 per share on December 31, 2007 compared with $17.12 per share on December 31, 2006. We caution that this metric, while correct from an accounting point of view, is not always the same as investors would view cash-on-hand. Stockholders' equity was $501.3 million or $17.86 per share on December 31, 2007 compared to $451.6 million or $15.99 per share on December 31, 2006. Shareholder Compensation Consistent with our shared goals and in the absence of transactions, we target shareholders compensation of 40% of our earnings in the form of stock buybacks or dividends. In 2007, we returned $40.2 million of our earnings to shareholders through dividends of $31.5 million ($1.12 per share) and $8.7 million in stock buybacks. From 2003, GAMCO has paid more than $90 million, or $3.11 per share in dividends to Class A and Class B shareholders, including $2.70 per share in special dividends. Share Repurchase In 2007, we repurchased 186,400 shares at an average investment of $46.45 per share. This includes the 20,200 shares that we purchased during the fourth quarter at an average investment of $54.06 per share. Since our buyback program was initiated in March 1999, we repurchased 4,856,058 class A common shares at an average investment of $39.72 per share. The total amount of shares currently available for repurchase under the current authorization is approximately 862,000 shares at December 31, 2007. Shares outstanding on December 31, 2007 were 28.1 million, level with September 30, 2007 shares and approximately 0.6% lower than 28.2 million shares outstanding on December 31, 2006. Fully diluted shares outstanding for the fourth quarter of 2007 were 29.1 million, level with third quarter 2007 fully diluted shares outstanding and 0.4% below our fully diluted shares of 29.2 million for the fourth quarter 2006. On December 7, 2007, GAMCO granted 385,400 Restricted Stock Awards ("RSA") shares to our team members. Under the terms of the RSA, staff will vest 30% of their respective award after 3 years of service and vest 70% of their respective award after 5 years of service. Subsequent to year end, GAMCO filed a Form S-3 to allow Cascade Investments to convert any portion of the $50 million of convertible debentures it currently holds and to liquefy its holdings. On January 22, 2008, Cascade Investments converted $10 million of the convertible debentures into 188,697 GBL shares. Financial Results In the first quarter of 2006, the provisions of FASB Interpretation No. 46R ("FIN 46R”) and Emerging Issue Task Force 04-5 ("EITF 04-5”) required the consolidation of our investment partnerships and offshore funds managed by our subsidiaries into our consolidated financial statements. However, since we amended the agreements of five investment partnerships and an offshore fund on March 31, 2006 to add substantive kickout rights, FIN 46R and EITF 04-5 only required us to consolidate these entities on our consolidated condensed statement of income for the first quarter 2006. Accordingly, to provide a better understanding of our core results and trends, GAMCO has provided the 2006 results before adjusting the first quarter 2006 results for FIN 46R and EITF 04-5 on these partnerships and this fund. These results are not presented in accordance with generally accepted accounting principles ("GAAP”) in the United States. A reconciliation of these non-GAAP financial measures to results presented in accordance with GAAP is presented in Table V. NOTES ON NON-GAAP FINANCIAL MEASURES A. Cash and investments as adjusted have been computed as follows: (in millions)   12/31/06   12/31/07 Cash and cash equivalents $ 138.1 $ 168.3 Investments (marketable securities)   479.3   366.9 Total cash and investments (marketable securities) 617.4 535.2 Net amounts receivable/(payable) from/to brokers   17.3   31.8 Adjusted cash and investments (marketable securities) 634.7 567.0 Investments (available for sale)   102.0   127.3 Total adjusted cash and investments $ 736.7 $ 694.3       We believe adjusted cash and investments is a more useful measure of the company's liquidity for analytical purposes.   Net amounts receivable/(payable) from/to brokers reflect cash and cash equivalents held with brokers and cash payable for securities purchased and recorded on a trade date basis for which settlement occurs subsequent to period end. B.   Operating income before management fee expense is used by management for purposes of evaluating its business operations. We believe this measure is useful in illustrating the operating results of GAMCO Investors, Inc (the "Company") as management fee expense is based on pre-tax income, which 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 expense to operating income is provided in Table IV. C.   Beginning January 1, 2006, the provisions of FASB Interpretation No. 46R ("FIN 46R”) and Emerging Issue Task Force 04-5 ("EITF 04-5”) require consolidation of the majority of our investment partnerships and offshore funds managed by our subsidiaries into our consolidated financial statements. However, since we amended the agreements of five investment partnerships and an offshore fund on March 31, 2006, FIN 46R and EITF 04-5 only required us to consolidate these entities on our consolidated condensed statement of income for the first quarter 2006. We were not required to consolidate these entities on our consolidated condensed statement of financial condition at March 31, 2006. In addition, these partnerships and offshore funds, for which the agreements were amended, are not required to be consolidated within our consolidated condensed statement of income or on our consolidated condensed statement of financial condition in future periods as long as we continue to not maintain a direct or indirect controlling financial interest. For the year ended December 31, 2006, the consolidation of these entities had no impact on net income but did affect the classification of income between operating and other income. As a result, in Table V, we have also provided our results before adjusting for FIN 46R and EITF 04-5 on these partnerships and this fund. 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. The Company reported Assets Under Management as follows: Table I:   Assets Under Management (millions) Mutual Funds: December 31, 2006     December 31, 2007     % Inc. (Dec.) Open-end $ 8,389 $ 9,774   16.5 % Closed-end 5,806 6,341 9.2 Fixed Income   744   1,122 50.8 Total Mutual Funds   14,939   17,237 15.4 Institutional & PWM: Equities: direct 10,282 10,708 4.1 " sub-advisory 2,340 2,584 10.4 Fixed Income   50   24 (52.0 ) Total Institutional & PWM   12,672   13,316 5.1 Investment Partnerships   491   460 (6.3) Total Assets Under Management $ 28,102 $ 31,013 10.4 Equities $ 27,308 $ 29,867 9.4 Fixed Income   794   1,146 44.3 Total Assets Under Management $ 28,102 $ 31,013 10.4 Table II:   Assets Under Management (millions)           % Increase/(decrease) Mutual Funds 12/06 3/07 6/07 9/07 12/07 9/07   12/06 Open-end $ 8,389 $ 8,858 $ 9,529 $ 9,866 $ 9,774 (0.9 ) % 16.5 % Closed-end 5,806 6,188 6,412 6,443 6,341 (1.6 ) 9.2 Fixed income   744   591   684   1,048   1,122 7.1 50.8 Total Mutual Funds   14,939   15,637   16,625   17,357   17,237 (0.7 ) 15.4 Institutional & PWM: Equities: direct 10,282 10,587 11,116 11,266 10,708 (5.0 ) 4.1 " sub-advisory 2,340 2,608 2,383 2,494 2,584 3.6 10.4 Fixed Income   50   49   21   27   24 (11.1 ) (52.0 ) Total Institutional & PWM   12,672   13,244   13,520   13,787   13,316 (3.4 ) 5.1 Investment Partnerships   491   477   486   491   460 (6.3 ) (6.3 ) Total Assets Under Management $ 28,102 $ 29,358 $ 30,631 $ 31,635 $ 31,013 (2.0 ) 10.4 Table III:   Fund Flows – 4th Quarter 2007 (millions) September 30, 2007   Net Cash Flows   MarketAppreciation /(Depreciation)     December 31, 2007 Mutual Funds: Equities $ 16,309 $ 79 $ (273) $ 16,115 Fixed Income   1,048   64   10   1,122 Total Mutual Funds   17,357   143   (263)   17,237 Institutional & PWM Equities: direct 11,266 (170) (388) 10,708 " sub-advisory 2,494 150 (60) 2,584 Fixed Income   27   (4)   1   24 Total Institutional & PWM   13,787   (24)   (447)   13,316 Investment Partnerships   491   (25)   (6)   460 Total Assets Under Management $ 31,635 $ 94 $ (716) $ 31,013 Table IV GAMCO INVESTORS, INC UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data)   For the Three Months Ended December 31, 2006   2007   %Inc.(Dec.)   Revenues $ 82,526 $ 89,017   7.9 % Expenses   47,682   46,557 (2.4 ) Operating income before management fee 34,844 42,460 21.9 Investment income 18,938 389 (97.9 ) Interest expense   (3,589 )   (2,428 ) (32.3 ) Other income, net   15,349   (2,039) (113.3 ) Income before management fee, income taxes and minority interest 50,193 40,421 (19.5 ) Management fee   4,943   4,072 (17.6 ) Income before income taxes and minority interest 45,250 36,349 (19.7 ) Income taxes 16,651 12,145 (27.1 ) Minority interest   1,620   133 (91.8 ) Net income $ 26,979 $ 24,071 (10.8 ) Net income per share: Basic $ 0.96 $ 0.86 (10.3 ) Diluted $ 0.94 $ 0.84 (10.2 ) Weighted average shares outstanding: Basic   28,240   28,077 (0.6 ) Diluted   29,208   29,075 (0.5 ) Reconciliation of Non-GAAP Financial Measures to GAAP: Operating income before management fee $ 34,844 $ 42,460 Deduct: management fee   4,943   4,072 Operating income $ 29,901 $ 38,388 Operating margin before management fee   42.2 %   47.7 % Operating margin after management fee   36.2 %   43.1 % Table V GAMCO INVESTORS, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except per share data)   For the Twelve Months Ended December 31,   2006 (a   )   Adjust- ments(b)     2006 (c   )     2007 (c   )   ? 2007(c) - 2006(c)     %   ? 2007(c) - 2006(a)     % Revenues 262,350 (887 ) 261,463 292,369 30,906 11.8 30,019 11.4 Expenses 171,718   162   171,880   174,739   2,859   1.7   3,021   1.8   Operating income before management fee 90,632 (1,049 ) 89,583 117,630 28,047 31.3 26,998 29.8 Investment income 56,360 14,759 71,119 38,644 (32,475 ) (45.7 ) (17,716 ) (31.4 ) Interest expense (13,646 ) (580 ) (14,226 ) (11,965 ) 2,261   (15.9 ) 1,681   (12.3 ) Other income, net 42,714   14,179   56,893   26,679   (30,214 ) (53.1 ) (16,035 ) (37.5 ) Income before management fee, income taxes and minority interest   133,346 13,130   146,476   144,309   (2,167   )   (1.5   )   10,963   8.2 Management fee 13,236   -   13,236   14,463   1,227   1,227   Income before income taxes and minority interest 120,110 13,130 133,240 129,846 (3,394 ) 9,736 Income taxes 45,924 4,924 50,848 49,548 (1,300 ) 3,624 Minority interest 2,259   8,206   10,465   729   (9,736 ) (1,530 ) Net income 71,927   -   71,927   79,569   7,642   10.6   7,642   10.6   Net income per share: Basic 2.52   -   2.52   2.83   0.31   12.2   0.31   12.2     Diluted 2.49   -   2.49   2.79   0.30   12.2   0.30   12.2   Weighted average shares outstanding: Basic 28,542     28,542   28,142   (400 ) (1.4 ) (400 ) (1.4 ) Diluted 29,525     29,525   29,129   (396 ) (1.3 ) (396 ) (1.3 ) Reconciliation of Non-GAAP Financial Measures to GAAP: Operating income before management fee 90,632 89,583 117,630 Deduct: management fee 13,236     13,236   14,463   Operating income 77,396     76,347   103,167   Operating margin before management fee 34.5 %   34.3 % 40.2 % Operating margin after management fee 29.5 %   29.2 % 35.3 % (a)   Final results before adjustments relating to FIN 46R and EITF 04-5 – not GAAP. (b) Adjustments relating to FIN 46R and EITF 04-5 on five partnerships and one offshore fund on which substantive kick-out rights were added on March 31, 2006. (c) GAAP basis. Table VI GAMCO INVESTORS, INC. UNAUDITED QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except per share data)       2006 2007                 Full-Year                 Full-Year 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Income Statement Data: Revenues 59,284 61,659 57,994 82,526 261,463 66,606 68,277 68,469 89,017 292,369 Expenses 37,381 50,378 36,439 47,682 171,880 42,694 47,660 37,828 46,557 174,739 Operating income before management fee 21,903 11,281 21,555 34,844 89,583 23,912 20,617 30,641 42,460 117,630 Investment income 29,498 10,355 12,328 18,938 71,119 13,572 17,359 7,324 389 38,644 Interest expense (3,875) (3,394) (3,368) (3,589) (14,226) (3,380) (3,329) (2,828) (2,428) (11,965) Other income, net 25,623 6,961 8,960 15,349 56,893 10,192 14,030 4,496 (2,039) 26,679 Income before management fee, income taxes and minority interest 47,526 18,242 30,515 50,193 146,476 34,104 34,647 35,137     40,421     144,309 Management fee 3,417 1,818 3,058 4,943 13,236 3,401 3,449 3,541 4,072 14,463 Income before income taxes and minority interest 44,109 16,424 27,457 45,250 133,240 30,703 31,198 31,596 36,349 129,846 Income taxes 16,541 7,360 10,296 16,651 50,848 11,207 12,856 13,340 12,145 49,548 Minority interest 8,608 119 118 1,620 10,465 332 345 (81) 133 729 Net income 18,960 8,945 17,043 26,979 71,927 19,164 17,997 18,337 24,071 79,569 Net income per share: Basic 0.65 0.31 0.60 0.96 2.52 0.68 0.64 0.65 0.86 2.83 Diluted 0.64 0.31 0.60 0.94 2.49 0.67 0.63 0.64 0.84 2.79 Weighted average shares outstanding: Basic 29,180 28,507 28,254 28,240 28,542 28,228 28,160 28,106 28,077 28,142 Diluted 30,185 29,496 29,235 29,208 29,525 29,196 29,147 29,099 29,075 29,129 Reconciliation of Non-GAAP Financial measures to GAAP: Operating income before management fee 21,903 11,281 21,555 34,844 89,583 23,912 20,617 30,641 42,460 117,630 Deduct: management fee 3,417 1,818 3,058 4,943 13,236 3,401 3,449 3,541 4,072 14,463 Operating income 18,486 9,463 18,497 29,901 76,347 20,511 17,168 27,100 38,388 103,167 Operating margin before management fee 36.9% 18.3% 37.2% 42.2% 34.3% 35.9% 30.2% 44.8% 47.7% 40.2% Operating margin after management fee 31.2% 15.3% 31.9% 36.2% 29.2% 30.8% 25.1% 39.6% 43.1% 35.3% Table VII GAMCO INVESTORS, INC. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) (dollars in thousands, except per share data)     December 31, December 31, 2006 2007 ASSETS Cash and cash equivalents $ 138,113 $ 168,319 Investments 589,495 495,008 Receivable from brokers 53,682 40,145 Other receivables 43,260 42,665 Other assets   12,681   11,443 Total assets $ 837,231 $ 757,580 LIABILITIES AND STOCKHOLDERS' EQUITY Payable to brokers $ 36,346 $ 7,562 Income taxes payable 13,922 17,539 Compensation payable 30,174 25,362 Securities sold short, not yet purchased 8,244 2,229 Accrued expenses and other liabilities   43,833   41,335 Total operating liabilities 132,519 94,027 5.5% Senior notes (due May 15, 2013) 100,000 100,000 6% Convertible note, $50 million outstanding (due August 14, 2011) 49,504 49,608 5.22% Senior notes (due February 17, 2007)   82,308   - Total debt 231,812 149,608 Total liabilities 364,331 243,635 Minority interest 21,324 12,630 Stockholders' equity   451,576   501,315 Total liabilities and stockholders' equity $ 837,231 $ 757,580