Press Room

News Releases

 

MINNEAPOLIS, Apr 18, 2012 (BUSINESS WIRE) --Piper Jaffray Companies (NYSE: PJC) today announced net income of $2.9 million, or $0.15 per diluted common share, for the quarter ended Mar. 31, 2012. Results included $3.4 million, or $0.18 per diluted common share, of additional income tax expense for writing off equity-related deferred tax assets. For the first quarter of 2011, net income was $7.2 million, or $0.38 per diluted common share. For the fourth quarter of 2011, the firm recorded non-GAAP net income of $2.1 million(1), or $0.11(1) per diluted common share. On a GAAP basis, the net loss for the fourth quarter was $116.4 million, or $7.38 per diluted common share. The non-GAAP results excluded the $118.4 million after-tax goodwill impairment charge that the firm recorded in the fourth quarter.

For the first quarter of 2012, net revenues were $117.7 million, compared to $124.8 million in the year-ago period and $99.2 million in the sequential fourth quarter.

"Against a more positive operating environment, we were pleased with our improved first quarter results. Compared to the fourth quarter of 2011, net revenues increased 19% and pre-tax profit on a non-GAAP basis increased seven-fold," said Andrew S. Duff, chairman and chief executive officer. "Stronger fixed income sales and trading and equity financing revenues, and solid asset management and public finance results drove the improved performance."

First Quarter
Consolidated Expenses
For the first quarter of 2012, compensation and benefits expenses were $73.5 million, down 3% compared to $75.5 million in the first quarter of 2011. Compensation and benefits expenses increased 15% compared to the fourth quarter of 2011 due to improved financial results.

For the first quarter of 2012, compensation and benefits expenses were 62.4% of net revenues, compared to 60.5% and 64.4% for the first and fourth quarters of 2011, respectively. The compensation ratio declined 50 basis points from the full-year 2011 compensation ratio of 62.9%, which the firm believes is a more accurate comparison.

Non-compensation expenses were $31.8 million, down 16% from $37.7 million in the year-ago period, mainly driven by cost-saving initiatives executed during 2011. Non-compensation expenses decreased 6% from non-GAAP non-compensation expenses of $33.7 million(2) in the fourth quarter of 2011. On a GAAP basis, including the $120.3 million pre-tax goodwill impairment charge, non-compensation expenses were $154.0 million in the fourth quarter of 2011.

Other Matters
In the first quarter of 2012, the firm incurred $3.4 million of additional income tax expense for writing off deferred tax assets related to equity grants that either vested at share prices lower than the grant date share price, or that were forfeited.

In the first quarter of 2012, the firm repurchased $7.0 million, or 287,788 shares, of its common stock at an average price of $24.46 per share. The firm has $44.3 million remaining on its share repurchase authorization, which expires on Sept. 30, 2012. In addition, the firm acquired $8.4 million, or 352,838 shares, related to employee tax obligations on the vesting of equity awards.

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
For the first quarter, Capital Markets generated pre-tax operating income of $7.9 million, compared to $7.3 million in the year-ago period and a non-GAAP, pre-tax operating loss of $2.5 million(3) in the fourth quarter of 2011. On a GAAP basis, including the $120.3 million pre-tax goodwill impairment charge, Capital Markets generated a pre-tax operating loss of $122.8 million in the fourth quarter of 2011.

Net revenues were $99.7 million, down 7% compared to the year-ago period. Revenues rose 22% compared to the sequential fourth quarter, primarily driven by significantly improved fixed income institutional brokerage revenues.

Asset Management
For the quarter ended Mar. 31, 2012, asset management generated pre-tax operating income of $4.5 million, up 6% compared to the first quarter of 2011 and up 8% compared to the fourth quarter of 2011. Net revenues were $18.0 million, down 1% and up 4%, compared to first and fourth quarters of 2011, respectively.

Additional Shareholder Information

As of Mar. 31, 2012 As of Dec. 31, 2011 As of Mar 31., 2011
Number of employees 1,006 1,011 1,046
Equity financings
# of transactions 22 12 19
Capital raised $3.4 billion $2.8 billion $2.5 billion
Tax-exempt issuance
# of transactions 139 144 88
Par value $2.3 billion $2.2 billion $1.0 billion
Mergers &
acquisitions
# of transactions 6 13 8
Aggregate deal value $0.7 billion $1.4 billion $1.0 billion
Asset Management AUM

$13.3 billion

$12.2 billion

$12.8 billion

Common shareholders' equity:

$721.8 million

$718.4 million

$833.6 million

Annualized qtrly.
return on avg.

1.6%(5)

1.1%(6)

4.0%(5)

common shareholders'
equity

Book value per share: $44.15 $45.61 $52.73
Tangible book value
per share((7)): $28.75 $29.51 $28.68

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., Apr. 18 at 9 a.m. ET (8 a.m. CT). The earnings release will be available on or after Apr. 18 at the firm's Web site at www.piperjaffray.com. The call can be accessed via webcast or by dialing (888)810- 0209 and referencing reservation #96211037. 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 11 a.m. ET Apr. 18 at the same Web address or by calling (855)859-2056 and referencing reservation #96211037.

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 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, our strategic priorities (including growth in public finance, asset management, and corporate advisory), the amount and timing of cost reduction measures and our quarterly run-rate for non-compensation expenses, anticipated financial results generally (including expectations regarding revenue levels, operating margins, our compensation ratio, earnings per share, and return on equity), the environment and prospects for capital markets transactions (including for our Asia-based business), current deal pipelines (or backlogs) 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) 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) our stock price may fluctuate as a result of several factors, including but not limited to, changes in our revenues and operating results, (6) the business operations that we conduct outside of the United States, including in Asia, subject us to unique risks, (7) hiring of additional senior talent may not yield the benefits we anticipate or yield them within expected timeframes, 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.

(C) 2012 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)
Mar. 31, Dec. 31, Mar. 31, 1Q '12 1Q '12
(Amounts in thousands, except per share data) 2012 2011 2011 vs. 4Q '11 vs. 1Q '11
Revenues:
Investment banking $ 48,868 $ 51,422 $ 47,041 (5.0 ) % 3.9 %
Institutional brokerage 45,331 26,039 48,231 74.1 (6.0 )
Asset management 17,905 17,115 17,929 4.6 (0.1 )
Interest 11,173 13,060 14,229 (14.4 ) (21.5 )
Other income/(loss) 834 (1,587 ) 5,511 N/M (84.9 )
Total revenues 124,111 106,049 132,941 17.0 (6.6 )
Interest expense 6,440 6,829 8,161 (5.7 ) (21.1 )
Net revenues 117,671 99,220 124,780 18.6 (5.7 )
Non-interest expenses:
Compensation and benefits 73,484 63,901 75,545 15.0 (2.7 )
Occupancy and equipment 7,880 7,533 8,448 4.6 (6.7 )
Communications 6,353 5,680 6,611 11.8 (3.9 )
Floor brokerage and clearance 2,220 2,322 2,466 (4.4 ) (10.0 )
Marketing and business development 5,121 6,388 6,210 (19.8 ) (17.5 )
Outside services 6,140 7,917 8,106 (22.4 ) (24.3 )
Goodwill impairment - 120,298 - N/M N/M
Intangible asset amortization expense 1,917 2,069 2,069 (7.3 ) (7.3 )
Other operating expenses 2,185 1,761 3,791 24.1 (42.4 )
Total non-interest expenses 105,300 217,869 113,246 (51.7 ) (7.0 )
Income/(loss) before income tax expense/(benefit) 12,371 (118,649 ) 11,534 N/M 7.3
Income tax expense/(benefit) 8,005 (2,902 ) 4,115 N/M 94.5
Net income/(loss) 4,366 (115,747 ) 7,419 N/M (41.2 )
Net income applicable to noncontrolling interests 1,437 617 186 132.9 % 672.6
Net income/(loss) applicable to Piper Jaffray Companies (1) 2,929 (116,364 ) 7,233 N/M (59.5 )
Net income/(loss) applicable to Piper Jaffray Companies'
common shareholders (1) $ 2,480 $ (116,364 ) $ 5,711 N/M (56.6 ) %
Earnings/(loss) per common share
Basic $ 0.15 $ (7.38 ) $ 0.38 N/M (59.0 ) %
Diluted $ 0.15 $ (7.38 ) (2 ) $ 0.38 N/M (58.9 ) %
Weighted average number of common shares outstanding
Basic 16,072 15,773 15,177 1.9 % 5.9 %
Diluted 16,072 15,773 (2 ) 15,224 1.9 % 5.6 %

(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
Three Months Ended Percent Inc/(Dec)
Mar. 31, Dec. 31, Mar. 31, 1Q '12 1Q '12
(Dollars in thousands) 2012 2011 2011 vs. 4Q '11 vs. 1Q '11
Capital Markets
Investment banking
Financing
Equities $ 23,443 $ 17,010 $ 24,682 37.8 % (5.0 ) %
Debt 14,769 15,211 9,666 (2.9 ) 52.8
Advisory services 11,290 19,832 13,424 (43.1 ) (15.9 )
Total investment banking 49,502 52,053 47,772 (4.9 ) 3.6
Institutional sales and trading
Equities 22,256 21,850 25,739 1.9 (13.5 )
Fixed income 28,507 11,142 29,189 155.9 (2.3 )
Total institutional sales and trading 50,763 32,992 54,928 53.9 (7.6 )
Other income/(loss) (609 ) (3,137 ) 3,880 (80.6 ) N/M
Net revenues 99,656 81,908 106,580 21.7 (6.5 )
Non-interest expenses
Goodwill impairment - 120,298 - N/M N/M
Operating expenses 91,800 84,434 99,320 8.7 (7.6 )
Total non-interest expenses 91,800 204,732 99,320 (55.2 ) % (7.6 )
Segment pre-tax operating income/(loss) $ 7,856 $ (122,824 ) $ 7,260 N/M 8.2 %
Segment pre-tax operating margin 7.9 % (150.0 )% 6.8 %
Asset Management
Management and performance fees
Management fees $ 17,221 $ 16,510 $ 17,812 4.3 % (3.3 ) %
Performance fees 424 499 117 (15.0 ) 262.4
Total management and performance fees 17,645 17,009 17,929 3.7 (1.6 )
Other income 370 303 271 22.1 36.5
Net revenues 18,015 17,312 18,200 4.1 (1.0 )
Operating expenses 13,500 13,137 13,926 2.8 (3.1 )
Segment pre-tax operating income $ 4,515 $ 4,175 $ 4,274 8.1 % 5.6 %
Segment pre-tax operating margin 25.1 % 24.1 % 23.5 %
Total
Net revenues $ 117,671 $ 99,220 $ 124,780 18.6 % (5.7 ) %
Non-interest expenses
Goodwill impairment - 120,298 - N/M N/M
Operating expenses 105,300 97,571 113,246 7.9 (7.0 )
Total non-interest expenses 105,300 217,869 113,246 (51.7 ) % (7.0 )
Total segment pre-tax operating income/(loss) $ 12,371 $ (118,649 ) $ 11,534 N/M 7.3 %
Pre-tax operating margin 10.5 % (119.6 )% 9.2 %
N/M - Not meaningful
FOOTNOTES
The press release includes the use of non-GAAP financial measures that are not prepared in accordance with U.S. generally accepted accounting principles and that exclude the effects of a goodwill impairment charge recognized in the fourth quarter of 2011. 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.
(1) Net income/(loss) applicable to Piper Jaffray Companies and earnings per share
Three Months Ended
(Amounts in thousands, except per share data) December 31, 2011
Net loss applicable to Piper Jaffray Companies $ (116,364 )
Adjustment to exclude the goodwill impairment charge, net of income tax 118,448
Net income applicable to Piper Jaffray Companies, excluding the goodwill impairment charge $ 2,084

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

$ 1,729
Diluted earnings per common share, excluding the goodwill impairment charge $ 0.11
Weighted average number of common share outstanding - diluted 15,773
(2) Consolidated non-compensation expenses
Three Months Ended
(Amounts in thousands) December 31, 2011
Non-compensation expenses $ 153,968
Adjustment to exclude the goodwill impairment charge (120,298 )
Non-compensation expenses, excluding the goodwill impairment charge $ 33,670
(3) Capital Markets pre-tax operating income and pre-tax margin
Three Months Ended
(Amounts in thousands) December 31, 2011
Capital Markets pre-tax operating loss $ (122,824 )
Adjustment to exclude the goodwill impairment charge 120,298
Capital Markets pre-tax operating loss, excluding the goodwill impairment charge $ (2,526 )
Capital Markets pre-tax operating margin (150.0 ) %
Capital Markets pre-tax operating margin, excluding the goodwill impairment charge (3.1 ) %
(4) Capital Markets operating expenses
Three Months Ended
(Amounts in thousands) December 31, 2011
Capital Markets operating expenses $ 204,732
Adjustment to exclude the goodwill impairment charge (120,298 )
Capital Markets operating expenses, excluding the goodwill impairment charge $ 84,434
(5) 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. Annualized return on average adjusted common shareholders' equity is computed by dividing annualized net income by average monthly adjusted common shareholders' equity. Management believes that annualized 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
Three Months Ended Three Months Ended
(Amounts in thousands) Mar. 31, 2012 Mar. 31, 2011
Common shareholders' equity $ 721,087 $ 823,141
Deduct: goodwill attributable to PJC Inc. acquisition by USB - 105,522
Adjusted common shareholders' equity $ 721,087 $ 717,619
Annualized net income applicable to Piper Jaffray Companies $ 11,714 $ 28,933
Annualized quarterly return on average adjusted common shareholders' equity 1.6 % 4.0 %
(6) 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, Including the Dec. 31, 2011, Excluding the
(Amounts in thousands) Goodwill Impairment Charge Goodwill 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 %
(7) 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) Mar. 31, 2012 Dec. 31, 2011 Mar. 31, 2011
Common shareholders' equity $ 721,779 $ 718,391 $ 833,578
Deduct: goodwill and identifiable intangible assets 251,739 253,656 380,161
Tangible common shareholders' equity $ 470,040 $ 464,735 $ 453,417
N/M - Not meaningful

SOURCE: Piper Jaffray Companies

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