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MINNEAPOLIS--(BUSINESS WIRE)--Jan. 30, 2013-- Piper Jaffray Companies (NYSE: PJC) today announced that for the quarter ended Dec. 31, 2012, net income from continuing operations was $15.6 million, or $0.88 per diluted common share. These results compared to non-GAAP net income from continuing operations of $2.4 million (1) or $0.13 (1) per diluted common share, in the year-ago period. The references to non-GAAP figures in the year-ago period exclude the effects of a $118.4 million after tax goodwill impairment charge. On a GAAP basis, net loss from continuing operations in the year-ago period was $116.0 million, or $7.35 per diluted common share. In the third quarter of 2012, net income from continuing operations was $14.5 million, or $0.82 per diluted common share.

For the fourth quarter of 2012, net revenues from continuing operations were $140.9 million, compared to $93.1 million in the fourth quarter of 2011, and $131.5 million in the third quarter of 2012.

For the quarter ended Dec. 31, 2012, net income, including continuing and discontinued operations, was $11.8 million, or $0.67 per diluted common share, compared to non-GAAP net income of $2.1 million(2), or $0.11 (2) per diluted common share, in the year-ago period, and $19.7 million, or $1.11 per diluted common share in the third quarter of 2012. On a GAAP basis, net loss from continuing and discontinued operations in the year-ago period was $116.4 million, or $7.38 per diluted common share. Discontinued operations includes the operating results of the Hong Kong capital markets business, which we have shut down, and FAMCO, a division of the asset management segment. The firm is actively pursuing a sale of the FAMCO business.

For the year ended Dec. 31, 2012, net income from continuing operations was $47.1 million, or $2.58 per diluted common share, compared to non-GAAP net income of $27.7 million(1), or $1.44 (1) per diluted common share in the prior year (and a net loss of $90.8 million, or $5.79 per diluted common share in the prior year on a GAAP basis). For 2012, net revenues from continuing operations were $489.0 million up 13% compared to 2011, due to higher revenues across our fixed income and advisory services businesses.

“We produced solid results for the quarter and the year despite adverse market conditions facing several of our businesses,” said Andrew S. Duff, chairman and chief executive officer. “Compared to the prior quarter, strong performance in M&A and public finance, and improved results in equities, more than offset weaker results in our fixed income trading businesses, while our equity capital raising and asset management businesses were flat sequentially.”

Duff continued, “Our strategy served us well as we focused our resources on our businesses where we are strongest, working to generate higher margins and improving our return on equity. Key execution steps in 2012 included adding resources in public finance, fixed income and M&A, creating more flexibility with our lenders, reducing costs, and exiting businesses that lacked sustainability or did not contribute meaningfully to our results. These efforts contributed to an improvement in ROE to 5.7%(6) in 2012 compared to 2.3%(6) in 2011.”

Fourth Quarter Results from Continuing Operations

Consolidated Expenses
For the fourth quarter of 2012, compensation and benefits expenses were $87.4 million, up 44% and 12% compared to the fourth quarter of 2011 and the third quarter of 2012, respectively, due to improved financial results.

For the fourth quarter of 2012, compensation and benefits expenses were 62.0% of net revenues, compared to 65.2% for the fourth quarter of 2011 and 59.4% for the third quarter of 2012. The compensation ratio decreased compared to the fourth quarter of 2011 due to higher revenues, and increased compared to the third quarter of 2012 primarily due to changes in our mix of revenues.

For the fourth quarter of 2012, non-compensation expenses were $30.7 million, compared to non-GAAP non-compensation expenses of $30.5 million(3) in the year-ago period, and $28.1 million in the third quarter of 2012. In the year ago period, non-compensation expenses on a GAAP basis were $150.8 million.

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. The operating results of the Hong Kong capital markets business, and FAMCO, a division of the asset management segment, are presented as discontinued operations for all periods presented.

Capital Markets
For the quarter, Capital Markets generated pre-tax operating income of $19.4 million, compared to a non-GAAP pre-tax operating loss of $2.1 million(4) in the year-ago period and pre-tax operating income of $20.6 million in the third quarter of 2012. On a GAAP basis, with the goodwill impairment charge, this segment generated a pre-tax operating loss of $122.4 million in the year-ago period.

Net revenues were $124.5 million, up 61% and 8% compared to the year-ago period and the third quarter of 2012, respectively.

Asset Management
For the quarter ended Dec. 31, 2012, asset management generated pre-tax operating income of $3.4 million, down 16% and 29%, compared to the fourth quarter of 2011 and the third quarter of 2012, respectively.

Other Matters
In the fourth quarter of 2012, the firm repurchased $4.7 million, or 158,332 shares, of its common stock at an average price of $29.37 per share. The firm has $95.4 million remaining on its share repurchase authorization, which expires on Sept. 30, 2014.

Fourth Quarter Results from Discontinued Operations

Discontinued operations includes the operating results of the Hong Kong capital markets business, which we have shut down, and FAMCO, a division of the asset management segment. The firm is actively pursuing a sale of the FAMCO business.

For the quarter ended Dec. 31, 2012, net loss from discontinued operations was $3.7 million, or $0.21 per diluted common share, compared to a net loss of $0.4 million in the fourth quarter of 2011, or $0.02 per diluted share, and net income of $5.2 million, or $0.29 per diluted share, in the third quarter of 2012. Included in the current quarter is a $3.4 million after-tax, non-cash goodwill impairment charge related to FAMCO.

Full-Year 2012 Results from Continuing Operations

Consolidated Expenses
For 2012, compensation and benefits expenses were $296.9 million, up 12% compared to 2011, due to improved financial performance. Compensation and benefits expenses were 60.7% of net revenues, down from 61.3% in 2011.

For 2012, non-compensation expenses were $123.1 million compared to $127.0 million(3) in 2011 on a non-GAAP basis (and $247.3 million on a GAAP basis).

Business Segment Results
The firm’s Hong Kong capital markets and FAMCO businesses are presented as discontinued operations for all periods presented.

Capital Markets
For 2012, Capital Markets generated pre-tax operating income of $52.5 million, compared to non-GAAP pre-tax operating income of $25.0 million(4) in 2011 (and pre-tax operating loss of $95.3 million on a GAAP basis). Net revenues were $424.1 million, up 15% compared to 2011 due to higher revenues in our fixed income and advisory businesses.

For 2012, operating expenses were $371.6 million, up 8% compared to non-GAAP operating expenses for 2011 of $344.0 million (5) (and $464.3 million on a GAAP basis). Segment pre-tax operating margin improved to 12.4%, compared to a non-GAAP pre-tax operating margin of 6.8%(4) in 2011. Pre-tax operating margin increased significantly in 2012 due to operating leverage related to increased revenues.

Asset Management
For 2012, asset management generated pre-tax operating income of $16.5 million, up 9% compared to 2011. Net revenues were $64.8 million, up 3% compared to 2011.

Operating expenses for the year were $48.3 million, up 1% compared to 2011. Segment pre-tax operating margin was 25.5%, up slightly from 2011.

Other Matters
For the full year 2012, the firm repurchased $47.2 million, or 2.0 million shares, of its common stock, at an average price of $23.22.

Additional Shareholder Information*

     
    For the Quarter Ended:
    As of Dec. 31, 2012   As of Sept. 30, 2012   As of Dec. 31, 2011
Number of employees   907   901   919
Equity financings      
# of transactions 16 14 10
Capital raised   $1.5 billion   $2.5 billion   $2.7 billion
Tax-exempt issuance
# of transactions 154 113 144
Par value   $2.1 billion   $2.3 billion   $2.2 billion
Mergers & acquisitions
# of transactions 22 6 11
Aggregate deal value   $6.8 billion   $0.7 billion   $1.3 billion
Asset Management AUM   $9.1 billion  

$9.2 billion

  $8.6 billion
Common shareholders’ equity   $733.3 million   $724.6 million   $718.4 million
Annualized qtrly. return on avg. common shareholders’ equity **   6.5%  

11.0%

 

1.1%(7)

Book value per share:   $48.20  

$47.58

  $45.61
Tangible book value per share(8):  

$32.39

 

$31.30

 

$29.51

 
     
    For the Year Ended:
    As of Dec. 31, 2012   As of Dec. 31, 2011
Equity financings
# of transactions 67 60
Capital raised   $9.1 billion***   $12.9 billion
Tax-exempt issuance
# of transactions 568 520
Par value   $9.3 billion   $6.9 billion
Mergers & acquisitions
# of transactions 40 38
Aggregate deal value   $10.2 billion   $5.2 billion
Asset Management AUM   $9.1 billion   $8.6 billion
Return on avg. common shareholders’ equity(6)   5.7%   2.3%
 

*Number of employees, transaction data, and AUM reflect continuing operations; other numbers reflect continuing and discontinued results.

**Annualized return on average common shareholders’ equity is computed by dividing annualized net income by average monthly common shareholders’ equity.

***Due to size, Facebook IPO capital raised has been excluded.

Conference Call
Andrew S. Duff, chairman and chief executive officer, and Debbra L. Schoneman, chief financial officer, will hold a conference call to review the financial results Wed., Jan. 30 at 9 a.m. ET (8 a.m. CT). The earnings release will be available on or after Jan. 30 at the firm’s Web site at www.piperjaffray.com. The call can be accessed via webcast or by dialing (888)810- 0209 or (706)902-1361 (international) and referencing reservation #85504834. Callers should dial in at least 15 minutes prior to the call time. A replay of the conference call will be available beginning at approximately 12 p.m. ET Jan. 30 at the same Web address or by calling (855)859-2056 and referencing reservation #85504834 .

About Piper Jaffray

Piper Jaffray is an investment bank and asset management firm serving clients in the U.S. and internationally. Proven advisory teams combine deep industry, product and sector expertise with ready access to capital. Founded in 1895, the firm is headquartered in Minneapolis and has offices across the United States and in London 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, the environment and prospects for capital markets transactions (including corporate advisory transactions), anticipated financial results from strategic trading activities within fixed income institutional brokerage, the sale of the FAMCO division of our asset management business, anticipated financial results generally (including expectations regarding our compensation ratio, revenue levels, operating margins, earnings per share, and return on equity), current deal pipelines (or backlogs), our strategic priorities (including growth in public finance, asset management, and corporate advisory), 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, 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) strategic trading activities comprise a meaningful portion of our fixed income institutional brokerage revenue, and results from these activities may be volatile and vary significantly, including the possibility of incurring losses, on a quarterly and annual basis, (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 sale of the FAMCO business could cause us to incur unforeseen expenses and have disruptive effects on our business, (6) 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, (7) our stock price may fluctuate as a result of several factors, including but not limited to, changes in our revenues and operating results, 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, 2011 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, 2011, 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.

© 2013 Piper Jaffray Companies, 800 Nicollet Mall, Suite 800, Minneapolis, Minnesota 55402-7020

Piper Jaffray Companies                          
Preliminary Unaudited Results of Operations
 
 
Three Months Ended Percent Inc/(Dec) Twelve Months Ended
Dec. 31, Sept. 30, Dec. 31, 4Q '12 4Q '12 Dec. 31, Dec. 31, Percent
(Amounts in thousands, except per share data) 2012 2012 2011 vs. 3Q '12 vs. 4Q '11 2012 2011 Inc/(Dec)
Revenues:
Investment banking $ 82,393 $ 51,083 $ 48,665 61.3 % 69.3 % $ 230,929 $ 200,500 15.2 %
Institutional brokerage 38,017 58,719 24,364 (35.3 ) 56.0 172,023 136,096 26.4
Asset management 16,516 16,136 15,519 2.4 6.4 65,215 63,307 3.0
Interest 13,102 12,457 13,034 5.2 0.5 48,844 55,440 (11.9 )
Other income/(loss)   (11 )   235   (1,705 ) N/M   (99.4 )   1,231     8,313   (85.2 )
Total revenues 150,017 138,630 99,877 8.2 50.2 518,242 463,656 11.8
 
Interest expense   9,106     7,125   6,824   27.8   33.4     29,290     31,573   (7.2 )
 
Net revenues   140,911     131,505   93,053   7.2   51.4     488,952     432,083   13.2  
 
Non-interest expenses:
Compensation and benefits 87,415 78,070 60,632 12.0 44.2 296,882 265,015 12.0
Occupancy and equipment 6,783 6,057 6,579 12.0 3.1 26,454 28,430 (7.0 )
Communications 4,431 5,276 5,181 (16.0 ) (14.5 ) 20,543 22,121 (7.1 )
Floor brokerage and clearance 2,120 1,825 2,249 16.2 (5.7 ) 8,054 8,925 (9.8 )
Marketing and business development 4,926 4,259 5,917 15.7 (16.7 ) 19,908 22,640 (12.1 )
Outside services 8,188 6,747 7,098 21.4 15.4 27,998 27,570 1.6
Restructuring-related expense - - - N/M N/M 3,642 - N/M
Goodwill impairment - - 120,298 N/M N/M - 120,298 N/M
Intangible asset amortization expense 1,736 1,736 1,814 - (4.3 ) 6,944 7,256 (4.3 )
Other operating expenses   2,530     2,183   1,661   15.9   52.3     9,516     10,017   (5.0 )
Total non-interest expenses   118,129     106,153   211,429   11.3   (44.1 ) %   419,941     512,272   (18.0 )
 

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

22,782 25,352 (118,376 ) (10.1 ) N/M 69,011 (80,189 ) N/M
 
Income tax expense/(benefit)   7,422     10,194   (2,989 ) (27.2 ) N/M     19,470     9,120   113.5  
 
Income/(loss) from continuing operations   15,360     15,158   (115,387 ) 1.3   N/M     49,541     (89,309 ) N/M  
 
Discontinued operations:
Income/(loss) from discontinued operations, net of tax   (3,741 )   5,171   (360 ) N/M   N/M     (5,807 )   (11,248 ) (48.4 )
 
Net income/(loss) 11,619 20,329 (115,747 ) (42.8 ) N/M 43,734 (100,557 ) N/M
 
Net income/(loss) applicable to noncontrolling interests   (205 )   665   617   N/M   N/M     2,466     1,463   68.6   %
 

Net income/(loss) applicable to Piper Jaffray Companies (1)

$ 11,824   $ 19,664 $ (116,364 ) (39.9 ) % N/M   $ 41,268   $ (102,020 ) N/M  
 

Net income/(loss) applicable to Piper Jaffray Companies' common shareholders (1)

$ 10,198   $ 16,840 $ (116,364 ) (39.4 ) % N/M   $ 35,335   $ (102,020 ) N/M  
 
Amounts applicable to Piper Jaffray Companies
Income/(loss) from continuing operations $ 15,565 $ 14,493 $ (116,004 ) 7.4 % N/M $ 47,075 $ (90,772 ) N/M
Income/(loss) from discontinued operations, net of tax   (3,741 )   5,171   (360 ) N/M   N/M     (5,807 )   (11,248 ) (48.4 ) %
Net income/(loss) applicable to Piper Jaffray Companies $ 11,824 $ 19,664 $ (116,364 ) (39.9 ) % N/M $ 41,268 $ (102,020 ) N/M
 
Earnings/(loss) per basic common share
Income/(loss) from continuing operations $ 0.88 $ 0.82 $ (7.35 ) 7.3 % N/M $ 2.58 $ (5.79 ) N/M
Income/(loss) from discontinued operations   (0.21 )   0.29   (0.02 ) N/M   N/M     (0.32 )   (0.72 ) (55.4 ) %
Earnings/(loss) per basic common share $ 0.67 $ 1.11 $ (7.38 ) (39.6 ) % N/M $ 2.26 $ (6.51 ) N/M
 
Earnings/(loss) per diluted common share
Income/(loss) from continuing operations $ 0.88 $ 0.82 $ (7.35 ) 7.3 % N/M $ 2.58 $ (5.79 ) N/M
Income/(loss) from discontinued operations   (0.21 )   0.29   (0.02 ) N/M   N/M     (0.32 )   (0.72 ) (55.4 ) %
Earnings/(loss) per diluted common share $ 0.67 $ 1.11 $ (7.38 ) (2) (39.6 ) % N/M $ 2.26 $ (6.51 ) (2) N/M
 
Weighted average number of common shares outstanding
Basic 15,253 15,210 15,773 0.3 % (3.3 ) % 15,615 15,672 (0.4 ) %
Diluted 15,256 15,210 15,773 (2) 0.3 % (3.3 ) % 15,616 15,672 (2) (0.4 ) %

 

(1) Net income applicable to Piper Jaffray Companies is the total net income earned by the Company. Piper Jaffray Companies calculates earnings per common share using the two-class method, which requires the allocation of consolidated net income between common shareholders and participating security holders, which in the case of Piper Jaffray Companies, represents unvested restricted stock with dividend rights.

(2) Earnings per diluted common share is calculated using the basic weighted average number of common shares outstanding for periods in which a loss is incurred.

N/M - Not meaningful

Piper Jaffray Companies
Preliminary Unaudited Segment Data from Continuing Operations
                     
 
Three Months Ended Percent Inc/(Dec) Twelve Months Ended
Dec. 31, Sept. 30, Dec. 31, 4Q '12 4Q '12 Dec. 31, Dec. 31, Percent
(Dollars in thousands) 2012 2012 2011 vs. 3Q '12 vs. 4Q '11 2012 2011 Inc/(Dec)
Capital Markets
 
Investment banking
Financing
Equities $ 18,039 $ 18,781 $ 15,479 (4.0 ) % 16.5 % $ 73,180 $ 74,161 (1.3 ) %
Debt 20,504 16,573 15,210 23.7 34.8 74,102 54,565 35.8
Advisory services   44,495     16,317     18,610   172.7   139.1     86,165     74,373   15.9  
Total investment banking 83,038 51,671 49,299 60.7 68.4 233,447 203,099 14.9
 
Institutional sales and trading
Equities 20,134 17,927 20,147 12.3 (0.1 ) 75,723 86,175 (12.1 )
Fixed income   23,480     46,690     11,097   (49.7 ) 111.6     119,253     77,017   54.8  
Total institutional sales and trading 43,614 64,617 31,244 (32.5 ) 39.6 194,976 163,192 19.5
 
Other income/(loss)   (2,144 )   (1,039 )   (3,206 ) 106.4   (33.1 )   (4,285 )   2,746   N/M  
 
Net revenues 124,508 115,249 77,337 8.0 61.0 424,138 369,037 14.9
 
Non-interest expenses
Goodwill impairment - - 120,298 N/M N/M - 120,298 N/M
Operating expenses   105,099     94,671     79,436   11.0   32.3     371,628     344,036   8.0  
Total non-interest expenses 105,099 94,671 199,734 11.0 (47.4 ) % 371,628 464,334 (20.0 ) %
 
Segment pre-tax operating income/(loss) $ 19,409   $ 20,578   $ (122,397 ) (5.7 ) % N/M   $ 52,510   $ (95,297 ) N/M  
 
Segment pre-tax operating margin

15.6%

 

17.9%

 

(158.3)%

 

12.4%

 

(25.8)%

 

 
 
Asset Management
 
Management and performance fees
Management fees $ 16,083 $ 15,800 $ 14,914 1.8 % 7.8 % $ 63,296 $ 60,873 4.0 %
Performance fees   121     22     499   450.0   (75.8 )   785     2,245   (65.0 )
Total management and performance fees 16,204 15,822 15,413 2.4 5.1 64,081 63,118 1.5
 
Other income/(loss)   199     434     303   (54.1 ) (34.3 )   733     (72 ) N/M  
 
Net revenues 16,403 16,256 15,716 0.9 4.4 64,814 63,046 2.8
 
Operating expenses   13,030     11,482     11,695   13.5   11.4     48,313     47,938   0.8  
 
Segment pre-tax operating income $ 3,373   $ 4,774   $ 4,021   (29.3 ) % (16.1 ) % $ 16,501   $ 15,108   9.2   %
 
Segment pre-tax operating margin

20.6%

 

29.4%

 

25.6%

 

25.5%

 

24.0%

 

 
 
Total
 
Net revenues $ 140,911 $ 131,505 $ 93,053 7.2 % 51.4 % $ 488,952 $ 432,083 13.2 %
 
Non-interest expenses
Goodwill impairment - - 120,298 N/M N/M - 120,298 N/M
Operating expenses   118,129     106,153     91,131   11.3   29.6     419,941     391,974   7.1  
Total non-interest expenses 118,129 106,153 211,429 11.3 (44.1 ) % 419,941 512,272 (18.0 ) %
 
Total segment pre-tax operating income/(loss) $ 22,782   $ 25,352   $ (118,376 ) (10.1 ) % N/M   $ 69,011   $ (80,189 ) N/M  
 
Pre-tax operating margin

16.2%

 

19.3%

 

(127.2)%

 

14.1%

 

(18.6)%

 

 
N/M - Not meaningful
 
Segment pre-tax operating income and segment pre-tax operating margin exclude the results of discontinued operations.
 
Piper Jaffray Companies                      
Preliminary Data from Discontinued Operations
 
 
Three Months Ended Percent Inc/(Dec) Twelve Months Ended
Dec. 31, Sept. 30, Dec. 31, 4Q '12 4Q '12 Dec. 31, Dec. 31, Percent
(Dollars in thousands) 2012 2012 2011 vs. 3Q '12 vs. 4Q '11 2012 2011 Inc/(Dec)
Piper Jaffray Asia
 
Net revenues $ 10 $ 2,674 $ 4,479 (99.6 ) % (99.8 ) % $ 6,635 $ 15,996 (58.5 ) %
 
Non-interest expenses
Restructuring-related expenses 478 11,057 - (95.7 ) N/M 11,535 - N/M
Operating expenses   -     5,843     4,905   N/M   N/M     16,550     24,983   (33.8 )
Total non-interest expenses   478     16,900     4,905   (97.2 ) (90.3 )   28,085     24,983   12.4  
 
Loss before income tax expense/(benefit) (468 ) (14,226 ) (426 ) (96.7 ) 9.9 (21,450 ) (8,987 ) 138.7
 
Income tax expense/(benefit)   (100 )   (21,029 )   41   (99.5 ) % N/M     (21,069 )   1,927   N/M  
 
Net income/(loss) $ (368 ) $ 6,803   $ (467 ) N/M   (21.2 ) % $ (381 ) $ (10,914 ) (96.5 ) %
 
 
FAMCO
 
Net revenues $ 1,490 $ 1,453 $ 1,596 2.5 % (6.6 ) % $ 5,718 $ 6,584 (13.2 ) %
 
Non-interest expenses
Goodwill impairment 5,508 - - N/M N/M 5,508 - N/M
Operating expenses   1,400     4,090     1,443   (65.8 ) (3.0 )   8,362     7,089   18.0  
Total non-interest expenses   6,908     4,090     1,443   68.9   378.7   %   13,870     7,089   95.7   %
 

Income/(loss) before income tax expense/(benefit)

(5,418 ) (2,637 ) 153 105.5 N/M (8,152 ) (505 ) N/M
 
Income tax expense/(benefit)   (2,045 )   (1,005 )   46   103.5   N/M     (2,726 )   (171 ) N/M  
 
Net income/(loss) $ (3,373 ) $ (1,632 ) $ 107   106.7   % N/M   $ (5,426 ) $ (334 ) N/M  
 
 
Total Discontinued Operations
 
Net revenues $ 1,500 $ 4,127 $ 6,075 (63.7 ) % (75.3 ) % $ 12,353 $ 22,580 (45.3 ) %
 
Non-interest expenses
Restructuring-related expenses 478 11,057 - (95.7 ) N/M 11,535 - N/M
Goodwill impairment 5,508 - - N/M N/M 5,508 - N/M
Operating expenses   1,400     9,933     6,348   (85.9 ) (77.9 )   24,912     32,072   (22.3 )
Total non-interest expenses   7,386     20,990     6,348   (64.8 ) 16.4   %   41,955     32,072   30.8  
 

Loss before income tax expense/(benefit)

(5,886 ) (16,863 ) (273 ) (65.1 ) N/M (29,602 ) (9,492 ) 211.9
 
Income tax expense/(benefit)   (2,145 )   (22,034 )   87   (90.3 ) % N/M     (23,795 )   1,756   N/M  
 
Net income/(loss) $ (3,741 ) $ 5,171   $ (360 ) N/M   N/M   $ (5,807 ) $ (11,248 ) (48.4 ) %
 
 

N/M - Not meaningful

 
FOOTNOTES
         
This press release includes the use of non-GAAP financial measures that are not prepared in accordance with U.S. generally accepted accounting principles. These non-GAAP financial measures should not be considered a substitute for measures of financial performance prepared in accordance with GAAP. These non-GAAP financial measures have been used in this press release because management believes they are useful to investors by providing greater transparency to Piper Jaffray’s operating performance.
 
The non-GAAP financial measures used in footnotes 1 through 5 exclude the effects of a goodwill impairment charge recognized in the fourth quarter of 2011.
 
 
(1) Income/(loss) from continuing operations and earnings per share
Three Months Ended Twelve Months Ended
(Amounts in thousands, except per share data) Dec. 31, 2011 Dec. 31, 2011
Loss from continuing operations $ (116,004 ) $ (90,772 )
Adjustment to exclude the goodwill impairment charge, net of income tax   118,448     118,448  
 
Net income from continuing operations, excluding the goodwill impairment charge $ 2,444   $ 27,676  
 

Net income applicable to Piper Jaffray Companies common shareholders, excluding the goodwill impairment charge

$ 2,027   $ 22,593  
 
 
Diluted earnings per common share, excluding the goodwill impairment charge $ 0.13 $ 1.44
 
Weighted average number of common shares outstanding - diluted 15,773 15,685
 
 
(2) Net income/(loss) applicable to Piper Jaffray Companies and earnings per share
Three Months Ended Twelve Months Ended
(Amounts in thousands, except per share data) Dec. 31, 2011 Dec. 31, 2011
Net loss applicable to Piper Jaffray Companies $ (116,364 ) $ (102,020 )
Adjustment to exclude the goodwill impairment charge, net of income tax   118,448     118,448  
 
Net income applicable to Piper Jaffray Companies, excluding the goodwill impairment charge $ 2,084   $ 16,428  
 

Net income applicable to Piper Jaffray Companies common shareholders, excluding the goodwill impairment charge

$ 1,729   $ 13,411  
 
 
Diluted earnings per common share, excluding the goodwill impairment charge $ 0.11 $ 0.86
 
Weighted average number of common shares outstanding - diluted 15,773 15,685
 
 
(3) Consolidated non-compensation expenses from continuing operations
Three Months Ended Twelve Months Ended
(Amounts in thousands) Dec. 31, 2011 Dec. 31, 2011
Non-compensation expenses $ 150,797 $ 247,257
Adjustment to exclude the goodwill impairment charge   (120,298 )   (120,298 )
 
Non-compensation expenses, excluding the goodwill impairment charge $ 30,499   $ 126,959  
 
 
(4) Capital Markets pre-tax operating income and pre-tax margin from continuing operations
Three Months Ended Twelve Months Ended
(Amounts in thousands) Dec. 31, 2011 Dec. 31, 2011
Capital Markets pre-tax operating loss $ (122,397 ) $ (95,297 )
Adjustment to exclude the goodwill impairment charge   120,298     120,298  
 
Capital Markets pre-tax operating income/(loss), excluding the goodwill impairment charge $ (2,099 ) $ 25,001  
 
Capital Markets pre-tax operating margin (158.3 ) % (25.8 ) %
Capital Markets pre-tax operating margin, excluding the goodwill impairment charge (2.7 ) % 6.8 %
 
 
(5) Capital Markets operating expenses from continuing operations
Three Months Ended Twelve Months Ended
(Amounts in thousands) Dec. 31, 2011 Dec. 31, 2011
Capital Markets operating expenses $ 199,734 $ 464,334
Adjustment to exclude the goodwill impairment charge   (120,298 )   (120,298 )
 
Capital Markets operating expenses, excluding the goodwill impairment charge $ 79,436   $ 344,036  
 
 
(6) Return on average adjusted common shareholders' equity
 
Adjusted common shareholders’ equity equals total common 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. Return on average adjusted common shareholders’ equity is computed by dividing net income by average monthly adjusted common shareholders’ equity. Management believes that return on adjusted common 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 common shareholders’ equity to adjusted common shareholders’ equity. Common shareholders’ equity is the most directly comparable GAAP financial measure to adjusted common shareholders’ equity.
 
Average for the Average for the
Year Ended Year Ended
Average for the Dec. 31, 2011, Dec. 31, 2011,
Year Ended Including the Goodwill Excluding the Goodwill
(Amounts in thousands) Dec. 31, 2012 Impairment Charge Impairment Charge
Common shareholders' equity $ 728,433 $ 825,483 $ 834,594
Deduct: goodwill attributable to PJC Inc. acquisition by USB   -   97,405     105,522  
 
Adjusted common shareholders' equity $ 728,433 $ 728,078   $ 729,072  
 
Annualized net income applicable to Piper Jaffray Companies $ 41,268 N/M $ 16,428
 
Annualized quarterly return on average adjusted common shareholders' equity 5.7 % N/M 2.3 %
 
 
(7) Annualized quarterly return on average adjusted common shareholders' equity
 
Management believes that the annualized quarterly return on average adjusted common shareholders' equity excluding the impact of the goodwill impairment charge is a meaningful measure and aids comparison to the other quarters presented.
 
Average for the Average for the
Three Months Ended Three Months Ended
Dec. 31, 2011, Dec. 31, 2011,
Including the Goodwill Excluding the Goodwill
(Amounts in thousands) Impairment Charge Impairment Charge
Common shareholders' equity $ 808,079 $ 837,691
Deduct: goodwill attributable to PJC Inc. acquisition by USB   79,141     105,522  
 
Adjusted common shareholders' equity $ 728,938 $ 732,169
 
Annualized net income applicable to Piper Jaffray Companies N/M $ 8,337
 
Annualized quarterly return on average adjusted common shareholders' equity N/M 1.1 %
 
N/M - Not meaningful
 
 
(8) Tangible common shareholders' equity
 
Tangible 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
(Amounts in thousands) Dec. 31, 2012 Sept. 30, 2012 Dec. 31, 2011
Common shareholders' equity $ 733,292 $ 724,616 $ 718,391
Deduct: goodwill and identifiable intangible assets   240,480   247,905     253,656  
 
Tangible common shareholders' equity $ 492,812 $ 476,711   $ 464,735  
 

Source: Piper Jaffray Companies

Piper Jaffray Companies
Tom Smith, 612-303-6336
Investor Relations