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MINNEAPOLIS, Jan 27, 2010 (BUSINESS WIRE) -- Piper Jaffray Companies (NYSE: PJC) today announced net income of $12.3 million from continuing operations, or $0.63 per diluted common share, for the quarter ended Dec. 31, 2009, compared to a net loss from continuing operations of $153.0 million, or $9.76 per diluted share, for the fourth quarter of 2008. In the third quarter of 2009, continuing operations generated net income of $9.3 million, or $0.47 per diluted common share. Fourth quarter 2009 net revenues from continuing operations were $132.9 million, compared to $59.4 million in the year-ago period, and $119.7 million for the third quarter of 2009.

For the full year 2009, the company recorded net income from continuing operations of $30.4 million, or $1.55 per diluted common share, compared to a net loss from continuing operations of $183.5 million, or $11.59 per diluted share, for the year-ago period.

"We are pleased with our fourth quarter and full year 2009 results," said Andrew S. Duff, chairman and chief executive officer. "In 2009, we advanced our asset management strategy with our announced acquisition of Advisory Research, and we found the right balance between maintaining lower costs and investing in our business. Our efforts are reflected in our improving operating margin, gains in market share, and progress on increasing our return on equity."

Results of Continuing Operations

Fourth Quarter

Net Revenues

Investment Banking

For the fourth quarter of 2009, total investment banking revenues were $73.6 million, up 189 percent compared to the fourth quarter of 2008 and up 52 percent compared with the third quarter of 2009.

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

Institutional Brokerage

For the quarter ended Dec. 31, 2009, institutional brokerage generated net revenues of $50.1 million, significantly improved compared to $28.5 million in the fourth quarter of 2008, and down 21 percent compared to the strong third quarter of 2009.

Fourth Quarter

Non-Interest Expenses

For the fourth quarter of 2009, compensation and benefits expenses were $79.8 million, up 64 percent compared to the year-ago period and up 11 percent compared to the third quarter of 2009. The increases compared to both periods were driven by improved results. The compensation ratio for the fourth quarter of 2009 was 60.0 percent, compared to 81.9 percent in the fourth quarter of 2008, and 60.0 percent in the third quarter of 2009.

For the fourth quarter of 2009, non-compensation expenses were $34.2 million, which included $1.4 million of legal and professional fees associated with the announced acquisition of Advisory Research. For the fourth quarter of 2008, non-compensation expenses were $179.3 million, which included a $130.5 million charge for impairment of goodwill, and $9.7 million for a restructuring charge. Non-compensation expenses for the third quarter of 2009 were $32.3 million.

Other Matters

In the fourth quarter of 2009, $15.9 million, or 347,421 shares, was repurchased pursuant to a share repurchase authorization, which runs through June 2010. The company has $61.1 million remaining under this authorization.

Full Year 2009

Net Revenues

For the full year 2009, net revenues were $468.8 million, an increase of 44 percent compared to 2008, mainly driven by significantly improved performance in fixed income institutional brokerage and increased equity and fixed income financing revenues, partially offset by lower advisory services revenues and equity institutional brokerage revenues.

The following is a recap of completed deal information for the full year of 2009:

Full Year 2009

Non-Interest Expenses

For the full year 2009, compensation and benefits expenses were $281.3 million, up 13 percent compared to $249.4 million in 2008. The increase was attributable to improved results in 2009. The compensation ratio improved in 2009 to 60.0 percent compared to 76.4 percent in 2008.

Non-compensation expenses were $131.0 million, which included $3.6 million of restructuring charges and $1.4 million of additional expense related to the announced acquisition of Advisory Research. The company significantly reduced core non-compensation expenses compared to 2008. Non-compensation expenses were $300.6 million in 2008, which included $17.9 million of restructuring charges, a $130.5 million charge for goodwill impairment, and $8.0 million for write-offs related to travel and legal expenses for equity financings that were not completed.

Additional Shareholder Information

As of Dec. 31, 2009 As of Sep. 30, 2009 As of Dec. 31, 2008
Number of employees: 1,039 1,017 1,038
FAMCO AUM: $6.9 billion $6.7 billion $5.9 billion
Shareholders' equity: $778.6 million $781.8 million $748.0 million
Annualized Return on
Average Adjusted 7.3% 5.5% (15.7)%

Shareholders' Equity1

Book value per share: $49.80 $48.94 $47.69
Tangible book value $38.50

$38.10

$36.53

per share2:

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) Dec. 31, 2009 Sept. 30, 2009 Dec. 31, 2008
Shareholders' equity $ 780,592 $ 779,810 $ 858,501
Deduct: goodwill attributable to PJC Inc. acquisition by USB 105,522 105,522 191,407
Adjusted shareholders' equity $ 675,070 $ 674,288 $ 667,094

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) Dec. 31, 2009 Sept. 30, 2009 Dec. 31, 2008
Shareholders' equity $ 778,616 $ 781,750 $ 747,979

Deduct: goodwill and identifiable intangible assets

176,692 173,117 175,105
Tangible shareholders' equity $ 601,924 $ 608,633 $ 572,874

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, Jan. 27, 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) 926-7510, or (212) 231-2904 internationally, and referencing reservation #21455097. 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 Jan. 27 at the same Web address or by calling (800) 633-8284 and referencing reservation #21455097.

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 and Hong Kong. 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, the timing of closing of our acquisition of Advisory Research, the expected benefits of this acquisition (including expectations regarding pre-tax income and mitigation of volatility in our business), anticipated financial results (including expectations regarding revenue and expense levels, operating margin, the compensation ratio, return on shareholders' equity, our quarterly run rate for non-compensation expenses, and the ratio of non-compensation expenses to revenues), expected hiring activity, productivity levels, our current deal pipelines, market share gains and trends, the environment and prospects for capital markets transactions and institutional brokerage activity, 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) the transaction with Advisory Research may not be completed, or completed within the expected timeframe, (2) the expected benefits of the Advisory Research transaction, including earnings accretion, margin improvement, return on equity improvement, compensation ratio improvement, the mitigation of volatility in our overall business, and the achievement of scale sufficient to support organic growth, may take longer than anticipated to achieve and may not be achieved in their entirety or at all, (3) 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, (4) 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, (5) we may not be able to compete successfully with other companies in the financial services industry, (6) our hiring of additional senior talent may not yield the benefits we anticipate or yield them within expected timeframes, (7) our ability to manage expenses, 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, (8) 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, (9) 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.

© 2010 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) Twelve Months Ended
Dec. 31, Sept. 30, Dec. 31, 4Q '09 4Q '09 Dec. 31, Dec. 31, Percent
(Amounts in thousands, except per share data) 2009 2009 2008 vs. 3Q '09 vs. 4Q '08 2009 2008 Inc/(Dec)
Revenues:
Investment banking $ 73,086 $ 48,115 $ 23,985 51.9 % 204.7 % $ 207,701 $ 159,747 30.0 %
Institutional brokerage 45,662 59,576 23,359 (23.4 ) 95.5 221,117 117,201 88.7
Interest 9,595 10,398 9,714 (7.7 ) (1.2 ) 36,254 48,496 (25.2 )
Asset management 4,864 3,568 3,985 36.3 22.1 14,681 16,969 (13.5 )
Other income 3,940 3,340 1,170 18.0 236.8 2,731 2,639 3.5
Total revenues 137,147 124,997 62,213 9.7 120.4 482,484 345,052 39.8
Interest expense 4,198 5,328 2,803 (21.2 ) 49.8 13,694 18,655 (26.6 )
Net revenues 132,949 119,669 59,410 11.1 123.8 468,790 326,397 43.6
Non-interest expenses:
Compensation and benefits 79,774 71,802 48,653 11.1 64.0 281,277 249,438 12.8
Occupancy and equipment 7,804 7,703 8,699 1.3 (10.3 ) 29,705 33,034 (10.1 )
Communications 5,679 5,474 5,893 3.7 (3.6 ) 22,682 25,098 (9.6 )
Floor brokerage and clearance 2,860 2,974 2,892 (3.8 ) (1.1 ) 11,948 12,787 (6.6 )
Marketing and business development 5,607 5,498 5,673 2.0 (1.2 ) 18,969 25,249 (24.9 )
Outside services 8,489 6,234 11,992 36.2 (29.2 ) 29,657 41,212 (28.0 )
Restructuring-related expenses - - 9,712 - (100.0 ) 3,572 17,865 (80.0 )
Goodwill impairment - - 130,500 - (100.0 ) - 130,500 (100.0 )
Other operating expenses 3,728 4,402 3,923 (15.3 ) (5.0 ) 14,428 14,821 (2.7 )
Total non-interest expenses 113,941 104,087 227,937 9.5 (50.0 ) % 412,238 550,004 (25.0 ) %

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

19,008 15,582 (168,527 ) 22.0 N/M 56,552 (223,607 ) N/M
Income tax expense/(benefit) 6,756 6,316 (15,496 ) 7.0 N/M 26,183 (40,133 ) N/M
Net income/(loss) from continuing operations 12,252 9,266 (153,031 ) 32.2 N/M 30,369 (183,474 ) N/M
Income/(loss) from discontinued operations, net of tax - - (287 ) - N/M - 499 N/M
Net income/(loss) 12,252 9,266 $ (153,318 ) 32.2 N/M 30,369 $ (182,975 ) N/M
Earnings allocated to participating stock awards (2,243 ) (1,690 ) N/A 32.7 N/M (5,481 ) N/A N/M

Net income applicable to Piper Jaffray Companies common shareholders

$ 10,009 $ 7,576 N/A 32.1 % N/M $ 24,888 N/A N/M
Earnings per basic common share
Income/(loss) from continuing operations $ 0.63 $ 0.47 $ (9.76 ) 34.0 % N/M $ 1.56 $ (11.59 ) N/M
Income/(loss) from discontinued operations - - (0.02 ) - N/M - 0.03 N/M
Earnings per basic common share $ 0.63 $ 0.47 $ (9.78 ) 34.0 % N/M $ 1.56 $ (11.55 ) N/M
Earnings per diluted common share
Income/(loss) from continuing operations $ 0.63 $ 0.47 $ (9.76 ) 34.0 % N/M $ 1.55 $ (11.59 ) N/M
Income/(loss) from discontinued operations - - (0.02 ) - N/M - 0.03 N/M
Earnings per diluted common share $ 0.63 $ 0.47 $ (9.78 ) 34.0 % N/M $ 1.55 $ (11.55 ) N/M
Weighted average number of common shares outstanding
Basic 15,803 16,031 15,676 (1.4 ) % 0.8 % 15,952 15,837 0.7 %
Diluted 15,908 16,131 15,676 (1.4 ) % 1.5 % 16,007 15,837 1.1 %

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) Twelve Months Ended
Dec. 31, Sept. 30, Dec. 31, 4Q '09 4Q '09 Dec. 31, Dec. 31, Percent
(Dollars in thousands) 2009 2009 2008 vs. 3Q '09 vs. 4Q '08 2009 2008 Inc/(Dec)
Investment banking
Financing
Equities $ 36,542 $ 17,769 $ 4,225 105.7 % N/M $ 81,668 $ 40,845 99.9 %
Debt 26,097 20,493 10,687 27.3 144.2 % 79,104 63,125 25.3
Advisory services 10,991 10,138 10,584 8.4 3.8 49,518 68,523 (27.7 )
Total investment banking 73,630 48,400 25,496 52.1 188.8 210,290 172,493 21.9
Institutional sales and trading
Equities 28,004 31,438 28,040 (10.9 ) (0.1 ) 120,488 129,867 (7.2 )
Fixed income 22,104 32,101 432 (31.1 ) N/M 117,176 6,295 N/M
Total institutional sales and trading 50,108 63,539 28,472 (21.1 ) 76.0 237,664 136,162 74.5
Asset management 4,864 3,568 3,985 36.3 22.1 14,681 16,969 (13.5 )
Other income 4,347 4,162 1,457 4.4 198.4 6,155 773 N/M
Net revenues $ 132,949 $ 119,669 $ 59,410 11.1 % 123.8 % $ 468,790 $ 326,397 43.6 %
N/M - Not meaningful

SOURCE: Piper Jaffray Companies

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