Piper Jaffray Companies (NYSE: PJC) today announced that for the
quarter ended June 30, 2013, net income from continuing operations
was $4.4 million, or $0.25 per diluted common share. These results
compared to net income from continuing operations of $10.8 million,
or $0.58 per diluted common share, in the year-ago period. The
year-ago results included a $7.1 million, or $0.35 per diluted
common share, tax benefit resulting from the resolution of a state
income tax matter and a $2.2 million after-tax, or $0.12 per
diluted common share, restructuring charge for severance and
occupancy-related charges. In the first quarter of 2013, net income
from continuing operations was $10.7 million, or $0.60 per diluted
common share.
For the second quarter of 2013, net revenues from continuing
operations were $99.8 million, compared to $103.1 million in the
year-ago period and $109.5 million in the first quarter of
2013.
For the quarter ended June 30, 2013, net income, including
continuing and discontinued operations, was $2.5 million, or $0.15
per diluted common share, compared to net income of $6.9 million,
or $0.37 per diluted common share, in the year-ago period, and
$10.1 million, or $0.57 per diluted common share, in the first
quarter of 2013. Discontinued operations includes the operating
results of our Hong Kong capital markets business, which we have
shut down, and FAMCO, a division of our asset management segment.
On April 30, 2013, the firm completed the sale of FAMCO under a
previously announced definitive agreement.
“We experienced extremely challenging conditions in the fixed
income markets this quarter which adversely impacted our Fixed
Income Brokerage business and our results for the quarter. Outside
of that business, most of our businesses performed well this
quarter led by Asset Management and capital raising in Public
Finance and Equities” said Andrew S. Duff, chairman and chief
executive officer. “We made significant strategic progress during
the quarter with our acquisitions of Seattle Northwest in public
finance, and Edgeview Partners in M&A, both of which closed in
the past week.”
Second Quarter Results from Continuing Operations
Consolidated ExpensesFor the second quarter of 2013,
compensation and benefits expenses were $65.0 million, up 4%
compared to the second quarter of 2012, and down 2% compared to the
first quarter of 2013.
For the second quarter of 2013, compensation and benefits
expenses were 65.1% of net revenues, compared to 60.7% and 60.4%
for the second quarter of 2012 and the first quarter of 2013,
respectively. The higher compensation ratio was driven by a change
in our business mix, primarily related to trading losses and the
impact of fixed components of compensation costs on a reduced
revenue base.
Non-compensation expenses were $31.4 million for the second
quarter of 2013, compared to $34.8 million in the year-ago period
and $25.3 million in the first quarter of 2013. Non-compensation
expenses decreased compared to the year-ago period due to
restructuring-related expenses incurred in the second quarter of
2012, and increased compared to the sequential quarter due to the
receipt of insurance proceeds for the reimbursement of prior legal
settlements in the first quarter of 2013.
Business Segment ResultsThe 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, a division of our asset management
segment, are presented as discontinued operations for all periods
presented.
Capital MarketsFor the quarter, Capital Markets generated
a pre-tax operating loss of $2.1 million, compared to pre-tax
operating income of $1.8 million and $12.8 million in the second
quarter of 2012 and the first quarter of 2013, respectively.
Net revenues were $81.8 million, down 7% and 10% compared to the
year-ago period and the first quarter of 2013, respectively.
- Equity financing revenues of $21.8
million increased 66% and 52% compared to the second quarter of
2012 and the first quarter of 2013, respectively. Revenues were up
compared to both periods due to more completed transactions and
higher revenue per transaction.
- Fixed income financing revenues of
$22.1 million were essentially flat compared to the year-ago period
and increased 30% compared to first quarter of 2013. Revenues were
favorable compared to the first quarter of 2013 due to more
completed transactions.
- Advisory services revenues were $9.4
million, down 36% compared to the second quarter of 2012 due to
fewer completed transactions. Advisory service revenues decreased
2% compared to first quarter of 2013.
- Equity institutional brokerage revenues
of $21.4 million were up 28% compared to the second quarter of 2012
due to an increase in client trading volumes. Revenues increased 3%
compared with the first quarter of 2013.
- Fixed income institutional brokerage
revenues were $5.0 million, down 76% and 82% compared to the second
quarter of 2012 and the first quarter of 2013, respectively.
Revenues were down compared to both periods due to trading losses
on inventory positions in the second quarter of 2013. Strategic
trading results while lower from previous quarters had positive net
revenues. The fixed income market experienced a rapid increase in
interest rates, a widening of credit spreads, and a volatile
trading environment. These market dynamics negatively impacted our
inventory values which were not fully mitigated by our hedging
strategies.
- Operating expenses for the second
quarter were $83.9 million, down 2% compared to the prior year
quarter. Compared to the first quarter of 2013, operating expenses
increased 7% due to higher non-compensation expenses.
Non-compensation expenses increased compared to the sequential
quarter due to the receipt of insurance proceeds for the
reimbursement of prior legal settlements in the first quarter of
2013.
- Segment pre-tax operating margin was a
negative 2.6% compared to 2.0% in the year-ago period and 14.0% in
the first quarter of 2013. Pre-tax operating margin in the current
quarter was lower compared to both periods due to lower net
revenues and the increase in the compensation ratio driven by the
change in the revenue mix, primarily related to trading
losses.
Asset ManagementFor the quarter ended June 30, 2013,
asset management generated pre-tax operating income of $5.5
million, up 41% compared to the second quarter of 2012 and in line
with the first quarter of 2013.
Net revenues were $18.0 million, up 16% compared to the year-ago
period and down slightly compared with the first quarter of 2013.
Increased revenues compared to the year-ago period were driven by
higher management fees from increased assets under management (AUM)
due to market appreciation.
- Operating expenses for the current
quarter were $12.5 million, up 7% compared to the year-ago period
and down 3% compared with the first quarter of 2013. Segment
pre-tax operating margin was 30.4%, compared to 25.0% in the
year-ago period and 29.6% in the first quarter of 2013. Segment
pre-tax margin improved relative to the year ago period due to
higher revenues.
- Assets under management were $10.2
billion in the second quarter of 2013, compared to $8.5 billion in
the year-ago period and $10.2 billion the first quarter of
2013.
Other MattersIn the second quarter of 2013, the firm
repurchased $25.7 million, or 797,673 shares, of its common stock
at an average price of $32.23 per share. The firm has $69.7 million
remaining on its share repurchase authorization, which expires on
September 30, 2014.
Second Quarter Results from Discontinued Operations
Discontinued operations includes the operating results of our
Hong Kong capital markets business, which we shut down, and FAMCO,
a division of our asset management segment. On April 30, 2013, the
firm completed the sale of FAMCO.
For the quarter ended June 30, 2013, the net loss from
discontinued operations was $1.9 million, or $0.11 per diluted
common share. The net loss was principally driven by expense from
contractual obligations related to the sale of FAMCO. The net loss
from discontinued operations was $3.9 million, or $0.21 per diluted
common share, in the year-ago period and $0.5 million, or $0.03 per
diluted common share, in the first quarter of 2013.
Additional Shareholder Information*
For the Quarter Ended: June
30, 2013 Mar. 31, 2013
June 30, 2012 Number of employees
939 911
892 Equity financings
# of
transactions 22 17 15 Capital
raised $5.0 billion
$6.2 billion $1.6
billion** Tax-exempt issuance # of transactions
185 152 164 Par value
$3.5 billion $2.5 billion
$2.6 billion Mergers &
acquisitions # of transactions 4 3
7 Aggregate deal value $0.2
billion $0.5 billion
$2.1 billion Asset Management AUM
$10.2 billion
$10.2 billion $8.5 billion
Common shareholders’ equity $729.9
million $752.4 million
$703.4 million Annualized qtrly. return on
avg. common shareholders’ equity ***
1.3% 5.5%
3.8%
Book value per share: $47.83
$47.02
$46.27 Tangible book value per
share(1):
$32.44
$32.10
$29.84
* Number of employees, transaction data, and AUM
reflect continuing operations; other numbers reflect continuing and
discontinued results.** Due to size, Facebook IPO capital
has been excluded*** Annualized return on average
common shareholders’ equity is computed by dividing annualized net
income by average monthly common shareholders’ equity.
Conference CallAndrew 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., July 17 at 9 a.m. ET (8 a.m. CT). The earnings
release will be available on or after July 17 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 #92053549. 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 July 17 at
the same Web address or by calling (855)859-2056 and referencing
reservation #92053549.
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 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 the interest rate environment), 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, the expected benefits of our
acquisitions of Seattle-Northwest Securities Corporation and
Edgeview Partners, L.P. (including restructuring costs,
non-compensation expenses and earnings per share), 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.
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) further interest rate volatility, especially if the changes
continue to be rapid or severe, could continue to negatively impact
our fixed income institutional business, (3) strategic trading
activities comprise a meaningful portion of our fixed income
institutional brokerage revenue, and results from these activities
may be volatile and vary significantly, including the possibility
of incurring losses, on a quarterly and annual basis, (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) our ability to manage expenses
may be limited by the fixed nature of certain expenses as well as
the impact from unanticipated expenses, (6) the expected
benefits of the Seattle-Northwest and Edgeview transactions,
including earnings accretion, may take longer than anticipated to
achieve and may not be achieved in their entirety or at all,
(7) 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,
(8) our stock price may fluctuate as a result of several
factors, including but not limited to, changes in our revenues and
operating results, and (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, 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) Six Months Ended
(Amounts in thousands, except per share
data)
June 30, Mar. 31, June 30, 2Q '13 2Q
'13 June 30, June 30, Percent 2013
2013
2012 vs. 1Q '13 vs. 2Q '12 2013
2012 Inc/(Dec) Revenues: Investment banking $
52,846 $ 40,362 $ 49,368 30.9 % 7.0 % $ 93,208 $ 97,453 (4.4 ) %
Institutional brokerage 20,560 43,260 31,207 (52.5 ) (34.1 ) 63,820
75,287 (15.2 ) Asset management 18,031 18,211 16,030 (1.0 ) 12.5
36,242 32,563 11.3 Interest 14,360 13,363 12,139 7.5 18.3 27,723
23,285 19.1 Other income 3,310 2,953
979 12.1 238.1 6,263
1,007 521.9 Total revenues 109,107 118,149
109,723 (7.7 ) (0.6 ) 227,256 229,595 (1.0 ) Interest
expense 9,335 8,616 6,625
8.3 40.9 17,951 13,059
37.5 Net revenues 99,772 109,533
103,098 (8.9 ) (3.2 ) 209,305
216,536 (3.3 )
Non-interest expenses:
Compensation and benefits 65,000 66,105 62,601 (1.7 ) 3.8 131,105
131,397 (0.2 ) Occupancy and equipment 6,543 5,817 6,752 12.5 (3.1
) 12,360 13,614 (9.2 ) Communications 5,030 5,232 4,939 (3.9 ) 1.8
10,262 10,836 (5.3 ) Floor brokerage and clearance 2,247 2,150
2,002 4.5 12.2 4,397 4,109 7.0 Marketing and business development
5,957 4,980 5,845 19.6 1.9 10,937 10,723 2.0 Outside services 8,449
7,214 7,225 17.1 16.9 15,663 13,063 19.9 Restructuring-related
expense - - 3,642 N/M N/M - 3,642 N/M Intangible asset amortization
expense 1,661 1,661 1,736 - (4.3 ) 3,322 3,472 (4.3 ) Other
operating expenses 1,552 (1,794 ) 2,701
N/M (42.5 ) (242 ) 4,803 N/M
Total non-interest expenses 96,439
91,365 97,443 5.6 (1.0 ) 187,804
195,659 (4.0 )
Income from continuing operations
before income tax expense/(benefit)
3,333 18,168 5,655 (81.7 ) (41.1 ) 21,501 20,877 3.0 Income
tax expense/(benefit) 1,644 5,600
(5,699 ) (70.6 ) N/M 7,244 1,854
290.7
Income from continuing operations
1,689 12,568 11,354 (86.6
) (85.1 ) 14,257 19,023 (25.1 )
Discontinued operations: Loss from discontinued operations,
net of tax (1,871 ) (521 ) (3,934 ) 259.1
(52.4 ) (2,392 ) (7,237 ) (66.9 )
Net income/(loss) (182 ) 12,047 7,420 N/M N/M 11,865 11,786
0.7 Net income/(loss) applicable to noncontrolling interests
(2,670 ) 1,901 569 N/M
N/M (769 ) 2,006 N/M
Net income applicable to Piper Jaffray Companies (1) $ 2,488
$ 10,146 $ 6,851 (75.5 ) % (63.7 ) % $ 12,634
$ 9,780 29.2 %
Net income applicable to Piper Jaffray
Companies' common shareholders (1)
$ 2,266 $ 8,966 $ 5,890 (74.7 ) % (61.5 ) % $
11,333 $ 8,344 35.8 %
Amounts
applicable to Piper Jaffray Companies Net income from
continuing operations $ 4,359 $ 10,667 $ 10,785 (59.1 ) % (59.6 ) %
$ 15,026 $ 17,017 (11.7 ) % Net loss from discontinued operations
(1,871 ) (521 ) (3,934 ) 259.1 (52.4 )
(2,392 ) (7,237 ) (66.9 ) Net income applicable to
Piper Jaffray Companies $ 2,488 $ 10,146 $ 6,851 (75.5 ) % (63.7 )
% $ 12,634 $ 9,780 29.2 %
Earnings/(loss) per basic
common share Income from continuing operations $ 0.25 $ 0.60 $
0.58 (58.3 ) % (56.9 ) % $ 0.86 $ 0.91 (5.5 ) % Loss from
discontinued operations (0.11 ) (0.03 ) (0.21
) 266.7 (47.6 ) (0.14 ) (0.39 ) (64.1 )
Earnings per basic common share $ 0.15 $ 0.58 $ 0.37 (74.1 ) %
(59.5 ) % $ 0.73 $ 0.52 40.4 %
Earnings/(loss) per
diluted common share Income from continuing operations $ 0.25 $
0.60 $ 0.58 (58.3 ) % (56.9 ) % $ 0.86 $ 0.91 (5.5 ) % Loss from
discontinued operations (0.11 ) (0.03 ) (0.21
) 266.7 (47.6 ) (0.14 ) (0.39 ) (64.1 )
Earnings per diluted common share $ 0.15 $ 0.57 $ 0.37 (73.7 ) %
(59.5 ) % $ 0.73 $ 0.52 40.4 %
Weighted average number of
common shares outstanding Basic 15,621 15,582 15,932 0.3 % (2.0
) % 15,602 16,002 (2.5 ) % Diluted 15,626 15,610 15,932 0.1 % (1.9
) % 15,619 16,002 (2.4 ) % (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) Six Months Ended (Dollars in thousands)
June 30, Mar. 31, June 30, 2Q '13 2Q
'13 June 30, June 30, Percent 2013
2013 2012 vs. 1Q '13 vs. 2Q '12
2013 2012 Inc/(Dec) Capital Markets
Investment banking Financing Equities $ 21,772 $ 14,303 $
13,132 52.2 % 65.8 % $ 36,075 $ 36,360 (0.8 ) % Debt 22,131 17,032
22,256 29.9 (0.6 ) 39,163 37,025 5.8 Advisory services 9,409
9,556 14,631 (1.5 ) (35.7 )
18,965 25,353 (25.2 ) Total investment
banking 53,312 40,891 50,019 30.4 6.6 94,203 98,738 (4.6 )
Institutional sales and trading Equities 21,392 20,735 16,682 3.2
28.2 42,127 37,662 11.9 Fixed income 4,959
28,043 20,620 (82.3 ) (76.0 ) 33,002
49,083 (32.8 ) Total institutional sales and
trading 26,351 48,778 37,302 (46.0 ) (29.4 ) 75,129 86,745 (13.4 )
Other income/(loss) 2,146 1,540
265 39.4 709.8 3,686
(1,102 ) N/M Net revenues 81,809 91,209 87,586
(10.3 ) (6.6 ) 173,018 184,381 (6.2 ) Operating expenses
83,937 78,458 85,803 7.0
% (2.2 ) % 162,395 171,858 (5.5
) Segment pre-tax operating income/(loss) $ (2,128 ) $
12,751 $ 1,783 N/M N/M $ 10,623
$ 12,523 (15.2 ) % Segment pre-tax operating margin
(2.6 )% 14.0 % 2.0 % 6.1 % 6.8 %
Asset
Management Management and performance fees Management
fees $ 17,567 $ 17,098 $ 15,564 2.7 % 12.9 % $ 34,665 $ 31,413 10.4
% Performance fees 305 351 218
(13.1 ) 39.9 656 642 2.2
Total management and performance fees 17,872 17,449 15,782
2.4 13.2 35,321 32,055 10.2 Other income/(loss) 91
875 (270 ) (89.6 ) N/M
966 100 866.0 Net revenues
17,963 18,324 15,512 (2.0 ) 15.8 36,287 32,155 12.9
Operating expenses 12,502 12,907
11,640 (3.1 ) 7.4 25,409 23,801
6.8 Segment pre-tax operating income $ 5,461
$ 5,417 $ 3,872 0.8 % 41.0 % $
10,878 $ 8,354 30.2 % Segment pre-tax
operating margin 30.4 % 29.6 % 25.0 % 30.0 % 26.0 %
Total Net revenues $ 99,772 $ 109,533 $ 103,098 (8.9
) % (3.2 ) % $ 209,305 $ 216,536 (3.3 ) % Operating expenses
96,439 91,365 97,443 5.6
(1.0 ) 187,804 195,659 (4.0 )
Pre-tax operating income $ 3,333 $ 18,168 $
5,655 (81.7 ) % (41.1 ) % $ 21,501 $ 20,877
3.0 % Pre-tax operating margin 3.3 % 16.6 % 5.5 %
10.3 % 9.6 % 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) June 30,
2013 Mar. 31, 2013 June 30, 2012 Common shareholders' equity $
729,880 $ 752,434 $ 703,385 Deduct: goodwill and identifiable
intangible assets 234,780 238,819
249,822 Tangible common shareholders' equity $
495,100 $ 513,615 $ 453,563
Piper Jaffray CompaniesTom Smith, 612-303-6336Investor
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