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MINNEAPOLIS--(BUSINESS WIRE)--Oct. 21, 2009-- Piper Jaffray Companies (NYSE: PJC) today announced net income of $9.3 million from continuing operations, or $0.47 per diluted common share, for the quarter ended Sept. 30, 2009, compared to a net loss from continuing operations of $27.5 million, or $1.75 per diluted common share, for the third quarter of 2008. In the second quarter of 2009, continuing operations generated net income of $11.6 million, or $0.59 per diluted common share. Third quarter 2009 net revenues from continuing operations were $119.7 million, compared to $73.5 million in the year-ago period, and $132.3 million for the second quarter of 2009.

For the first nine months of 2009, the company recorded net income from continuing operations of $18.1 million, or $0.93 per diluted common share, compared to a net loss from continuing operations of $30.4 million, or $1.92 per diluted common share, for the year-ago period. Net revenues of $335.8 million year-to-date represent a 26 percent increase over the same period last year, mainly driven by significantly improved performance in fixed income institutional brokerage and increased equity financing revenues, partially offset by lower advisory services revenues.

“We are pleased with our third quarter results, our second consecutive quarter of solid performance. We have a balanced mix of businesses, and all of them contributed to our performance, the largest of which represented no more than a third of aggregate revenues,” said Andrew S. Duff, chairman and chief executive officer. “We also held the compensation ratio to 60 percent and non-compensation costs were within our stated goal of $32-$33 million per quarter, resulting in a pre-tax operating margin of 13 percent.”

Results of Continuing Operations

Third Quarter

Net Revenues

Investment Banking

For the third quarter of 2009, total investment banking revenues were $48.4 million, down 4 percent compared to the third quarter of 2008 and down 23 percent compared to the second quarter of 2009.

The following is a recap of completed deal information for the third quarter of 2009:

Institutional Brokerage

For the third quarter of 2009, institutional brokerage generated net revenues of $63.5 million, significantly improved compared to $18.0 million in the third quarter of 2008, and down 3 percent compared to the robust second quarter of 2009.

Third Quarter

Non-Interest Expenses

For the third quarter of 2009, compensation and benefits expenses were $71.8 million, down 11 percent compared to the year-ago period and down 10 percent compared to the second quarter of 2009. The compensation ratio for the third quarter of 2009 was 60.0 percent, compared to 109.4 percent in the third quarter of 2008, and 60.0 percent in the second quarter of 2009.

For the third quarter of 2009, non-compensation expenses were $32.3 million, down 19 percent compared to the same quarter last year, due to restructuring charges and higher costs across nearly every expense category in the year-ago period. Compared to the second quarter of 2009, non-compensation costs decreased 6 percent, mainly due to restructuring costs recorded in the second quarter, partially offset by higher marketing and business development expenses in the current quarter.

Other Matters

In the third quarter of 2009, $8.0 million, or 175,273 shares, was repurchased pursuant to a share repurchase authorization, which runs through June 2010. The company has $77 million remaining under this authorization.

Additional Shareholder Information

      As of Sept. 30, 2009     As of June 30, 2009     As of Sept. 30, 2008
Number of employees:     1,024     1,001     1,175
FAMCO AUM:     $6.7 billion     $5.9 billion     $8.1 billion
Shareholders’ equity:     $781.8 million     $778.1 million     $902.6 million

Annualized Return on
Average Adjusted
Shareholders’ Equity1

   

   5.5%

   

   7.0%

   

   N.M.

Book value per share:     $48.94     $48.30     $57.58

Tangible book value
per share2:

    $38.10     $37.51     $38.44

N.M.= Not Meaningful

1Adjusted shareholders’ equity equals total shareholders’ equity, including goodwill associated with acquisitions, less goodwill resulting from the 1998 acquisition of our predecessor company, Piper Jaffray Companies Inc., by U.S. Bancorp. Annualized return on average adjusted shareholders’ equity is computed by dividing annualized net income by average monthly adjusted shareholders’ equity. Management believes that annualized return on adjusted shareholders’ equity is a meaningful measure of performance because it reflects equity deployed in our businesses after our spin off from U.S. Bancorp on December 31, 2003. The following table sets forth a reconciliation of shareholders’ equity to adjusted shareholders’ equity. Shareholders’ equity is the most directly comparable GAAP financial measure to adjusted shareholders’ equity.

                Average for the
Three Months Ended     Three Months Ended     Three Months Ended
(Dollars in thousands) Sept. 30, 2009 June 30, 2009 Sept. 30, 2008
 
Shareholders' equity $

779,810

$ 769,825 $ 925,650
 
Deduct: goodwill attributable to PJC Inc. acquisition by USB   105,522   105,522   220,035
 
Adjusted shareholders' equity $

674,288

$ 664,303 $ 705,615

2Tangible shareholders’ equity equals total shareholders’ equity less all goodwill and identifiable intangible assets. Tangible book value per share is computed by dividing tangible shareholders’ equity by common shares outstanding. Management believes that tangible book value per share is a more meaningful measure of our book value per share. Shareholders’ equity is the most directly comparable GAAP financial measure to tangible shareholders’ equity. The following is a reconciliation of shareholders’ equity to tangible shareholders’ equity:

                As of     As of     As of
(Dollars in thousands) Sept. 30, 2009 June 30, 2009 Sept. 30, 2008
 
Shareholders' equity $ 781,750 $ 778,109 $

902,580

 
Deduct: goodwill and identifiable intangible assets   173,117   173,731   299,982
 
Tangible shareholders' equity $ 608,633 $ 604,378 $

602,598

Conference Call

Andrew S. Duff, chairman and chief executive officer, and Debbra L. Schoneman, chief financial officer, will host a conference call to discuss third quarter results on Wednesday, Oct. 21, at 9 a.m. ET (8 a.m. CT). The call can be accessed via live audio webcast available through the firm's Web site at www.piperjaffray.com or by dialing (800) 931-6358 and referencing reservation #21439249. Callers should dial in at least 15 minutes early to receive instructions. A replay of the conference call will be available beginning at approximately 11 a.m. ET Oct. 21 at the same Web address or by calling (800) 633-8284 and referencing reservation #21439249.

About Piper Jaffray

Piper Jaffray Companies (NYSE: PJC) is a leading, international middle market investment bank and institutional securities firm, serving the needs of middle market corporations, private equity groups, public entities, nonprofit clients and institutional investors. Founded in 1895, Piper Jaffray provides a comprehensive set of products and services, including equity and debt capital markets products; public finance services; mergers and acquisitions advisory services; structured products; equity and fixed-income institutional brokerage; and equity research. Piper Jaffray headquarters are located in Minneapolis, Minnesota, with offices across the U.S. and in London, Hong Kong and Shanghai. Piper Jaffray & Co. is the firm's principal operating subsidiary. (www.piperjaffray.com)

Cautionary Note Regarding Forward-Looking Statements

This press release and the conference call to discuss the contents of this press release contain forward-looking statements. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements and are subject to significant risks and uncertainties that are difficult to predict. These forward-looking statements cover, among other things, statements made about general economic and market conditions, our current deal pipelines, market share gains and trends, the environment and prospects for capital markets transactions and institutional brokerage activity, anticipated financial results (including expectations regarding revenue and expense levels, the compensation ratio, return on shareholders’ equity, and our quarterly run rate for non-compensation expenses), liquidity and capital resources, inventory positions, share repurchase plans or other similar matters. These statements involve inherent risks and uncertainties, both known and unknown, and important factors could cause actual results to differ materially from those anticipated or discussed in the forward-looking statements including (1) market and economic conditions or developments may be unfavorable, including in specific sectors in which we operate, and these conditions or developments (including market fluctuations or volatility) may adversely affect the environment for capital markets transactions and activity and our business, revenue levels and profitability, (2) the volume of anticipated investment banking transactions as reflected in our deal pipelines (and the net revenues we earn from such transactions) may differ from expected results if any transactions are delayed or not completed at all or if the terms of any transactions are modified, (3) we may not be able to compete successfully with other companies in the financial services industry, (4) the disruption in the competitive landscape and our hiring of additional senior talent may not yield the benefits we anticipate or yield them within expected timeframes, (5) our ability to manage expenses at reduced revenue levels, including our quarterly run rate for non-compensation expenses, may be limited by the fixed nature of certain expenses as well as the impact from unanticipated expenses during the year, (6) an inability to access capital readily or on terms favorable to us could impair our ability to fund operations and could jeopardize our financial condition, (7) an inability to readily divest or transfer inventory positions may result in future inventory levels that differ from management’s expectations and potential financial losses from a decline in value of illiquid positions, and (8) the other factors described under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2008 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2008, and updated in our subsequent reports filed with the SEC (available at our Web site at www.piperjaffray.com and at the SEC Web site at www.sec.gov). Forward-looking statements speak only as of the date they are made, and readers are cautioned not to place undue reliance on them. We undertake no obligation to update them in light of new information or future events.

© 2009 Piper Jaffray & Co., 800 Nicollet Mall, Suite 800, Minneapolis, Minnesota 55402-7020

Piper Jaffray Companies                                          
Preliminary Unaudited Results of Operations
 
Three Months Ended Percent Inc/(Dec) Nine Months Ended
Sept. 30, Jun. 30, Sept. 30, 3Q '09 3Q '09 Sept. 30, Sept. 30, Percent
(Amounts in thousands, except per share data) 2009 2009 2008 vs. 2Q '09 vs. 3Q '08 2009 2008 Inc/(Dec)
Revenues:
Investment banking $ 48,115 $ 62,150 $ 48,313 (22.6 ) % (0.4 ) % $ 134,615 $ 135,762 (0.8 ) %
Institutional brokerage 59,576 60,852 12,834 (2.1 ) 364.2 175,455 93,842 87.0
Interest 10,398 8,973 10,509 15.9 (1.1 ) 26,659 38,782 (31.3 )
Asset management 3,568 3,240 4,314 10.1 (17.3 ) 9,817 12,984 (24.4 )
Other income/(loss)   3,340     (950 )   697   N/M   379.2     (1,209 )   1,469   N/M  
Total revenues 124,997 134,265 76,667 (6.9 ) 63.0 345,337 282,839 22.1
 
Interest expense   5,328     1,975     3,148   169.8   69.3     9,496     15,852   (40.1 )
 
Net revenues   119,669     132,290     73,519   (9.5 ) 62.8     335,841     266,987   25.8  
 
Non-interest expenses:
Compensation and benefits 71,802 79,377 80,421 (9.5 ) (10.7 ) 201,503 200,785 0.4
Occupancy and equipment 7,703 7,680 8,092 0.3 (4.8 ) 21,901 24,335 (10.0 )
Communications 5,474 5,430 6,597 0.8 (17.0 ) 17,003 19,205 (11.5 )
Floor brokerage and clearance 2,974 3,232 3,342 (8.0 ) (11.0 ) 9,088 9,895 (8.2 )
Marketing and business development 5,498 3,419 6,099 60.8 (9.9 ) 13,362 19,576 (31.7 )
Outside services 6,234 7,415 9,270 (15.9 ) (32.8 ) 21,168 29,220 (27.6 )
Restructuring-related expenses - 3,572 4,570 (100.0 ) (100.0 ) 3,572 8,153 (56.2 )
Other operating expenses   4,402     3,747     1,830   17.5   140.5     10,700     10,898   (1.8 )
Total non-interest expenses   104,087     113,872     120,221   (8.6 ) (13.4 ) %   298,297     322,067   (7.4 ) %

 

Income/(loss) from continuing operations before
  income tax expense/(benefit)

15,582 18,418 (46,702 ) (15.4 ) N/M 37,544 (55,080 ) N/M
 
Income tax expense/(benefit)   6,316     6,842     (19,166 ) (7.7 ) N/M     19,427     (24,637 ) N/M  
 
Net income/(loss) from continuing operations   9,266     11,576     (27,536 ) (20.0 ) N/M     18,117     (30,443 ) N/M  
 
Income/(loss) from discontinued operations, net of tax   -     -     (653 ) -   N/M     -     786   N/M  
 
Net income/(loss)   9,266     11,576   $ (28,189 ) (20.0 ) N/M     18,117   $ (29,657 ) N/M  
 
Earnings allocated to participating stock awards   (1,690 )   (2,101 )   N/A   (19.6 ) N/M     (3,254 )   N/A   N/M  
 
Net income applicable to Piper Jaffray Companies

common shareholders

$ 7,576   $ 9,475     N/A   (20.0 ) % N/M   $ 14,863     N/A   N/M  
 
Earnings per basic common share
Income/(loss) from continuing operations $ 0.47 $ 0.59 $ (1.75 ) (20.3 ) % N/M $ 0.93 $ (1.92 ) N/M
Income/(loss) from discontinued operations   -     -     (0.04 ) -   N/M     -     0.05   N/M  
Earnings per basic common share $ 0.47 $ 0.59 $ (1.79 ) (20.3 ) % N/M $ 0.93 $ (1.87 ) N/M
 
Earnings per diluted common share
Income/(loss) from continuing operations $ 0.47 $ 0.59 $ (1.75 ) (20.3 ) % N/M $ 0.93 $ (1.92 ) N/M
Income/(loss) from discontinued operations   -     -     (0.04 ) -   N/M     -     0.05   N/M  
Earnings per diluted common share $ 0.47 $ 0.59 $ (1.79 ) (20.3 ) % N/M $ 0.93 $ (1.87 ) N/M
 
Weighted average number of common shares outstanding
Basic 16,031 16,104 15,772 (0.5 ) % 1.6 % 16,001 15,891 0.7 %
Diluted 16,131 16,117 15,772 0.1 % 2.3 % 16,039 15,891 0.9 %
 
N/M - Not meaningful

N/A - Not applicable as allocation of income was not made

due to net loss position

Piper Jaffray Companies
Preliminary Unaudited Revenues From Continuing Operations (Detail)
                                       
Three Months Ended Percent Inc/(Dec) Nine Months Ended
Sept. 30, Jun. 30, Sept. 30, 3Q '09 3Q '09 Sept. 30, Sept. 30, Percent
(Dollars in thousands) 2009 2009 2008 vs. 2Q '09 vs. 3Q '08 2009 2008 Inc/(Dec)
Investment banking
Financing
Equities $ 17,769 $ 23,294 $ 11,397 (23.7 ) % 55.9 % $ 45,126 $ 36,620 23.2 %
Debt 20,493 20,126 17,771 1.8 15.3 53,007 52,438 1.1
Advisory services   10,138   19,574   21,358   (48.2 ) (52.5 )   38,527   57,939   (33.5 )
Total investment banking 48,400 62,994 50,526 (23.2 ) (4.2 ) 136,660 146,997 (7.0 )
 
Institutional brokerage
Equities 31,438 30,384 35,302 3.5 (10.9 ) 92,484 101,827 (9.2 )
Fixed income   32,101   35,166   (17,280 ) (8.7 ) N/M     95,072   5,863   N/M  
Total institutional brokerage 63,539 65,550 18,022 (3.1 ) 252.6 187,556 107,690 74.2
 
Asset management 3,568 3,240 4,314 10.1 (17.3 ) 9,817 12,984 (24.4 )
 
Other income/(loss) 4,162 506 657 722.5 533.5 1,808 (684 ) N/M
               
Net revenues $ 119,669 $ 132,290 $ 73,519   (9.5 ) % 62.8   % $ 335,841 $ 266,987   25.8   %
 
N/M - Not meaningful

Source: Piper Jaffray Companies

Piper Jaffray
Jennifer A. Olson-Goude, 612-303-6277
Investor and Media Relations