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MINNEAPOLIS, July 21 /PRNewswire-FirstCall/ -- Piper Jaffray Companies (NYSE: PJC) today announced net income of $13.0 million, or $.67 per diluted share, for the quarter ended June 30, 2004, up from $8.6 million, or $.45 per diluted share, for the year-ago period. Net income totaled $13.8 million, or $0.71 per diluted share in the first quarter of 2004. Net revenues for the second quarter were $207.3 million, essentially unchanged from the second quarter of 2003 and unchanged sequentially.

For the first six months, net income and earnings per diluted share approximately doubled from the year-ago period at $26.8 million and $1.38, respectively. Net revenues of $416.7 million year-to-date represent an 11.3 percent increase over the year-ago period, primarily due to significantly improved equity investment banking revenues.

"We faced a more challenging market environment in our fixed income business and softer private client activity, which constrained growth in revenues and earnings," said Chairman and CEO Andrew S. Duff. "However, we experienced stronger activity in mergers and acquisitions and continued healthy equity underwriting for the quarter."

Results of Operations

Net Revenues

Overall, second quarter net revenues were relatively unchanged compared to the year-ago period, but the revenue mix shifted significantly, to equity- related products from fixed income products. A $10.5 million rise in investment banking revenues was offset by a $10.0 million decrease in principal transactions, primarily due to a decline in fixed income institutional sales and trading. The fixed income business achieved record revenues in the second quarter of last year driven by high-yield corporate bonds where the firm has proprietary research capabilities. Commissions and fees remained essentially flat with the second quarter of last year, but declined sequentially $3.7 million, or 5.4 percent, from the first quarter of 2004 driven by softer individual investor activity.

Non-Interest Expenses

For the quarter, non-interest expenses were $186.6 million, a 2.6 percent decrease from the second quarter of 2003. Compensation expenses were $127.7 million, consistent with last year. Non-compensation expenses were $58.9 million, down $5.6 million or 8.7 percent compared to the second quarter of last year. The decrease was attributed to lower loan losses related to certain forgivable employee loans, offset in part by new public company costs and higher expenses associated with increased equity deal activity.

For the quarter, pre-tax operating margin was 10.0 percent, up from 6.5 percent for the year-ago period and down slightly from 10.6 percent for the first quarter of 2004.

Business Segment Review

Capital Markets

Capital Markets recorded $113.6 million in net revenues for the quarter, relatively unchanged from the year-ago period. Segment pre-tax operating income for the quarter decreased $5.6 million, or 21.8 percent, to $20.0 million compared to the second quarter of 2003. A $13.2 million rise in fees from mergers and acquisitions and a $3.1 million increase in equity underwriting were offset primarily by a $12.0 million decline in fixed income institutional sales and trading and a $3.7 million decrease in fixed income underwriting. The increase in M&A primarily stemmed from a significant transaction that closed in the quarter. Lower fixed income institutional sales were driven by a substantially reduced institutional client order flow and reduced trading profits due to the uncertainty around rising interest rates during the second quarter of 2004.

Equity trading volumes declined in the second quarter from the first quarter, resulting in a $4.2 million sequential decrease in equity institutional sales. Also compared to the preceding quarter, equity underwriting decreased by $6.0 million due to the timing of some deals.

Segment operating expenses were $93.6 million for the quarter, up 4.1 percent over the year-ago period. The increase was driven by spending on technology, expansion of research coverage and additional expenses associated with stronger equity deal activity. Segment pre-tax operating margin was 17.6 percent, below the prior year quarter but in line with annual historical margins.

The number and value of deals completed for both equity underwriting and M&A transactions significantly improved over the same quarter last year. Following is a recap of completed deals and the industry rankings (based on the number of transactions completed) during the second quarter of 2004.

Private Client Services

Private Client Services recorded $88.1 million in net revenues for the quarter, representing a 0.8 percent decrease from the same quarter last year. Net revenues declined 7.8 percent from a stronger first quarter, primarily due to lower private client demand for equities amid concern over inflation, rising interest rates and geopolitical events. Segment pre-tax operating income was $11.8 million, up significantly from $0.8 million in the year-ago period.

Segment operating expenses were $76.3 million, which was 13.3 percent below the year-ago period, primarily due to lower loan losses related to certain forgivable employee loans. The year-ago period included an $8.8 million loan loss reserve for anticipated attrition related to implementing a new compensation plan for financial advisors. Segment pre-tax operating margin was 13.4 percent for the quarter, up from 0.9 percent in the year-ago period and 12.8 percent in the first quarter of 2004.

Corporate Support and Other

Corporate Support and Other pre-tax operating loss was $9.9 million for the second quarter compared to a loss of $12.0 million in the year-ago period and a loss of $8.7 million in the preceding quarter. Second quarter results included a net $1.0 million gain on a venture investment in a company we recently took public.


     Additional Shareholder Information

                                  As of           As of           As of
                              June 30, 2004  March 31, 2004   June 30, 2003
     Full Time Employees:            3,043           3,019           3,023
     Financial Advisors:               850             867             924
     Client Assets:            $49 billion     $51 billion     $48 billion
     Shareholders' equity:  $700.7 million  $685.0 million  $619.7 million
     Book value per share:          $36.24          $35.43          $32.24
     Tangible book value
      per share:                    $20.43          $19.62          $16.34

Conference Call

Andrew S. Duff, Chairman and CEO, and Sandra G. Sponem, Chief Financial Officer, will host a conference call to discuss second quarter 2004 financial results on Wednesday, July 21, 2004, at 11 a.m. Eastern Time (10 a.m. Central Time). To access the call, please dial (800) 374-0255, or (706) 643-7489 international, and refer to conference ID 8526038 and the leader's name, Jennifer Olson-Goude. Callers should dial in at least 15 minutes early to receive instructions. A replay of the conference call will be available through midnight Friday, Aug. 13, 2004 by calling (800) 642-1687 or (706) 645-9291 international.

About Piper Jaffray Companies

Piper Jaffray Companies (NYSE: PJC) is a focused securities firm dedicated to delivering superior financial advice, investment products and transaction execution within selected sectors of the financial services marketplace. The company operates through two primary revenue-generating segments: Capital Markets and Private Client Services. Investment Research, an independent group reporting to the CEO, supports clients of both segments. Through its chief operating subsidiary, Piper Jaffray & Co., the firm has served corporations, government and non-profit entities, institutional investors and the financial advisory needs of private individuals for more than 108 years. Headquartered in Minneapolis, Piper Jaffray has approximately 3,000 employees in 111 offices in 23 states across the country and in London. For more information about Piper Jaffray, visit us online at http://www.piperjaffray.com .

Since 1895. Member SIPC and NYSE.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements. Statements that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements. These forward-looking statements cover, among other things, the future prospects of Piper Jaffray Companies. Forward-looking statements involve inherent risks and uncertainties, and important factors could cause actual results to differ materially from those anticipated, including the following: (1) we may experience increased costs resulting from decreased purchasing power and size compared to that previously provided by our association with U.S. Bancorp, (2) we compete with U.S. Bancorp with respect to clients we both serviced prior to our spin-off from U.S. Bancorp and may not be able to retain these clients, (3) the continued ownership of U.S. Bancorp common stock and options by our executive officers and some of our directors will create, or will appear to create, conflicts of interest, (4) we have agreed to certain restrictions to preserve the tax treatment of the spin-off, which reduce our strategic and operating flexibility, (5) we have agreed to indemnify U.S. Bancorp for taxes and related losses resulting from any actions we take that cause the spin-off to fail to qualify as a tax-free transaction, (6) the separation and distribution agreement entered into between U.S. Bancorp and us contains cross-indemnification obligations of U.S. Bancorp and us that either party may be unable to satisfy, (7) developments in market and economic conditions have in the past adversely affected, and may in the future adversely affect, our business and profitability, (8) we may not be able to compete successfully with other companies in the financial services industry, (9) our underwriting and market-making activities may place our capital at risk, (10) an inability to readily divest or transfer trading positions may result in financial losses to our business, (11) use of derivative instruments as part of our risk management techniques may place our capital at risk, while our risk management techniques themselves may not fully mitigate our market risk exposure, (12) 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, (13) our technology systems are critical components of our operations and the failure of those systems may disrupt our business, cause financial loss and constrain our growth, (14) our business is subject to extensive regulation that limits our business activities, and a significant regulatory action against our company may have a material adverse financial effect or cause significant reputational harm, (15) regulatory capital requirements may adversely affect our ability to expand or maintain present levels of our business or impair our ability to meet our financial obligations, (16) our exposure to legal liability is significant, and could lead to substantial damages and restrictions on our business going forward, (17) we may suffer losses if our reputation is harmed, (18) provisions in our certificate of incorporation and bylaws and of Delaware law may prevent or delay an acquisition of our company, which could decrease the market value of our common stock, and (19) other factors identified in the document entitled "Risk Factors" filed as Exhibit 99.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and in our subsequent reports filed with the SEC. These reports are available at our Web site at http://www.piperjaffray.com and at the SEC's Web site at http://www.sec.gov . Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them in light of new information or future events.


    Piper Jaffray Companies
    Preliminary Unaudited Results of Operations

                                                            Percent Inc/(Dec)
                                 For the Three Months Ended   2Q04     2Q04
    (Amounts in thousands,       June 30, March 31, June 30,   vs.      vs.
     except per share data)         2004     2004     2003    1Q04     2Q03
    Revenues:

     Commissions and fees         $65,776  $69,512  $65,445   (5.4)%    0.5%
     Principal transactions        50,243   52,076   60,267   (3.5)   (16.6)
     Investment banking            68,180   64,862   57,652    5.1     18.3
     Interest                      11,088   12,463   11,811  (11.0)    (6.1)
     Other income                  16,407   14,400   15,202   13.9      7.9

      Total revenues              211,694  213,313  210,377   (0.8)     0.6

     Interest expense               4,391    3,913    5,327   12.2    (17.6)

      Net revenues                207,303  209,400  205,050   (1.0)     1.1

    Non-interest expenses:

     Compensation and benefits    127,690  129,707  127,070   (1.6)     0.5
     Occupancy and equipment       13,683   13,732   12,596   (0.4)     8.6
     Communications                10,712   10,458    9,538    2.4     12.3
     Floor brokerage and
      clearance                     4,559    4,800    5,904   (5.0)   (22.8)
     Marketing and business
      development                  11,131   10,662    9,362    4.4     18.9
     Outside services               9,922    9,158    8,358    8.3     18.7
     Cash award program             1,269    1,071        -   18.5      N/M
     Royalty fee                        -        -    1,033    N/M      N/M
     Other operating expenses       7,647    7,640   17,761    0.1    (56.9)

      Total non-interest expenses 186,613  187,228  191,622   (0.3)    (2.6)

    Income before income tax
     expense                       20,690   22,172   13,428   (6.7)    54.1

    Income tax expense              7,710    8,382    4,806   (8.0)    60.4

    Net income                    $12,980  $13,790   $8,622   (5.9)%   50.5%

    Earnings per common share
     Basic                          $0.67    $0.71    $0.45   (5.6)%   48.9%
     Diluted                        $0.67    $0.71    $0.45   (5.6)%   48.9%

    Weighted average number of
     common shares
     Basic                         19,333   19,333   19,223    0.0%     0.6%
     Diluted                       19,395   19,366   19,223    0.1%     0.9%

    N/M - Not Meaningful


    Piper Jaffray Companies
    Preliminary Unaudited Results of Operations

                                                For the Six Months Ended
    (Amounts in thousands, except per        June 30,     June 30,  Percent
     share data)                               2004         2003    Inc/(Dec)
    Revenues:

     Commissions and fees                   $135,288     $125,342       7.9%
     Principal transactions                  102,319      110,534      (7.4)
     Investment banking                      133,042       95,758      38.9
     Interest                                 23,551       23,307       1.0
     Other income                             30,807       30,070       2.5

      Total revenues                         425,007      385,011      10.4

     Interest expense                          8,304       10,754     (22.8)

      Net revenues                           416,703      374,257      11.3

    Non-interest expenses:

     Compensation and benefits               257,397      235,976       9.1
     Occupancy and equipment                  27,415       26,674       2.8
     Communications                           21,170       18,484      14.5
     Floor brokerage and clearance             9,359       11,827     (20.9)
     Marketing and business development       21,793       18,708      16.5
     Outside services                         19,080       16,992      12.3
     Cash award program                        2,340            -       N/M
     Royalty fee                                   -        1,979       N/M
     Other operating expenses                 15,287       23,214     (34.1)

      Total non-interest expenses            373,841      353,854       5.6

    Income before income tax expense          42,862       20,403     110.1

    Income tax expense                        16,092        7,088     127.0

    Net income                               $26,770      $13,315     101.1%

    Earnings per common share
     Basic                                     $1.38        $0.69     100.0%
     Diluted                                   $1.38        $0.69     100.0%

    Weighted average number of common shares
     Basic                                    19,333       19,206       0.7%
     Diluted                                  19,380       19,206       0.9%

    N/M - Not Meaningful


    Piper Jaffray Companies
    Preliminary Unaudited Segment Data

                                                           Percent Inc/(Dec)
                               For the Three Months Ended   2Q04       2Q04
                              June 30, March 31,  June 30,   vs.        vs.
    (Dollars in thousands)      2004      2004      2003    1Q04       2Q03
    Capital Markets
      Net revenues           $113,598  $111,880  $115,551    1.5%      (1.7)%
      Operating expenses       93,565    92,241    89,921    1.4        4.1
      Segment pre-tax
       operating income       $20,033   $19,639   $25,630    2.0%     (21.8)%
      Segment operating margin   17.6%     17.6%     22.2%

    Private Client Services
      Net revenues            $88,071   $95,542   $88,738   (7.8)%     (0.8)%
      Operating expenses       76,251    83,272    87,941   (8.4)     (13.3)
      Segment pre-tax
       operating income       $11,820   $12,270      $797   (3.7)%  1,383.1%
      Segment operating margin   13.4%     12.8%      0.9%

    Corporate Support and Other
      Net revenues             $5,634    $1,978      $761  184.8%     640.3%
      Operating expenses       15,528    10,644    12,727   45.9       22.0
      Segment pre-tax
       operating loss         $(9,894)  $(8,666) $(11,966)  14.2%     (17.3)%
      Segment operating margin    N/M       N/M       N/M


    Reconciliation to total income
     before taxes:
      Total segment pre-tax
       operating income       $21,959   $23,243   $14,461   (5.5)%     51.8%
      Royalty fee                   -         -     1,033    N/M        N/M
      Cash award program        1,269     1,071         -   18.5        N/M
      Total income before tax
       expense                $20,690   $22,172   $13,428   (6.7)%     54.1%
      Pre-tax operating margin   10.0%     10.6%      6.5%

    N/M - Not Meaningful


    Piper Jaffray Companies
    Preliminary Unaudited Segment Data

                                                For the Six Months Ended
                                             June 30,    June 30,   Percent
    (Dollars in thousands)                     2004        2003    Inc/(Dec)
    Capital Markets
      Net revenues                          $225,478    $199,293     13.1%
      Operating expenses                     185,806     165,520     12.3
      Segment pre-tax operating income       $39,672     $33,773     17.5%
      Segment operating margin                  17.6%       16.9%

    Private Client Services
      Net revenues                          $183,613    $173,604      5.8%
      Operating expenses                     159,523     166,341     (4.1)
      Segment pre-tax operating income       $24,090      $7,263    231.7%
      Segment operating margin                  13.1%        4.2%

    Corporate Support and Other
      Net revenues                            $7,612      $1,360    459.7%
      Operating expenses                      26,172      20,014     30.8
      Segment pre-tax operating loss        $(18,560)   $(18,654)    (0.5)%
      Segment operating margin                   N/M         N/M

    Reconciliation to total income
     before taxes:
      Total segment pre-tax operating
       income                                $45,202     $22,382    102.0
      Royalty fee                                  -       1,979      N/M
      Cash award program                       2,340           -      N/M
      Total income before tax expense        $42,862     $20,403    110.1%
      Pre-tax operating margin                  10.3%        5.5%

    N/M - Not Meaningful


    Piper Jaffray Companies
    Preliminary Unaudited Supplemental Information

    (Dollars in thousands)    For the Three Months Ended  Percent Inc/(Dec)
    Capital Markets          June 30, March 31,  June 30, 2Q04 vs.  2Q04 vs.
                               2004      2004      2003     1Q04      2Q03
    Institutional Sales
     Fixed Income             $18,876   $19,296    30,901    (2.2)%   (38.9)%
     Equities                  30,268    34,487    31,909   (12.2)     (5.1)

    Total Institutional Sales  49,144    53,783    62,810    (8.6)    (21.8)

    Investment Banking
     Underwriting
      Fixed Income             14,540    14,721    18,276    (1.2)    (20.4)
      Equities                 20,888    26,918    17,800   (22.4)     17.3
     Mergers and
      Acquisitions             26,399    13,152    13,167   100.7     100.5

    Total Investment Banking   61,827    54,791    49,243    12.8      25.6

    Net Interest                3,151     2,306     2,571    36.6      22.6

    Other Income                 (524)    1,000       927  (152.4)   (156.5)

      Capital Markets Net
       Revenues              $113,598  $111,880  $115,551     1.5%     (1.7)%


    Piper Jaffray Companies
    Preliminary Unaudited Supplemental Information

    (Dollars in thousands)                       For the Six Months Ended
    Capital Markets                            June 30,    June 30,   Percent
                                                 2004        2003    Inc/(Dec)
    Institutional Sales
      Fixed Income                             $38,172      53,742    (29.0)%
      Equities                                  64,755      59,093      9.6

    Total Institutional Sales                  102,927     112,835     (8.8)

    Investment Banking
      Underwriting
        Fixed Income                            29,261      31,135     (6.0)
        Equities                                47,806      22,334    114.1
      Mergers and Acquisitions                  39,551      26,416     49.7

    Total Investment Banking                   116,618      79,885     46.0

    Net Interest                                 5,457       4,542     20.1

    Other Income                                   476       2,031    (76.6)

        Capital Markets Net Revenues          $225,478    $199,293     13.1%

Source: Piper Jaffray Companies

CONTACT: Jennifer A. Olson-Goude, Investor Relations
+1-612-303-6277,
or Dana H. Wade, Public Affairs and Media Relations
+1-415-277-1556
both of Piper Jaffray Companies
Web site: http://www.piperjaffray.com