<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.
------
For the quarterly period ended July 31, 1997
---------------
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
---------------------------------------------------
(Registrant's telephone number including area code)
NOT APPLICABLE
--------------------------------------------------------------------
(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 15,432,431 Units of
limited partnership interest outstanding at September 10, 1997.
<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 19
SIGNATURES 20
- 2 -
<PAGE>
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF FINANCIAL CONDITION
(In Thousands)
<TABLE>
<CAPTION>
At July 31, 1997 At April 30, 1997
-------------------- --------------------
ASSETS
<S> <C> <C>
Cash and short term investments $ 101 $ 91
Investment in Oppenheimer Capital 32,640 26,796
Distribution receivable (Note 3) 14,050 17,090
10% note due 2012 from Oppenheimer Equities, Inc. 32,193 32,193
Interest receivable 538 538
Other assets 138 136
Goodwill, net 38,653 39,305
-------------------- --------------------
TOTAL ASSETS $ 118,313 $ 116,149
==================== ====================
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
<S> <C> <C>
Distribution payable to partners $ 14,806 $ 17,858
-------------------- --------------------
TOTAL LIABILITIES 14,806 17,858
-------------------- --------------------
General partner's capital 1,049 996
Limited partners' capital; 15,429,298 and 15,373,586
Units outstanding, respectively 102,458 97,295
-------------------- --------------------
TOTAL PARTNERS' CAPITAL 103,507 98,291
-------------------- --------------------
TOTAL LIABILITIES AND
PARTNERS' CAPITAL $ 118,313 $ 116,149
==================== ====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 3 -
<PAGE>
OPPENHEIMER CAPITAL, L.P.
STATEMENTS OF INCOME
(In Thousands, except for per unit amounts)
<TABLE>
<CAPTION>
Three Months Ended
July 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
REVENUES
Equity in earnings of Oppenheimer Capital:
Operating earnings $ 15,963 $ 11,468
Gain on Quest sale (Note 6) 2,809 -
------------ ------------
Total equity in earnings of Oppenheimer Capital 18,772 11,468
Interest 813 812
------------ ------------
TOTAL REVENUES 19,585 12,280
------------ ------------
EXPENSES
Amortization of goodwill 652 652
Other expenses (Note 4) 33 33
------------ ------------
TOTAL EXPENSES 685 685
------------ ------------
NET INCOME $ 18,900 $ 11,595
============ ============
NET INCOME PER UNIT (NOTES 5 AND 6) $ 1.21 $ 0.75
============ ============
DISTRIBUTIONS DECLARED PER UNIT $ 0.95 $ 0.65
============ ============
</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>
Three Months Ended
July 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 18,900 $ 11,595
Adjustments to reconcile net income to net cash provided
by operating activities:
Distributions received (less than) in excess of equity in
earnings of Oppenheimer Capital (1,682) 482
Amortization of goodwill 652 652
(Increase) in other assets (2) (2)
------------ ------------
Net cash provided by operating activities 17,868 12,727
------------ ------------
Cash flows from investing activities
Capital contributions to Oppenheimer Capital (631) (273)
------------ ------------
Cash flows from financing activities
Distributions to partners:
General partner (179) (127)
Limited partners (17,679) (12,586)
Issuance of limited partnership units on exercise of
restricted options 631 273
------------ ------------
Net cash (used in) financing activities (17,227) (12,440)
------------ ------------
Net increase in cash and short term investments 10 14
Cash and short term investments at beginning of period 91 35
------------ ------------
Cash and short term investments at end of period $ 101 $ 49
============ ============
Supplemental disclosure of cash flow information:
New York City unincorporated business tax paid $ 35 $ 35
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 5 -
<PAGE>
OPPENHEIMER CAPITAL, L.P.
NOTES TO THE FINANCIAL STATEMENTS
1. Organization:
Oppenheimer Capital, L.P. (the "Partnership") is a publicly traded
limited partnership owned 1% by its general partner, Oppenheimer Financial Corp.
("Opfin"), and 99% by its public limited partners ("Unitholders"). The
Partnership's sole business is its holding of a 67.6% interest in Oppenheimer
Capital (the "Operating Partnership"), a registered investment adviser. Opfin
holds the remaining 32.4% interest in the Operating Partnership. The Operating
Partnership is part of an affiliated group of companies operating in the
financial services industry. The financial statements of the Partnership should
be read in conjunction with the consolidated financial statements of the
Operating Partnership.
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 1997 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 July 31, 1997, the Partnership had a distribution receivable of $14.1
million from the Operating Partnership that was received on August 29, 1997.
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.
- 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
July 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Net Income $ 18,900 $ 11,595
Less 1% applicable to the General Partner 189 116
------------ ------------
Net income available to the Limited Partners $ 18,711 $ 11,479
============ ============
Weighted average number of units outstanding 15,427 15,363
============ ============
Net income per unit $ 1.21 $ .75
============ ============
</TABLE>
6. Gain on Quest Sale
Included in "Equity in earnings of Oppenheimer Capital" for the three
months ended July 31, 1997 is a gain of $2.8 million, or $0.18 per unit,
resulting from the Operating Partnership's sale of the investment advisory and
other contracts and business relationships for its Quest for Value Dual Purpose
Fund to OppenheimerFunds, Inc., which is unrelated to the Operating Partnership.
7. Sale of Opfin Interest
On July 22, 1997, Oppenheimer Group, Inc. ("OGI") and its subsidiary,
Opfin, entered into an Amended and Restated Agreement and Plan of Merger,
providing for PIMCO Advisors and its affiliate, Thomson Advisory Group Inc., to
acquire, among other things, Opfin's current 32.4% managing general partner
interest in the Operating Partnership, and Opfin's 1% general partner interest
in the Partnership and in the various subpartnerships of the Operating
Partnership. The transaction covers only the private interests OGI holds in the
Operating Partnership and the Partnership, does not include the publicly traded
units of the Partnership, and is subject to certain conditions being satisfied
prior to closing, including the closing of the sale of the stock of Oppenheimer
Holdings, Inc., an affiliate, to a third party, and consents of certain clients.
It is anticipated that the transaction will close no later than the last
quarter of calendar 1997.
Upon consummation of the transaction, the Operating Partnership will
function as an indirect subsidiary of PIMCO Advisors. PIMCO Advisors has advised
OGI that it anticipates that the senior portfolio management team of the
Operating Partnership will continue in their present capacities.
- 7 -
<PAGE>
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands)
<TABLE>
<CAPTION>
At July 31, 1997 At April 30, 1997
-------------------- --------------------
ASSETS
<S> <C> <C>
Cash and short term investments $ 32,869 $ 27,123
Investment management fees receivable 57,990 52,357
Investments in affiliated mutual funds and other
sponsored investment products 3,371 4,347
Furniture, equipment and leasehold improvements
at cost, less accumulated depreciation and
amortization of $2,958 and $2,812 3,752 3,795
Intangible assets, less accumulated amortization
of $987 and $565 1,213 1,511
Other assets 3,860 3,886
-------------------- --------------------
TOTAL ASSETS $ 103,055 $ 93,019
==================== ====================
<CAPTION>
LIABILITIES, MINORITY INTEREST AND PARTNERS' CAPITAL
<S> <C> <C>
Accrued employee compensation and benefits $ 18,933 $ 13,914
Accrued expenses and other liabilities 9,152 8,880
Note payable - 400
Deferred investment management fees 5,482 4,532
Distribution payable to partners 20,789 25,318
-------------------- --------------------
TOTAL LIABILITIES 54,356 53,044
-------------------- --------------------
Minority interest 396 277
PARTNERS' CAPITAL 48,303 39,698
-------------------- --------------------
TOTAL LIABILITIES , MINORITY INTEREST
AND PARTNERS' CAPITAL $ 103,055 $ 93,019
==================== ====================
</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
July 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
OPERATING REVENUES
Investment management fees $ 53,093 $ 39,433
Net distribution assistance and commission income 1,599 1,405
Interest and dividends 351 237
------------ ------------
TOTAL OPERATING REVENUES 55,043 41,075
------------ ------------
OPERATING EXPENSES
Compensation and benefits 23,991 17,610
Occupancy 1,757 1,493
General and administrative 3,124 2,787
Promotional 1,430 1,551
------------ ------------
TOTAL OPERATING EXPENSES 30,302 23,441
------------ ------------
OPERATING INCOME 24,741 17,634
Gain on Quest sale (Note 4) 4,374 -
------------ ------------
INCOME BEFORE TAXES AND MINORITY INTEREST 29,115 17,634
Taxes (Note 3) (1,218) (585)
------------ ------------
INCOME BEFORE MINORITY INTEREST 27,897 17,049
Minority interest (119) (56)
------------ ------------
NET INCOME $ 27,778 $ 16,993
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- 9 -
<PAGE>
OPPENHEIMER CAPITAL
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
July 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 27,778 $ 16,993
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of restricted unit compensation expense 980 535
Depreciation and amortization 247 230
Minority interest, net of distributions 119 87
(Increase) decrease in investment management fees receivable (5,633) 830
(Increase) decrease in other assets (197) 381
Increase (decrease) in accrued employee compensation and benefits 5,019 (3,731)
Increase in accrued expenses and other liabilities 272 1,859
Increase in deferred investment management fees 950 308
------------ ------------
Net cash provided by operating activities 29,535 17,492
------------ ------------
Cash flows from investing activities
Purchases of fixed assets (178) (350)
Sale of AMA license 1,000 -
Intangible assets resulting from acquisitions (500) -
Proceeds from sales of mutual fund shares and other investments 976 -
Purchases of mutual fund shares and other investments - (35)
------------ ------------
Net cash provided by (used in) investing activities 1,298 (385)
------------ ------------
Cash flows from financing activities
Payment of note payable (400) (400)
Distributions to partners:
Oppenheimer Financial Corp. (8,228) (5,801)
Oppenheimer Capital, L.P. (17,090) (11,950)
Contributions by Oppenheimer Capital, L.P. 631 273
------------ ------------
Net cash (used in) financing activities (25,087) (17,878)
------------ ------------
Net increase (decrease) in cash and short term investments 5,746 (771)
Cash and short term investments at beginning of period 27,123 21,019
------------ ------------
Cash and short term investments at end of period $ 32,869 $ 20,248
============ ============
Supplemental disclosure of cash flow information:
Interest paid $ 22 $ 38
============ ============
New York City unincorporated business tax paid $ 983 $ 661
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
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 67.6% general partner interest in the Operating
Partnership and Oppenheimer Financial Corp. ("Opfin") holds the remaining 32.4%
general partner 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 1997 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. 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 $1,194,000 for the three months ended July 31, 1997 and
$585,000 for the three months ended July 31, 1996.
A domestic corporate subsidiary of the Operating Partnership is subject to
Federal, state, and local income taxes. A foreign corporate subsidiary is
subject to taxes in the foreign jurisdiction in which it is located.
4. Gain on Quest Sale:
On July 18, 1997, the Operating Partnership completed the sale of the
investment advisory and other contracts and business relationships of the Quest
for Value Dual Purpose Fund to OppenheimerFunds, Inc., which is unrelated to the
Operating Partnership. The Operating Partnership received a payment of $7.0
million and recorded a gain of $4.4 million, before New York City UBT and
minority interest.
5. Sale of Opfin Interest
On July 22, 1997, Oppenheimer Group, Inc. ("OGI") and its subsidiary,
Opfin, entered into an Amended and Restated Agreement and Plan of Merger,
providing for PIMCO Advisors and its affiliate, Thomson Advisory Group Inc., to
acquire, among other things, Opfin's current 32.4% managing general partner
interest in the Operating Partnership, and Opfin's 1% general partner interest
in the Partnership and in the various subpartnerships of the Operating
Partnership. The transaction covers only the private interests OGI holds in the
Operating Partnership and the Partnership, does not include the publicly traded
units of the Partnership, and is subject to certain conditions being satisfied
prior to closing, including the closing of the sale of the stock of Oppenheimer
Holdings, Inc., an affiliate, to a third party, and consents of certain clients.
It is anticipated that the transaction will close no later than the last
quarter of calendar 1997.
Upon consummation of the transaction, the Operating Partnership will
function as an indirect subsidiary of PIMCO Advisors. PIMCO Advisors has advised
OGI that it anticipates that the senior portfolio management team of the
Operating Partnership will continue in their present capacities.
6. Sale of AMA License:
In May 1997, the Operating Partnership sold its exclusive right to market
to members of the American Medical Association ("AMA") to Scudder, Stevens
& Clark, Inc. for $1.0 million. Simultaneously, the Operating Partnership
purchased the AMA's 19.9% interest in AMA Investment Advisers, L.P. for
$500,000. The $1.0 million payment was used to reduce unamortized goodwill.
- 11 -
<PAGE>
OPPENHEIMER CAPITAL
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Prior Period Financial Information:
Certain prior period financial information has been reclassified to
conform with the current period's presentation.
- 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 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 $32,193,000 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 July 31, 1997 and July 31, 1996 of $18.8
million and $11.5 million, respectively. Equity in earnings of the Operating
Partnership for the three months ended July 31, 1997 included a gain recognized
by the Operating Partnership on the sale of the investment advisory and other
contracts and business relationships of the Quest for Value Dual Purpose Fund,
Inc. to OppenheimerFunds, Inc. (the "Dual Purpose sale") of $2.8 million.
Excluding the Dual Purpose sale, the increase in equity in earnings of the
Operating Partnership is primarily due to the higher operating income of the
Operating Partnership.
Other expenses consist of New York City unincorporated business tax
("UBT"). For the three months ended July 31, 1997 and July 31, 1996, New York
City UBT totaled $33,000 and $33,000, respectively.
Net income for the three months ended July 31, 1997 and July 31, 1996
amounted to $18.9 million and $11.6 million, respectively, or $1.21 per unit and
$.75 per unit, respectively. Excluding the Dual Purpose sale, net income for the
three months ended July 31, 1997 amounted to $16.1 million, or $1.03 per unit.
Taxes
The Partnership is not subject to Federal, state, or local income
taxes, which are the obligations of the individual partners. However, beginning
in calendar 1998, the Partnership will elect to be subject to a 3.5% tax on its
share of the Operating Partnership's gross income from the active conduct of a
trade or business in order to retain its partnership status. The imposition of
this tax will reduce both net income and cash available for distribution to
partners.
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 months
ended July 31, 1997 and July 31, 1996, the Partnership declared distributions to
Unitholders of $.95 per unit and $.65 per unit, respectively.
- 13 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OPPENHEIMER CAPITAL, L.P. (Continued)
Sale of Opfin Interest
On July 22, 1997, Oppenheimer Group, Inc. ("OGI") and its subsidiary,
Opfin, entered into an Amended and Restated Agreement and Plan of Merger,
providing for PIMCO Advisors and its affiliate, Thomson Advisory Group Inc., to
acquire, among other things, Opfin's current 32.4% managing general partner
interest in the Operating Partnership, and Opfin's 1% general partner interest
in the Partnership and in the various subpartnerships of the Operating
Partnership. The transaction covers only the private interests OGI holds in the
Operating Partnership and the Partnership, does not include the publicly traded
units of the Partnership, and is subject to certain conditions being satisfied
prior to closing, including the closing of the sale of the stock of Oppenheimer
Holdings, Inc., an affiliate, to a third party, and consents of certain clients.
It is anticipated that the transaction will close no later than the last
quarter of calendar 1997.
Upon consummation of the transaction, the Operating Partnership will
function as an indirect subsidiary of PIMCO Advisors. PIMCO Advisors has advised
OGI that it anticipates that the senior portfolio management team of the
Operating Partnership will continue in their present capacities.
It is the Partnership's present intention to declare a special
distribution prior to the close of the above transaction. This special
distribution will consist of the undistributed earnings of the Partnership up to
the close of the transaction.
- 14 -
<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 its subsidiary
entities; Opcap Advisors ("Advisors"), OCC Distributors ("Distributors"),
Oppenheimer Capital Limited, Oppenheimer Capital Trust Company ("Opcap Trust"),
and 225 Liberty Street Advisers, L.P., formerly AMA Investment Advisers, L.P.
("AMA Advisers"). The results for the quarter ended July 31, 1996 also include
Saratoga Capital Management ("Saratoga"), which was sold on April 29, 1997.
For the periods presented, the Operating Partnership's operations have
been characterized by substantial increases in assets under management. This
growth has been from four principal sources. First, new clients have entered
into investment management agreements 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 and
variable annuities managed by Advisors have added to assets under management due
to increased sales and market appreciation. Fourth, wrap fee assets have
increased due to new accounts opened, expanded distribution to broker-dealers
and market appreciation. Revenues are generally derived from charging a fee
based on the net assets of clients' portfolios. All periods presented show
increased operating revenue. Revenues for all periods presented consist
principally of investment management fees.
In fiscal 1996, the Operating Partnership began to implement a
strategic decision to withdraw from selling directly to the retail market, and
to instead market directly to institutions with strong retail distribution
capabilities. In November 1995, the Operating Partnership withdrew from the
open-end mutual fund distribution business and began to eliminate retail
operations at AMA Advisers, completing this process in the first quarter of
fiscal 1997. The Operating Partnership also reduced the losses incurred by
Saratoga throughout fiscal 1997, and during the fourth quarter of fiscal 1997
sold its interest in Saratoga. Additionally, the Operating Partnership
terminated the distribution of unit investment trusts during the fourth quarter
of fiscal 1997.
On July 18, 1997, the Operating Partnership completed the sale of the
investment advisory and other contracts and business relationships of its Quest
for Value Dual Purpose Fund to OppenheimerFunds, Inc. ("OFI"), which is
unrelated to the Operating Partnership. The fund has been renamed the
Oppenheimer Quest Capital Value Fund, and continues to be managed by Advisors
under a subadvisory agreement with OFI.
As shown below, the value of assets under management increased 50.3% to
$60.8 billion at July 31, 1997 from $40.4 billion at July 31, 1996. 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 newer businesses,
including mutual funds and wrap fee accounts.
<TABLE>
<CAPTION>
Percent
At July 31, 1997 At July 31, 1996 Increase
-------------------- -------------------- -----------------
<S> <C> <C> <C>
Separate Account Management $ 38,684 $ 27,456 40.9%
Wrap Fee 7,505 3,674 104.3%
Mutual Funds & Other Commingled Products 14,568 9,306 56.5%
-------------------- -------------------- -----------------
Total $ 60,757 $ 40,436 50.3%
==================== ==================== =================
</TABLE>
- 15 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OPPENHEIMER CAPITAL (Continued)
Operating Revenues
Total operating revenues increased 34.0% for the three months ended
July 31, 1997 to $55.0 million from $41.1 million for the three months ended
July 31, 1996. Total operating revenues include investment management fees, net
distribution assistance and commission income, and interest and dividends.
Investment management fees increased 34.6% for the three months ended
July 31, 1997 to $53.1 million from $39.4 million for the three months ended
July 31, 1996 as average assets under management for the three months ended July
31, 1997 increased 35.8% to $55.8 billion from $41.1 billion for the three
months ended July 31, 1996.
Net distribution assistance and commission income increased 13.9% to
$1.6 million for the three months ended July 31, 1997 from $1.4 million for the
three months ended July 31, 1996. The increase was due to higher certificate of
deposit commission income resulting from greater demand for funds by banks, and
was offset in part by lower unit investment trust commission income as a result
of the Operating Partnership's decision to withdraw from this business during
the fourth quarter of fiscal 1997.
Interest and dividend income increased to $351,000 for the three months
ended July 31, 1997 from $237,000 for the three months ended July 31, 1996. This
increase can be primarily attributed to higher average cash balances.
Operating Expenses
Total operating expenses increased 29.3% for the three months ended
July 31, 1997 to $30.3 million from $23.4 million for the three months ended
July 31, 1996.
The Operating Partnership's most significant expense category is
employee compensation and benefits, which includes salaries, bonuses, sales
commissions, incentive compensation and other payroll related expenses.
Compensation and benefits expense increased 36.2% for the three months ended
July 31, 1997 to $24.0 million from $17.6 million for the three months ended
July 31, 1996. Compensation and benefits expense increased primarily due to
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 industry competitive pressures and their
individual contributions to firm profitability. In addition, compensation and
benefits expense increased due to higher amortization expenses related to
restricted units granted to certain key employees on May 1, 1997, as well as
staff salary increases and additions to staff to support expanding businesses.
These increases were offset in part by staff reductions as a result of the sale
of the Operating Partnership's 50% interest in Saratoga and the decision to
withdraw from the distribution of unit investment trusts.
Occupancy expenses increased 17.7% for the three months ended July 31,
1997 to $1.8 million from $1.5 million for the three months ended July 31, 1996.
This increase was due to adjustments to rent escalation accruals during the
quarters ended July 31, 1997 and 1996.
General and administrative expenses increased 12.1% for the three
months ended July 31, 1997 to $3.1 million from $2.8 million for the three
months ended July 31, 1996. The increase in general and administrative expenses
reflects increased costs incurred in connection with the development of new
businesses and increased investments in computer equipment and software as a
result of increased technical support for professional and administrative staff
and higher professional services expense due to the expansion of the Operating
Partnership's business. This increase was offset in part by savings realized
from the sale of the Operating Partnership's interest in Saratoga.
- 16 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OPPENHEIMER CAPITAL (Continued)
Operating Expenses (Continued)
Promotional expenses decreased 7.8% for the three months ended July 31,
1997 to $1.4 million from $1.6 million for the three months ended July 31, 1996.
The decrease in promotional expenses was due primarily to the elimination of
costs incurred by Saratoga and the elimination of the retail distribution of
unit investment trusts. This decrease was offset in part by increased travel and
entertainment expenses as a result of new business activities.
Operating Income
Operating income for the three months ended July 31, 1997 increased
40.3% to $24.7 million from $17.6 million for the three months ended July 31,
1996. For the three months ended July 31, 1997, the operating profit margin
expanded to 44.9% from 42.9% for the three months ended July 31, 1996 as
operating revenues grew 34.0% while expenses increased only 29.3%.
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 $1,194,000
for the three months ended July 31, 1997 and $585,000 for the three months ended
July 31, 1996. This increase was due to higher operating income as well as the
gain on the sale of the Quest for Value Dual Purpose Fund.
Corporate subsidiaries of the Operating Partnership were subject to
income taxes of $24,000 for the three months ended July 31, 1997.
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
investment management fees receivable or to expand its facilities to accommodate
the growth of its businesses), the Operating Partnership currently intends to
borrow from a commercial bank.
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 July 31, 1997,
the Operating Partnership declared a distribution to its partners of $20.8
million which was paid on August 29, 1997.
Sale of AMA License
In May 1997, the Operating Partnership sold its exclusive right to
market to members of the American Medical Association ("AMA") to Scudder,
Stevens & Clark, Inc. for $1.0 million. Simultaneously, the Operating
Partnership purchased the AMA's 19.9% interest in AMA Advisers for $500,000.
The $1.0 million payment was used to reduce unamortized goodwill.
- 17 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
OPPENHEIMER CAPITAL (Continued)
Sale of Opfin Interest
On July 22, 1997, Oppenheimer Group, Inc. ("OGI") and its subsidiary,
Opfin, entered into an Amended and Restated Agreement and Plan of Merger,
providing for PIMCO Advisors and its affiliate, Thomson Advisory Group Inc., to
acquire, among other things, Opfin's current 32.4% managing general partner
interest in the Operating Partnership, and Opfin's 1% general partner interest
in the Partnership and in the various subpartnerships of the Operating
Partnership. The transaction covers only the private interests OGI holds in the
Operating Partnership and the Partnership, does not include the publicly traded
units of the Partnership, and is subject to certain conditions being satisfied
prior to closing, including the closing of the sale of the stock of Oppenheimer
Holdings, Inc., an affiliate, to a third party, and consents of certain clients.
It is anticipated that the transaction will close no later than the last
quarter of calendar 1997.
Upon consummation of the transaction, the Operating Partnership will
function as an indirect subsidiary of PIMCO Advisors. PIMCO Advisors has advised
OGI that it anticipates that the senior portfolio management team of the
Operating Partnership will continue in their present capacities.
- 18 -
<PAGE>
Part II. Other Information
Not applicable.
- 19 -
<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: September 10, 1997 By: /s/ George A. Long
-------------------
George A. Long
Chairman, Chief Executive and
Chief Investment Officer
of Oppenheimer Capital
By: /s/ Joseph M. La Motta
-----------------------
Joseph M. La Motta
Executive Vice President and Director
of Oppenheimer Financial Corp.;
Chairman Emeritus
of Oppenheimer Capital
By: /s/ Sheldon M. Siegel
----------------------
Sheldon M. Siegel
Managing Director and Chief Financial
Officer of Oppenheimer Capital
- 20 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION ECTRACTED 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> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> JUL-31-1997
<CASH> 101
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,689<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 118,313<F2>
<CURRENT-LIABILITIES> 14,806
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 103,507<F3>
<TOTAL-LIABILITY-AND-EQUITY> 118,313
<SALES> 0
<TOTAL-REVENUES> 19,585
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 685
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 18,900
<INCOME-TAX> 0
<INCOME-CONTINUING> 18,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,900
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.21
<FN>
<F1> CURRENT ASSETS IS COMPRISED OF CASH ($101), DISTRIBUTION RECEIVABLE
($14,050), AND INTEREST RECEIVABLE ($538)
<F2> TOTAL ASSETS INCLUDE CURRENT ASSETS PLUS INVESTMENT IN OPPENHEIMER CAPITAL
($32,640), A NON-TRADE NOTE RECEIVABLE ($32,193), GOODWILL ($38,653) AND
OTHER ASSETS ($138)
<F3> OTHER SHAREHOLDERS EQUITY IS COMPRISED OF GENERAL PARTNER'S CAPITAL
($1,049) AND LIMITED PARTNERS' CAPITAL ($102,458)
</FN>
</TABLE>
