To Our Shareholders:
We are pleased to bring you, our shareholders, this our first Quarterly Report since our Initial Public Offering on February 11, 1999.
Financial Results -- 1st Quarter 1999 vs. 1st Quarter 1998
Our total revenues rose 24% to $39.7 million in the first quarter of 1999 as compared to $31.9 million in the initial quarter of 1998. Operating income also increased 24% to $16.8 million in the first quarter of 1999 from $13.5 million in the same period a year earlier. Net income rose 27%, a slightly higher rate due to improved investment performance in 1999. Finally, on a pro forma basis, net income per share increased 29% to $0.31 per share compared to $0.24 per share in the first quarter of 1998. Reflecting a one time charge, net of tax benefit, of $30.9 million or $1.03 per share, overall results for the 1999 quarter showed a loss of $0.72 per share.
Underlying the growth in revenues and earnings is the increase in assets under management. Paced by a 30% rise in our open-end mutual funds, to $5.7 billion from $4.4 billion, total assets under management were $17 billion at March 31, 1999 compared to $16.3 billion at December 31, 1998 and $15.4 billion at March 31, 1998.
Growth Initiatives
To meet our growth objective, we will leverage our competitive strengths and pursue a business strat egy which will include attracting experienced professionals to help our clients earn their target rate of return, expand our product offerings, increase distribution and marketing and to seek out strategic alliances and acquisitions.
In recent months we have initiated actions in each of these business strategies:
- Ms. Barbara Marcin and Mr. Timothy O’Brien have
joined our investment team.
Barbara Marcin, CFA comes to us as the former head of value investments at Citibank Global A s s e t Management. Ms. Marcin, a regular guest on CNBC and PBS’s "Wall Street Week with Louis Rukeyser," will manage a new fund, the Gabelli Blue Chip Value Fund.
Timothy O’Brien, CFA former portfolio manager of the Eaton Vance Utilities Fund, is a highly ranked analyst and past "winner" of Institutional Investor’s "Best of the Buy Side" award. Mr. O’Brien will manage a new open-end fund to concentrate on investing in telecoms, utilities and related businesses.
- tOur second relationship center outside the New York
area was opened in June 1999 to service our institutional
and high net worth clients in the southeastern United
States. Gerry Mathison looks forward to sharing his
insights into our various managed products from our
office at 249 Royal Palm Way, Palm Beach, Florida.
- Filings were approved to allow the Gabelli Family of
Mutual Funds to add a multi-class structure to our current
no load products. While the funds will retain a no load
format, we will be in a better and more flexible position to
access the large mutual fund shareholder base which utilizes
a financial advisor or consultant for investment decisions.
This distribution channel was not as readily available
to us.
Share Repurchase Program
On March 8, 1999, the Board of Directors of the Company authorized the repurchase of up to $3 million of Class A Common Stock in the open market. No shares were purchased in the first quarter, but we purchased 55,600 shares in May.
Gabelli Asset Management started trading on the New York Stock Exchange on February 11, with the sale of six million shares of its Class A Common Stock in its Initial Public Offering at $17.50. The Offering was led by Merrill Lynch, Salomon Smith Barney and Gabelli & Company.
We want to thank our clients, our staff, and our professional staff for their support, confidence and encouragement in this milestone in our firm’s history. Along with first quarter financial statements, we include quarterly data for 1998 on an adjusted historical basis as well as on a “pro forma” basis.
Mario J. Gabelli Chairman & Chief Executive Officer
Unaudited Consolidated Statements of Income
Unaudited Condensed Consolidated Statements of Financial Condition