Piper Jaffray Companies (NYSE: PJC) today announced net income
of $9.3 million from continuing operations, or $0.47 per diluted
common share, for the quarter ended Sept. 30, 2009, compared to a
net loss from continuing operations of $27.5 million, or $1.75 per
diluted common share, for the third quarter of 2008. In the second
quarter of 2009, continuing operations generated net income of
$11.6 million, or $0.59 per diluted common share. Third quarter
2009 net revenues from continuing operations were $119.7 million,
compared to $73.5 million in the year-ago period, and $132.3
million for the second quarter of 2009.
For the first nine months of 2009, the company recorded net
income from continuing operations of $18.1 million, or $0.93 per
diluted common share, compared to a net loss from continuing
operations of $30.4 million, or $1.92 per diluted common share, for
the year-ago period. Net revenues of $335.8 million year-to-date
represent a 26 percent increase over the same period last year,
mainly driven by significantly improved performance in fixed income
institutional brokerage and increased equity financing revenues,
partially offset by lower advisory services revenues.
“We are pleased with our third quarter results, our second
consecutive quarter of solid performance. We have a balanced mix of
businesses, and all of them contributed to our performance, the
largest of which represented no more than a third of aggregate
revenues,” said Andrew S. Duff, chairman and chief executive
officer. “We also held the compensation ratio to 60 percent and
non-compensation costs were within our stated goal of $32-$33
million per quarter, resulting in a pre-tax operating margin of 13
percent.”
Results of Continuing Operations
Third Quarter
Net Revenues
Investment Banking
For the third quarter of 2009, total investment banking revenues
were $48.4 million, down 4 percent compared to the third quarter of
2008 and down 23 percent compared to the second quarter of
2009.
- Equity financing revenues were
$17.8 million, 56 percent above the year-ago revenues, primarily
driven by a higher number of completed transactions. Equity
financing revenues decreased 24 percent compared to the second
quarter of 2009, due to fewer completed transactions, partially
offset by higher average revenue per transaction.
- Fixed income financing revenues,
primarily comprised of public finance, were $20.5 million, up 15
percent compared to the same period last year, and up 2 percent
compared to the strong sequential second quarter. Public finance
underwriting activity continued at a solid pace.
- Advisory services revenues were
$10.1 million, down 53 percent and 48 percent, compared to the
year-ago period and the second quarter of 2009, respectively. The
number of completed mergers and acquisitions transactions and the
average revenue per transaction, decreased during the quarter
versus the comparative periods.
The following is a recap of completed deal information for the
third quarter of 2009:
- 24 equity financings raising a
total of $4.5 billion in capital. Of the completed transactions, 20
were public offerings.
- 150 tax-exempt issues with a
total par value of $2.4 billion.
- 6 merger and acquisition
transactions with an aggregate enterprise value of $500 million.
(The number of deals and the enterprise value include disclosed and
undisclosed transactions.)
Institutional Brokerage
For the third quarter of 2009, institutional brokerage generated
net revenues of $63.5 million, significantly improved compared to
$18.0 million in the third quarter of 2008, and down 3 percent
compared to the robust second quarter of 2009.
- Equities institutional brokerage
revenues were $31.4 million, down 11 percent compared to the
year-ago period, and up 4 percent compared to the second quarter of
2009. Compared to both periods, U.S. equities revenues declined,
mainly due to lower volumes, while other products improved,
including convertibles and European equities.
- Fixed income institutional
brokerage revenues were $32.1 million, a substantial improvement
from negative revenues of $17.3 million reported for the year-ago
period, mainly driven by a $21.7 million loss related to a tender
option bond program. Compared to the robust second quarter of 2009,
revenues decreased 9 percent. While still at strong levels,
revenues declined in trading flow opportunities and from lower
client activity, partially offset by increased revenues from
municipal proprietary opportunities.
Third Quarter
Non-Interest Expenses
For the third quarter of 2009, compensation and benefits
expenses were $71.8 million, down 11 percent compared to the
year-ago period and down 10 percent compared to the second quarter
of 2009. The compensation ratio for the third quarter of 2009 was
60.0 percent, compared to 109.4 percent in the third quarter of
2008, and 60.0 percent in the second quarter of 2009.
For the third quarter of 2009, non-compensation expenses were
$32.3 million, down 19 percent compared to the same quarter last
year, due to restructuring charges and higher costs across nearly
every expense category in the year-ago period. Compared to the
second quarter of 2009, non-compensation costs decreased 6 percent,
mainly due to restructuring costs recorded in the second quarter,
partially offset by higher marketing and business development
expenses in the current quarter.
Other Matters
In the third quarter of 2009, $8.0 million, or 175,273 shares,
was repurchased pursuant to a share repurchase authorization, which
runs through June 2010. The company has $77 million remaining under
this authorization.
Additional Shareholder Information
As of Sept. 30, 2009
As of June 30, 2009 As of Sept. 30,
2008 Number of employees: 1,024
1,001 1,175 FAMCO
AUM: $6.7 billion $5.9
billion $8.1 billion Shareholders’
equity: $781.8 million
$778.1 million $902.6 million
Annualized Return
onAverage AdjustedShareholders’
Equity1
5.5%
7.0%
N.M.
Book value per share: $48.94
$48.30 $57.58
Tangible book valueper
share2:
$38.10 $37.51
$38.44
N.M.= Not Meaningful
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) Sept. 30, 2009
June 30, 2009 Sept. 30, 2008 Shareholders' equity $
779,810
$ 769,825 $ 925,650 Deduct: goodwill attributable to PJC
Inc. acquisition by USB 105,522 105,522
220,035 Adjusted shareholders' equity $
674,288
$ 664,303 $ 705,615
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)
Sept. 30, 2009 June 30, 2009 Sept. 30, 2008 Shareholders'
equity $ 781,750 $ 778,109 $
902,580
Deduct: goodwill and identifiable intangible assets
173,117 173,731 299,982 Tangible shareholders'
equity $ 608,633 $ 604,378 $
602,598
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, Oct. 21, 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) 931-6358 and referencing reservation #21439249.
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 Oct. 21 at the same Web
address or by calling (800) 633-8284 and referencing reservation
#21439249.
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, Hong Kong and Shanghai. 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, our current deal pipelines, market share
gains and trends, the environment and prospects for capital markets
transactions and institutional brokerage activity, anticipated
financial results (including expectations regarding revenue and
expense levels, the compensation ratio, return on shareholders’
equity, and our quarterly run rate for non-compensation expenses),
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) 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, (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, (4) the disruption in the competitive landscape and our
hiring of additional senior talent may not yield the benefits we
anticipate or yield them within expected timeframes, (5) our
ability to manage expenses at reduced revenue levels, 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 during the year, (6) 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, (7) an inability to readily divest or transfer
inventory positions may result in future inventory levels that
differ from management’s expectations and potential financial
losses from a decline in value of illiquid positions, 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, 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.
© 2009 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) Nine Months Ended
Sept. 30, Jun. 30, Sept. 30, 3Q '09
3Q '09 Sept. 30, Sept. 30, Percent
(Amounts in thousands, except per share data)
2009
2009 2008 vs. 2Q '09 vs. 3Q '08
2009 2008 Inc/(Dec) Revenues:
Investment banking $ 48,115 $ 62,150 $ 48,313 (22.6 ) % (0.4 ) % $
134,615 $ 135,762 (0.8 ) % Institutional brokerage 59,576 60,852
12,834 (2.1 ) 364.2 175,455 93,842 87.0 Interest 10,398 8,973
10,509 15.9 (1.1 ) 26,659 38,782 (31.3 ) Asset management 3,568
3,240 4,314 10.1 (17.3 ) 9,817 12,984 (24.4 ) Other income/(loss)
3,340 (950 ) 697 N/M
379.2 (1,209 ) 1,469 N/M Total
revenues 124,997 134,265 76,667 (6.9 ) 63.0 345,337 282,839 22.1
Interest expense 5,328 1,975
3,148 169.8 69.3 9,496
15,852 (40.1 ) Net revenues 119,669
132,290 73,519 (9.5 ) 62.8
335,841 266,987 25.8
Non-interest expenses: Compensation and benefits
71,802 79,377 80,421 (9.5 ) (10.7 ) 201,503 200,785 0.4 Occupancy
and equipment 7,703 7,680 8,092 0.3 (4.8 ) 21,901 24,335 (10.0 )
Communications 5,474 5,430 6,597 0.8 (17.0 ) 17,003 19,205 (11.5 )
Floor brokerage and clearance 2,974 3,232 3,342 (8.0 ) (11.0 )
9,088 9,895 (8.2 ) Marketing and business development 5,498 3,419
6,099 60.8 (9.9 ) 13,362 19,576 (31.7 ) Outside services 6,234
7,415 9,270 (15.9 ) (32.8 ) 21,168 29,220 (27.6 )
Restructuring-related expenses - 3,572 4,570 (100.0 ) (100.0 )
3,572 8,153 (56.2 ) Other operating expenses 4,402
3,747 1,830 17.5 140.5
10,700 10,898 (1.8 ) Total non-interest
expenses 104,087 113,872 120,221
(8.6 ) (13.4 ) % 298,297 322,067
(7.4 ) %
Income/(loss) from continuing
operations before income tax
expense/(benefit)
15,582 18,418 (46,702 ) (15.4 ) N/M 37,544 (55,080 ) N/M
Income tax expense/(benefit) 6,316 6,842
(19,166 ) (7.7 ) N/M 19,427
(24,637 ) N/M
Net income/(loss) from
continuing operations 9,266 11,576
(27,536 ) (20.0 ) N/M 18,117
(30,443 ) N/M
Income/(loss) from discontinued
operations, net of tax - -
(653 ) - N/M - 786 N/M
Net income/(loss) 9,266
11,576 $ (28,189 ) (20.0 ) N/M 18,117 $
(29,657 ) N/M
Earnings allocated to participating
stock awards (1,690 ) (2,101 ) N/A
(19.6 ) N/M (3,254 ) N/A N/M
Net income applicable to Piper Jaffray Companies
common shareholders
$ 7,576 $ 9,475 N/A (20.0 ) % N/M
$ 14,863 N/A N/M
Earnings per basic common share Income/(loss) from
continuing operations $ 0.47 $ 0.59 $ (1.75 ) (20.3 ) % N/M $ 0.93
$ (1.92 ) N/M Income/(loss) from discontinued operations -
- (0.04 ) - N/M -
0.05 N/M Earnings per basic common
share $ 0.47 $ 0.59 $ (1.79 ) (20.3 ) % N/M $ 0.93 $ (1.87 ) N/M
Earnings per diluted common share Income/(loss) from
continuing operations $ 0.47 $ 0.59 $ (1.75 ) (20.3 ) % N/M $ 0.93
$ (1.92 ) N/M Income/(loss) from discontinued operations -
- (0.04 ) - N/M -
0.05 N/M Earnings per diluted common
share $ 0.47 $ 0.59 $ (1.79 ) (20.3 ) % N/M $ 0.93 $ (1.87 ) N/M
Weighted average number of common shares outstanding
Basic 16,031 16,104 15,772 (0.5 ) % 1.6 % 16,001 15,891 0.7 %
Diluted 16,131 16,117 15,772 0.1 % 2.3 % 16,039 15,891 0.9 %
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) Nine Months Ended
Sept. 30, Jun. 30, Sept. 30, 3Q '09
3Q '09 Sept. 30, Sept. 30, Percent
(Dollars in thousands)
2009 2009 2008 vs.
2Q '09 vs. 3Q '08 2009 2008
Inc/(Dec) Investment banking Financing Equities $ 17,769 $
23,294 $ 11,397 (23.7 ) % 55.9 % $ 45,126 $ 36,620 23.2 % Debt
20,493 20,126 17,771 1.8 15.3 53,007 52,438 1.1 Advisory services
10,138 19,574 21,358 (48.2 ) (52.5 )
38,527 57,939 (33.5 ) Total investment banking
48,400 62,994 50,526 (23.2 ) (4.2 ) 136,660 146,997 (7.0 )
Institutional brokerage Equities 31,438 30,384 35,302 3.5 (10.9 )
92,484 101,827 (9.2 ) Fixed income 32,101 35,166
(17,280 ) (8.7 ) N/M 95,072 5,863
N/M Total institutional brokerage 63,539 65,550
18,022 (3.1 ) 252.6 187,556 107,690 74.2 Asset management
3,568 3,240 4,314 10.1 (17.3 ) 9,817 12,984 (24.4 ) Other
income/(loss) 4,162 506 657 722.5 533.5 1,808 (684 ) N/M
Net revenues $
119,669 $ 132,290 $ 73,519 (9.5 ) % 62.8 % $ 335,841
$ 266,987 25.8 % N/M - Not meaningful
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