MutualFundWire.com: Gabelli Sets Aside $12 Million for Timer Settlement

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Monday, August 7, 2006

Gabelli Sets Aside $12 Million for Timer Settlement

Settlement payments took a deep bite into the earnings of Gamco Investors, the parent company to Gabelli Funds, during the second quarter. The firm also reported an increase in revenues despite a dip in assets under management.

Gabelli's asset base slipped $800 million to $26.8 billion at the end of June 30 from $27.6 billion in June 2005. However, revenues rose to $62.8 million in the second quarter from $59.6 million a year ago. Assets in the firm's equity funds fell 3 percent over the twelve months to $13.1 billion from $13.5 billion, according to the earnings report.

The Rye, New York-based holding company said that its net income fell to $8.9 million (31 cents per diluted share) from $12.9 million (42 cents a share) during the same quarter in 2005. Analysts had expected the firm to earn as much as 51 cents per share.

The miss was caused by reserves set aside to settle regulators' charges that the firm allowed market timers in its funds. That reserve was nearly $12 million, or 27 cents a share. Not counting the reserve, Gamco's earnings rose to $16.8 million, or 58 cents a share, seven cents higher than analysts had expected and 30 percent higher than year ago earnings.

Gamco officials also said that the firm has renegotiated the terms of a $50 million convertible note held by Cascade Investment. Gamco increased the interest rate on the August 2011 note to 6 percent from 5 percent and raised the conversion price to $53 per GBL share from $52 per share. Both changes are effective on September 15, 2006. In addition, Gamco and Cascade agreed to extend the exercise date for Cascade's put option until May 15, 2007.

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