<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
X EXCHANGE ACT OF 1934.
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For the quarterly period ended January 31, 1996
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
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For the transition period from _________ to _________
Commission file number: 1-9597
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OPPENHEIMER CAPITAL, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 13-3412614
- ------------------------------- --------------------
(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 office) (Zip Code)
(212) 667-7000
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(Registrant's telephone number including area code)
NOT APPLICABLE
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(Former name, address and 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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
The issuer is a Limited Partnership. There were 15,255,070 Units of
limited partnership interest outstanding at March 10, 1996.
<PAGE>
OPPENHEIMER CAPITAL, L.P.
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF FINANCIAL CONDITION 3
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF INCOME 4
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF CASH FLOWS 5
OPPENHEIMER CAPITAL, L.P.
NOTES TO THE FINANCIAL STATEMENTS 6
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION 8
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF INCOME 9
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF CASH FLOWS 10
OPPENHEIMER CAPITAL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 13
PART II - OTHER INFORMATION 18
SIGNATURES 19
- 2 -
<PAGE>
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF FINANCIAL CONDITION
(In Thousands)
<TABLE>
<CAPTION>
January 31, 1996 April 30, 1995
-------------------- -----------------
ASSETS
<S> <C> <C>
Cash and short-term investments $ 41 $ 60
Investment in Oppenheimer Capital 24,142 9,707
Distribution receivable (Note 3) 17,340 9,545
10% Note due 2012 from Oppenheimer Equities, Inc. 32,193 32,193
Interest receivable 547 538
Other assets 126 109
Goodwill, net 42,524 44,481
-------------------- -----------------
TOTAL ASSETS $ 116,913 $ 96,633
==================== =================
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
<S> <C> <C>
Distribution payable to partners $ 18,106 $ 10,321
-------------------- -----------------
TOTAL LIABILITIES 18,106 10,321
-------------------- -----------------
General partner's capital 1,002 876
Limited partners' capital; 15,255,070 and 15,136,837
Units outstanding, respectively 97,805 85,436
-------------------- -----------------
TOTAL PARTNERS' CAPITAL 98,807 86,312
-------------------- -----------------
TOTAL LIABILITIES AND
PARTNERS' CAPITAL $ 116,913 $ 96,633
==================== =================
</TABLE>
The accompanying notes are an integral part of these statements.
- 3 -
<PAGE>
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF INCOME
(In Thousands, except for per unit amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31, January 31,
------------------------- ------------------------
1996 1995 1996 1995
------------ ---------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES
Equity in earnings of Oppenheimer Capital:
Operating earnings $ 10,776 $ 7,278 $ 29,540 $ 23,522
Gain on Quest sale (Note 6) 17,734 - 17,734 -
------------ ---------- ----------- ----------
Total equity in earnings of Oppenheimer Capital 28,510 7,278 47,274 23,522
Interest 812 815 2,437 2,441
------------ ---------- ----------- ----------
TOTAL REVENUES 29,322 8,093 49,711 25,963
------------ ---------- ----------- ----------
EXPENSES
Amortization of goodwill 652 652 1,956 1,956
Other expenses (Note 4) 33 218 100 939
------------ ---------- ----------- ----------
TOTAL EXPENSES 685 870 2,056 2,895
------------ ---------- ----------- ----------
NET INCOME $ 28,637 $ 7,223 $ 47,655 $ 23,068
============ ========== =========== ==========
NET INCOME PER UNIT (NOTES 5 AND 6) $ 1.86 $ .47 $ 3.10 $ 1.51
============ ========== =========== ==========
DISTRIBUTIONS DECLARED PER UNIT $ 1.175 $ .50 $ 2.35 $ 1.50
============ ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
- 4 -
<PAGE>
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
January 31,
-----------------------------
1996 1995
------------- ------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 47,655 $ 23,068
Adjustments to reconcile net income to net cash provided
by operating activities:
Distributions received in excess of (less than) equity in
earnings of Oppenheimer Capital (21,197) 672
Amortization of goodwill 1,956 1,956
(Increase) in interest receivable (9) (9)
(Increase) in other assets (17) (21)
------------- ------------
Net cash provided by operating activities 28,388 25,666
------------- ------------
Cash flows from investing activities
Capital contributions to Oppenheimer Capital (300) (86)
------------- ------------
Cash flows from financing activities Distributions to partners:
General partner (284) (256)
Limited partners (28,123) (25,351)
Issuance of limited partnership units on exercise of
restricted options 300 86
------------- ------------
Net cash (used in) financing activities (28,107) (25,521)
------------- ------------
Net (decrease) increase in cash and short term investments (19) 59
Cash and short term investments at beginning of period 60 75
------------- ------------
Cash and short term investments at end of period $ 41 $ 134
============= ============
Supplemental disclosure of cash flow information:
New York City unincorporated business taxes paid $ 117 $ 960
============= ============
</TABLE>
The accompanying notes are an integral part of these statements.
- 5 -
<PAGE>
OPPENHEIMER CAPITAL, L.P.
NOTES TO THE FINANCIAL STATEMENTS
1. Organization:
Oppenheimer Capital, L.P. (the "Partnership") holds a 67.32% general
partnership interest in Oppenheimer Capital (the "Operating Partnership"), a
general partnership. The Partnership (through the Operating Partnership) engages
in the investment management business. The limited partners and Oppenheimer
Financial Corp., the Partnership's general partner (the "General Partner"), hold
a 99% interest and 1% interest, respectively, in the Partnership.
The financial statements of the Partnership should be read in
conjunction with the consolidated financial statements of the Operating
Partnership.
The Operating Partnership is part of an affiliated group of companies
operating in the financial services industry.
2. Basis of Presentation:
The interim financial information in this report has not been audited.
The financial statements should be read in conjunction with the financial
statements included in the Partnership's 1995 Annual Report. 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 results of operations for any interim
period are not necessarily indicative of the operating results for a full year.
3. Distribution Receivable:
On January 31, 1996, the Operating Partnership declared distributions to
its partners, payable on February 29, 1996, of which $17,340,000 was received by
the Partnership.
4. Other Expenses:
Other expenses consist of New York City unincorporated business tax
("UBT") at a rate of 4% of taxable income. The decline in New York City UBT is
due to a change in the tax law effective January 1, 1995. After that date, the
New York City UBT is imposed on the total income of the Operating Partnership
and the Partnership is allowed to claim a credit for its pro rata share of any
New York City UBT paid by the Operating Partnership.
The Partnership is not otherwise subject to Federal, state or local
income taxes which are instead obligations of the individual partners. However,
under current tax law the Partnership will be taxable as a corporation beginning
in 1998.
- 6 -
<PAGE>
OPPENHEIMER CAPITAL, L.P.
NOTES TO THE FINANCIAL STATEMENTS
(Continued)
5. Net Income Per Unit:
(In thousands, except for per unit amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31, January 31,
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Income $ 28,637 $ 7,223 $ 47,655 $ 23,068
Less 1% applicable to the General Partner 286 72 477 231
----------- ----------- ----------- -----------
Net income available to the Limited Partners $ 28,351 $ 7,151 $ 47,178 $ 22,837
=========== =========== =========== ===========
Weighted average number of units outstanding 15,247 15,137 15,241 15,136
=========== =========== =========== ===========
Net income per unit $ 1.86 $ .47 $ 3.10 $ 1.51
=========== =========== =========== ===========
</TABLE>
6. Gain on Quest Sale:
Included in "Equity in earnings of Oppenheimer Capital" for the three
and nine months ended January 31, 1996 is a gain resulting from the Operating
Partnership's sale of the investment advisory and other contracts and business
relationships for its twelve Quest for Value mutual funds to Oppenheimer
Management Corporation ("OMC"), which is unrelated to the Operating Partnership.
The Partnership's share of the gain on the sale, which was completed on November
22, 1995, totaled $17,734,000, or $1.15 per unit. An additional purchase price
payment of up to $3.8 million may be received by the Operating Partnership on
the first anniversary of the closing if the assets of the six merged fixed
income funds are then at stated levels.
Total assets of the twelve funds were $1.7 billion at November 21, 1995.
The six equity funds involved, representing $1.4 billion of those assets, will
continue to be managed by Opcap, under a subadvisory contract with OMC, which
will allow the current portfolio management teams to remain in place. The six
fixed income funds, representing approximately $300 million of those assets,
have been merged into comparable funds managed by OMC.
- 7 -
<PAGE>
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands)
<TABLE>
<CAPTION>
January 31, 1996 April 30, 1995
------------------- ------------------
ASSETS
<S> <C> <C>
Cash and short-term investments $ 27,520 $ 9,214
Investment management fees receivable 40,452 33,177
Furniture, equipment and leasehold improvements
at cost, less accumulated depreciation and
amortization of $2,391 and $1,867 3,441 3,733
Intangible assets, less accumulated amortization
of $330 and $395 1,746 3,012
Investments in affiliated mutual funds and other
sponsored investment products 6,474 2,887
Other assets (Note 6) 1,864 4,106
------------------- ------------------
TOTAL ASSETS $ 81,497 $ 56,129
=================== ==================
<CAPTION>
LIABILITIES, MINORITY INTEREST AND PARTNERS' CAPITAL
<S> <C> <C>
Accrued employee compensation and benefits $ 9,631 $ 8,324
Accrued expenses and other liabilities 6,176 6,878
Note payable 800 1,200
Loan payable to bank - 9,182
Deferred investment management fees 2,804 1,716
Distribution payable to partners 25,757 14,282
------------------- ------------------
TOTAL LIABILITIES 45,168 41,582
------------------- ------------------
Minority interest 469 87
PARTNERS' CAPITAL 35,860 14,460
------------------- ------------------
TOTAL LIABILITIES , MINORITY INTEREST
AND PARTNERS' CAPITAL $ 81,497 $ 56,129
=================== ==================
</TABLE>
The accompanying notes are an integral part of these statements.
- 8 -
<PAGE>
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31, January 31,
-------------------------- ---------------------------
1996 1995 1996 1995
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Investment management fees $ 40,391 $ 29,634 $ 114,258 $ 89,889
Net distribution assistance and commission income (247) 2,328 1,835 5,532
Interest and dividends 419 79 603 184
----------- ----------- ----------- ------------
TOTAL OPERATING REVENUES 40,563 32,041 116,696 95,605
----------- ----------- ----------- ------------
OPERATING EXPENSES
Compensation and benefits 17,290 13,954 51,097 40,966
Occupancy 1,704 1,526 5,118 4,793
General and administrative 3,291 2,890 8,872 6,917
Promotional 1,468 2,558 5,599 7,684
----------- ----------- ----------- ------------
TOTAL OPERATING EXPENSES 23,753 20,928 70,686 60,360
----------- ----------- ----------- ------------
OPERATING INCOME 16,810 11,113 46,010 35,245
Gain on Quest sale (Note 8) 27,725 - 27,725 -
----------- ----------- ----------- ------------
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST 44,535 11,113 73,735 35,245
Income taxes (Note 3) (1,860) (233) (3,093) (823)
----------- ----------- ----------- ------------
INCOME BEFORE MINORITY INTEREST 42,675 10,880 70,642 34,422
Minority interest (315) (60) (398) 3
----------- ----------- ----------- ------------
NET INCOME $ 42,360 $ 10,820 $ 70,244 $ 34,425
=========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
- 9 -
<PAGE>
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
January 31,
--------------------------
1996 1995
------------ -----------
<S> <C> <C>
Cash flows from operating activities
Net income $ 70,244 $ 34,425
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of restricted unit compensation expense 1,165 960
Depreciation and amortization 736 831
Minority interest, net of distributions 382 111
(Increase) decrease in:
Investment management fees receivable (7,275) (2,769)
Other assets 2,795 365
Increase (decrease) in:
Accrued employee compensation and benefits 1,307 (443)
Accrued expenses and other liabilities (702) 1,513
Deferred investment management fees 1,088 (157)
------------ -----------
Net cash provided by operating activities 69,740 34,836
------------ -----------
Cash flows from investing activities
Purchases of fixed assets (232) (1,295)
Intangible assets resulting from acquisitions - (1,688)
Proceeds from sales of mutual fund shares and other investments 2,817 752
Purchases of mutual fund shares and other investments (5,891) (3,222)
------------ -----------
Net cash (used in) investing activities (3,306) (5,453)
------------ -----------
Cash flows from financing activities
Net (repayments of) proceeds from bank loans (9,182) 9,257
Issuance of note payable - 1,200
Payment of note payable (400) -
Distributions to partners:
Oppenheimer Financial Corp. (12,771) (11,704)
Oppenheimer Capital, L.P. (26,075) (24,195)
Contributions by Oppenheimer Capital, L.P. 300 86
----------- -----------
Net cash (used in) financing activities (48,128) (25,356)
----------- -----------
Net increase in cash and short term investments 18,306 4,027
Cash and short term investments at beginning of period 9,214 3,702
----------- -----------
Cash and short term investments at end of period $ 27,520 $ 7,729
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ 609 $ 491
=========== ===========
New York City unincorporated business taxes paid $ 3,025 $ 625
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
- 10 -
<PAGE>
OPPENHEIMER CAPITAL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Organization:
Oppenheimer Capital (the "Operating Partnership"), a general partnership,
engages in the investment management business. Oppenheimer Capital, L.P. (the
"Partnership") holds a 67.32% general partnership interest in the Operating
Partnership and Oppenheimer Financial Corp. ("Opfin") holds the remaining 32.68%
general partnership interest. The Operating Partnership is part of an affiliated
group of companies operating in the financial services industry.
2. Basis of Presentation:
The interim financial information in this report has not been audited. The
financial statements should be read in conjunction with the financial statements
included in the Partnership's 1995 Annual Report. 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 results of operations for any interim period are
not necessarily indicative of the operating results for a full year.
3. Income Taxes:
Although the Operating Partnership is not otherwise subject to Federal,
state or local income taxes, it was subject to New York City unincorporated
business tax ("UBT") of $1,860,000 and $3,093,000, respectively, for the three
months and nine months ended January 31, 1996 and $233,000 and $823,000,
respectively, for the three months and nine months ended January 31, 1995. There
are two reasons for the significant increase in New York City UBT. First, due to
a change in the tax law effective January 1, 1995, the New York City UBT is
imposed on the total income of the Operating Partnership and the Partnership is
allowed to claim a credit for its pro rata share of any New York City UBT paid
by the Operating Partnership. Previously, New York City UBT was assessed
directly at the Partnership level. A second reason for the increase can be
attributed to higher earnings, including the $27,725,000 gain realized by the
Operating Partnership on the sale of the investment advisory and other contracts
and business relationships for its twelve Quest for Value mutual funds. The
sale, which occurred during the three months ended January 31, 1996, resulted in
New York City UBT of $1,109,000.
4. Acquisitions of Businesses:
In May, 1994, a subsidiary of the American Medical Association ("AMA") and
the Operating Partnership formed AMA Investment Advisers, L.P. to acquire the
assets of AMA Investment Advisers, Inc. and American Medical Investment Company,
Inc. The Operating Partnership and Opfin acquired a 79.1% and 1.0% partnership
interest, respectively, for their pro rata portions of $500,000 and a $1,200,000
promissory note bearing interest at the prime rate. On May 1, 1995, $400,000 was
paid on the promissory note, with the remainder due in two equal installments of
$400,000 on May 1, 1996 and May 1, 1997. AMA Investment Advisers, L.P. offers
investment services and products tailored especially for members of the AMA,
other health care professionals and medical organizations.
On May 1, 1994, the Operating Partnership acquired Liberty Street Trust
Company from Oppenheimer Holdings, Inc., an affiliate, for its net book value of
approximately $1,629,000 and renamed it Oppenheimer Capital Trust Company. This
company offers collectively-managed portfolios of specialized asset classes.
On May 10, 1994, the Operating Partnership formed Saratoga Capital
Management, a joint venture, to provide asset allocation services to
broker-dealers utilizing mutual funds managed by independent investment advisers
and Opcap Advisors (formerly Quest for Value Advisors), an affiliated investment
adviser.
- 11 -
<PAGE>
OPPENHEIMER CAPITAL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Prior Period Financial Information:
Certain prior period financial information has been reclassified to
conform with the current period presentation.
6. Other Assets:
Included in other assets at April 30, 1995 is an investment in Orange
County, California securities. On December 7, 1994, in response to the
bankruptcy filing by Orange County, the Operating Partnership voluntarily
purchased $2,000,000 principal amount of Orange County Tax and Revenue
Anticipation Notes at par from a mutual fund for which Opcap Advisors acts as
the sole investment adviser. This investment was recorded at market value. In
February 1995, the Operating Partnership sold a total of $1,000,000 principal
amount of the Orange County Tax and Revenue Anticipation Notes and realized a
loss of approximately $100,000. The remaining principal amount was sold on
November 2, 1995 and the Operating Partnership realized an additional loss of
approximately $60,000.
7. Restricted Unit Plan and Restricted Option Plan
On August 15, 1995, the Board of Directors of Opfin approved (i) the
extension of the term of the Restricted Unit Plan and the Restricted Option Plan
(the "Plans"), effective as of July 9, 1994, until July 9, 1999 or until such
earlier time as the units authorized for issuance under the Plans have been
granted and have been vested, and (ii) an increase in the aggregate number of
units authorized for issuance under the Plans to 2,475,000.
8. Gain on Quest Sale
On November 22, 1995, the Operating Partnership completed the sale of the
investment advisory and other contracts and business relationships for its
twelve Quest for Value mutual funds to Oppenheimer Management Corporation
("OMC"), which is unrelated to the Operating Partnership, for a price of $41.7
million. An additional purchase price payment of up to $3.8 million may be
received by the Operating Partnership on the first anniversary of the closing if
the assets of the six merged fixed income funds are then at stated levels. The
gain on the sale, shown separately from operating income on the statements of
income, amounted to $27,725,000 before New York City UBT and minority interest.
Total assets of the twelve funds were $1.7 billion at November 21, 1995.
The six equity funds involved, representing $1.4 billion of those assets, will
continue to be managed by Opcap under a subadvisory contract with OMC, which
will allow the current portfolio management teams to remain in place. The six
fixed income funds, representing approximately $300 million of those assets,
have been merged into comparable funds managed by OMC.
- 12 -
<PAGE>
PART I, ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPPENHEIMER CAPITAL, L.P.
General
The primary sources of income for Oppenheimer Capital, L.P. ( the
"Partnership") are its proportionate share of the net income of Oppenheimer
Capital (the "Operating Partnership") and interest income on a $32,193,000 par
value 10% note due 2012 from Oppenheimer Equities, Inc. ("Equities"), an
affiliate.
Revenues and Expenses
The Partnership recorded equity in earnings of the Operating
Partnership for the three months ended January 31, 1996 and January 31, 1995 of
$28,510,000 and $7,278,000, respectively. For the nine months ended January 31,
1996 and January 31, 1995, the Partnership recorded equity in earnings of the
Operating Partnership of $47,274,000 and $23,522,000, respectively. Equity in
earnings of the Operating Partnership increased for both the three and nine
month periods due to higher operating income of the Operating Partnership and
due to a gain recognized by the Operating Partnership on the sale of the Quest
for Value investment advisory and other contracts and business relationships
(the "Quest sale") to Oppenheimer Management Corporation ("OMC"). Equity in
earnings of the Operating Partnership for both the three and nine months ended
January 31, 1996 included $17,734,000 related to the Quest Sale.
Other expenses consist of New York City unincorporated business tax
("UBT"). For the three months ended January 31, 1996 and January 31, 1995, the
Partnership's New York City UBT totaled $33,000 and $218,000, respectively, and
for the nine months ended January 31, 1996 and January 31, 1995, New York City
UBT totaled $100,000 and $939,000, respectively. The decline in New York City
UBT is due to a change in the tax law effective January 1, 1995. New York City
UBT is now imposed on the total income of the Operating Partnership and the
Partnership is allowed to claim a credit for its pro rata share of any New York
City UBT paid by the Operating Partnership. Previously New York City UBT was
assessed directly at the Partnership level.
Net income for the three months ended January 31, 1996 and January 31,
1995 amounted to $28,637,000 and $7,223,000, respectively, or $1.86 per unit and
$.47 per unit, respectively. Net income for the nine months ended January 31,
1996 and January 31, 1995 amounted to $47,655,000 and $23,068,000, respectively,
or $3.10 per unit and $1.51 per unit, respectively. For both the three and nine
months ended January 31, 1996, the gain on the Quest sale represented net income
of $17,734,000, or $1.15 per unit.
Liquidity and Capital Resources
The only business activity carried on by the Partnership is its
investment in the Operating Partnership. The Partnership receives quarterly cash
distributions from the Operating Partnership and receives interest income from
the Equities note. Available cash flow, which equals cash distributions from the
Operating Partnership plus interest income from the Equities note less New York
City UBT, is distributed by the Partnership to its partners. Consequently, the
Partnership does not require any additional liquidity or capital resources.
The Partnership makes quarterly distributions in an amount equal to 99%
of available cash flow to the limited partners (the "Unitholders") and 1% to the
general partner, Oppenheimer Financial Corp. ("Opfin"). For the three and nine
months ended January 31, 1996, the Partnership declared distributions to
Unitholders of $1.175 per unit and $2.35 per unit, respectively. The $1.175 per
unit distribution declared during the three months ended January 31, 1996 was
comprised of a $0.625 regular quarterly distribution and a $0.55 special
distribution resulting from the Quest sale.
- 13 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OPPENHEIMER CAPITAL
General
The Operating Partnership's results of operations include those of its
basic institutional investment management business and those of Opcap Advisors
(formerly Quest For Value Advisors), OCC Distributors (formerly Quest For Value
Distributors), Oppenheimer Capital Futures Management, Oppenheimer Capital
Limited, AMA Investment Advisers, L.P. ("AMA Advisers"), American Medical
Investment Co., L.P. ("Amico"), Oppenheimer Capital Trust Company and Saratoga
Capital Management.
For the periods presented, the Operating Partnership's operations have
been characterized by increases in assets under management. This growth has been
from three principal sources. First, new clients have entered into investment
management agreements with the Operating Partnership and existing clients have
added funds to their accounts under management. Second, rising securities price
levels have increased the market values of investment portfolios. Third, mutual
funds managed by Opcap Advisors have added to assets under management. Revenues
are generally derived from charging a fee based on the net assets of clients'
portfolios. Revenues for all periods presented consist principally of investment
management fees.
The value of assets under management increased 33.3% to $38.8 billion
at January 31, 1996 from $29.1 billion at January 31, 1995. Institutional and
private account assets under management increased 30.6% to $30.7 billion from
$23.5 billion. The increase in the institutional and private account assets
under management is net of a lost $1.3 billion option management account with a
low effective fee rate. Mutual fund assets under management increased 44.6% to
$8.1 billion from $5.6 billion for the same period. This increase is net of a
$300 million reduction in fixed income mutual fund assets as a result of the
Quest sale.
Gain on Quest Sale
On November 22, 1995, the Operating Partnership completed the sale of
the investment advisory and other contracts and business relationships for its
twelve Quest for Value mutual funds (the "Quest sale") to Oppenheimer Management
Corporation ("OMC"), which is unrelated to the Operating Partnership, for a
price of $41.7 million. An additional purchase price payment of up to $3.8
million may be received by the Operating Partnership on the first anniversary of
the closing if the assets of the six merged fixed income funds are then at
stated levels. The gain on the sale, before New York City unincorporated
business tax ("UBT") and minority interest, amounted to $27.7 million.
The net proceeds from the Quest sale were used to pay a special
distribution to partners, reduce bank borrowings, and to fund the working
capital needs of the Operating Partnership.
Total assets of the twelve funds were $1.7 billion at November 21,
1995. The six equity funds involved, representing $1.4 billion of those assets,
will continue to be managed by Opcap Advisors (formerly Quest for Value
Advisors), an affiliated investment adviser, under a subadvisory contract with
OMC, which will allow the current portfolio management teams to remain in place.
The six equity funds have been renamed the Oppenheimer/Quest funds. The six
fixed income funds, representing approximately $300 million of those assets,
have been merged into comparable funds managed by OMC.
Annual sub-advisory fees related to the Oppenheimer/Quest funds are
projected at $6.4 million annually, based on assets under management as of
February 27, 1996, down from the previous $15.7 million of annual advisory fees
for the twelve Quest for Value Funds at November 21, 1995. This decrease is
expected to be offset by increased fund sales as a result of OMC's extensive
mutual fund distribution capabilities and by cost reductions related to the
Operating Partnership's withdrawal from the mutual fund distribution business.
Assets in the six equity funds have increased 22.1% to $1.7 billion at February
27, 1996 from $1.4 billion on November 21, 1995, reflecting record fund sales
and market appreciation.
- 14 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OPPENHEIMER CAPITAL (Continued)
Gain on Quest Sale (continued)
The Operating Partnership implemented a portion of the mutual fund
distribution cost savings prior to the close of the Quest sale, and now that the
sale has been completed, costs will be reduced further. In addition, as a result
of the sale, significant expenditures that would have been made in systems,
technology, sales and marketing capabilities, and new product development will
not be made. These savings are expected to emerge over time.
Operating Revenues
Total operating revenues increased 26.6% for the three months ended
January 31, 1996 to $40,563,000 from $32,041,000 for the three months ended
January 31, 1995 and increased 22.1% for the nine months ended January 31, 1996
to $116,696,000 from $95,605,000 for the nine months ended January 31, 1995.
Total operating revenues include investment management fees, net distribution
assistance and commission income, and interest and dividends.
Investment management fees increased 36.3% for the three months ended
January 31, 1996 to $40,391,000 from $29,634,000 for the three months ended
January 31, 1995 as average assets under management for the three months ended
January 31, 1996 increased 29.9% to $37.3 billion from $28.8 billion for the
three months ended January 31, 1995. Investment management fees increased 27.1%
for the nine months ended January 31, 1996 to $114,258,000 from $89,889,000 for
the nine months ended January 31, 1995 as average assets under management for
the nine months ended January 31, 1996 increased 22.4% to $35.8 billion from
$29.2 billion for the nine months ended January 31, 1995. In addition,
investment management fees increased due to higher fee realizations resulting
from a shift in the asset mix toward higher effective fee rate businesses,
including mutual funds, variable annuities and wrap fee accounts.
Net distribution assistance and commission income decreased to
$(247,000) for the three months ended January 31, 1996 from $2,328,000 for the
three months ended January 31, 1995, and decreased 66.8% to $1,835,000 for the
nine months ended January 31, 1996 from $5,532,000 for the nine months ended
January 31, 1995. These decreases reflected lower certificate of deposit
commission income as a result of less demand for funds by banks, lower unit
investment trust commission income due to industrywide weakness as a result of
the strength of the U.S. equity markets, and reduced distribution income as the
Operating Partnership no longer receives commissions and distribution assistance
payments on the twelve Quest for Value funds whose investment advisory and other
contracts and business relationships were sold to OMC.
Interest and dividend income increased to $419,000 for the three months
ended January 31, 1996 from $79,000 for the three months ended January 31, 1995
and increased to $603,000 for the nine months ended January 31, 1996 from
$184,000 for the nine months ended January 31, 1995. The increase in interest
and dividend income can be primarily attributed to the interest earned on the
proceeds received from the Quest sale.
Operating Expenses
Total expenses increased 13.5% for the three months ended January 31,
1996 to $23,753,000 from $20,928,000 for the three months ended January 31, 1995
and increased 17.1% for the nine months ended January 31, 1996 to $70,686,000
from $60,360,000 for the nine months ended January 31, 1995. For both periods
presented, the increase in expenses reflected the expansion of the Operating
Partnership's business, including new businesses, products and services,
including Oppenheimer Capital Trust Company, Saratoga Capital Management, and
the International, Wrap Fee, and Unit Investment Trust divisions. In order to
service an expanding institutional investment management business, the Operating
Partnership added to its client service staff. To increase efforts to obtain new
institutional business, additional marketing and support staff was added. In
addition, the international division continued to expand with additional
portfolio managers, researchers, and support staff. As a result of the expansion
outlined above, staff support services such as information systems, legal,
accounting and human resources were expanded. These increases were offset in
part by staff reductions at OCC Distributors, AMA Investment Advisers and in
mutual fund accounting.
- 15 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OPPENHEIMER CAPITAL (Continued)
Operating Expenses (continued)
As a result of the Quest sale, the number of employees at OCC
Distributors declined to 10 at January 31, 1996 from 56 employees at July 31,
1995, and 75 employees at January 31, 1995. However, to support the growth in
some of the Operating Partnership's newer businesses and the increase in the
number of accounts serviced in its core business, the Operating Partnership has
continued to add staff to these areas.
The major category of expense of the Operating Partnership is employee
compensation and benefits. Compensation and benefits expense increased 23.9% for
the three months ended January 31, 1996 to $17,290,000 from $13,954,000 for the
three months ended January 31, 1995 and increased 24.7% for the nine months
ended January 31, 1996 to $51,097,000 from $40,966,000 for the nine months ended
January 31, 1995. Compensation and benefits expense increased due to additions
to staff in the new businesses entered into during the past year and in the core
investment management business, and was offset in part by staff reductions at
OCC Distributors, AMA Investment Advisers and in mutual fund accounting.
Compensation and benefits expense also increased due to staff salary increases.
In addition, compensation and benefits increased as a result of higher incentive
compensation costs due to increased new business, higher operating profits and
increased participation by key executives in incentive compensation plans as a
result of their individual contribution to firm profitability.
Occupancy expenses increased 11.7% for the three months ended January
31, 1996 to $1,704,000 from $1,526,000 for the three months ended January 31,
1995 and increased 6.8% for the nine months ended January 31, 1996 to $5,118,000
from $4,793,000 for the nine months ended January 31, 1995. The increases
reflected increased amortization expense relating to leasehold improvements made
during the past year, increased equipment rental costs and increased rent
expenditures.
General and administrative expenses increased 13.9% for the three
months ended January 31, 1996 to $3,291,000 from $2,890,000 for the three months
ended January 31, 1995. For the nine months ended January 31, 1996, general and
administrative expenses increased 28.3% to $8,872,000 from $6,917,000 for the
nine months ended January 31, 1995. The 13.9% increase from the prior year
quarter is significantly less than the 28.3% increase when comparing the nine
month amounts. This decline is primarily due to reduced costs as a result of the
Quest sale and cost reductions of AMA Advisers. As a result of the Quest sale in
November 1995, the Operating Partnership was able to eliminate all of its
outstanding bank loans and the related interest expense. The 28.3% increase in
the nine month comparison is the result of costs incurred in connection with the
development of new businesses and increased investments in computer equipment
and software as a result of the increased computer support for professional and
administrative staff, and higher professional services expenses due to the
expansion of the Operating Partnership's business, and was offset in part by
cost savings realized from the Quest sale and cost reductions at AMA Advisers.
Promotional expenses decreased 42.6% for the three months ended January
31, 1996 to $1,468,000 from $2,558,000 for the three months ended January 31,
1995 and decreased 27.1% for the nine months ended January 31, 1996 to
$5,599,000 from $7,684,000 for the nine months ended January 31, 1995. The
decrease in promotional expenses was due primarily to a reduction in promotional
expenses incurred by OCC Distributors and AMA Advisers and was offset in part by
increased expenses in the Operating Partnership's new businesses due to
increased staff size and increased new business activities.
Operating Income
Operating income for the three months ended January 31, 1996 increased
51.3% to $16,810,000 from $11,113,000 for the three months ended January 31,
1995 and increased 30.5% for the nine months ended January 31, 1996 to
$46,010,000 from $35,245,000 for the nine months ended January 31, 1995. The
increase in operating income was a result of greater increases in operating
revenues than in operating expenses as described above.
- 16 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OPPENHEIMER CAPITAL (Continued)
Income Taxes
The Operating Partnership is not subject to Federal, state, or local
income taxes, which are the obligations of the individual partners. The
Operating Partnership, however, was subject to New York City UBT of $1,860,000
and $3,093,000, respectively, for the three months and nine months ended January
31, 1996 and $233,000 and $823,000, respectively, for the three months and nine
months ended January 31, 1995. There are two reasons for the significant
increase in New York City UBT. First, due to a change in the tax law effective
January 1, 1995, the New York City UBT is imposed on the total income of the
Operating Partnership and the Partnership is allowed to claim a credit for its
pro rata share of any New York City UBT paid by the Operating Partnership.
Previously, New York City UBT was assessed directly at the Partnership level. A
second reason for the increase can be attributed to higher earnings, including
the $27,725,000 gain realized by the Operating Partnership on the sale of the
investment advisory and other contracts and business relationships for its
twelve Quest for Value mutual funds. The sale, which occurred during the three
months ended January 31, 1996, resulted in New York City UBT of $1,109,000.
Liquidity and Capital Resources
The net gain on the Quest sale totaled $26.3 million. The proceeds from
the sale were used to pay a special distribution to partners of $12.6 million
and the remaining funds were used to reduce bank borrowings and to fund the
working capital needs of the Operating Partnership.
The Operating Partnership has established a $20 million credit facility
with a commercial bank to meet operating and financing needs. These funds have
been used to support increased management fees receivable, to expand its
facilities, to accommodate the growth of its business and to finance
acquisitions.
The Operating Partnership intends to distribute on a quarterly basis
substantially all its net income to the Partnership and to Opfin. The Operating
Partnership may distribute to the Partnership and to Opfin excess cash, taking
into account the Operating Partnership's financial condition, results of
operations, cash requirements and general economic conditions. On January 31,
1996, the Operating Partnership declared a distribution to its partners of
$25,757,000, payable on February 29, 1996.
The Operating Partnership has two broker-dealer subpartnerships, OCC
Distributors and Amico, both of which are subject to the rules and regulations
of the Securities and Exchange Commission, which require the maintenance of
minimum net capital. For the nine months ended January 31, 1996, these
broker-dealer subpartnerships met these minimum net capital requirements. During
the three months ended January 31, 1996, the Amico subpartnership ceased
operations.
- 17 -
<PAGE>
Part II. Other Information
Items 1-5. Not applicable.
- 18 -
<PAGE>
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 Capital, L.P.
By: Oppenheimer Financial Corp.,
its General Partner
Date: March 12, 1996 By: /s/ Joseph M. La Motta
Joseph M. La Motta
Executive Vice President and Director
of Oppenheimer Financial Corp.;
President and Chief Executive Officer
of Oppenheimer Capital
By: /s/ Sheldon M.Siegel
Sheldon M.Siegel
Managing Director and Chief Financial
Officer of Oppenheimer Capital
- 19 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENTS OF FINANCIAL CONDITION AND STATEMENTS OF INCOME FOUND ON PAGES 3 AND
4 OF THE PARTNERSHIP'S FORM 10-Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000814562
<NAME> OPPENHEIMER CAPITAL, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> JAN-31-1996
<CASH> 41
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18,054<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 116,913<F2>
<CURRENT-LIABILITIES> 18,106
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 98,807<F3>
<TOTAL-LIABILITY-AND-EQUITY> 116,913
<SALES> 0
<TOTAL-REVENUES> 49,711
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,056
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 47,655
<INCOME-TAX> 0
<INCOME-CONTINUING> 47,655
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,655
<EPS-PRIMARY> 3.10
<EPS-DILUTED> 3.10
<FN>
<F1> CURRENT ASSETS IS COMPRISED OF CASH ($41), DISTRIBUTION RECEIVABLE
($17,340), INTEREST RECEIVABLE ($547), AND OTHER ASSETS ($126)
<F2> TOTAL ASSETS INCLUDE CURRENT ASSETS PLUS INVESTMENT IN OPPENHEIMER CAPITAL
($24,142), A NON-TRADE NOTE RECEIVABLE ($32,193), AND GOODWILL ($42,524)
<F3> OTHER SHAREHOLDERS EQUITY IS COMPRISED OF GENERAL PARTNER'S CAPITAL
($1,002) AND LIMITED PARTNERS' CAPITAL ($97,805)
</FN>
</TABLE>
