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MINNEAPOLIS--(BUSINESS WIRE)--Oct. 16, 2013-- Piper Jaffray Companies (NYSE: PJC) today announced that for the quarter ended September 30, 2013, net income from continuing operations was $6.9 million, or $0.42 per diluted common share. The results for the quarter were reduced by $0.15 per diluted common share, due to a $2.3 million after-tax charge ($3.8 million pre-tax), related to restructuring and integration costs associated with the acquisitions of Seattle-Northwest and Edgeview. Excluding these costs, net income from continuing operations would have been $9.2 million, or $0.57 per diluted common share. These results compared to net income from continuing operations of $14.5 million, or $0.82 per diluted common share, in the year-ago period. In the second quarter of 2013, net income from continuing operations was $4.4 million, or $0.25 per diluted common share.

For the third quarter of 2013, net revenues from continuing operations were $128.3 million, compared to $131.5 million in the year-ago period and $99.8 million in the second quarter of 2013.

For the quarter ended September 30, 2013, net income, including continuing and discontinued operations, was $5.3 million, or $0.33 per diluted common share, compared to net income of $19.7 million, or $1.11 per diluted common share, in the year-ago period, and $2.5 million, or $0.15 per diluted common share, in the second quarter of 2013. Discontinued operations in the current quarter principally include expenses related to FAMCO, an asset management subsidiary we sold in the second quarter.

“The diversification in our mix of businesses contributed to our solid performance for the quarter. Our equity-related businesses, led by equity capital raising and asset management, registered strong performance and third quarter M&A revenue surpassed the revenue generated in the first half of the year. In Fixed Income, we rebounded from a challenging second quarter, while the results in our Public Finance business reflected soft market conditions,” said Andrew S. Duff, chairman and chief executive officer.

Third Quarter Results from Continuing Operations

Consolidated Expenses

For the third quarter of 2013, compensation and benefits expenses were $79.4 million, up 2% and 22% compared to the third quarter of 2012 and the second quarter of 2013, respectively. The increase in compensation and benefits expenses compared to the second quarter of 2013 was due to improved financial results.

For the third quarter of 2013, compensation and benefits expenses were 61.9% of net revenues, compared to 59.4% and 65.1% for the third quarter of 2012 and the second quarter of 2013, respectively. The compensation ratio increased compared to the third quarter of 2012 due to a change in our business mix, and decreased compared to the second quarter of 2013 due to an increased revenue base.

Non-compensation expenses were $36.8 million for the third quarter of 2013, compared to $28.1 million in the year-ago period and $31.4 million in the second quarter of 2013. Third quarter non-compensation expenses included $3.8 million of acquisition-related restructuring, integration and transaction costs. In addition, intangible amortization increased $1.2 million in the quarter related to the acquisitions of Seattle-Northwest and Edgeview. Excluding acquisition-related expenses, third quarter non-compensation expenses were $31.8 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 our Hong Kong capital markets business, and FAMCO, an asset management subsidiary sold in the second quarter, are presented as discontinued operations for all periods presented.

Capital Markets
For the quarter, Capital Markets generated pre-tax operating income of $6.4 million, compared to pre-tax operating income of $20.6 million and a pre-tax operating loss of $2.1 million in the third quarter of 2012 and the second quarter of 2013, respectively.

Net revenues were $110.3 million, down 4% compared to the year-ago period and up 35% compared to the second quarter of 2013, respectively.

Asset Management
For the quarter ended September 30, 2013, asset management generated pre-tax operating income of $5.7 million, up 20% and 4% compared to the third quarter of 2012 and the second quarter of 2013, respectively.

Net revenues were $18.1 million, an increase of 11% compared to the third quarter of 2012. Increased revenues compared to the prior year quarter were driven by higher management fees from increased assets under management (AUM) due to market appreciation.

Other Matters
In the third quarter of 2013, the firm repurchased $29.0 million, or 885,000 shares, of its common stock at an average price of $32.79 per share. The firm has $40.7 million remaining on its share repurchase authorization, which expires on September 30, 2014.

Third Quarter Results from Discontinued Operations

Discontinued operations include the operating results of our Hong Kong capital markets business, which we shut down, and FAMCO, an asset management subsidiary we sold in the second quarter of 2013.

For the quarter ended September 30, 2013, the net loss from discontinued operations was $1.5 million, or $0.09 per diluted common share. The net loss was principally driven by additional expense from contractual obligations related to the sale of FAMCO. Results from discontinued operations was net income of $5.2 million, or $0.29 per diluted common share, in the year-ago period and a net loss of $1.9 million, or $0.11 per diluted common share, in the second quarter of 2013.

   

Additional Shareholder Information*

 
      For the Quarter Ended:
      Sept. 30, 2013     June 30, 2013     Sept. 30, 2012
Full time employees       1002       918       903
Equity financings              
# of transactions 28 22 14
Capital raised       $4.8 billion       $5.0 billion       $2.5 billion
Negotiated tax-exempt issuances
# of transactions 61 143 76
Par value       $1.3 billion       $2.9 billion       $1.6 billion
Mergers & acquisitions
# of transactions 11 4 6
Aggregate deal value       $1.0 billion       $0.2 billion       $0.7 billion
Asset Management
AUM       $10.6 billion       $10.2 billion       $9.2 billion
Common shareholders’ equity       $707.4 million       $729.9 million       $724.6 million
Annualized quarterly return on common shareholders’ equity**       3.0%       1.3%       11.0%
Book value per share:       $49.11       $47.83       $47.58
Tangible book value per share(1):       $31.56       $32.44       $31.30

*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.

 

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., Oct. 16 at 9 a.m. ET (8 a.m. CT). The earnings release will be available on or after Oct. 16 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 #71538766. 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 Oct. 16 at the same Web address or by calling (855)859-2056 and referencing reservation #71538766.

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, 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 interest rate environment and outlook for equity markets), financial results for fixed income institutional brokerage (including inventory valuations, strategic trading results, and hedging activities), the environment and prospects for capital markets and corporate advisory transactions (including our performance in specific sectors), our integration of Seattle-Northwest Securities Corporation and Edgeview Partners, L.P., 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.

Forward-looking 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. These risks, uncertainties and important factors include, but are not limited to, the following:

A further listing and description of these and other risks, uncertainties and important factors can be found in the sections titled “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2012 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, 2012, 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 1000, Minneapolis, Minnesota 55402-7020

               
Piper Jaffray Companies
Preliminary Unaudited Results of Operations
 
 
Three Months Ended Percent Inc/(Dec) Nine Months Ended
(Amounts in thousands, except per share data) Sept. 30, June 30, Sept. 30, 3Q '13 3Q '13 Sept. 30, Sept. 30, Percent
2013 2013 2012 vs. 2Q '13 vs. 3Q '12 2013 2012 Inc/(Dec)
Revenues:
Investment banking $ 62,373 $ 52,846 $ 51,083 18.0 % 22.1 % $ 155,581 $ 148,536 4.7 %
Institutional brokerage 37,218 20,560 58,719 81.0 (36.6 ) 101,038 134,006 (24.6 )
Asset management 18,309 18,031 16,136 1.5 13.5 54,551 48,699 12.0
Interest 16,259 14,360 12,457 13.2 30.5 43,982 35,742 23.1
Other income   4,679     3,310     235

 

41.4   N/M     10,942     1,242   781.0  
Total revenues 138,838 109,107 138,630 27.2 0.2 366,094 368,225 (0.6 )
 
Interest expense   10,524     9,335     7,125   12.7   47.7     28,475     20,184   41.1  
 
Net revenues   128,314     99,772     131,505   28.6   (2.4 )   337,619     348,041   (3.0 )
 
Non-interest expenses:
Compensation and benefits 79,426 65,000 78,070 22.2 1.7 210,531 209,467 0.5
Occupancy and equipment 6,509 6,543 6,057 (0.5 ) 7.5 18,869 19,671 (4.1 )
Communications 5,778 5,030 5,276 14.9 9.5 16,040 16,112 (0.4 )
Floor brokerage and clearance 2,109 2,247 1,825 (6.1 ) 15.6 6,506 5,934 9.6
Marketing and business development 5,447 5,957 4,259 (8.6 ) 27.9 16,384 14,982 9.4
Outside services 8,082 8,449 6,747 (4.3 ) 19.8 23,745 19,810 19.9
Restructuring and integration costs 3,823 - - N/M N/M 3,823 3,642 5.0
Intangible asset amortization expense 2,899 1,661 1,736 74.5 67.0 6,221 5,208 19.5
Other operating expenses   2,181     1,552     2,183   40.5   (0.1 )   1,939     6,986   (72.2 )
Total non-interest expenses   116,254     96,439     106,153   20.5   9.5     304,058     301,812   0.7  
 

Income from continuing operations before income tax expense

12,060 3,333 25,352 261.8 (52.4 ) 33,561 46,229 (27.4 )
 
Income tax expense   2,886     1,644     10,194   75.5   (71.7 )   10,130     12,048   (15.9 )
 
Income from continuing operations   9,174     1,689     15,158   443.2   (39.5 )   23,431     34,181   (31.5 )
 
Discontinued operations:
Income/(loss) from discontinued operations, net of tax   (1,529 )   (1,871 )   5,171   (18.3 ) N/M     (3,921 )   (2,066 ) 89.8  
 
Net income/(loss) 7,645 (182 ) 20,329 N/M (62.4 ) 19,510 32,115 (39.2 )
 
Net income/(loss) applicable to noncontrolling interests   2,323     (2,670 )   665   N/M   249.3     1,554     2,671   (41.8 )
 

Net income applicable to Piper Jaffray Companies (1)

$ 5,322   $ 2,488   $ 19,664   113.9   % (72.9 ) % $ 17,956   $ 29,444   (39.0 ) %
 

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

$ 4,826   $ 2,266   $ 16,840   113.0   % (71.3 ) % $ 16,163   $ 25,151   (35.7 ) %
 
Amounts applicable to Piper Jaffray Companies
Net income from continuing operations $ 6,851 $ 4,359 $ 14,493 57.2 % (52.7 ) % $ 21,877 $ 31,510 (30.6 ) %
Net income/(loss) from discontinued operations   (1,529 )   (1,871 )   5,171   (18.3 ) N/M     (3,921 )   (2,066 ) 89.8  
Net income applicable to Piper Jaffray Companies $ 5,322 $ 2,488 $ 19,664 113.9 % (72.9 ) % $ 17,956 $ 29,444 (39.0 ) %
 
Earnings/(loss) per basic common share
Income from continuing operations $ 0.42 $ 0.25 $ 0.82 68.0 % (48.8 ) % $ 1.29 $ 1.71 (24.6 ) %
Income/(loss) from discontinued operations   (0.09 )   (0.11 )   0.29   (18.2 ) N/M     (0.23 )   (0.11 ) 109.1  
Earnings per basic common share $ 0.33 $ 0.15 $ 1.11 120.0 % (70.3 ) % $ 1.06 $ 1.60 (33.8 ) %
 
Earnings/(loss) per diluted common share
Income from continuing operations $ 0.42 $ 0.25 $ 0.82 68.0 % (48.8 ) % $ 1.29 $ 1.71 (24.6 ) %
Income/(loss) from discontinued operations   (0.09 )   (0.11 )   0.29   (18.2 ) N/M     (0.23 )   (0.11 ) 109.1  
Earnings per diluted common share $ 0.33 $ 0.15 $ 1.11 120.0 % (70.3 ) % $ 1.06 $ 1.60 (33.8 ) %
 
Weighted average number of common shares outstanding
Basic 14,621 15,621 15,210 (6.4 ) % (3.9 ) % 15,271 15,736 (3.0 ) %
Diluted 14,626 15,626 15,210 (6.4 ) % (3.8 ) % 15,284 15,736 (2.9 ) %
 
(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.
 
N/M - Not meaningful
 
               
Piper Jaffray Companies
Preliminary Unaudited Segment Data from Continuing Operations
 
 
Three Months Ended Percent Inc/(Dec) Nine Months Ended
(Dollars in thousands) Sept. 30, June 30, Sept. 30, 3Q '13 3Q '13 Sept. 30, Sept. 30, Percent
2013 2013 2012 vs. 2Q '13 vs. 3Q '12 2013 2012 Inc/(Dec)
Capital Markets
 
Investment banking

 

Financing
Equities $ 30,010 $ 21,772 $ 18,781 37.8 % 59.8 % $ 66,085 $ 55,141 19.8 %
Debt 12,808 22,131 16,573 (42.1 ) (22.7 ) 51,971 53,598 (3.0 )
Advisory services   20,215     9,409     16,317   114.8   23.9     39,180     41,670   (6.0 )
Total investment banking 63,033 53,312 51,671 18.2 22.0 157,236 150,409 4.5
 
Institutional sales and trading
Equities 22,960 21,392 17,927 7.3 28.1 65,087 55,589 17.1
Fixed income   20,437     4,959     46,690   312.1   (56.2 )   53,439     95,773   (44.2 )
Total institutional sales and trading 43,397 26,351 64,617 64.7 (32.8 ) 118,526 151,362 (21.7 )
 
Other income/(loss)   3,833     2,146     (1,039 ) 78.6   N/M     7,519     (2,141 ) N/M  
 
Net revenues 110,263 81,809 115,249 34.8 (4.3 ) 283,281 299,630 (5.5 )
 
Operating expenses   103,906     83,937     94,671   23.8   % 9.8     266,301     266,529   (0.1 )
 
Segment pre-tax operating income/(loss) $ 6,357   $ (2,128 ) $ 20,578   N/M   (69.1 ) % $ 16,980   $ 33,101   (48.7 ) %
 
Segment pre-tax operating margin 5.8 % (2.6 )% 17.9 % 6.0 % 11.0 %
 
 
Asset Management
 
Management and performance fees
Management fees $ 17,547 $ 17,567 $ 15,800 (0.1 ) % 11.1 % $ 52,212 $ 47,213 10.6 %
Performance fees   60     305     22   (80.3 ) 172.7     716     664   7.8  
Total management and performance fees 17,607 17,872 15,822 (1.5 ) 11.3 52,928 47,877 10.5
 
Other income   444     91     434   387.9   2.3     1,410     534   164.0  
 
Net revenues 18,051 17,963 16,256 0.5 11.0 54,338 48,411 12.2
 
Operating expenses   12,348     12,502     11,482   (1.2 ) 7.5     37,757     35,283   7.0  
 
Segment pre-tax operating income $ 5,703   $ 5,461   $ 4,774   4.4   % 19.5   % $ 16,581   $ 13,128   26.3   %
 
Segment pre-tax operating margin 31.6 % 30.4 % 29.4 % 30.5 % 27.1 %
 
 
Total
 
Net revenues $ 128,314 $ 99,772 $ 131,505 28.6 % (2.4 ) % $ 337,619 $ 348,041 (3.0 ) %
 
Operating expenses   116,254     96,439     106,153   20.5   9.5     304,058     301,812   0.7  
 
Pre-tax operating income $ 12,060   $ 3,333   $ 25,352   261.8   % (52.4 ) % $ 33,561   $ 46,229   (27.4 ) %
 
Pre-tax operating margin 9.4 % 3.3 % 19.3 % 9.9 % 13.3 %
 
N/M - Not meaningful
 
Segment pre-tax operating income/(loss) and segment pre-tax operating margin exclude the results of discontinued operations.
 
 
FOOTNOTES
               
(1) 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) Sept. 30, 2013 June 30, 2013 Sept. 30, 2012
Common shareholders' equity $ 707,365 $ 729,880 $ 724,616
Deduct: goodwill and identifiable intangible assets   252,761     234,780     247,905  
 
Tangible common shareholders' equity $ 454,604   $ 495,100   $ 476,711  
 

Source: Piper Jaffray Companies

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