FORM 10-K/A GAMCO Investors, Inc. - Gabelli

Liquidity and Capital Resources
Our principal assets consist of cash, short-term investments, securities held for investment purposes and investments in mutual funds, and investment partnerships and offshore funds,
both proprietary and external. Short-term investments are comprised primarily of United States treasury securities with maturities of less than one year and money market funds
managed by GBL. Although the investment partnerships and offshore funds are for the most part illiquid, the underlying investments of such partnerships or funds are for the most
part liquid, and the valuations of these products reflect that underlying liquidity.
Summary cash flow data is as follows:
2004 (a) 2005 (a) 2006
(in thousands)
Cash flows used in:
Operating activities $ (23,879) $ (31,029) $ (5,708)
Investing activities (11,056) (7,205) (2,668)
Financing activities (94,480) (45,626) (28,390)
Decrease in cash and cash equivalents (129,415) (83,860) (36,766)
Cash and cash equivalents at beginning of year 386,511 257,096 173,161
Income related to investment partnerships and offshore funds consolidated under FIN 46R and EITF 04-5, net - - 1,754
Effect of exchange rates on cash and cash equivalents - (75) (36)
Cash and cash equivalents at end of year $ 257,096 $ 173,161 $ 138,113
(a) Restated as described in note A of item 8 of this report on Form 10-K.
Cash and liquidity requirements have historically been met through cash generated by operating income and our borrowing capacity. At December 31, 2006, we had cash and cash
equivalents of $138.1 million, a decrease of $35.0 million from the prior year-end primarily due to the Company’s financing activities. We have established a collateral account,
consisting of cash and cash equivalents and U.S. treasury securities totaling $54.2 million, to secure a $51.3 million letter of credit issued in favor of the holder of the $50 million 6%
convertible note. Cash and cash equivalents and investments in securities held in the collateral account are restricted from other uses until the date of expiration and are classified as
restricted cash on the consolidated statements of financial condition. Under the terms of the capital lease, we are obligated to make minimum total payments of $4.9 million through
April 2013.
Net cash used in operating activities was $5.7 million for the year ended December 31, 2006, principally resulting from $1,039.9 million in purchases of investments in securities, a
$42.1 million increase in receivable from brokers, $4.9 million in purchases of investments in partnerships and affiliates and $40.0 million from the net effects of the FIN 46R and
EITF 04-5 consolidation. The uses were partially offset by proceeds from sales of investments in securities of $1,014.3 million, $22.8 million in increase in accrued expenses and
other liabilities, $14.6 million in distributions from investments in partnerships and affiliates and an increase in compensation payable of $1.3 million. Excluding the net effects of the
consolidation of investment partnerships and offshore funds, our cash provided by operating activities was $34.2 million. Net cash used in operating activities of $31.0 million in
2005 results primarily from purchases of trading investments in securities of $1,171.3 million and investments in partnerships and affiliates of $16.0 million, partially offset by
proceeds from sales of trading investments in securities of $1,063.1 million and $37.5 million of distributions from partnerships and affiliates.
Net cash used in investing activities of $2.7 million in 2006 is due to purchases of available for sale securities of $5.4 million, partially offset by proceeds from sales of available for
sale securities of $2.8 million. Net cash used in investing activities of $7.2 million in 2005 is due to purchases of available for sale securities of $9.3 million, partially offset by
proceeds from sales of available for sale securities of $2.1 million.
Net cash used in financing activities of $28.4 million in 2006 principally resulted from the repurchase of our class A common stock under the Stock Repurchase Program of $54.6
million and dividends paid of $3.4 million, partially offset by $29.7 million in contributions by partners into our investment partnerships. Excluding the net effects of the consolidation
of investment partnerships and offshore funds, our net cash used in financing activities was $58.1 million. Net cash used in financing activities of $45.6 million in 2005 was primarily
due to the repurchase of $50 million of the 5% convertible note, the purchase of an additional $37.2 million of our class A common stock, dividend payments of $20.1 million and
$9.7 million for the tender offer of employee stock options partially offset by $70.6 million received for the settlement of forward contracts relating to the mandatory convertible
securities.
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