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MINNEAPOLIS, Apr 20, 2011 (BUSINESS WIRE) --

Piper Jaffray Companies (NYSE: PJC) today announced net income of $7.2 million, or $0.38 per diluted common share, for the quarter ended Mar. 31, 2011. For the first quarter of 2010, Piper Jaffray recorded net income of $0.5 million, or $0.03 per diluted common share, which included a $5.2 million, or $0.26 per diluted common share, write-off of a deferred tax asset. For the fourth quarter of 2010, net income was $9.4 million, or $0.49 per diluted common share, which was reduced by $0.48 per diluted common share due to a $9.1 million after-tax restructuring charge. First quarter 2011 net revenues were $124.8 million, compared to $109.6 million in the year-ago period, and $176.4 million for the fourth quarter of 2010.

"Our capital markets and asset management businesses generally performed well during the quarter. Our results reflect lower equity financing activity from China-based issuers, and were negatively impacted by historically low municipal underwriting levels industry-wide. The municipal market remains very challenging, and we believe it will remain so further into 2011," said Andrew S. Duff, chairman and chief executive officer. "We are making significant progress against our strategic growth initiatives, and we are optimistic about the outlook for our firm."

First Quarter

Consolidated Expenses

For the first quarter of 2011, compensation and benefits expenses were $75.5 million, up from $65.1 million in the first quarter of 2010, mainly due to improved performance. Compensation and benefits expenses were down from $106.4 million in the very strong fourth quarter of 2010. For the first quarter, compensation and benefits expenses as a percentage of net revenues were 60.5 percent, compared to 59.4 percent for the first quarter of 2010 and 60.3 for the fourth quarter of 2010.

Non-compensation expenses were $37.9 million, an increase of 7 percent compared to the first quarter of 2010, mainly due to a full quarter of intangible amortization expense related to Advisory Research, which was acquired on Mar. 1, 2010, higher expense write-offs for deals that were not completed due to the volatility in the capital markets, and higher charitable contributions expense. Non-compensation expenses decreased 19 percent compared to the fourth quarter of 2010, primarily due to the $9.5 million (pre-tax) restructuring charge recorded in the fourth quarter.

First Quarter

Business Segment Results

The firm has two reportable business segments: Capital Markets and Asset Management. Consolidated net revenues and expenses are fully allocated to these two segments.

Capital Markets

Capital Markets generated pre-tax operating income of $7.1 million, down 5 percent compared to the year-ago period and down from $16.0 million in the strong fourth quarter of 2010, which was reduced by $9.4 million (pre-tax) of restructuring charges. Net revenues of $106.6 million rose 6 percent compared to the first quarter of 2010 and declined 29 percent compared to the fourth quarter of 2010.

The following is a recap of completed deal information for the first quarter of 2011:

Asset Management

For the quarter ended Mar. 31, 2011, asset management generated pre-tax operating income of $4.3 million, compared to $1.7 million in the first quarter of 2010, and $7.1 million in the fourth quarter of 2010. Net revenues of $18.2 million were double the $9.2 million generated in the year-ago period, primarily attributable to the acquisition of Advisory Research on Mar. 1, 2010. Revenues decreased 28 percent compared to the fourth quarter of 2010, mainly due to $7.6 million of performance fees, the majority of which are recorded at year end if earned.

Additional Shareholder Information

As of Mar. 31, 2011 As of Dec. 31, 2010 As of Mar. 31, 2010
Number of employees: 1,046 1,031 1,092
Asset Management AUM: $12.8 billion $12.3 billion $12.8 billion
Shareholders' equity: $833.6 million $813.3 million $838.4 million
Annualized Qtrly. Return on Avg. Adjusted Shareholders' Equity1

4.0%

5.4%

0.3%

Book value per share: $52.73 $55.50 $52.25
Tangible book value per share2: $28.68 $29.42 $28.38

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) Mar. 31, 2011 Dec. 31, 2010 Mar. 31, 2010
Shareholders' equity $ 823,141 $ 809,154 $ 800,059
Deduct: goodwill attributable to PJC Inc. acquisition by USB 105,522 105,522 105,522
Adjusted shareholders' equity $ 717,619 $ 703,632 $ 694,537

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) Mar. 31, 2011 Dec. 31, 2010 Mar. 31, 2010
Shareholders' equity $ 833,578 $ 813,312 $ 838,423
Deduct: goodwill and identifiable intangible assets 380,161 382,174 383,084
Tangible shareholders' equity $ 453,417 $ 431,138 $ 455,339

Conference Call

Andrew S. Duff, chairman and chief executive officer, and Debbra L. Schoneman, chief financial officer, will host a conference call to discuss first quarter results on Wed., Apr. 20, at 9 a.m. ET (8 a.m. CT). To view a copy of the earnings release on or after Apr. 20, please visit www.piperjaffray.com. The call can be accessed via live audio webcast available through the firm's Web site at www.piperjaffray.com or by dialing (800)919-0625 and referencing reservation #21518365. 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 Apr. 20 at the same Web address or by calling (800) 633-8284 and referencing reservation #21518365.

About Piper Jaffray

Piper Jaffray is a leading middle market investment bank and asset management firm serving clients in the U.S. and internationally. A proven advisory team combines deep industry, product and sector expertise with ready access to global capital. Founded in 1895, the firm is headquartered in Minneapolis and has offices across the United States and in London, Hong Kong and Zurich. 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 (including the municipal market), anticipated financial results (including expectations regarding operating margins, earnings per share, return on equity, and productivity and revenue and expense levels), the environment and prospects for capital markets transactions, current deal pipelines, our five-year strategic priorities (including significant revenue growth for our corporate advisory and public finance businesses, investments in our Asia-based business, growth in our asset management business and the revenue yield thereof, and expansion of middle market, fixed income sales), the earnings per share benefits from our European restructuring, the revenue expected from the new MLP product and assets under management, 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 (including the municipal market), and these conditions or developments, such as market fluctuations or volatility, may adversely affect 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, which may impact our ability to achieve our growth priorities and objectives, (4) our ability to manage expenses may be limited by the fixed nature of certain expenses as well as the impact from unanticipated expenses, (5) the business operations that we conduct outside of the United States, including in Asia, subject us to unique risks, (6) hiring of additional senior talent may not yield the benefits we anticipate or yield them within expected timeframes, and (7) 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, 2010 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, 2010, 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.

© 2011 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)
Mar. 31, Dec. 31, Mar. 31, 1Q '11 1Q '11
(Amounts in thousands, except per share data) 2011 2010 2010 vs. 4Q '10 vs. 1Q '10
Revenues:
Investment banking $ 47,041 $ 94,650 $ 43,748 (50.3 ) % 7.5 %
Institutional brokerage 48,231 46,343 49,095 4.1 (1.8 )
Asset management 17,929 24,988 9,154 (28.2 ) 95.9
Interest 14,229 12,592 13,449 13.0 5.8
Other income 5,511 5,989 2,927 (8.0 ) 88.3
Total revenues 132,941 184,562 118,373 (28.0 ) 12.3
Interest expense 8,161 8,190 8,787 (0.4 ) (7.1 )
Net revenues 124,780 176,372 109,586 (29.3 ) 13.9
Non-interest expenses:
Compensation and benefits 75,545 106,371 65,096 (29.0 ) 16.1
Occupancy and equipment 8,448 9,019 7,669 (6.3 ) 10.2
Communications 6,611 5,983 6,489 10.5 1.9
Floor brokerage and clearance 2,466 2,823 2,617 (12.6 ) (5.8 )
Marketing and business development 6,210 6,435 5,322 (3.5 ) 16.7
Outside services 8,106 8,436 8,004 (3.9 ) 1.3
Restructuring-related expenses - 9,530 - (100.0 ) -
Intangible asset amortization expense 2,069 2,183 976 (5.2 ) 112.0
Other operating expenses 3,977 2,445 4,258 62.7 (6.6 )
Total non-interest expenses 113,432 153,225 100,431 (26.0 ) 12.9
Income before income tax expense 11,348 23,147 9,155 (51.0 ) 24.0
Income tax expense 4,115 13,727 8,645 (70.0 ) (52.4 )
Net income 7,233 9,420 510 (23.2 ) 1,318.2
Net income allocated to restricted participating shares (1,522 ) (2,222 ) (101 ) (31.5 ) 1,406.9
Net income applicable to common shareholders $ 5,711 $ 7,198 $ 409 (20.7 ) % 1,296.3 %
Earnings per common share
Basic $ 0.38 $ 0.49 $ 0.03 (23.5 ) % 1,357.1 %
Diluted $ 0.38 $ 0.49 $ 0.03 (23.7 ) % 1,360.5 %
Weighted average number of common shares outstanding
Basic 15,177 14,635 15,837 3.7 % (4.2 ) %
Diluted 15,224 14,639 15,924 4.0 % (4.4 ) %
Piper Jaffray Companies
Preliminary Unaudited Segment Data
Three Months Ended Percent Inc/(Dec)
Mar. 31, Dec. 31, Mar. 31, 1Q '11 1Q '11
(Dollars in thousands) 2011 2010 2010 vs. 4Q '10 vs. 1Q '10
Capital Markets
Investment banking
Financing
Equities $ 24,682 $ 42,108 $ 16,988 (41.4 ) % 45.3 %
Debt 9,666 19,936 15,181 (51.5 ) (36.3 )
Advisory services 13,424 34,629 11,975 (61.2 ) 12.1
Total investment banking 47,772 96,673 44,144 (50.6 ) 8.2
Institutional sales and trading
Equities 25,739 27,486 26,927 (6.4 ) (4.4 )
Fixed income 29,189 22,565 27,376 29.4 6.6
Total institutional sales and trading 54,928 50,051 54,303 9.7 1.2
Other income 3,880 4,311 1,985 (10.0 ) 95.5
Net revenues 106,580 151,035 100,432 (29.4 ) 6.1
Operating expenses 99,506 134,999 93,026 (26.3 ) 7.0
Segment pre-tax operating income $ 7,074 $ 16,036 $ 7,406 (55.9 ) % (4.5 ) %
Segment pre-tax operating margin 6.6 % 10.6 % 7.4 %
Asset Management
Management and performance fees
Management fees $ 17,812 $ 17,418 $ 8,815 2.3 % 102.1 %
Performance fees 117 7,570 339 (98.5 ) (65.5 )
Total management and performance fees 17,929 24,988 9,154 (28.2 ) 95.9
Other income 271 349 - (22.3 ) N/M
Net revenues 18,200 25,337 9,154 (28.2 ) 98.8
Operating expenses 13,926 18,226 7,405 (23.6 ) 88.1
Segment pre-tax operating income $ 4,274 $ 7,111 $ 1,749 (39.9 ) % 144.4 %
Segment pre-tax operating margin 23.5 % 28.1 % 19.1 %
Total
Net revenues $ 124,780 $ 176,372 $ 109,586 (29.3 ) % 13.9 %
Operating expenses 113,432 153,225 100,431 (26.0 ) 12.9
Total segment pre-tax operating income $ 11,348 $ 23,147 $ 9,155 (51.0 ) % 24.0 %
Pre-tax operating margin 9.1 % 13.1 % 8.4 %
N/M - Not meaningful

SOURCE: Piper Jaffray Companies

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