GAMCO Reports Record Second Quarter Earnings

GAMCO Investors, Inc. (GAMCO) (NYSE: GBL) today announced second quarter 2007 earnings. The second quarter 2007 net income was $18.0 million, or $0.63 per fully diluted share, about double the restated $8.9 million, or $0.31 per fully diluted share in 2006 ($0.30 per fully diluted share as previously restated). The restated second quarter 2006 results reflect a previously-reported special charge of $0.27 per fully diluted share. During the second quarter of 2007, we elected to terminate a compensation arrangement for one of our closed-end funds that resulted in a one-time $0.08 reduction in fully diluted earnings per share. Additionally, GAMCO has filed a Form 10-K/A restating the reported 2006 earnings, increasing them to $2.49 per fully diluted share from $2.40 per fully diluted share, to reflect the reversal of certain previously-accrued expenses for compensation in investment partnerships. For the six months ended June 30, 2007, net income was $37.2 million versus a restated $27.9 million in the comparable 2006 period and fully diluted earnings per share were $1.30 versus a restated $0.96 in the comparable 2006 period. The six-month 2006 results were after a special charge of $0.27 per fully diluted share and after the $0.02 per fully diluted share reversal of the previously-accrued investment partnerships compensation expenses, as filed on our Form 10-K/A, disclosed above. During the six months ended June 30, 2007, net income was crimped by $0.12 per fully diluted share as a result of the $0.08 per fully diluted share decrease for the second quarter 2007 as mentioned above and $0.04 per fully diluted share impact that was reflected in first quarter 2007 for the following one-time charges: $0.03 per fully diluted share launch expenses of our new closed-end fund, Gabelli Global Deal Fund; and a half cent per fully diluted share in charitable gifts. Assets Under Management – Record $30.6 Billion at June 30th Assets Under Management (AUM) were a record $30.6 billion as of June 30, 2007, 4.3% higher than March 31, 2007 AUM of $29.4 billion and 14.4% greater than June 30, 2006 AUM of $26.8 billion. Equity assets under management were a record $29.9 billion on June 30, 2007, 4.2% more than March 31, 2007 equity assets of $28.7 billion and 15.7% above the $25.9 billion on June 30, 2006. Our closed-end equity funds reached a record AUM of $6.4 billion on June 30, 2007, up 3.6% from $6.2 billion on March 31, 2007 and 21.9% higher than the $5.3 billion on June 30, 2006. Our open-end equity fund AUM were $9.5 billion on June 30, 2007, a 7.6% gain from $8.9 billion on March 31, 2007 and 22.2% from $7.8 billion at June 30, 2006. Our institutional and high net worth business had $13.5 billion in separately managed accounts on June 30, 2007. While up only a nominal 2.1% from $13.2 billion on March 31st, we do note that – as previously disclosed – on June 22nd we were displaced as a subadvisor to a mutual fund entity as a result of its sale. We managed $551 million as of March 31, 2007 for this account. Our Investment Partnerships AUM were $486 million on June 30, 2007 versus $477 million on March 31, 2007 and $536 million on June 30, 2006. We receive incentive and fulcrum fees for our investment partnership assets, certain institutional client assets, preferred issues of our closed-end funds and our new closed-end fund launched in January 2007, the Gabelli Global Deal Fund. As of June 30, 2007, assets generating performance-based fees were $3.6 billion, an increase of 3.8% versus the $3.5 billion on March 31, 2007 and a 19.5% increase over the $3.0 billion on June 30, 2006. Fixed income AUM, primarily money market mutual funds, totaled $705 million on June 30, 2007 compared to AUM of $640 million on March 31, 2007 and AUM of $918 million on June 30, 2006. 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 certain 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. Accordingly, to provide a better understanding of our core results and trends, GAMCO has provided the 2006 results before adjusting for FIN 46R and EITF 04-5. 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. Restatement GAMCO has filed a Form 10-K/A restating prior year results to reflect the reversal of certain previously-accrued expenses for investment partnerships. The net effect on a per share basis (diluted) was: 2006 EPS   1st Quarter   2nd Quarter   3rd Quarter   4th Quarter   Full Year Restated $0.64 $0.31 $0.60 $0.94 $2.49 Reported $0.63 $0.30 $0.59 $0.88 $2.40 Revenues For the second quarter of 2007, investment advisory fees were $57.7 million, an increase of $4.1 million or 7.6% compared to the revenues in 2006 before adjusting for FIN 46R and EITF 04-5: Our closed-end funds revenues surged 19.3% to $12.8 million in the second quarter 2007 from $10.8 million in 2006, driven by investment returns and the launch of a new fund. Open-end mutual funds revenues grew 15.7% to $23.3 million from $20.1 million in second quarter 2006, primarily due to investment performance. Institutional and high net worth separate accounts revenues decreased 2.4% to $20.3 million from $20.7 million in second quarter 2006, predominantly the result of a shift in the recognition of performance fees. Investment Partnership revenues were $1.3 million, down 31.2%, or $0.6 million below revenues in 2006, before adjusting for FIN 46R and EITF 04-5. A decrease in AUM led to lower management fees as well as a decline in incentive fees. Commission revenues from our institutional research business, Gabelli & Company, Inc., were $4.0 million in the second quarter 2007, up 42.7% from the prior year. The increase was due to higher average per share revenue due to changes in trade mix as well as to an increase in overall trading volume. Mutual fund distribution fees and other income were $6.6 million for the second quarter 2007, an increase of $1.4 million, or 25.6%, from $5.2 million in second quarter 2006. For the six months ended June 30, 2007, investment advisory fees were $114.2 million, an increase of $10.2 million or 9.8% compared to the revenues in 2006 before adjusting for FIN 46R and EITF 04-5: Our closed-end funds revenues surged 17.3% to $24.6 million for the six months ended June 30, 2007 from $21.0 million in 2006, driven by investment returns and the launch of two funds. Open-end mutual funds revenues grew 11.0% to $44.7 million from $40.2 million in 2006 as a result of higher average AUM. Larger performance fees contributed to institutional and high net worth separate account revenues increasing 4.3% to $41.9 million from $40.1 million reported in 2006. Investment Partnership revenues were $3.1 million versus $3.6 million in 2006 before adjusting for FIN 46R and EITF 04-5. Commission revenues from our institutional research business, Gabelli & Company, Inc., were $8.1 for the six months ended June 30, 2007, up 26.3% from the prior year’s comparable amount of $6.4 million. The increase was due to higher overall trading volume as well as to an increase in average per share revenue due to changes in trade mix. Mutual fund distribution fees and other income were $12.6 million for the six months ended June 30, 2007, an increase of $2.0 million, or 19.2%, from $10.6 million from the 2006 period. Operating Margin The operating margin before management fee was 36.3% for the second quarter of 2007 compared to 37.6% in the prior year period. The second quarter 2007 operating margin was impacted by a one-time charge relating to the termination of a closed-end fund compensation agreement while the 2006 quarter included a reserve relating to a proposed resolution of a regulatory matter. Including these items, the second quarter 2007 reported operating margin was 30.2% versus a reported 18.3% in the comparable 2006 period. Other Income / Expense Total other income (which represents primarily investment income in our proprietary investments), net of interest expense, was $14.0 million for the second quarter 2007 compared to $7.0 million in 2006. Total other income, net of interest expense, was $24.2 million for the six months ended June 30, 2007 compared to $18.1 million in 2006 before adjusting for FIN 46R and EITF 04-5. The management fee for the three months ended June 30, 2007 was $3.4 million versus $1.8 million in 2006. The effective tax rate for the three months ended June 30, 2007 was 41.2% as compared to the prior year quarter’s effective rate of 44.8%. For the six months ended June 30, 2007, the effective tax rate was 38.9% as compared to 39.5% in the prior year’s comparable period. Business Highlights In May 2007, the shareholders of the Gabelli Equity Trust approved the spin-off of the Gabelli Healthcare & WellnessRX Trust, our ninth closed-end fund. In June, The Gabelli SRI Fund was launched. This is an open-end fund that will invest according to the Fund's stated socially responsible guidelines. Our Board has authorized management to take the steps necessary to prepare for the spin-off of our interest in Gabelli Advisers, Inc., the 42%-owned subsidiary and advisor to the six GAMCO Westwood open-end funds with $433 million in AUM. Four of the GAMCO Westwood Funds’ Class AAA shares are rated four stars or better by Morningstar. While this proposed spin-off does not require a shareholder vote, we intend to present it for a vote along with other items at a special meeting of shareholders later this year. GAMCO expects to establish an office in Shanghai, China to provide research and investment opportunities for our hedge funds as well as for venture capital and private equity. GAMCO celebrated its Thirtieth Anniversary by hosting its annual dinner for institutional and high net worth individuals at the American Museum of Natural History. We modified the terms of the $50 million convertible note issued by GAMCO with Cascade Investment LLC in April 2007 to extend the exercise date for Cascade’s put option from May 15, 2007 to December 17, 2007 and to extend the expiration date of the related letter of credit. The note matures in August 2011, bears interest at the annual rate of 6%, and has a conversion price of $53 per GAMCO share. Should Cascade Investment LLC convert its note, they would own approximately 11% of GAMCO's Class A Common Stock. Robert W. Bruce III, former President and Chief Investment Officer of Fireman’s Fund, was the third recipient of the Graham & Dodd, Murray, Greenwald Prize for Value Investing. Gabelli & Company, Inc., our institutional equity research firm, held its 5th annual Dental & Veterinary Conference during second quarter 2007. Favorable demographic trends and new technologies continue to drive demand for those firms. Agnes Mullady was named President and C.O.O. of the Closed End Fund segment of Gabelli Funds, LLC., both of which are newly-created positions. Agnes will continue to serve as Vice President of Gabelli Funds, LLC and is Treasurer of all Gabelli investment companies, both open end and closed end, advised by the advisory affiliates of GAMCO Investors, Inc. Financial Highlights Statement of Financial Condition – Liquidity and Flexibility We ended the quarter with approximately $708.7 million in adjusted cash and investments, which is net of $7.4 million of cash and investments held by our consolidated investment partnerships. This included approximately $140.4 million of our investments in The Gabelli Dividend & Income Trust, The Gabelli Global Deal Fund, Westwood Holdings Group, various Gabelli and GAMCO open-end mutual funds as well as other investments classified as available for sale securities. 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 $19.62 per share on June 30, 2007 compared with $17.13 per share on December 31, 2006 and $15.52 per share on June 30, 2006. Stockholders' equity was $490.8 million or $17.44 per share on June 30, 2007 compared to $451.6 million or $15.99 per share on December 31, 2006 and $402.4 million or $14.23 per share on June 30, 2006. Shareholder Compensation Dividends In addition to the regular quarterly dividend of $0.03 per share, which was declared on May 9, 2007 and paid on June 28, 2007, subsequent to the end of our quarter, the Board of Directors declared a special cash dividend of $1.00 per share paid on July 30, 2007 to holders of record on July 23, 2007. Stock Buyback Shares outstanding on June 30, 2007 were 28.1 million, slightly below March 31, 2007 shares of 28.2 million and approximately 0.5% lower than 28.3 million shares outstanding on June 30, 2006. Fully diluted shares outstanding for the first quarter of 2007 were 29.1 million, 0.1 million below the first quarter 2007 fully diluted shares outstanding and 1.2% below our fully diluted shares of 29.5 million for the second quarter 2006. Through June 30, 2007, we repurchased 4,783,858 class A common shares at an average investment of $39.58 per share since our buyback program was initiated in March 1999. In the second quarter of 2007, we repurchased 55,600 shares at an average investment of $49.35 per share. The total amount of shares currently available for repurchase under the current authorization is approximately 934,000 shares at June 30, 2007. NOTES ON NON-GAAP FINANCIAL MEASURES A. Cash and investments as adjusted have been computed as follows: (in millions) 6/30/06 12/31/06 6/30/07 Cash and cash equivalents $116.9 $138.1 $104.7 Investments (marketable securities) 455.4 479.2 458.8 Total cash and investments (marketable securities) 572.3 617.3 563.5 Net amounts receivable/(payable) from/to brokers 32.1 17.3 12.2 Adjusted cash and investments (marketable securities) 604.4 634.6 575.7 Investments (available for sale) 86.7 102.0 140.4 Total adjusted cash and investments $691.1 $736.6 $716.1 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 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 V. 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 certain investment partnerships and an offshore fund on March 31, 2006, FIN46R 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 six months ended June 30, 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. 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)   June 30 % 2006 2007 Inc. (Dec.) Mutual Funds: Equities Open-end $ 7,796 $ 9,529 22.2% Closed-end 5,258 6,412 21.9 Fixed Income   863   684 (20.7) Total Mutual Funds   13,917   16,625 19.5 Institutional & Separate Accounts: Equities: direct 9,520 11,116 16.8 " sub-advisory 2,750 2,383 (13.3) Fixed Income   55   21 (61.8) Total Institutional & Separate Accounts   12,325   13,520 9.7 Investment Partnerships   536   486 (9.3) Total Assets Under Management $ 26,778 $ 30,631 14.4   Equities 25,860 29,926 15.7 Fixed Income   918   705 (23.2) Total Assets Under Management $ 26,778 $ 30,631 14.4 Table II: Assets Under Management (millions) % Increase/(decrease) 6/06 9/06 12/06 3/07 6/07 3/07 6/06 Mutual Funds Open-end $ 7,796 $ 7,854 $ 8,389 $ 8,858 $ 9,529 7.6% 22.2% Closed-end 5,258 5,327 5,806 6,188 6,412 3.6 21.9 Fixed income   863   683   744   591   684 15.7 (20.7) Total Mutual Funds   13,917   13,864   14,939   15,637   16,625 6.3 19.5 Institutional & Separate Accounts: Equities: direct 9,520 9,470 10,282 10,587 11,116 5.0 16.8 " sub-advisory 2,750 2,725 2,340 2,608 2,383 (8.6) (13.3) Fixed Income   55   54   50   49   21 (57.1) (61.8) Total Institutional & Separate Accounts   12,325   12,249   12,672   13,244   13,520 2.1 9.7 Investment Partnerships   536   488   491   477   486 1.9 (9.3) Total Assets Under Management $ 26,778 $ 26,601 $ 28,102 $ 29,358 $ 30,631 4.3 14.4 Table III: Fund Flows – 2nd Quarter 2007 (millions)   Market March 31,2007 NetCash Flows Appreciation /(Depreciation) June 30,2007 Mutual Funds: Equities $ 15,046 $ 149 $ 746 $ 15,941 Fixed Income   591   80   13   684 Total Mutual Funds   15,637   229   759   16,625 Institutional & Separate Accounts Equities: direct 10,587 (161) 690 11,116 " sub-advisory 2,608 (415) 190 2,383 Fixed Income   49   (29)   1   21 Total Institutional & Separate Accounts   13,244   (605)   881   13,520   Investment Partnerships   477   (3)   12   486 Total Assets Under Management $ 29,358 $ (379) $ 1,652 $ 30,631 Table IV GAMCO INVESTORS, INC UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data)   For the Three Months EndedJune 30, 2006 (a) 2007 % Inc.(Dec.)   Revenues $ 61,659 $ 68,277 10.7 % Expenses   50,378   47,660 (5.4)   Operating income before management fee 11,281 20,617 82.8   Investment income 10,355 17,359 67.6 Interest expense   (3,394)   (3,329) (1.9) Other income (expense), net   6,961   14,030 101.6   Income before management fee, income taxes and minority interest 18,242 34,647 89.9 Management fee   1,818   3,449 Income before income taxes and minority interest 16,424 31,198 Income taxes 7,360 12,856 Minority interest   119   345 Net income $ 8,945 $ 17,997 101.2   Net income per share: Basic $ 0.31 $ 0.64 103.7   Diluted $ 0.31 $ 0.63 101.4   Weighted average shares outstanding: Basic   28,507   28,160 (1.2)   Diluted   29,496   29,147 (1.2)   Reconciliation of Non-GAAP Financial Measures to GAAP: Operating income before management fee $ 11,281 $ 20,617 82.8 Deduct: management fee   1,818   3,449 Operating income $ 9,463 $ 17,168 81.5 Operating margin before management fee   18.3%   30.2% Operating margin after management fee   15.3%   25.1%   (a) As restated to reflect the reversal of certain previously-accrued expenses for compensation in investment partnerships. Table V GAMCO INVESTORS, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except per share data)   For the Six Months Ended June 30, 2006 (a)(b) Adjustments(c) 2006 (b)(d) 2007 (d)   ?2007(d) -2006(b)(d) % ?2007(d) -2006(a)(b) %   Revenues $ 121,906 ($ 963) $ 120,943 $ 134,883 $ 13,940 11.5% $ 12,977 10.6% Expenses   87,571   189   87,760   90,354   2,594 3.0   2,783 3.2   Operating income before management fee 34,335 (1,152) 33,183 44,529 11,346 34.2 10,194 29.7   Investment income 24,756 15,097 39,853 30,931 (8,922) (22.4) 6,175 24.9 Interest expense   (6,678)   (591)   (7,269)   (6,709)   560 (7.7)   (31) 0.5 Other income (expense), net   18,078   14,506   32,584   24,222   (8,362) (25.7)   6,144 34.0   Income before management fee, income taxes and minority interest 52,413 13,354 65,767 68,751 2,984 4.5 16,338 31.2 Management fee   5,235   -   5,235   6,850   1,615   1,615 Income before income taxes and minority interest 47,178 13,354 60,532 61,901 1,369 14,723 Income taxes 18,893 5,008 23,901 24,063 162 5,170 Minority interest   381   8,346   8,727   677   (8,050)   296 Net income $ 27,904 $ - $ 27,904 $ 37,161 $ 9,257 33.2 $ 9,257 33.2   Net income per share: Basic $ 0.97 $ - $ 0.97 $ 1.32 $ 0.35 36.2 $ 0.35 36.2   Diluted $ 0.96 $ - $ 0.96 $ 1.30 $ 0.34 35.9 $ 0.34 35.9   Weighted average shares outstanding: Basic   28,842   28,842   28,194   (648) (2.2)   (648) (2.2)   Diluted   29,838   29,838   29,172   (666) (2.2)   (666) (2.2) Reconciliation of Non-GAAP Financial Measures to GAAP: Operating income before management fee $ 34,335 $ 33,183 $ 44,529 Deduct: management fee   5,235   5,235   6,850 Operating income $ 29,100 $ 27,948 $ 37,679 Operating margin before management fee   28.2%   27.4%   33.0% Operating margin after management fee   23.9%   23.1%   27.9%   (a) Final results before adjustments relating to FIN 46R and EITF 04-5 – not GAAP. (b) As restated to reflect the reversal of certain previously-accrued expenses for compensation in investment partnerships. (c) Adjustments relating to FIN 46R and EITF 04-5. (d) GAAP basis. Table VI GAMCO INVESTORS, INC. UNAUDITED QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands, except per share data)   2006 2007 1st * 2nd * 3rd * 4th * 1st 2nd Quarter Quarter Quarter Quarter Total Quarter Quarter Total Income Statement Data:   Revenues $ 59,284 $ 61,659 $ 57,994 $ 82,526 $ 261,463 $ 66,606 $ 68,277 $ 134,883   Expenses   37,381   50,378   36,439   47,682   171,880   42,694   47,660   90,354   Operating income before management fee 21,903 11,281 21,555 34,844 89,583 23,912 20,617 44,529     Investment income 29,498 10,355 12,328 18,938 71,119 13,572 17,359 30,931 Interest expense   (3,875)   (3,394)   (3,368)   (3,589)   (14,226)   (3,380)   (3,329)   (6,709) Other income (expense), net   25,623   6,961   8,960   15,349   56,893   10,192   14,030   24,222 Income before management fee, income taxes and minority interest     47,526 18,242     30,515     50,193     146,476 34,104 34,647 68,751   Management fee   3,417   1,818   3,058   4,943   13,236   3,401   3,449   6,850   Income before income taxes and minority interest 44,109 16,424 27,457 45,250 133,240 30,703 31,198 61,901   Income taxes 16,541 7,360 10,296 16,651 50,848 11,207 12,856 24,063 Minority interest   8,608   119   118   1,620   10,465   332   345   677   Net income $ 18,960 $ 8,945 $ 17,043 $ 26,979 $ 71,927 $ 19,164 $ 17,997 $ 37,161   Net income per share: Basic $ 0.65 $ 0.31 $ 0.60 $ 0.96 $ 2.52 $ 0.68 $ 0.64 $ 1.32   Diluted $ 0.64 $ 0.31 $ 0.60 $ 0.94 $ 2.49 $ 0.67 $ 0.63 $ 1.30   Weighted average shares outstanding: Basic   29,180   28,507   28,254   28,240   28,542   28,228   28,160   28,194   Diluted   30,185   29,496   29,235   29,208   29,525   29,196   29,147   29,172   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 $ 44,529 Deduct: management fee   3,417   1,818   3,058   4,943   13,236   3,401   3,449   6,850 Operating income $ 18,486 $ 9,463 $ 18,497 $ 29,901 $ 76,347 $ 20,511 $ 17,168 $ 37,679 Operating margin before management fee   36.9%   18.3%   37.2%   42.2%   34.3%   35.9%   30.2%   33.0% Operating margin after management fee   31.2%   15.3%   31.9%   36.2%   29.2%   30.8%   25.1%   27.9%   * As restated to reflect the reversal of certain previously-accrued expenses for compensation in investment partnerships. Table VII GAMCO INVESTORS, INC. CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (dollars in thousands, except per share data)   December 31, June 30, June 30, 2006 (a) 2006 (a) 2007 ASSETS (unaudited) (unaudited)   Cash and cash equivalents $ 138,113 $ 116,852 $ 104,726 Investments 589,495 549,808 620,142 Receivables 96,942 61,262 69,157 Other assets   12,681   12,364   12,046   Total assets $ 837,231 $ 740,286 $ 806,071   LIABILITIES AND STOCKHOLDERS' EQUITY   Compensation payable $ 30,174 $ 34,366 $ 46,075 Income taxes payable 13,922 2,556 14,951 Accrued expenses and other liabilities   88,423   48,890   90,250 Total operating liabilities 132,519 85,812 151,276 5.5% Senior notes (due May 15, 2013) 100,000 100,000 100,000 6% Convertible note, $50 million outstanding (due August 14, 2011)(b) 49,504 50,000 49,561 5.22% Senior notes (due February 17, 2007)   82,308   82,308   - Total debt 231,812 232,308 149,561 Total Liabilities 364,331 318,120 300,837   Minority interest 21,324 19,724 14,441   Stockholders' equity   451,576   402,442   490,793   Total liabilities and stockholders' equity $ 837,231 $ 740,286 $ 806,071   (a) As restated to reflect the reversal of certain previously-accrued expenses for compensation in investment partnerships. (b) At June 30, 2007 and December 31, 2006, the conversion price was $53 per share. At June 30, 2006, the convertible note was 5% with a conversion price of $52 per share.