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, 1995
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)
840 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, 1995, 13,501,764 publicly traded Class A units of
limited partner interest and 26,619,391 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, 1995. In
addition, there were 32,960,826 privately-held Class B units of limited partner
interests issued and outstanding at September 30, 1995.
PIMCO ADVISORS L.P.
INDEX
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial statements (Unaudited)
Consolidated Statements of Financial Condition as of
September 30, 1995 and December 31, 1994 3
Consolidated Statements of Operations for the nine months
ended September 30, 1995 and 1994 4
Consolidated Statements of Operations for the three months
ended September 30, 1995 and 1994 5
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1995 and 1994 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-12
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
2
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
PIMCO Advisors L.P. and Subsidiaries
Consolidated Statements of Financial Condition
As of September 30, 1995 and December 31, 1994
(Unaudited)
September 30, 1995 December 31, 1994
------------------ -----------------
Assets
- ------
Current Assets:
Cash and cash equivalents $ 47,779,210 $ 55,003,751
Fees receivable 52,265,586 29,134,608
Investment in Proprietary Funds 10,826,759 663,347
Other assets - current 4,659,252 4,618,374
------------ ------------
Total Current Assets 115,530,807 89,420,080
Investments in limited partnerships 3,285,016 2,094,029
Fixed assets, net of accumulated depreciation 10,225,068 7,898,697
Intangible assets, net of accumulated amortization 252,834,102 279,840,951
Other assets - non current 2,390,783 454,390
------------ ------------
Total Assets $384,265,776 $379,708,147
============ ============
Liabilities and Partners' Capital
- ---------------------------------
Current Liabilities:
Accounts payable, accrued expenses and
other current liabilities $ 16,735,292 $ 19,547,610
Accrued compensation 32,953,847 13,387,340
------------ ------------
Total Current Liabilities 49,689,139 32,934,950
Other Liabilities - non current 497,013 1,244,423
------------ ------------
Total Liabilities 50,186,152 34,179,373
------------ ------------
Partners' Capital:
General Partner (800,000 units issued and outstanding) 3,565,614 3,863,283
Class A Limited Partners (40,121,155 and 40,018,155
units issued and outstanding at September 30, 1995
and December 31, 1994, respectively) 233,829,271 248,374,088
Class B Limited Partners (32,960,826
units issued and outstanding) 112,941,304 115,177,051
Unamortized compensation (16,256,565) (21,885,648)
------------ ------------
Total Partners' Capital 334,079,624 345,528,774
------------ ------------
Total Liabilities and Partners' Capital $384,265,776 $379,708,147
============ ============
See accompanying notes
3
PIMCO Advisors L.P. and Subsidiaries
Consolidated Statements of Operations
For the nine months ended September 30, 1995 and 1994
(Unaudited)
September 30, 1995 September 30, 1994
------------------ ------------------
Revenues:
Investment advisory fees:
Private accounts $148,455,504 $104,389,842
Proprietary Funds 51,694,328 20,190,206
Distribution and servicing fees 28,644,034
Other 992,336
------------ ------------
Total revenues 229,786,202 124,580,048
------------ ------------
Expenses:
Compensation and benefits 109,009,197 86,246,584
Amortization of intangibles, restricted units
and option plans 32,635,932
Commissions 20,736,108
General and administrative 6,790,103 3,523,641
Occupancy and equipment 6,466,117 2,785,272
Other 12,063,798 9,987,769
------------ ------------
Total expenses 187,701,255 102,543,266
------------ ------------
Operating income 42,084,947 22,036,782
Equity in income of limited partnership 155,002 15,725
Other income 2,655,277 567,056
------------ ------------
Income before taxes 44,895,226 22,619,563
Provision for taxes 505,378 9,800,715
------------ ------------
Net income $ 44,389,848 $ 12,818,848
============ ============
Net income allocated to:
General Partner $ 645,529
Class A Limited Partner Units 32,334,287
Class B Limited Partner Units 11,410,032
------------
Total $ 44,389,848
============
Net income per unit
General Partner and Class A Limited Partner unit $ 0.81
============
Class B Limited Partner unit $ 0.31
============
Cash distributions paid per unit:
General Partner and Class A Limited Partner unit $ 1.179
============
Class B Limited Partner unit $ 0.414
============
See accompanying notes
4
PIMCO Advisors L.P. and Subsidiaries
Consolidated Statements of Operations
For the three months ended September 30, 1995 and 1994
(Unaudited)
September 30, 1995 September 30, 1994
------------------ ------------------
Revenues:
Investment advisory fees:
Private accounts $ 51,681,169 $ 33,129,821
Proprietary Funds 20,122,732 7,426,127
Distribution and servicing fees 11,088,648
Other 310,260
------------ ------------
Total revenues 83,202,809 40,555,948
------------ ------------
Expenses:
Compensation and benefits 38,764,094 27,505,028
Amortization of intangibles, restricted units
and option plans 11,366,016
Commissions 7,689,152
General and administrative 2,121,240 1,259,554
Occupancy and equipment 2,230,259 969,707
Other 4,618,929 4,622,657
------------ ------------
Total expenses 66,789,690 34,356,946
------------ ------------
Operating income 16,413,119 6,199,002
Equity in income of limited partnership 57,149 97,065
Other income 934,272 620,806
------------ ------------
Income before taxes 17,404,540 6,916,873
Provision for taxes 263,384 2,937,855
------------ ------------
Net income $ 17,141,156 $ 3,979,018
============ ============
Net income allocated to:
General Partner $ 231,969
Class A Limited Partner Units 11,633,599
Class B Limited Partner Units 5,275,588
------------
Total $ 17,141,156
============
Net income per unit
General Partner and Class A Limited Partner unit $ 0.29
============
Class B Limited Partner unit $ 0.14
============
Cash distributions paid per unit:
General Partner and Class A Limited Partner unit $ 0.470
============
Class B Limited Partner unit $ 0.199
============
See accompanying notes
5
PIMCO Advisors L.P. and Subsidiaries
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1995 and 1994
(Unaudited)
September 30, 1995 December 31, 1994
------------------ -----------------
Cash flows from operating activities:
Net income $ 44,389,848 $ 12,818,848
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, amortization, Restricted Unit and
Option Plans 34,730,364 1,691,330
Equity in (income) loss of limited partnerships (155,002) (15,725)
Unrealized gain on investments (95,647)
Deferred income taxes (48,023)
Change in operating assets and liabilities:
Fees receivable (23,130,978) 9,043,771
Other assets (1,849,819) 174,772
Accounts payable, accrued expenses and
other current liabilities (2,812,318) (21,782,827)
Accrued compensation 19,566,507 5,232,985
Other liabilities (747,410)
Other 12,593 83,252
------------ ------------
Net cash provided by operating activities 69,908,138 7,198,383
------------ ------------
Cash flows from investing activities:
Purchases of fixed assets (4,702,671) (1,309,388)
Proceeds from sale of fixed assets 269,275
Notes receivable advances (265,709) (118,307)
Investments in Proprietary Funds (10,067,765)
Investments in limited partnerships and other (897,728) (48,646,635)
Proceeds from sale of investments in Proprietary Funds 56,972,210
------------ ------------
Net cash provided by (used in) investing activities (15,664,598) 6,897,880
------------ ------------
Cash flows from financing activities:
Cash distribution paid (61,843,002)
Proceeds from option exercises 374,921
Dividends (9,200,000)
------------ ------------
Net cash used in financing activities (61,468,081) (9,200,000)
------------ ------------
Net increase (decrease) in cash and cash equivalents (7,224,541) 4,896,263
Cash and cash equivalents, beginning of period 55,003,751 9,299,366
------------ ------------
$ 47,779,210 $ 14,195,629
============ ============
Supplemental schedule of non-cash operating activities:
Increase in other assets and long term compensation
liabilities relating to a subsidiary's long-term
compensation plan $ 994,004
============
Supplemental schedule of non-cash financing activities:
Non-cash dividend to affiliate $ 700,000
============
Reduction of payable to affiliate by capital contribution $ 500,000
============
Supplemental disclosures:
Taxes paid $ 383,310 $ 13,440,295
============ ============
Interest paid $ 18,750 $ 46,217
============ ============
See accompanying notes
6
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, 1995 and December 31, 1994, (b) the results
of operations for the nine- and three-month periods ended September 30, 1995 and
1994, and (c) the cash flows for the nine-month periods ended September 30, 1995
and 1994, for PIMCO Advisors L.P. ("PA") 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
PA's Annual Report on Form 10-K for the year ended December 31, 1994. 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.
7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PIMCO Advisors L.P. and subsidiaries ("PA") was formed on November 15, 1994
("Date of Consolidation"), when Pacific Financial Asset Management Group
("PFAMCo Group") merged (the "Consolidation") certain of its investment
management businesses and substantially all of its assets into Thomson Advisory
Group L.P. ("TAG"). The PFAMCo Group comprised the operations of Pacific
Financial Asset Management Corporation ("PFAMCo"), an indirect wholly-owned
subsidiary of Pacific Mutual Life Insurance Company ("Pacific Mutual"), and
certain of its wholly-owned investment management subsidiaries. The businesses
of PFAMCo Group contributed to PA were then contributed to newly formed
subsidiaries of PA. The investment advisor subsidiaries are as follows:
Pacific Investment Management Company ("Pacific Investment
Management") and its wholly-owned subsidiary, StocksPLUS Management,
Inc. ("StocksPLUS"), managing primarily Fixed Income, with
approximately $68.5 billion in assets under management;
Columbus Circle Investors ("CCI"), managing primarily Equities, with
approximately $13.0 billion in assets under management;
Cadence Capital Management ("Cadence") managing Equities, with
approximately $2.4 billion in assets under management;
Parametric Portfolio Associates ("Parametric"), managing Equities,
with approximately $1.5 billion in assets under management;
NFJ Investment Group ("NFJ"), managing Equities, with approximately
$1.4 billion in assets under management; and
Blairlogie Capital Management ("Blairlogie"), managing Equities, with
approximately $650 million in assets under management.
The subsidiaries are each a registered investment advisor and collectively they
provide a broad array of investment management and advisory services for
clients, using distinctive investment management styles.
In addition to the investment management subsidiaries, PA sponsors three mutual
fund families: PIMCO Funds (funds for institutions); PIMCO Advisors Funds
(retail funds and Cash Accumulation Trust); and PIMCO Advisors Institutional
Funds (funds for institutional and 401 (k)/defined contribution investors).
Under generally accepted accounting principles, the Consolidation is accounted
for as an acquisition of TAG by PFAMCo Group, even though the legal form was the
reverse. Therefore, the historical financial statements include the operations
of PFAMCo Group, in its corporate form, prior to the Consolidation and the
combined results of PA, in its partnership form, for the period since the
Consolidation.
Due to the different bases of presentation and resulting difficulties in
analyzing comparative historical financial information as a result of the
required accounting presentation, management has included below certain pro
forma financial information as if the Consolidation occurred at the beginning of
1993. Pro forma results eliminate the significant comparative differences in the
historical results of operations arising primarily from different taxation of
corporations and partnerships, from the inclusion of the former TAG's results of
operations in the pro forma results for the nine- and three-month periods ended
September 30, 1994, and from certain transactions and restructuring effected by
the Consolidation, principally related to the creation and amortization of
intangibles and revised profit sharing arrangements.
8
PRO FORMA FINANCIAL INFORMATION
The following table compares the actual results of operations for the nine- and
three-month periods ended September 30, 1995 to the pro forma results of
operations for the nine- and three-month periods ended September 30, 1994 as if
the Consolidation discussed above had occurred on January 1, 1993. The pro
forma operating results give effect to:
(i) The Consolidation of PFAMCo Group and TAG;
(ii) The amendment of existing Options under TAG's 1993 Class A LP Unit
Option Plan;
(iii) The adoption of the 1994 Class B LP Unit Option Plan;
(iv) The contribution of PIMCO Advisors Distribution Company ("PADCo") to
PA in exchange for Class A Limited Partnership Units; and
(v) Certain transactions effected by PFAMCo Group and TAG in connection
with the Consolidation, primarily related to intangible amortization
and profit sharing.
Nine Months Ended Three Months Ended
September 30, September 30,
1995 1994 1995 1994
-------- ------- ------- -------
(Amounts in thousands, except per unit amount)
Revenues:
Investment advisory fees $200,149 $172,114 $71,804 $56,527
Distribution, servicing fees and other 29,637 28,386 11,399 9,448
-------- -------- ------- -------
229,786 200,500 83,203 65,975
-------- -------- ------- -------
Expenses:
Compensation and benefits 109,009 89,675 38,764 29,638
Commissions 20,736 17,506 7,689 5,470
Amortization of intangibles, options
and restricted units 32,636 30,447 11,366 10,090
Occupancy and equipment 6,466 4,764 2,230 1,631
General and administrative 6,790 5,142 2,121 1,949
Other (net) 9,759 11,930 3,892 3,685
-------- -------- ------- -------
185,396 159,464 66,062 52,463
-------- -------- ------- -------
Net income $ 44,390 $ 41,036 $17,141 $13,512
======== ======== ======= =======
Net income allocated to:
General Partner $ 646 $ 646 $ 232 $ 215
Class A Limited Partnership Units 32,334 32,299 11,633 10,768
Class B Limited Partnership Units 11,410 8,091 5,276 2,529
-------- -------- ------- -------
Total $ 44,390 $ 41,036 $17,141 $13,512
======== ======== ======= =======
Net income per unit:
General Partner and Class A $ 0.81 $ 0.81 $ 0.29 $ 0.27
Limited Partnership Unit ======== ======== ======= =======
Class B Limited Partnership Unit $ 0.31 $ 0.21 $ 0.14 $ 0.07
======== ======== ======= =======
The pro forma information given above is not intended to reflect the results
that actually would have been obtained if the operations were consolidated
during the period presented.
9
PRO FORMA FINANCIAL INFORMATION
RESULTS OF OPERATIONS FOR 1995 ACTUAL COMPARED TO 1994 PRO FORMA
PA 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 proprietary families 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, therefore, are determined in large part
based upon the level of assets under management which are dependent upon market
conditions, client decisions to add or withdraw assets from PA's management and
from PA's ability to attract new clients, among other factors. In addition, PA
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, but also provide an opportunity
to earn higher fees than could be obtained under fee arrangements based solely
on a percentage of assets under management.
PA's consolidated actual 1995 nine month revenues, including those of its
wholly-owned distributor PADCo, were $229.8 million compared to $200.5 million
pro forma in the nine months of 1994, up $29.3 million. Advisory revenues were
$200.1 million actual in 1995 compared to $172.1 million pro forma in 1994, up
$28.0 million. PADCo's revenues were $29.6 million actual in 1995 compared to
$28.4 million pro forma in 1994, up $1.2 million. PA's consolidated actual 1995
third quarter revenues, including those of its wholly-owned distributor PADCo,
were $83.2 million compared to $66.0 million pro forma in the third quarter of
1994, up $17.2 million. Advisory revenues were $71.8 million actual in 1995
compared to $56.5 million pro forma in 1994, up $15.3 million. Advisory revenue
increases resulted from the commitment of new assets by institutional clients
and from market appreciation. These increases were also affected by an increase
in performance based fees during the third quarter and on a year-to-date basis.
Revenues (pro forma in 1994) by operating entity were as follows:
Nine Months Ended Three Months Ended
September 30, September 30,
1995 1994 1995 1994
-------- ------- ------- -------
(In millions)
Pacific Investment Management $ 126.1 $ 106.8 $ 45.6 $ 34.5
CCI 38.7 32.9 13.9 11.0
Cadence 10.5 9.0 4.0 3.1
Parametric 2.9 3.4 1.0 1.1
NFJ 4.4 3.6 1.5 1.2
PADCo 29.6 28.4 11.4 9.4
Other (1) 17.6 16.4 5.8 5.7
-------- -------- ------- -------
$ 229.8 $ 200.5 $ 83.2 $ 66.0
======== ======== ======= =======
(1) Includes PA's Institutional Services (formerly PFAMCo) and Mutual Funds
divisions and Blairlogie.
Compensation and benefits expenses in the nine months of 1995 of $109.0 million
were $19.3 million higher than 1994 pro forma. Compensation and benefits in the
third quarter of 1995 of $38.8 million were $9.2 million higher than 1994 pro
forma. These increases reflect additional staffing, primarily in Pacific
Investment Management's client support and administration areas, as well as
higher profit sharing expenses which are based on profits of each of the
investment advisor subsidiaries.
Commission expenses, incurred by PADCo related to sales and servicing of retail
mutual funds, increased $3.2 million to $20.7 million in the nine months and
increased $2.2 million to $7.7 million in the third quarter reflecting higher
trail commissions due to an increased level of qualifying assets, as well as
increased "up front" commissions on higher current sales levels.
Amortization of intangibles, options and restricted units increased in the nine
months and the third quarter due to the acceleration of vesting of options and
restricted units due to terminations as a result of the Consolidation.
10
Occupancy and equipment has increased in the nine months and the third quarter
primarily due to additional office space as a result of the additional staffing
discussed above.
Other expenses (net) in the nine months of 1995 decreased by $2.2 million from
pro forma nine months 1994 due principally to income from invested funds of $2.6
million. Other expenses, net in the third quarter of 1995 increased by $0.2
million from pro forma 1994 due principally to increases in insurance cost.
Marketing and promotional expenses (included in other, net) were also lower in
the nine months of 1995 compared to 1994 by $1.6 million as a result of lower
expenditures at most subsidiaries.
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 PA's 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. Since Class A Limited Partner and General Partner units
are entitled to a priority distribution of $1.88 per unit per year, the amount
of net income allocated to such units is currently greater than the net income
allocated per Class B Limited Partner unit. Due to the priority distribution,
any dilution to net income per unit from the assumed exercise of unit options is
currently applied entirely to Class B Limited Partner units.
HISTORICAL FINANCIAL STATEMENTS
The historical financial statements reflect the results of PFAMCo Group during
the nine- and three-month periods ended September 30, 1994. The results for the
nine-and three-month periods ended September 30, 1995 include PA's post-
Consolidation combined results in its partnership form. This accounting
treatment, known as "reverse acquisition" accounting, is required under
generally accepted accounting principles.
Therefore, many of the comparative differences in the results of operations
between 1995 and 1994 are due to the reorganization of PFAMCo Group into
partnership form, the inclusion of the former TAG operations in combination with
PFAMCo Group's operations for the nine- and three-month periods ended September
30, 1995, and from transactions and restructuring which occurred in the
Consolidation. The 1995 results also include certain first-time non-cash
expenses related to the amortization of intangible assets created by the
Consolidation and from expenses related to option and restricted unit plans.
RESULTS OF OPERATIONS FOR 1995 COMPARED TO 1994
PA's 1995 nine month revenues, including PADCo, were $229.8 million compared to
$124.6 million in the nine months of 1994, up $105.2 million. PA's 1995 third
quarter revenues, including PADCo, were $83.2 million compared to $40.6 million
in the third quarter of 1994, up $42.6 million. The increase in revenues results
primarily from the inclusion of the former TAG in the results of PA's
operations.
Compensation and benefits which primarily includes salaries, employee benefits
and incentive compensation is PA's largest expense category. Incentive
compensation consists of profit-sharing and other incentive awards which are
based upon profitability of the investment management subsidiaries. Profit-
sharing awards range from 15% to 45% of such profits after Consolidation. Prior
to the Consolidation, profit-sharing awards ranged from 40% to 80% of the
profits, as defined, of the operating subsidiaries of PFAMCo Group.
Commission expenses include the up-front, trail and service fee commissions from
PADCo's operations. Restricted Unit and Option Plan expenses result from grants
to key employees of restricted units and options to purchase units at
substantially reduced prices. Such plans generally have 5-year vesting
provisions and other restrictions and the associated expense is being amortized
over the 5-year period. There were no similar items in the 1994 results of
operations for commissions and Restricted Unit and Option Plan expenses.
Occupancy and equipment expenses increased over 1994 due to facility expansion
primarily at Pacific Investment Management and the inclusion of TAG's costs.
Other expenses includes marketing, professional fees, insurance and other
expenses.
11
Equity in income of partnerships represents earnings from StocksPLUS' investment
in a limited partnership, StocksPLUS, L.P., a pooled investment vehicle whose
investment objective is to create returns for clients above the S & P 500 index.
The amount earned by StocksPLUS will vary from year-to-year and will depend on
the relative investment performance of StocksPLUS, L.P. Other income consists
principally of earnings on invested cash, and increased in the nine-and three-
month periods ended September 30, 1995 due primarily to higher levels of cash
and cash equivalents. Income tax expenses represent the current and deferred
provision for federal and state income taxes. Following the Consolidation, PA is
organized as a partnership whose income is generally not subject to tax at the
partnership entity level. PA does, however, have some corporate subsidiaries
that may be subject to federal and state income taxes.
CAPITAL RESOURCES AND LIQUIDITY
PA's and its predecessor entities' combined business has not historically been
capital intensive. Prior to the Consolidation, working capital requirements had
been satisfied out of operating cash flow or short-term borrowings. PA will make
quarterly profit-sharing payments and distributions to its unitholders. PA may
need to finance profit-sharing payments using short-term borrowings. PA had
approximately $47.8 million of cash and cash equivalents at September 30, 1995
compared to approximately $55.0 million at December 31, 1994. PA's liquidity
not otherwise used for quarterly distributions will be used for general purposes
including profit-sharing payments and brokers' commissions on sales of mutual
fund shares distributed without a front-end sales load. PA 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 first nine months of 1995, the Partnership distributed $0.239 per
Class A Limited Partner and General Partner unit and $0.077 per Class B Limited
Partner unit related to the 1994 post-Consolidation earnings from November 16,
1994 through December 31, 1994 and also distributed $0.94 per Class A Limited
Partner and General Partner unit and $0.337 per Class B Limited Partner unit
related to 1995 earnings. The Partnership declared a third quarter distribution
of $0.47 per Class A Limited Partner and General Partner unit payable to holders
of record on October 30, 1995. The payment date for this distribution is
November 15, 1995.
PA currently has no long-term debt. The Partnership does expect to obtain a $25
million multi-year revolving line of credit for working capital purposes.
ECONOMIC FACTORS
The general economy including interest rates, inflation and client responses to
economic factors will affect, to some degree, the operations of PA. 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
PA. PA's 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 PA. Any resulting revenue fluctuations may or may not
be recoverable in the pricing of services offered by PA.
12
PART II: OTHER INFORMATION
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
No reports on Form 8-K were filed during the third quarter of 1995.
13
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
November 14, 1995
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