Piper Jaffray Companies (NYSE: PJC) today announced net income
of $7.4 million, or $0.36 per diluted common share, for the second
quarter ended June 30, 2010, compared to net income of $11.6
million, or $0.59 per diluted common share, for the second quarter
of 2009 and net income of $0.5 million, or $0.03 per diluted common
share, for the first quarter of 2010. Second quarter 2010 net
revenues were $127.7 million, compared to $132.3 million in the
year-ago period, and $109.6 million for the first quarter of
2010.
For the six months ending June 30, 2010, net income was $7.9
million, or $0.39 per diluted common share, compared to $8.9
million and $0.45 per diluted common share in 2009. Net revenues
were $237.2 million for the six months, up 10 percent compared to
the prior year.
“We had mixed performance for the quarter. We generated solid
investment banking results attributable to equity financing and
advisory fee revenues. These results were partially offset,
however, by significantly lower fixed income revenues driven by
very challenging trading conditions in the second quarter.” said
Andrew S. Duff, chairman and chief executive officer. “Our backlogs
continue to be healthy across equity, public finance, and M&A.
We need constructive capital markets to realize the revenue
potential in these backlogs.”
Consolidated ExpensesFor the second quarter, compensation
and benefits expenses were $77.7 million, down 2 percent compared
to the year-ago period. Compensation and benefits expenses were up
19 percent compared to the first quarter of 2010, driven by higher
revenues, profitability, and the addition of Advisory Research. For
the second quarter, compensation as a percentage of net revenues
was 60.9 percent, compared to 60.0 percent in the year-ago period
and 59.4 percent in the first quarter of 2010.
Non-compensation expenses were $38.1 million, up 11 percent
compared to the second quarter of 2009 and up 8 percent compared to
the first quarter of 2010. The increases compared to both periods
primarily resulted from a full quarter of expenses related to
Advisory Research, including intangible amortization, costs
associated with headcount reductions at FAMCO, and an increase in
travel and entertainment expenses.
Business Segment ResultsBeginning with the second quarter
of 2010, financial results are also provided for two business
segments: Capital Markets and Asset Management. Consolidated net
revenues and expenses are fully allocated to these two
segments.
Capital MarketsCapital Markets generated pre-tax
operating income of $8.9 million, compared to $19.8 million in the
second quarter of 2009, and $7.4 million in the first quarter of
2010. Net revenues were $112.0 million, compared to $128.9 million
in the year-ago period and $100.4 million in the first quarter of
2010.
- Equity financing revenues were
$34.8 million, an increase of 49 percent compared to the second
quarter of 2009, and double the revenues reported in the first
quarter of 2010. The improved performance was driven by a higher
number of completed transactions and higher average revenue per
transaction.
- Fixed income financing revenues
were $14.4 million, down 29 percent compared to the same period
last year, and down 5 percent compared to the first quarter of
2010. The lower revenues resulted from fewer completed transactions
and lower average revenues per transaction.
- Advisory services revenues were
$23.2 million, up 19 percent and 94 percent, compared to the
year-ago period and the first quarter of 2010, respectively. The
improvement mainly resulted from a higher aggregate value of
completed transactions.
- Equity institutional brokerage
revenues were $27.5 million, down 10 percent compared to the prior
year’s second quarter, mainly driven by lower client volumes in
U.S. equity securities. Equity institutional brokerage revenues
increased 2 percent compared to the first quarter of 2010.
- Fixed income institutional
brokerage revenues were $9.7 million, down 72 percent compared to
the year-ago period, and down 64 percent compared to the first
quarter of 2010. The lower revenues were primarily driven by
continued low client activity in municipal products and reduced
trading performance across products, including municipal strategic
trading and taxable securities.
- Operating expenses for the
quarter were $103.1 million, down 5 percent compared to the second
quarter in 2009. Operating expenses increased 11 percent compared
to the first quarter of 2010, mainly due to higher compensation
expenses.
The following is a recap of completed deal information for the
second quarter of 2010:
- 28 equity financings raising a
total of $3.5 billion in capital.
- 121 tax-exempt issues with a
total par value of $1.6 billion.
- 11 merger and acquisition
transactions with an aggregate enterprise value of $4.6 billion.
(The number of deals and the enterprise value include disclosed and
undisclosed transactions.)
Asset ManagementFor the quarter ended June 30, 2010,
asset management generated pre-tax operating income of $3.0
million, compared to a loss of $1.4 million in the second quarter
of 2009, and operating income of $1.7 million in the first quarter
of 2010. Net revenues were $15.7 million, compared to $3.4 million
in the year-ago period and $9.2 million in the first quarter of
2010. The increased revenues were primarily attributable to a full
quarter of results for Advisory Research.
- Operating expenses for the
quarter were $12.7 million, compared to $4.8 million in the
prior-year period and $7.4 million in the first quarter of 2010.
The increases were mainly attributable to a full quarter of
Advisory Research expenses.
- Assets under management (AUM)
were $11.8 billion, compared to $5.9 billion a year ago. The
increase was attributable to the acquisition of Advisory Research.
AUM was down $1.0 billion compared to the first quarter of 2010,
which reflected the decline in equity prices during the quarter.
Net asset client flows were essentially flat compared to the end of
the sequential first quarter.
Other MattersIn the second quarter of 2010, $30.0
million, or 893,050 shares, of the company’s common stock was
repurchased pursuant to a share repurchase authorization. The
average price per share repurchased was $33.57. The remainder of
the share repurchase authorization expired as of June 30, 2010.
Additional Shareholder Information
As of
June 30, 2010 As of Mar. 31, 2010
As of June 30, 2009 Number of
employees: 1,083
1,092 1,001
Asset
ManagementAUM:
$11.8 billion
$12.8 billion $5.9 billion
Shareholders’ equity: $817.0
million $838.4 million
$778.1 million
Annualized Qtrly.Return
on Avg.AdjustedShareholders’ Equity1
4.0%
0.3%
7.0%
Book value per share: $53.71
$52.25
$48.30
Tangible book valueper
share2:
$28.67
$28.38 $37.51
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) June 30, 2010 Mar. 31, 2010
June 30, 2009 Shareholders' equity $ 836,210 $ 800,059 $
769,825
Deduct: goodwill attributable to
PJC Inc. acquisition by USB
105,522 105,522 105,522 Adjusted
shareholders' equity $ 730,688 $ 694,537 $ 664,303
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
June 30, 2010
Mar. 31, 2010
June 30, 2009
Shareholders' equity $ 817,025 $ 838,423 $ 778,109
Deduct: goodwill and identifiable intangible assets 380,880
383,084 173,731 Tangible shareholders' equity
$ 436,145 $ 455,339 $ 604,378
Conference CallAndrew S. Duff, chairman and chief
executive officer, and Debbra L. Schoneman, chief financial
officer, will host a conference call to discuss second quarter
results on Wednesday, July 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) 768-8804, or
(212) 231-2903 internationally, and referencing reservation
#21475255. 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 July 21 at the same
Web address or by calling (800) 633-8284 and referencing
reservation #21475255.
About Piper JaffrayPiper Jaffray Companies (NYSE: PJC) is
a leading, international investment bank and institutional
securities firm, serving the needs of corporations, private equity
groups, public entities, nonprofit clients and institutional
investors. Founded in 1895, Piper Jaffray provides a broad set of
products and services, including equity and debt capital markets
products; public finance services; financial advisory services;
equity and fixed-income institutional brokerage; equity research
and fixed income analytics; and asset management services. 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 StatementsThis
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 continued market volatility), anticipated
financial results (including expectations regarding revenue and
expense levels, operating margin, the compensation ratio, return on
shareholders’ equity, and non-compensation expenses), the
environment and prospects for capital markets transactions and
institutional brokerage activity (including fixed income sales and
trading activity and the municipal sector within fixed income), our
current deal pipelines, expected hiring activity, liquidity and
capital resources, 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) 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, 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, (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) 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, 2009 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, 2009, 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) Six Months Ended Jun. 30,
Mar. 31, Jun. 30, 2Q '10 2Q '10 Jun.
30, Jun. 30, Percent (Amounts in thousands,
except per share data)
2010 2010 2009 vs.
1Q '10 vs. 2Q '09 2010 2009
Inc/(Dec)
Revenues:
Investment banking $ 71,745 $ 43,748 $ 62,150 64.0 % 15.4 % $
115,493 $ 86,500 33.5 % Institutional brokerage 32,084 49,095
60,852 (34.6 ) (47.3 ) 81,179 115,879 (29.9 ) Interest 12,648
11,120 8,973 13.7 41.0 23,768 16,261 46.2 Asset management 15,873
9,154 3,240 73.4 389.9 25,027 6,249 300.5 Other income/(loss)
3,495 2,927 (950 ) 19.4
N/M 6,422 (4,549 ) N/M Total
revenues 135,845 116,044 134,265 17.1 1.2 251,889 220,340 14.3
Interest expense 8,192 6,458
1,975 26.9 314.8 14,650
4,168 251.5 Net revenues 127,653
109,586 132,290 16.5 (3.5
) 237,239 216,172 9.7
Non-interest expenses:
Compensation and benefits 77,678 65,096 79,377 19.3 (2.1 ) 142,774
129,701 10.1 Occupancy and equipment 8,056 7,669 7,680 5.0 4.9
15,725 14,198 10.8 Communications 6,199 6,489 5,430 (4.5 ) 14.2
12,688 11,529 10.1 Floor brokerage and clearance 3,307 2,617 3,232
26.4 2.3 5,924 6,114 (3.1 ) Marketing and business development
6,095 5,322 3,419 14.5 78.3 11,417 7,864 45.2 Outside services
7,735 8,004 7,415 (3.4 ) 4.3 15,739 14,934 5.4
Restructuring-related expenses - - 3,572 N/M (100.0 ) - 3,572
(100.0 ) Other operating expenses 6,747 5,234
3,747 28.9 80.1 11,981
6,298 90.2 Total non-interest expenses
115,817 100,431 113,872
15.3 1.7 216,248 194,210
11.3
Income before income tax
expense
11,836 9,155 18,418 29.3 (35.7 ) 20,991 21,962 (4.4 ) Income
tax expense 4,458 8,645 6,842
(48.4 ) % (34.8 ) 13,103 13,111
(0.1 )
Net income 7,378 510
11,576 N/M (36.3 ) 7,888
8,851 (10.9 )
Net income allocated to
restricted participating shares
(1,666 ) (101 ) (2,101 ) N/M (20.7 )
(1,675 ) (1,582 ) 5.9
Net income
applicable to common shareholders $ 5,712 $ 409 $
9,475 N/M (39.7 ) % $ 6,213 $ 7,269
(14.5 ) %
Earnings per common share Basic $ 0.36 $
0.03 $ 0.59 N/M (38.9 ) % $ 0.39 $ 0.45 (13.9 ) % Diluted $ 0.36 $
0.03 $ 0.59 N/M (39.0 ) % $ 0.39 $ 0.45 (14.2 ) %
Weighted average number of common shares outstanding Basic
15,901 15,837 16,104 0.4 % (1.3 ) % 15,869 15,987 (0.7 ) % Diluted
15,925 15,924 16,117 0.0 % (1.2 ) % 15,925 15,995 (0.4 ) %
N/M - Not meaningful
Piper Jaffray Companies Preliminary Unaudited
Segment Data Three Months Ended Percent
Inc/(Dec) Six Months Ended Jun. 30, Mar.
31, Jun. 30, 2Q '10 2Q '10 Jun. 30,
Jun. 30, Percent
(Dollars in thousands)
2010 2010 2009 vs. 1Q '10 vs. 2Q
'09 2010 2009 Inc/(Dec)
Capital Markets
Investment banking Financing Equities $ 34,776 $ 16,988 $
23,294 104.7 % 49.3 % $ 51,764 $ 27,357 89.2 % Debt 14,355 15,181
20,126 (5.4 ) (28.7 ) 29,536 32,514 (9.2 ) Advisory services
23,197 11,975 19,574 93.7
18.5 35,172 28,389 23.9
Total investment banking 72,328 44,144 62,994 63.8 14.8 116,472
88,260 32.0 Institutional sales and trading Equities 27,501
26,927 30,384 2.1 (9.5 ) 54,428 61,046 (10.8 ) Fixed income
9,733 27,376 35,166 (64.4 )
(72.3 ) 37,109 62,971 (41.1 ) Total
institutional sales and trading 37,234 54,303 65,550 (31.4 ) (43.2
) 91,537 124,017 (26.2 ) Other income/(loss) 2,423
1,985 344 22.1 604.4
4,408 (2,310 ) N/M Net
revenues 111,985 100,432 128,888 11.5 (13.1 ) 212,417 209,967 1.2
Operating expenses 103,114 93,026
109,041 10.8 (5.4 ) 196,140
185,453 5.8 Segment pre-tax
operating income $ 8,871 $ 7,406 $ 19,847 19.8
% (55.3 ) % $ 16,277 $ 24,514 (33.6 ) %
Segment pre-tax operating margin 7.9 % 7.4 % 15.4 % 7.7 % 11.7 %
Asset Management Management and
performance fees $ 15,873 $ 9,154 $ 3,240 73.4 % 389.9 % $ 25,027 $
6,249 300.5 % Other income/(loss) (205 ) -
162 N/M N/M (205 )
(44 ) 365.9 Net revenues 15,668 9,154 3,402 71.2
360.6 24,822 6,205 300.0 Operating expenses 12,703
7,405 4,831 71.5 162.9
% 20,108 8,757 129.6 %
Segment pre-tax operating income/(loss) $ 2,965 $
1,749 $ (1,429 ) 69.5 % N/M $ 4,714 $
(2,552 ) N/M Segment pre-tax operating margin 18.9 %
19.1 % N/M 19.0 % N/M
Total Net
revenues $ 127,653 $ 109,586 $ 132,290 16.5 % (3.5 ) % $ 237,239 $
216,172 9.7 % Operating expenses 115,817
100,431 113,872 15.3 1.7
216,248 194,210 11.3
Total segment pre-tax operating income $ 11,836 $ 9,155
$ 18,418 29.3 % (35.7 ) % $ 20,991 $
21,962 (4.4 ) % Pre-tax operating margin 9.3 % 8.4 %
13.9 % 8.8 % 10.2 % N/M - Not meaningful
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