<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from________________ to __________________
Commission File Number 1-09772
PIMCO ADVISORS L.P.
(Exact name of registrant as specified in its charter)
Delaware 06-1349805
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
800 Newport Center Drive
Newport Beach, CA 92660
(Address of principal executive offices)
(Zip Code)
(714) 717-7022
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan confirmed by a
court.
Yes No
----- -----
As of September 30, 1997, 13,588,764 publicly traded Class A units of
limited partner interest and 26,557,391 privately-held Class A units of limited
partner interest were issued and outstanding. There were 800,000 units of
general partner interest issued and outstanding at September 30, 1997. In
addition, there were 32,992,531 privately-held Class B units of limited partner
interest issued and outstanding at September 30, 1997.
<PAGE>
PIMCO ADVISORS L.P.
INDEX
<TABLE>
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Statements of Financial Condition as of
September 30, 1997 and December 31, 1996 3
Consolidated Statements of Operations for the three months
ended September 30, 1997 and September 30, 1996 4
Consolidated Statements of Operations for the nine months
ended September 30, 1997 and September 30, 1996 5
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1997 and September 30, 1996 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-11
PART II OTHER INFORMATION
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
2
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
PIMCO ADVISORS L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
Assets
- ------
Current Assets:
Cash and cash equivalents $ 33,172,652 $ 41,311,545
Fees receivable 81,617,543 66,272,441
Short term investments 24,934,892 11,520,726
Notes receivable 1,715,071 1,569,950
Other assets - current 2,747,079 4,387,208
------------ ------------
Total current assets 144,187,237 125,061,870
Investments in limited partnerships 3,398,144 2,629,864
Fixed assets, net of accumulated depreciation 10,801,603 10,561,346
Intangible assets, net of accumulated amortization 180,815,838 207,822,687
Other non current assets 26,525,291 12,424,534
------------ ------------
Total assets $365,728,113 $358,500,301
============ ============
Liabilities and Partners' Capital
- ---------------------------------
Current Liabilities:
Accounts payable, accrued expenses and
other current liabilities $ 24,187,295 $ 33,813,925
Accrued compensation 53,085,409 26,027,732
------------ ------------
Total current liabilities 77,272,704 59,841,657
Other non current liabilities 9,479,234 2,415,883
------------ ------------
Total liabilities 86,751,938 62,257,540
------------ ------------
Partners' Capital:
General Partner (800,000 units issued
and outstanding) 2,691,047 2,986,983
Class A Limited Partners (40,146,155
units issued and outstanding) 192,413,535 205,420,612
Class B Limited Partners (32,992,531
and 32,960,826 units issued and outstanding) 90,958,450 98,369,570
Unamortized compensation (7,086,857) (10,534,404)
------------ ------------
Total Partner's Capital 278,976,175 296,242,761
------------ ------------
Total liabilities and partners' capital $365,728,113 $358,500,301
============ ============
</TABLE>
See accompanying notes.
3
<PAGE>
PIMCO Advisors L.P. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
--------------------------------------------
September 30, 1997 September 30, 1996
------------------ ------------------
<S> <C> <C>
Revenues:
Investment advisory fees:
Private accounts $ 66,550,205 $ 52,889,341
Proprietary Funds 43,678,796 31,860,003
Distribution and servicing fees 14,643,864 12,121,557
Other 244,505 228,086
------------ ------------
Total revenues 125,117,370 97,098,987
------------ ------------
Expenses:
Compensation and benefits 55,532,641 43,176,174
Amortization of intangibles, restricted units
and option plans 10,353,443 10,319,085
Commissions 11,654,910 9,127,681
General and administrative 6,939,318 4,058,746
Occupancy and equipment 2,452,511 2,305,601
Other 6,603,282 5,164,611
------------ ------------
Total expenses 93,536,105 74,151,898
------------ ------------
Operating income 31,581,265 22,947,089
Equity in (loss) income of limited partnership (123,443) 82,005
Other income 1,374,087 939,380
------------ ------------
Income before taxes 32,831,909 23,968,474
Provision for taxes 772,970 238,035
------------ ------------
Net income $ 32,058,939 $ 23,730,439
============ ============
Net income allocated to:
General Partner $ 302,443 $ 262,036
Class A Limited Partner Units 17,021,191 13,149,665
Class B Limited Partner Units 14,735,305 10,318,738
------------ ------------
Total $ 32,058,939 $ 23,730,439
============ ============
Net income per unit:
General Partner and Class A Limited Partner unit $ 0.40 $ 0.32
============ ============
Class B Limited Partner unit $ 0.42 $ 0.28
============ ============
Cash distributions paid per unit:
General Partner and Class A Limited Partner unit $ 0.470 $ 0.470
============ ============
Class B Limited Partner unit $ 0.505 $ 0.447
============ ============
</TABLE>
See accompanying notes.
4
<PAGE>
PIMCO Advisors L.P. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended
---------------------------------------
September 30, 1997 September 30, 1996
------------------ ------------------
<S> <C> <C>
Revenues:
Investment advisory fees:
Private accounts $182,364,963 $156,571,557
Proprietary Funds 119,875,646 94,575,782
Distribution and servicing fees 40,316,623 35,185,219
Other 1,652,823 828,408
------------ ------------
Total revenues 344,210,055 287,160,966
------------ ------------
Expenses:
Compensation and benefits 151,560,373 128,119,778
Amortization of intangibles, restricted units and option plans 30,999,737 30,852,315
Commissions 32,188,873 27,480,251
General and administrative 18,834,411 13,019,473
Occupancy and equipment 7,482,631 6,932,010
Other 22,505,987 15,423,389
------------ ------------
Total expenses 263,572,012 221,827,216
------------ ------------
Operating income 80,638,043 65,333,750
Equity in (loss) income of limited partnership (350,614) 173,556
Other income 3,599,429 2,227,716
------------ ------------
Income before taxes 83,886,858 67,735,022
Provision for taxes 1,225,610 833,554
------------ ------------
Net income $ 82,661,248 $ 66,901,468
============ ============
Net income allocated to:
General Partner $ 849,602 $ 770,361
Class A Limited Partner Units 44,479,115 38,651,130
Class B Limited Partner Units 37,332,531 27,479,977
------------ ------------
Total $ 82,661,248 $ 66,901,468
============ ============
Net income per unit:
General Partner and Class A Limited Partner unit $ 1.06 $ 0.96
============ ============
Class B Limited Partner unit $ 1.06 $ 0.76
============ ============
Cash distributions paid per unit:
General Partner and Class A Limited Partner unit $ 1.410 $ 1.410
============ ============
Class B Limited Partner unit $ 1.404 $ 1.209
============ ============
</TABLE>
See accompanying notes.
5
<PAGE>
PIMCO Advisors L.P. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended
--------------------------------------------
September 30, 1997 September 30, 1996
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 82,661,248 $ 66,901,468
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization 32,315,605 29,553,183
Issuance of restricted units in lieu of directors fees 121,119 -
Restricted Unit and Option Plans 3,992,888 3,845,466
Equity in (income) loss of limited partnership 350,614 (173,556)
Unrealized loss (gain) on investments (1,256,708) 150,348
Change in operating assets and liabilities:
Fees receivable (15,345,101) (5,622,393)
Other assets (14,843,417) (5,495,334)
Accounts payable, accrued expenses and other
current liabilities (9,626,630) 13,492,355
Accrued compensation 27,057,677 17,330,853
Other liabilities 7,063,351 (56,243)
Other 10,910 (43,687)
------------- ------------
Net cash provided by operating activities 112,501,556 119,882,460
------------- ------------
Cash flows from investing activities:
Purchases of fixed assets . (2,804,725) (2,394,268)
Proceeds from sale of fixed assets 3,000 621,387
Notes receivable advances (520,531) (676,737)
Purchase of investments (45,712,557) (517,227)
Sale of investments 35,201,306 783,570
Investments in limited partnerships (2,765,100) (800,000)
------------- ------------
Net cash used in investing activities (16,598,607) (2,983,275)
------------- ------------
Cash flows from financing activities:
Cash distributions paid (104,041,842) (97,560,217)
------------- ------------
Net cash used in financing activities (104,041,842) (97,560,217)
------------- ------------
Net (decrease) increase in cash and cash equivalents (8,138,893) 19,338,968
Cash and cash equivalents, beginning of period 41,311,545 34,915,170
------------- ------------
Cash and cash equivalents, end of period $ 33,172,652 $ 54,254,138
============= ============
Supplemental disclosures:
Taxes paid $ 279,710 $ 356,232
============= ============
Interest paid $ 67,083 $ -
============= ============
</TABLE>
See accompanying notes.
6
<PAGE>
PIMCO ADVISORS L.P.
Notes to Consolidated Financial Statements
(Unaudited)
1) The condensed consolidated financial statements included herein have been
prepared without audit in accordance with the instructions to Form 10-Q pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In the opinion of
PIMCO Partners, G.P., the General Partner, all adjustments, consisting only of
normal recurring adjustments, necessary for a fair statement of (a) the
financial condition at September 30, 1997 and December 31, 1996, (b) the results
of operations for the nine- and three-month periods ended September 30, 1997 and
1996, and (c) the cash flows for the nine-month periods ended September 30, 1997
and 1996, for PIMCO Advisors L.P. ("PIMCO Advisors") have been made. It is
suggested that these unaudited condensed consolidated financial statements be
read in conjunction with the consolidated financial statements and notes
included in PIMCO Advisors's Annual Report on Form 10-K for the year ended
December 31, 1996. Certain reclassifications have been made to conform the prior
period presentation to the current period presentation. These interim results
may not be indicative of the results which may occur in the future. (See Item 2
- - Management's Discussion and Analysis of Financial Condition and Results of
Operations - Results of Operations).
2) Earnings per unit are computed under the two-class method and are based on
the weighted average number of units outstanding, assuming the exercise of
dilutive unit options. See Exhibit 11 for the computation of the weighted
average number of units outstanding during the periods.
Distributions on the units outstanding are paid quarterly in arrears to
unitholders of record as of the thirtieth day of the first month following each
quarter-end.
3) On February 13, 1997, PIMCO Advisors and its affiliate, Thomson Advisory
Group Inc. ("TAG Inc."), and Oppenheimer Group, Inc. and its subsidiary,
Oppenheimer Financial Corp. signed a definitive agreement for TAG Inc. to
acquire a one-third, managing general partner interest in Oppenheimer Capital (a
general partnership), the 1 percent general partner interest in Oppenheimer
Capital, L.P. and 100% of the stock of Advantage Advisers, an affiliate of
Oppenheimer Group, which manages eight closed-end funds. The transaction covers
only the private interests Oppenheimer Group holds in Oppenheimer Capital and
Oppenheimer Capital, L.P. and does not include the publicly traded units of
Oppenheimer Capital, L.P. On July 22, 1997 an amended and restated agreement was
signed reflecting minor financial and structural modifications. The acquisition
is subject to certain client, lender and other approvals, and is expected to
be completed this year.
The amended agreement provides for the acquisition by TAG Inc. of the above
listed assets through a merger with Oppenheimer Group, Inc. in exchange for
total consideration of approximately $230 million (formerly $233 million) in
convertible preferred stock to be issued by TAG Inc. and the assumption of
approximately $32 million of debt. Subsequently, TAG Inc. will contribute all of
the acquired interests to PIMCO Advisors in exchange for approximately $262
million of newly issued Class A Limited Partner Units at $25.50 per unit -
approximately 10.3 million units. The original agreement resulted in the
contribution of only the general partner interest in Oppenheimer Capital to
PIMCO Advisors, in exchange for approximately $233 million of newly issued Class
A Limited Partner Units, at $25.50 per unit. PIMCO Advisors may be obligated in
certain circumstances to purchase such convertible preferred stock for its issue
price. PIMCO Advisors will account for this transaction using the purchase
method. After the closing, operating results for PIMCO Advisors will include its
proportionate share of the operating results of Oppenheimer Capital.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PIMCO Advisors L.P. and subsidiaries (the "Partnership" or "PIMCO Advisors") are
primarily involved in investment advisory services. The Partnership's strategy
is to pursue growth by marketing the investment management expertise,
performance record and reputation of its six institutional investment management
firms (the "Investment Management Firms"). The Investment Management Firms are
as follows:
Pacific Investment Management Company ("Pacific Investment
Management") and its wholly owned subsidiary, StocksPLUS Management,
Inc. ("StocksPLUS"), manages primarily fixed income investments, with
approximately $108.5 billion in assets under management;
Columbus Circle Investors ("CCI") and its wholly owned subsidiary,
Columbus Circle Trust Company ("CCTC"), manages primarily equity and
equity related investments, with approximately $11.5 billion in assets
under management;
Cadence Capital Management ("Cadence") manages equity and equity
related investments, with approximately $4.9 billion in assets under
management;
Parametric Portfolio Associates ("Parametric"), manages equity and
equity related investments, with approximately $2.5 billion in assets
under management;
NFJ Investment Group ("NFJ"), manages equity and equity related
investments, with approximately $2.3 billion in assets under
management; and
Blairlogie Capital Management ("Blairlogie"), manages equity and
equity related investments, with approximately $875 million in assets
under management.
PIMCO Advisors, together with the Investment Management Firms, sponsors and
manages mutual funds for both institutional and retail investors.
PIMCO Funds. In January 1997, the Partnership restructured its proprietary
mutual funds into a single fund family called "PIMCO Funds" which is comprised
of two series: (i) PIMCO Funds: Pacific Investment Management Series ("PIMCO
Funds PIMS Series"), 20 funds advised by Pacific Investment Management, and
(ii) PIMCO Funds: Multi-Manager Series ("PIMCO Funds MMS Series"), 21 funds
advised by the Partnership and subadvised by the Investment Management Firms and
one independent subadvisor. The PIMCO Funds PIMS Series are primarily fixed
income funds and the PIMCO Funds MMS Series are primarily equity funds. All
PIMCO Funds are offered in up to five different share classes: institutional and
administrative share classes primarily for institutional investors and, for
retail investors, Class A shares (which are "front end" load), Class B shares
(which are "back-end load"), and Class C shares (which are "level load").
The PIMCO Funds now feature a "unified fee" structure which has specified
advisory and administrative fees per fund. As a result, the Partnership and
Pacific Investment Management (and not the PIMCO Funds) bear the risk of
increases in service costs (including of third-party service providers such as
transfer agents) and will directly benefit from decreases in those costs.
RESULTS OF OPERATIONS FOR 1997 COMPARED TO 1996
PIMCO Advisors derives substantially all its revenues and net income from
advisory fees for investment management services provided to its institutional
and individual clients and advisory, distribution and servicing fees for
services provided to its two proprietary series of mutual funds ("Proprietary
Funds").
Generally, such fees are determined based upon a percentage of client assets
under management and are billed quarterly to institutional clients, either in
advance or arrears, depending on the agreement with the client, and monthly in
arrears to Proprietary Funds. Revenues are determined in large part based upon
the level of assets under management; which itself is dependent upon factors
including market conditions, client decisions to add or withdraw assets from
PIMCO Advisors management and from PIMCO Advisors ability to attract new
clients. In addition, PIMCO Advisors has certain accounts which are subject to
performance based fee schedules wherein performance relative to the S&P 500
Index or other benchmarks over a particular time period can result in additional
fees. Such performance based fees can have a significant effect on revenues, and
8
<PAGE>
provide an opportunity to earn higher fees (as well as lower) than could be
obtained under fee arrangements based solely on a percentage of assets under
management.
PIMCO Advisors consolidated 1997 third quarter revenues, including those of its
wholly owned distributor PIMCO Funds Distribution Company ("PFD"), were $125.1
million compared to $97.1 million in the third quarter of 1996, up $28.0
million. Advisory revenues were $110.2 million in the third quarter of 1997
compared to $84.7 million for the same period in 1996, up $25.5 million. For the
nine months ended September 30, 1997 PIMCO Advisors consolidated revenues were
$344.2 million compared to $287.2 milllion in the same period of 1996. Revenues
at the distributor for the nine months of 1997 increased to $46.3 million in
1997 from $39.7 million in 1996. Advisory revenue increases resulted from both
the commitment of new assets by institutional clients and from market
appreciation. Performance based fees amounted to $9.3 million during the third
quarter of 1997 as compared to $4.9 million during the same period in 1996. For
the nine months ended September 30, 1997 performance fees increased to $20.8
million, from $16.3 million in the comparable period of 1996. The increase in
performance based fees occurred in both fixed income portfolio products seeking
to outperform relative benchmarks, and an equity product seeking to outperform
the S&P 500 Index.
Revenues by operating entity were as follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
1997 1996 1997 1996
------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
($ in millions)
Pacific Investment Management $ 74.4 $54.9 $200.4 $162.1
CCI 14.3 15.5 43.8 47.2
Cadence 6.8 4.5 17.5 13.0
Parametric 1.1 0.9 3.2 2.6
NFJ 2.4 1.8 6.3 5.4
Blairlogie 1.1 0.9 3.2 2.8
PFD 16.3 13.3 46.3 39.7
Other 8.7 5.3 23.5 14.4
------ ----- ------ ------
$125.1 $97.1 $344.2 $287.2
====== ===== ====== ======
Assets under management, in the aggregate, were as follows:
Three Months Nine Months
Ended Ended
September 30, September 30,
1997 1996 1997 1996
------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
($ in billions)
Beginning of period $119.9 $100.8 $110.0 $ 95.2
End of period $130.6 $104.5 $130.6 $104.5
</TABLE>
Compensation and benefits in the third quarter of 1997 of $55.5 million were
$12.3 million higher than the same period in 1996. For the nine month period,
this cost category increased from $128.1 million in 1996 to $151.6 million in
1997. These increases reflect additional staffing, at both Pacific Investment
Management and CCI, as well as higher profit sharing expenses which are based on
profits of each of the investment management subsidiaries.
Commission expenses, incurred by PFD related to sales and servicing of retail
mutual funds, increased $2.5 million to $11.7 million in the third quarter of
1997 compared to the same period a year ago, and increased $4.7 million to $32.2
million for the nine months of 1997 compared to 1996, reflecting higher trail
commissions due to an increased level of qualifying assets, as well as increased
"up front" commissions on higher current sales levels.
9
<PAGE>
General and administrative expenses amounted to $6.9 million during the third
quarter of 1997, an increase of $2.9 million over the same period a year ago.
This cost category increased by $5.8 million to $18.8 million for the nine
months of 1997 compared to 1996. This increase can be primarily attributed to
the conversion of the retail share classes of the PIMCO Funds to a fixed
administrative fee basis resulting in increases to this cost category for
expenses previously borne directly by the funds. There is a corresponding
increase in revenues related to this conversion. These incremental costs account
for substantially all of this increase.
Occupancy and equipment increased by $147,000 to $2.5 million in the third
quarter of 1997 from the same period a year ago; during the nine months of 1997
these costs increased $550,000 to $7.5 million compared to the same period in
1996. The increase in this expense category can be attributed primarily to
additional office space and equipment as a result of the additional staffing
discussed above.
Other expenses in the third quarter of 1997 increased by $1.4 million from 1996.
Such costs for the nine months of 1997 increased $7.1 million to $22.5 million
compared to the same period in 1996 due principally to increases in marketing
and promotional costs and professional fees as well as other increases
reflective of inflation and increased staffing.
Net income per unit is computed under the two-class method which allocates net
income to Class A and Class B Limited Partner units in proportion to the
Operating Profit Available for Distribution for each class. Operating Profit
Available for Distribution is defined by PIMCO Advisors partnership agreement
and is computed as the sum of net income plus non-cash charges from the
amortization of intangible assets, non-cash compensation expenses arising from
option and restricted unit plans and losses of any subsidiary which is not a
flow-through entity for tax purposes. Class A Limited Partner and General
Partner units are entitled to a priority distribution of $1.88 per unit per year
until December 31, 1997. Because of this, the amount of Operating Profit
Available for Distribution allocated to such units can be greater than the
amount allocated to Class B Limited Partner units. In addition, because of the
priority distribution, the initial dilution to net income per unit from the
assumed exercise of unit options can be applied entirely to Class B Limited
Partner units. However, growth in both net income and Operating Profit Available
for Distribution in 1997 beyond the priority levels has resulted in the year to
date allocations of income and distributions per unit to be equal across all
classes.
CAPITAL RESOURCES AND LIQUIDITY
PIMCO Advisors and its predecessor entities' combined business has not
historically been capital intensive. In general, working capital requirements
had been satisfied out of operating cash flow or short-term borrowings. PIMCO
Advisors will make quarterly profit-sharing payments and distributions to its
unitholders. PIMCO Advisors may need to finance profit-sharing payments using
short-term borrowings.
PIMCO Advisors had approximately $58.1 million of cash and cash equivalents and
short-term investments at September 30, 1997 compared to approximately $52.8
million at December 31, 1996. PIMCO Advisors liquidity not otherwise used for
quarterly distributions will be used for general purposes including profit-
sharing payments, seed money for new mutual funds, and brokers' commissions on
sales of mutual fund shares distributed without a front-end sales load. PIMCO
Advisors believes that the level of such commissions may increase in the future
due to the introduction of new products and mutual fund pricing structures which
may require an alternate financing source.
The Partnership distributes substantially all of its "Operating Profit Available
for Distribution", after appropriate reserves, to its partners. Distributions
are paid quarterly, in arrears, on the units outstanding to unitholders of
record on the thirtieth day of the first month following each quarter-end.
During the nine months of 1997, the Partnership distributed $1.410 per Class A
Limited Partner and General Partner unit and $1.404 per Class B Limited Partner
unit related to the fourth quarter of 1996's and first two quarters of 1997's
earnings. During the third quarter of 1997, the Partnership distributed $0.47
per Class A Limited Partner and General Partner unit and $0.505 per Class B
Limited Partner unit related to the second quarter of 1997's earnings. The
Partnership declared a third quarter distribution of $0.58 per Class A Limited
Partner and General Partner unit payable to holders of record on October 30,
1997. The payment date for this distribution is November 15, 1997. The
Partnership also declared a third quarter distribution of $0.58 per Class B
Limited Partner unit payable to holders of record on October 30, 1997. The
payment date for this distribution is November 30, 1997.
PIMCO Advisors currently has no long-term debt. In April 1996, the Partnership
obtained a $25 million, four year revolving line of credit for working capital
purposes. There was no outstanding balance at Septemeber 30, 1997, nor was the
facility utilized during the quarter ended September 30, 1997.
10
<PAGE>
ECONOMIC FACTORS
The general economy including interest rates, inflation and client responses to
economic factors will affect, to some degree, the operations of PIMCO Advisors.
As a significant portion of assets under management are fixed income funds,
fluctuations in interest rates could have a material impact on the operations of
PIMCO Advisors. PIMCO Advisors advisory business is generally not capital
intensive and therefore any effect of inflation, other than on interest rates,
is not expected to have a significant impact on its operations or financial
condition. Client responses to the economy, including decisions as to the amount
of assets deposited may also impact the operations of PIMCO Advisors. Any
resulting revenue fluctuations may or may not be recoverable in the pricing of
services offered by PIMCO Advisors.
During the first nine months of 1997, assets under management for PIMCO
Advisors and its subsidiaries increased $20.6 billion. While net cash inflows
for PIMCO Advisors, as a whole, were significant ($7.6 billion during the nine
months of 1997), CCI experienced substantial net cash outflows ($4.9 billion
during the nine months of 1997) predominantly from its "large cap" separate
account clients during this period, attributable in large part to
underperformance measured against relevant benchmarks. This trend started in
1995 and has continued through the third quarter of 1997.
11
<PAGE>
PART II: OTHER INFORMATION
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Computations of Net Income Per Unit.
27 Financial Data Schedule.
(b) Reports on Form 8-K
A report on Form 8-K was filed on July 23, 1997 disclosing the
Amended and Restated Agreement and Plan of Merger dated as of
July 22, 1997 by and among Oppenheimer Group, Inc., Oppenheimer
Financial Corp., the Seller Trust under Declaration of Trust
dated July 22, 1997, the Indemnity Trust under Declaration of
Trust dated July 22, 1997, PIMCO Advisors L.P., PIMCO Advisors
Inc., PAI Transitory Corp. and Thomson Advisory Group Inc.
12
<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.
PIMCO Advisors L.P.
By /s/ William D. Cvengros
-----------------------
William D. Cvengros
Chief Executive Officer
By /s/ Robert M. Fitzgerald
------------------------
Robert M. Fitzgerald
Principal Accounting Officer
October 31, 1997
13
<PAGE>
EXHIBIT 11
PIMCO Advisors L.P.
Computations of Primary Net Income Per Unit
(in thousands, except per unit amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended September 30,
--------------------------------------------
General Partner
and Class A Class B
---------------------------------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $82,661 $66,901 $82,661 $66,901
======= ======= ======= =======
Weighted average number of units outstanding 40,946 40,932 32,983 32,961
Weighted average effect of Limited Partnership
unit options 1,736 1,514 2,170 1,401
------- ------- ------- -------
Weighted average number of units and unit equivalents
used to calculate net income per unit 42,682 42,446 35,153 34,362
======= ======= ======= =======
Net income per unit $ 1.06 $ 0.96 $ 1.06 $ 0.76
======= ======= ======= =======
<CAPTION>
For the three months ended September 30,
--------------------------------------------
General Partner
and Class A Class B
---------------------------------------------
1997 1996 1997 1996
------- ------- ------- -------
Net income $32,059 $23,730 $32,059 $23,730
======= ======= ======= =======
Weighted average number of units outstanding 40,946 40,946 32,993 32,961
Weighted average effect of Limited Partnership
unit options 1,824 1,564 2,792 1,515
------- ------- ------- -------
Weighted average number of units and unit equivalents used
to calculate net income per unit 42,771 42,510 35,785 34,476
======= ======= ======= =======
Net income per unit $ 0.40 $ 0.32 $ 0.42 $ 0.28
======= ======= ======= =======
</TABLE>
14
<PAGE>
PIMCO Advisors L.P.
Computations of Fully Diluted Net Income Per Unit
(in thousands, except per unit amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended September 30,
--------------------------------------------------
General Partner
and Class A Class B
--------------------------------------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $82,661 $66,901 $82,661 $66,901
======= ======= ======= =======
Weighted average number of units outstanding 40,946 40,932 32,983 32,961
Weighted average effect of Limited Partnership unit options 1,778 1,533 2,477 1,498
------- ------- ------- -------
Weighted average number of units and unit equivalents used
to calculate net income per unit 42,724 42,465 35,430 34,459
======= ======= ======= =======
Net income per unit $ 1.06 $ 0.96 $ 1.06 $ 0.75
======= ======= ======= =======
<CAPTION>
For the three months ended September 30,
--------------------------------------------------
General Partner
and Class A Class B
--------------------------------------------------
1997 1996 1997 1996
------- ------- ------- -------
Net income $32,059 $23,730 $32,059 $23,730
======= ======= ======= =======
Weighted average number of units outstanding 40,946 40,946 32,993 32,961
Weighted average effect of Limited Partnership unit options 1,883 1,612 3,176 1,757
------- ------- ------- -------
Weighted average number of units and unit equivalents used
to calculate net income per unit 42,829 42,558 36,169 34,718
======= ======= ======= =======
Net income per unit $ 0.40 $ 0.32 $ 0.42 $ 0.28
======= ======= ======= =======
</TABLE>
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PIMCO
ADVISORS L.P. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 33,172
<SECURITIES> 24,935
<RECEIVABLES> 81,617
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 144,187
<PP&E> 10,801 <F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 365,728
<CURRENT-LIABILITIES> 77,273
<BONDS> 0
0
0
<COMMON> 278,976 <F2>
<OTHER-SE> (7,087) <F3>
<TOTAL-LIABILITY-AND-EQUITY> 365,728
<SALES> 0 <F4>
<TOTAL-REVENUES> 344,210 <F5>
<CGS> 0 <F4>
<TOTAL-COSTS> 236,565 <F6>
<OTHER-EXPENSES> 27,007 <F7>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 83,887
<INCOME-TAX> 1,226
<INCOME-CONTINUING> 82,661
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 82,661
<EPS-PRIMARY> 1.06 <F8>
<EPS-DILUTED> 1.06 <F9>
<FN>
<F1> Net of accumulated depreciation and amortization.
<F2> Entity is a partnership. Amount shown represents Partners' Capital.
<F3> Amount shown comprises Unamortized Compensation.
<F4> The partnership is in the service business and has no sales or cost of
goods sold of tangible products.
<F5> Amount shown comprises revenues from services.
<F6> Amount shown comprises costs of services.
<F7> Amount shown is from amortization of intangible assets.
<F8> Amount shown is for the Partnership's General Partner and Class A Limited
Partner Units.
<F9> Amount is for the Partnership's Class B Limited Partner Units.
</FN>
</TABLE>
