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 October 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.
------------------------------------------------------
(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 15,367,586 Units of
limited partnership interest outstanding at December 9, 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 12
PART II - OTHER INFORMATION 16
SIGNATURES 17
- 2 -
<PAGE>
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF FINANCIAL CONDITION
(In Thousands)
<TABLE>
<CAPTION>
At October 31, 1996 At April 30, 1996
----------------------- --------------------
ASSETS
<S> <C> <C>
Cash and short-term investments $ 55 $ 35
Investment in Oppenheimer Capital 28,153 23,362
Distribution receivable (Note 3) 10,890 11,950
10% Note due 2012 from Oppenheimer Equities, Inc. 32,193 32,193
Interest receivable 538 538
Other assets 132 128
Goodwill, net 40,589 41,893
----------------------- --------------------
TOTAL ASSETS $ 112,550 $ 110,099
======================= ====================
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
<S> <C> <C>
Distribution payable to partners $ 11,642 $ 12,713
----------------------- --------------------
TOTAL LIABILITIES 11,642 12,713
----------------------- --------------------
General partner's capital 1,023 987
Limited partners' capital; 15,367,586 and 15,255,070
Units outstanding, respectively 99,885 96,399
----------------------- --------------------
TOTAL PARTNERS' CAPITAL 100,908 97,386
----------------------- --------------------
TOTAL LIABILITIES AND
PARTNERS' CAPITAL $ 112,550 $ 110,099
======================= ====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF INCOME
(In Thousands, except for per unit amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
October 31, October 31,
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES
Equity in earnings of Oppenheimer Capital $ 12,495 $ 9,715 $ 23,963 $ 18,764
Interest 813 812 1,625 1,625
----------- ----------- ----------- -----------
TOTAL REVENUES 13,308 10,527 25,588 20,389
----------- ----------- ----------- -----------
EXPENSES
Amortization of goodwill 652 652 1,304 1,304
Other expenses (Note 4) 34 34 67 67
----------- ----------- ----------- -----------
TOTAL EXPENSES 686 686 1,371 1,371
----------- ----------- ----------- -----------
NET INCOME $ 12,622 $ 9,841 $ 24,217 $ 19,018
=========== =========== =========== ===========
NET INCOME PER UNIT (NOTE 5) $ .81 $ .64 $ 1.56 $ 1.24
=========== =========== =========== ===========
DISTRIBUTIONS DECLARED PER UNIT $ .75 $ .625 $ 1.40 $ 1.175
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 4 -
<PAGE>
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
October 31,
------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 24,217 $ 19,018
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 (2,698) (1,563)
Amortization of goodwill 1,304 1,304
(Increase) in other assets (4) (25)
-------------- --------------
Net cash provided by operating activities 22,819 18,734
-------------- --------------
Cash flows from investing activities
Capital contributions to Oppenheimer Capital (380) (48)
-------------- --------------
Cash flows from financing activities Distributions to partners:
General partner (228) (188)
Limited partners (22,571) (18,596)
Issuance of limited partnership units on exercise of
restricted options 380 48
-------------- --------------
Net cash (used in) financing activities (22,419) (18,736)
-------------- --------------
Net increase (decrease) in cash and short term investments 20 (50)
Cash and short term investments at beginning of period 35 60
-------------- --------------
Cash and short term investments at end of period $ 55 $ 10
============== ==============
Supplemental disclosure of cash flow information:
New York City unincorporated business tax paid $ 71 $ 90
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
OPPENHEIMER CAPITAL, L.P.
NOTES TO THE FINANCIAL STATEMENTS
1. Organization:
Oppenheimer Capital, L.P. (the "Partnership") holds a 67.49% 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 1996 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 October 31, 1996, the Operating Partnership declared distributions to
its partners, payable on November 29, 1996, of which $10.9 million was received
by the Partnership.
4. Other Expenses:
Other expenses consist of New York City unincorporated business tax at a
rate of 4% of taxable income. The Partnership is not subject to Federal, state
or local income taxes which are 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 Six Months Ended
October 31, October 31,
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Income $ 12,622 $ 9,841 $ 24,217 $ 19,018
Less 1% applicable to the General Partner 126 98 242 190
----------- ----------- ----------- -----------
Net income available to the Limited Partners $ 12,496 $ 9,743 $ 23,975 $ 18,828
=========== =========== =========== ===========
Weighted average number of units outstanding 15,366 15,240 15,364 15,237
=========== =========== =========== ===========
Net income per unit $ .81 $ .64 $ 1.56 $ 1.24
=========== =========== =========== ===========
</TABLE>
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<PAGE>
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands)
<TABLE>
<CAPTION>
At October 31, 1996 At April 30, 1996
----------------------- --------------------
ASSETS
<S> <C> <C>
Cash and short-term investments $ 24,931 $ 21,019
Investment management fees receivable 46,477 43,016
Investments in affiliated mutual funds and other
sponsored investment products 3,706 4,644
Furniture, equipment and leasehold improvements
at cost, less accumulated depreciation and
amortization of $2,540 and $2,179 3,534 3,515
Intangible assets, less accumulated amortization
of $470 and $377 1,605 1,699
Other assets 3,209 2,445
----------------------- --------------------
TOTAL ASSETS $ 83,462 $ 76,338
======================= ====================
<CAPTION>
LIABILITIES, MINORITY INTEREST AND PARTNERS' CAPITAL
<S> <C> <C>
Accrued employee compensation and benefits $ 13,585 $ 12,873
Accrued expenses and other liabilities 7,684 7,168
Note payable 400 800
Deferred investment management fees 3,627 2,870
Distribution payable to partners 16,135 17,751
----------------------- --------------------
TOTAL LIABILITIES 41,431 41,462
----------------------- --------------------
Minority interest 318 174
PARTNERS' CAPITAL 41,713 34,702
----------------------- --------------------
TOTAL LIABILITIES , MINORITY INTEREST
AND PARTNERS' CAPITAL $ 83,462 $ 76,338
======================= ====================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- 8 -
<PAGE>
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
October 31, October 31,
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Investment management fees $ 43,286 $ 37,061 $ 82,720 $ 71,615
Net distribution assistance and commission income 1,243 2,174 2,647 4,339
Interest and dividends 268 80 505 179
----------- ----------- ----------- -----------
TOTAL OPERATING REVENUES 44,797 39,315 85,872 76,133
----------- ----------- ----------- -----------
OPERATING EXPENSES
Compensation and benefits 18,760 17,428 36,370 33,807
Occupancy 1,650 1,745 3,143 3,414
General and administrative 3,338 2,952 6,125 5,581
Promotional 1,708 2,022 3,259 4,131
----------- ----------- ----------- -----------
TOTAL OPERATING EXPENSES 25,456 24,147 48,897 46,933
----------- ----------- ----------- -----------
OPERATING INCOME 19,341 15,168 36,975 29,200
Income taxes (Note 3) (770) (682) (1,355) (1,233)
----------- ----------- ----------- -----------
INCOME BEFORE MINORITY INTEREST 18,571 14,486 35,620 27,967
Minority interest (57) (51) (113) (83)
----------- ----------- ----------- -----------
NET INCOME $ 18,514 $ 14,435 $ 35,507 $ 27,884
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
October 31,
------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 35,507 $ 27,884
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of restricted unit compensation expense 1,062 759
Depreciation and amortization 462 472
Minority interest, net of distributions 144 67
(Increase) decrease in:
Investment management fees receivable (3,461) (2,227)
Other assets (704) (2,865)
Increase (decrease) in:
Accrued employee compensation and benefits 712 3,063
Accrued expenses and other liabilities 516 (1,220)
Deferred investment management fees 757 599
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Net cash provided by operating activities 34,995 26,532
-------------- --------------
Cash flows from investing activities
Purchases of fixed assets (380) (178)
Proceeds from sales of mutual fund shares and other investments 1,934 399
Purchases of mutual fund shares and other investments (1,063) (3,025)
-------------- --------------
Net cash (used in) investing activities 491 (2,804)
-------------- --------------
Cash flows from financing activities
Net proceeds from bank loans - 1,005
Payment of note payable (400) (400)
Distributions to partners:
Oppenheimer Financial Corp. (10,261) (8,458)
Oppenheimer Capital, L.P. (21,293) (17,200)
Contributions by Oppenheimer Capital, L.P. 380 48
-------------- --------------
Net cash (used in) financing activities (31,574) (25,005)
-------------- --------------
Net increase (decrease) in cash and short term investments 3,912 (1,277)
Cash and short term investments at beginning of period 21,019 9,214
-------------- --------------
Cash and short term investments at end of period $ 24,931 $ 7,937
============== ==============
Supplemental disclosure of cash flow information:
Interest paid $ 54 $ 492
============== ==============
New York City unincorporated business tax paid $ 1,452 $ 1,060
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<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 67.49% general partnership interest in the Operating
Partnership and Oppenheimer Financial Corp. ("Opfin") holds the remaining 32.51%
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 1996 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:
The Operating Partnership is not subject to Federal, state or local income
taxes. The Operating Partnership was subject to New York City unincorporated
business tax of $770,000 and $1.4 million, respectively, for the three months
and six months ended October 31, 1996 and $682,000 and $1.2 million,
respectively, for the three months and six months ended October 31, 1995.
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 $1.2
million promissory note bearing interest at the prime rate. On each of May 1,
1995 and May 1, 1996, $400,000 was paid on the promissory note, with the
remainder due on 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 $1.6 million 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, an affiliated investment adviser.
5. Prior Period Financial Information:
Certain prior period financial information has been reclassified to
conform with the current period's presentation.
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<PAGE>
PART I, ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPPENHEIMER CAPITAL, L.P.
General
The primary source of income for Oppenheimer Capital, L.P. ( the
"Partnership") is its proportionate share of the net income of Oppenheimer
Capital (the "Operating Partnership") and interest income on a $32.2 million par
value 10% note due from Oppenheimer Equities, Inc. in the year 2012 (the
"Equities note").
Revenues and Expenses
The Partnership recorded equity in earnings of the Operating
Partnership for the three months ended October 31, 1996 and October 31, 1995 of
$12.5 million and $9.7 million, respectively. For the six months ended October
31, 1996 and October 31, 1995, the Partnership recorded equity in earnings of
the Operating Partnership of $24.0 million and $18.8 million, respectively.
Other expenses consist of New York City unincorporated business tax
("UBT"). For the three months ended October 31, 1996 and October 31, 1995, New
York City UBT totaled $34,000 and $34,000, respectively, and for the six months
ended October 31, 1996 and October 31, 1995, New York City UBT totaled $67,000
and $67,000, respectively.
Net income for the three months ended October 31, 1996 and October 31,
1995 amounted to $12.6 million and $9.8 million, respectively, or $.81 per unit
and $.64 per unit, respectively. Net income for the six months ended October 31,
1996 and October 31, 1995 amounted to $24.2 million and $19.0 million,
respectively, or $1.56 per unit and $1.24 per unit, respectively.
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
Oppenheimer Equities, Inc. The Partnership distributes its available cash flow
to its partners, which equals cash distributions from the Operating Partnership
plus interest income from the Equities note less New York City UBT.
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 six
months ended October 31, 1996, the Partnership declared distributions to
Unitholders of $.75 per unit and $1.40 per unit, respectively. For the three and
six months ended October 31, 1996, the Partnership declared distributions to
Unitholders of $.625 per unit and $1.175 per unit, respectively.
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<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
("Advisors"), OCC Distributors ("Distributors"), Oppenheimer Capital Limited,
AMA Investment Advisers, L.P. ("AMA Advisers"), 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, retail
accounts including wrap fee, mutual funds and other commingled products have
added to assets under management due to increased sales and market appreciation.
The growth in assets under management has been tempered by the Operating
Partnership's withdrawal from the low fee rate option management business in
order to concentrate on businesses offering higher returns. For the periods
presented, the option management business had no material effect on revenues or
profitability. 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.
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 OppenheimerFunds, Inc.
("OFI"), which is unrelated to the Operating Partnership. The six equity funds
involved continue to be managed by Advisors under a subadvisory contract with
OFI, which allows the current portfolio management team to remain in place, and
have been renamed the Oppenheimer Quest Value funds ("Quest funds"). The six
fixed income funds have been merged into comparable funds managed by OFI.
As shown below, the value of assets under management increased 24.5% to
$45.8 billion at October 31, 1996 from $36.8 billion at October 31, 1995. The
Operating Partnership continued to experience growth in its traditional
business, the management of separate accounts for large financial institutions
and high-net-worth individual investors, as well as its retail businesses,
including mutual funds and wrap fee accounts.
<TABLE>
<CAPTION>
Percent
At October 31, 1996 At October 31, 1995 Increase
---------------------- ---------------------- --------------
<S> <C> <C> <C>
Separate Account Management $ 30,771 $ 25,492 20.7%
Wrap Fee 4,603 2,385 93.0%
Mutual Funds & Other Commingled Products 10,398 7,437 39.8%
---------------------- ---------------------- --------------
Subtotal 45,772 35,314 29.6%
Option Management (1) - 1,436 n/a
---------------------- ---------------------- --------------
Total $ 45,772 $ 36,750 24.5%
====================== ====================== ==============
</TABLE>
(1) Reflects withdrawal from the option management business.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OPPENHEIMER CAPITAL (Continued)
Operating Revenues
Total operating revenues increased 13.9% for the three months ended
October 31, 1996 to $44.8 million from $39.3 million for the three months ended
October 31, 1995 and increased 12.8% for the six months ended October 31, 1996
to $85.9 million from $76.1 million for the six months ended October 31, 1995.
Total operating revenues include investment management fees, net distribution
assistance and commission income, and interest and dividends.
Investment management fees increased 16.8% for the three months ended
October 31, 1996 to $43.3 million from $37.1 million for the three months ended
October 31, 1995 as average assets under management for the three months ended
October 31, 1996 increased 18.8% to $43.2 billion from $36.4 billion for the
three months ended October 31, 1995. Investment management fees increased 15.5%
for the six months ended October 31, 1996 to $82.7 million from $71.6 million
for the six months ended October 31, 1995 as average assets under management for
the six months ended October 31, 1996 increased 21.1% to $42.4 billion from
$35.0 billion for the six months ended October 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 and the withdrawal from the
option management business, which had very low fee rates. Offsetting the above
increase in part, the fee rate the Operating Partnership receives for
subadvising the Quest funds was reduced compared to the previous advisory fee.
Annual subadvisory fees related to the Quest funds are projected at $9.3 million
annually, based on assets under management at October 31, 1996, down from the
previous $15.7 million of annual fees for the twelve Quest for Value Funds at
November 22, 1995. The loss in advisory fee revenue has been more than offset by
the elimination of distribution expenses related to these funds. Assets in the
six equity funds have more than doubled to $3.1 billion at November 29, 1996
from $1.4 billion on November 21, 1995, reflecting record fund sales and market
appreciation.
Net distribution assistance and commission income decreased 42.8% to
$1.2 million for the three months ended October 31, 1996 from $2.2 million for
the three months ended October 31, 1995, and decreased 39.0% to $2.6 million for
the six months ended October 31, 1996 from $4.3 million for the six months ended
October 31, 1995. These decreases were primarily due to lower unit investment
trust commission income due to reduced demand for fixed income unit investment
trusts, and reduced commission and distribution income as a result of the Quest
sale. These decreases were offset in part by higher certificate of deposit
commission income resulting from greater demand for funds by banks.
Interest and dividend income increased to $268,000 and $505,000 for the
three months and six months ended October 31, 1996, respectively, from $80,000
and $179,000 for the three and six months ended October 31, 1995, respectively.
These increases can be primarily attributed to the interest earned on proceeds
received from the Quest sale.
Operating Expenses
Total expenses increased 5.4% for the three months ended October 31,
1996 to $25.5 million from $24.1 million for the three months ended October 31,
1995 and increased 4.2% for the six months ended October 31, 1996 to $48.9
million from $46.9 million for the six months ended October 31, 1995.
The Operating Partnership's most significant category of expense is
employee compensation and benefits, which includes salaries, bonuses, sales
commissions, incentive compensation and other payroll related expenses.
Compensation and benefits expense increased 7.6% for the three months ended
October 31, 1996 to $18.8 million from $17.4 million for the three months ended
October 31, 1995 and increased 7.6% for the six months ended October 31, 1996 to
$36.4 million from $33.8 million for the six months ended October 31, 1995.
Compensation and benefits expense increased due to additions to staff in the
expanding retail and separate account management businesses. Compensation and
benefits expense also increased due to staff salary increases. In addition,
compensation and benefits increased as a result of higher incentive compensation
accruals due to increased new
- 14 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OPPENHEIMER CAPITAL (Continued)
Operating Expenses (Continued)
business and higher operating profits. These increases were offset in part by
significant staff reductions at Distributors, AMA Advisers, and in mutual fund
accounting.
Occupancy expenses decreased 5.4% for the three months ended October
31, 1996 to $1.7 million from the three months ended October 31, 1995 and
decreased 7.9% for the six months ended October 31, 1996 to $3.1 million from
$3.4 million for the six months ended October 31, 1995. These decreases were due
to reduced rent expense as a result of the scale back of operations of AMA
Advisers. Additionally, adjustments to rent escalation accruals were made during
the quarter ended July 31, 1996.
General and administrative expenses increased 13.1% for the three
months ended October 31, 1996 to $3.3 million from $3.0 million for the three
months ended October 31, 1995. For the six months ended October 31, 1996,
general and administrative expenses increased 9.7% to $6.1 million from $5.6
million for the six months ended October 31, 1995. For both the three and six
months ended October 31, 1996, the increase in general and administrative
expenses reflects the significant investment made by the Operating Partnership
in computer equipment and software to support professional and administrative
staff. These increases were offset in part by savings realized from the Quest
sale and cost reductions at AMA Advisers.
Promotional expenses decreased 15.5% for the three months ended October
31, 1996 to $1.7 million from $2.0 million for the three months ended October
31, 1995 and decreased 21.1% for the six months ended October 31, 1996 to $3.3
million from $4.1 million for the six months ended October 31, 1995. The
decrease in promotional expenses was due primarily to a reduction in expenses
incurred by Distributors as a result of the elimination of the open-end mutual
fund distribution effort (the Quest sale), and the elimination of the retail
operations of AMA Advisers.
Operating Income
Operating income for the three months ended October 31, 1996 increased
27.5% to $19.3 million from $15.2 million for the three months ended October 31,
1995 and increased 26.6% for the six months ended October 31, 1996 to $37.0
million from $29.2 million for the six months ended October 31, 1995. For the
three months ended October 31, 1996, the operating profit margin expanded to
43.2% from 38.6% for the three months ended October 31, 1996 as operating
revenues grew 13.9% while expenses increased only 5.4%. For the six months ended
October 31, 1996, the operating profit margin expanded to 43.1% from 38.4% for
the six months ended October 31, 1996 as operating revenues grew 12.8% while
expenses increased only 4.2%.
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 $770,000 and
$1.4 million, respectively, for the three months and six months ended October
31, 1996 and $682,000 and $1.2 million, respectively, for the three months and
six months ended October 31, 1995.
Liquidity and Capital Resources
The Operating Partnership's business is not capital intensive and its
working capital requirements are generally modest. To the extent that additional
funds are required by the Operating Partnership (e.g., to support increased
management fees receivable or to expand its facilities to accommodate the growth
of its businesses), the Operating Partnership currently intends to borrow from
affiliated or non-affiliated parties. 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 October 31, 1996, the Operating Partnership
declared a distribution to its partners of $16.1 million, payable on November
29, 1996.
- 15 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OPPENHEIMER CAPITAL (Continued)
Liquidity and Capital Resources (Continued)
In December 1996, the Operating Partnership will receive an additional
purchase price payment of $3.4 million from OFI related to the Quest sale. The
Operating Partnership will record a gain, before New York City UBT and minority
interest, of approximately $2.0 million.
Part II. Other Information
Not applicable.
- 16 -
<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: December 9, 1996 By: /s/ Joseph M. La Motta
-----------------------
Joseph M. La Motta
Executive Vice President and Director
of Oppenheimer Financial Corp.;
Chairman and Chief Executive Officer
of Oppenheimer Capital
By: /s/ Sheldon M. Siegel
-----------------------
Sheldon M. Siegel
Managing Director and Chief Financial
Officer of Oppenheimer Capital
- 17 -
<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> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 55
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,483<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 112,550<F2>
<CURRENT-LIABILITIES> 11,642
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 100,908<F3>
<TOTAL-LIABILITY-AND-EQUITY> 112,550
<SALES> 0
<TOTAL-REVENUES> 25,588
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,371
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 24,217
<INCOME-TAX> 0
<INCOME-CONTINUING> 24,217
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,217
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 1.56
<FN>
<F1> CURRENT ASSETS IS COMPRISED OF CASH ($55), DISTRIBUTION RECEIVABLE
($10,890), AND INTEREST RECEIVABLE ($538)
<F2> TOTAL ASSETS INCLUDE CURRENT ASSETS PLUS INVESTMENT IN OPPENHEIMER CAPITAL
($28,153), A NON-TRADE NOTE RECEIVABLE ($32,193), GOODWILL ($40,589) AND
OTHER ASSETS ($132)
<F3> OTHER SHAREHOLDERS EQUITY IS COMPROSED OF GENERAL PARTNER'S CAPITAL
($1,023) AND LIMITED PARTNERS' CAPITAL ($99,885)
</FN>
</TABLE>
