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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1994
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 2-72720
OPPENHEIMER & CO., INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-2798343
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
OPPENHEIMER TOWER
WORLD FINANCIAL CENTER, NEW YORK, NEW YORK 10281
(Address of principal executive offices) (Zip Code)
(212) 667-7000
Registrant's telephone number, including area code
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report).
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No _____
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OPPENHEIMER & CO., INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (Unaudited)
Consolidated Statements of Financial Condition 3
Consolidated Statements of Income 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Changes in Financial Condition 10
Results of Operations 11
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
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OPPENHEIMER & CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands)
(Unaudited)
Item 1.
ASSETS
April 30, January 31,
1993 1994
Cash $ 7,055 $ 21,158
Cash and securities segregated pursuant
to Federal Regulations 1,702 1,923
Deposits paid for securities borrowed 860,267 946,093
Receivable from brokers and dealers 102,873 124,918
Receivable from customers 595,412 761,702
Securities in trading and investment accounts -
at market value 299,571 801,601
Securities purchased under agreements
to resell 1,523,318 1,419,232
Exchange memberships at cost (market value
$6,515 and $8,093, respectively) 3,084 3,379
Furniture, fixtures and leasehold improvements -
at cost less accumulated depreciation and
amortization of $34,986 and $37,764, respectively 13,870 14,729
Other assets 69,342 69,642
TOTAL ASSETS $3,476,494 $4,164,377
The accompanying notes are an integral part of these statements.
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OPPENHEIMER & CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Continued)
(In thousands, except per share data)
(Unaudited)
LIABILITIES AND SHAREHOLDER'S EQUITY
April 30, January 31,
1993 1994
Short term borrowings $ 158,865 $ 197,272
Drafts payable 15,630 26,220
Securities sold under agreements to
repurchase 1,660,921 1,468,653
Deposits received for securities loaned 645,038 868,600
Payable to brokers and dealers 57,093 139,909
Payable to customers 385,826 303,014
Securities sold but not yet purchased -
at market value 166,880 678,380
Accrued employee compensation and benefits 61,557 99,012
Other liabilities and accrued expenses 60,412 84,303
3,212,222 3,865,363
COMMITMENTS AND CONTINGENCIES (Note 3)
LIABILITIES SUBORDINATED TO CLAIMS OF GENERAL
CREDITORS 55,652 53,696
SHAREHOLDER'S EQUITY
Preferred stock, par value $.10 per share;
200,000 shares authorized; none issued - -
Common stock, par value $.10 per share;
200,000 shares authorized; 100,000
shares issued and outstanding 10 10
Additional paid-in capital 92,660 92,660
Retained earnings 115,950 152,648
TOTAL SHAREHOLDER'S EQUITY 208,620 245,318
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $3,476,494 $4,164,377
The accompanying notes are an integral part of these statements.
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OPPENHEIMER & CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
January 31, January 31,
1993 1994 1993 1994
REVENUES
Commissions $ 46,081 $ 56,549 $120,033 $160,897
Trading and investments 27,866 43,734 82,303 141,231
Investment banking 20,029 37,606 64,961 107,838
Investment management fees 8,713 13,947 15,262 25,572
Interest and dividends 67,269 38,518 192,446 107,382
Other 4,002 4,584 10,561 11,089
TOTAL REVENUES 173,960 194,938 485,566 554,009
EXPENSES
Employee compensation and benefits 74,589 101,077 202,949 289,705
Occupancy and equipment 11,586 13,869 35,037 38,153
Data processing and communications 8,013 9,711 23,257 27,202
Brokerage, exchange and clearance fees 4,597 5,337 13,396 16,436
Interest 51,763 31,459 155,465 85,327
Other 10,505 15,078 30,973 40,508
TOTAL EXPENSES 161,053 176,531 461,077 497,331
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING FOR
INCOME TAXES 12,907 18,407 24,489 56,678
INCOME TAX EXPENSE 4,560 5,737 9,360 22,346
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING FOR INCOME TAXES 8,347 12,670 15,129 34,332
CUMULATIVE EFFECT ON PRIOR YEARS OF
CHANGE IN ACCOUNTING FOR INCOME
TAXES (BENEFIT) - - - (2,366)
NET INCOME $ 8,347 $ 12,670 $ 15,129 $ 36,698
The accompanying notes are an integral part of these statements.
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OPPENHEIMER & CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the Nine Months
Ended January 31,
1993 1994
Cash flows from operating activities:
Net income $ 15,129 $ 36,698
Adjustments to reconcile net income to net
cash used for operating activities:
Non-cash charges (credits) included in net income:
Deferred income taxes (3,373) (1,846)
Depreciation and amortization 2,445 2,778
Amortization of original issue discount and
deferred issuance costs on subordinated debt 293 137
Decreases (increases) in assets:
Cash and securities segregated pursuant
to Federal Regulations (2,054) (221)
Deposits paid for securities borrowed 376,269 (85,826)
Receivable from brokers and dealers 101,586 (22,045)
Receivable from customers (78,645) (166,290)
Securities in trading and investment accounts 2,002,051 (502,030)
Securities purchased under agreements to resell 1,044,997 104,086
Other assets (19,140) 1,618
Increases (decreases) in liabilities:
Drafts payable 10,698 10,590
Securities sold under agreements to repurchase (1,423,742) (192,268)
Deposits received for securities loaned (239,996) 223,562
Payable to brokers and dealers (22,907) 82,816
Payable to customers (32,331) (82,812)
Securities sold but not yet purchased (1,854,648) 511,500
Accrued employee compensation and benefits (14,430) 37,455
Other liabilities and accrued expenses 11,352 23,891
NET CASH USED FOR OPERATING ACTIVITIES (126,446) (18,207)
Cash flows from investing activities:
Purchases of:
Exchange memberships 0 (295)
Furniture, fixtures and leasehold improvements (1,610) (3,637)
NET CASH USED FOR INVESTING ACTIVITIES (1,610) (3,932)
The accompanying notes are an integral part of these statements.
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OPPENHEIMER & CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)
(Unaudited)
For the Nine Months
Ended January 31,
1993 1994
Cash flows from financing activities:
Short term borrowings $136,335 $ 38,407
Additions to account executive subordinated
indebtedness 230 94
Payments on account executive subordinated
indebtedness (1,292) (985)
Partial redemption of 12 3/4% Debentures due 2002 - (1,274)
Dividends paid on common stock (10,500) -
NET CASH PROVIDED BY FINANCING ACTIVITIES 124,773 36,242
NET INCREASE (DECREASE) IN CASH (3,283) 14,103
Cash, beginning of year 10,604 7,055
CASH, January 31, $ 7,321 $ 21,158
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $189,276 $ 81,736
Net payments made to an affiliate under
a tax sharing agreement (2,886) 23,653
The accompanying notes are an integral part of these statements.
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OPPENHEIMER & CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of
Oppenheimer & Co., Inc. and its wholly-owned subsidiaries, (collectively
the "Company"). The consolidated financial statements should be read in
conjunction with the Company's annual report (Form 10-K) for the year ended
April 30, 1993. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the
financial position and results of operations for all periods presented have
been made. The notes to the consolidated financial statements are only
those, which in the opinion of management, are necessary to update the
annual report. The nature of the Company's business is such that the
results of operations for any interim period are not indicative of results
of operations for a full year.
NOTE 2. SECURITIES IN TRADING AND INVESTMENT ACCOUNTS AND SECURITIES
SOLD BUT NOT YET PURCHASED
The positions consist of the following securities:
Market Value
(In thousands)
April 30, January 31,
1993 1994
Securities in Trading and Investment Accounts:
U.S. Government Obligations $166,613 $507,266
State and Municipal Bonds 43,990 97,514
Corporate Bonds 46,243 87,850
Corporate Stock 42,614 107,086
Options 111 1,885
$299,571 $801,601
Securities Sold But Not Yet Purchased:
U.S. Government Obligations $113,250 $552,914
State and Municipal Bonds 1,215 14,790
Corporate Bonds 4,309 57,545
Corporate Stock 47,530 52,843
Options 576 288
$166,880 $678,380
NOTE 3. COMMITMENTS AND CONTINGENCIES
The Company has satisfied collateral requirements with clearing
corporations and others at January 31, 1994 by obtaining letters of credit
in the amount of $96,857,265, which are secured by firm-owned securities
(market value $122,891,642), and unsecured letters of credit in the amount
of $34,433,000. PAGE8
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OPPENHEIMER & CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4. INCOME TAXES
Effective May 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes".
The adoption of SFAS 109 changed the Company's method of accounting for
income taxes from the deferred approach (APB 11) to an asset and liability
approach. The asset and liability approach requires the recognition of
deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between the carrying amounts and the
tax bases of other assets and liabilities. Deferred tax assets are
required to be reduced by a valuation allowance to the extent that, based
on the weight of available evidence, it is more likely than not the
deferred tax assets will not be realized. The Company has reflected a
benefit of $2,366,000 in the quarter ended July 31, 1993 from the adoption
of SFAS 109, representing the cumulative effect on prior years of a change
in accounting for income taxes.
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OPPENHEIMER & CO., INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
1. Changes in Financial Condition
The Company believes that it has sufficient resources to meet all
present and anticipated future capital needs of its business operations.
The majority of the Company's assets and liabilities are highly liquid
and/or short-term in nature. Customer transactions are collateralized by
marketable securities and the Company may demand payment of all of the
outstanding balances at any time. Receivables and payables with other
brokers and dealers represent either current open transactions which
usually settle within a few days or stock borrow and stock loan
transactions which normally can be closed within a few days. A significant
amount of leverage is inherent in the financing of the Company's assets.
These funds are usually available to the Company on an overnight basis from
commercial banks and other institutions through collateralized and
uncollateralized loans. In addition to borrowings from banks on an
overnight basis, a substantial amount of financing is done utilizing
repurchase agreements and letters of credit. These repurchase agreements
primarily represent financing arrangements secured by U.S. Government
Obligations on an overnight or term basis. Funding needs are determined
in proportion to the amount and mix of assets. Sources of funds utilized
in addition to short-term overnight borrowings are represented by
subordinated debentures issued by the Company, drafts payable, deferred
payments, funds left on deposit with the Company by customers and by the
Company's own capital.
As a registered broker-dealer and a member of the New York Stock
Exchange, the Company is subject to the Securities and Exchange
Commission's Uniform Net Capital Rule, which specifies Uniform Minimum Net
Capital Requirements for all its registrants, and is designed to measure
the general financial integrity and liquidity, and to control the expansion
of a broker-dealer business. At January 31, 1994, the Company's net
capital under the Uniform Net Capital Rule was $115,789,367 and the amount
in excess of 2%, 4% and 5% of Aggregate Debit Items were $97,017,916,
$78,246,465 and $68,860,740, respectively.
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OPPENHEIMER & CO., INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
2. Results of Operations
Quarter Ended January 31, 1994 as Compared to Quarter Ended
January 31, 1993.
The Company reported income before taxes of $18,407,000 for the three
months ended January 31, 1994 as compared to income before taxes of
$12,907,000 for the comparable period in 1993.
Revenues for the three months ended January 31, 1994 were $194,938,000
as compared to $173,960,000, for the three months ended January 31, 1993,
reflecting an increase of 12%. Trading and investment income increased 57%
as a result of increased profits in equity and fixed income trading.
Investment banking revenues increased 88% resulting from increased revenues
in underwriting and corporate finance. Investment management fees
increased 60% principally as a result of increased assets subject to
management fees and increased profitability of accounts under incentive
arrangements. Net interest and dividend income decreased 54%. Interest
and dividend income decreased 43% as a result of lower levels of activity
in the trading and financing of U.S. Government Obligations. Interest
expense decreased 39% also as a result of lower levels of U.S. Government
Obligations activity.
Total expenses for the three months ended January 31, 1994 increased
10% from the same period in 1993. Employee compensation increased 36% as
a result of increased account executive compensation and increased
incentive compensation costs, both related to increased revenues. Interest
expense decreased 39% as discussed above. The remaining expenses increased
27% as a result of increased cost levels.
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OPPENHEIMER & CO., INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
2. Results of Operations
Nine Months Ended January 31, 1994 as Compared to Nine Months Ended
January 31, 1993
The Company reported income before taxes of $56,678,000 for the nine
months ended January 31, 1994 as compared to income before taxes of
$24,489,000 for the comparable period in 1993.
Revenues for the nine months ended January 31, 1994 were $554,009,000
as compared to $485,566,000, for the nine months ended January 31, 1993,
reflecting an increase of 14%. Trading and investment income increased 72%
as a result of increased profits in equity and fixed income trading.
Investment banking revenues increased 66% resulting from increased revenues
in underwriting and corporate finance. Investment management fees
increased 68% principally as a result of increased assets subject to
management fees and increased profitability of accounts under incentive
arrangements. Net interest and dividend income decreased 40%. Interest and
dividend income decreased 44% as a result of lower levels of activity in
the trading and financing of U.S. Government Obligations. Interest expense
decreased 45% also as a result of lower levels of U.S. Government
Obligations activity.
Total expenses for the nine months ended January 31, 1994 increased 8%
from the same period in 1993. Employee compensation increased 43% as a
result of increased account executive compensation and increased incentive
compensation costs, both related to increased revenues. Interest expense
decreased 45% as discussed above. The remaining expenses increased 19% as
a result of increased cost levels.
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OPPENHEIMER & CO., INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits: None
b. Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OPPENHEIMER & CO., INC.
Date: March 15, 1994 By: /s/ Stephen Robert
Stephen Robert
Chairman of the Board and
Chief Executive Officer
Date: March 15, 1994 By: /s/ Dennis E. Feeney
Dennis E. Feeney
Controller
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OPPENHEIMER & CO., INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OPPENHEIMER & CO., INC.
Date: March 15, 1994 By:
Stephen Robert
Chairman of the Board and
Chief Executive Officer
Date: March 15, 1994 By:
Dennis E. Feeney
Controller
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