Piper Jaffray Companies Announces 2013 First Quarter Results

  Piper Jaffray Companies Announces 2013 First Quarter Results

Business Wire

MINNEAPOLIS -- April 17, 2013

Piper Jaffray Companies (NYSE: PJC) today announced that for the quarter ended
Mar. 31, 2013, net income from continuing operations was $10.7 million, or
$0.60 per diluted common share. These results compared to net income from
continuing operations of $6.2 million, or $0.33 per diluted common share, in
the year-ago period, and $15.6 million, or $0.88 per diluted common share, in
the fourth quarter of 2012.

For the first quarter of 2013, net revenues from continuing operations were
$109.5 million, compared to $113.4 million in the year-ago period and $140.9
million in the sequential fourth quarter.

For the quarter ended Mar. 31, 2013, net income, including continuing and
discontinued operations, was $10.1 million, or $0.57 per diluted common share,
compared to net income of $2.9 million, or $0.15 per diluted common share, in
the year-ago period, and $11.8 million, or $0.67 per diluted common share, in
the fourth quarter of 2012. 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 March 8, 2013, the
firm signed a definitive agreement to sell FAMCO. The transaction, valued at
$4.0 million, is subject to customary closing conditions and is expected to
close during the second quarter of 2013.

“We produced solid results this quarter led by our public finance, fixed
income and asset management businesses,” said Andrew S. Duff, chairman and
chief executive officer.

First Quarter Results from Continuing Operations

Consolidated Expenses
For the first quarter of 2013, compensation and benefits expenses were $66.1
million, down 4% and 24% compared to the first and fourth quarters of 2012,
respectively, due to lower financial results.

For the first quarter of 2013, compensation and benefits expenses were 60.4%
of net revenues, compared to 60.6% and 62.0% for the first and fourth quarters
of 2012, respectively.

Non-compensation expenses were $25.3 million for the first quarter of 2013,
compared to $29.4 million in the year-ago period and $30.7 million in the
fourth quarter of 2012. The decrease was primarily due to receipt of insurance
proceeds for the reimbursement of prior legal settlements.

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, a division of our asset management segment, are presented
as discontinued operations for all periods presented.

Capital Markets
For the quarter, Capital Markets generated pre-tax operating income of $12.8
million, compared to $10.7 million and $19.4 million in the first and fourth
quarters of 2012, respectively.

Net revenues were $91.2 million, down 6% and 27% compared to the year-ago
period and the fourth quarter of 2012, respectively.

  *Equity financing revenues of $14.3 million decreased 38% and 21% compared
    to the first and fourth quarters of 2012, respectively. Revenues were down
    compared to both periods due to lower revenue per transaction.
  *Fixed income financing revenues of $17.0 million increased 15% compared to
    the year-ago period and decreased 17% compared to fourth quarter of 2012.
    Revenues were favorable compared to the year-ago period due to higher
    revenue per transaction, and lower compared to the fourth quarter of 2012
    due to fewer completed transactions.
  *Advisory services revenues were $9.6 million, down 11% and 79% compared to
    the first and fourth quarters of 2012, respectively, due to fewer
    completed transactions. Advisory services revenues were very strong in the
    fourth quarter of 2012 as sellers were motivated to complete deals prior
    to year-end, which resulted in less activity in early 2013.
  *Equity institutional brokerage revenues of $20.7 million were in line with
    the first quarter of 2012 and up 3% compared to the fourth quarter of
    2012.
  *Fixed income institutional brokerage revenues were $28.0 million, down
    slightly compared to the first quarter of 2012 and up 19% compared to the
    fourth quarter of 2012. Revenues were favorable compared to the fourth
    quarter of 2012 due to increased results from the firm’s strategic trading
    businesses and the expansion of our middle market sales group.
  *Operating expenses for the first quarter were $78.5 million, down 9%
    compared to the prior year quarter, primarily due to lower
    non-compensation expenses. Compared to the fourth quarter of 2012,
    operating expenses decreased 25% due to lower compensation and
    non-compensation expenses.
  *For the first quarter of 2013, the capital markets segment pre-tax
    operating margin was 14.0%, compared to 11.1% in the year-ago period, and
    a 15.6% operating margin in the fourth quarter of 2012. Pre-tax operating
    margin in the current quarter was higher compared to the year-ago period
    due to lower operating expenses, and less than the fourth quarter of 2012
    due to lower revenues.

Asset Management
For the quarter ended Mar. 31, 2013, asset management generated pre-tax
operating income of $5.4 million, up 21% and 61% compared to the first and
fourth quarters of 2012, respectively.

Net revenues were $18.3 million, up 10% and 12%, compared to the year-ago
period and fourth quarter of 2012, respectively. Increased revenues were
driven by higher management fees from increased assets under management (AUM)
due to market appreciation.

  *Operating expenses for the current quarter were $12.9 million, up 6%
    compared to the year-ago period and essentially flat with the fourth
    quarter of 2012. Segment pre-tax operating margin was 29.6%, compared to
    26.9% in the year-ago period and 20.6% in the fourth quarter of 2012.
    Segment pre-tax margin improved relative to the comparable quarters due to
    higher revenues.
  *Assets under management were $10.2 billion in the first quarter of 2013,
    compared to $9.1 billion in the year-ago period and the fourth quarter of
    2012. Compared to the sequential fourth quarter, the increase in AUM was
    attributable to the market appreciation of client assets.

Other Matters
In the first quarter of 2013, the firm acquired $13.9 million, or 340,789
shares, related to employee obligations on the vesting of equity awards.

First 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 March 8, 2013, the firm signed a definitive
agreement to sell FAMCO. The transaction is expected to close during the
second quarter of 2013.

For the quarter ended Mar. 31, 2013, the net loss from discontinued operations
was $0.5 million, or $0.03 per diluted common share, compared to a net loss of
$3.3 million in the year-ago period, or $0.17 per diluted share. The net loss
from discontinued operations was $3.7 million, or $0.21 per diluted common
share, in the fourth quarter of 2012, which included a $3.4 million after-tax,
non-cash goodwill impairment charge related to FAMCO.


Additional Shareholder Information*
                              
                              For the Quarter Ended:
                              Mar. 31,        Dec. 31,        Mar. 31,
                                 2013              2012              2012
Number of employees            911             907             915
Equity financings                                           
# of transactions                17                16                22
Capital raised                 $6.2            $1.5            $3.4
                                 billion           billion           billion
Tax-exempt issuance
# of transactions                152               154               139
Par value                      $2.5            $2.1            $2.3
                                 billion           billion           billion
Mergers & acquisitions
# of transactions                3                 22                5
Aggregate deal value           $0.5            $6.8            $0.7
                                 billion           billion           billion
Asset Management AUM           $10.2           $9.1            $9.1
                                 billion           billion           billion
Common shareholders’           $752.4          $733.3          $721.8
equity                           million           million           million
Annualized qtrly.
return on avg. common          5.5%            6.5%            1.6%
shareholders’ equity
**
Book value per share:          $47.02          $48.20          $44.15
Tangible book value            $32.10          $32.39          $28.75
per share^(1):

*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., Apr. 17 at 9 a.m. ET (8 a.m. CT). The earnings release will be
available on or after Apr. 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 #29572054. 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.
17 at the same Web address or by calling (855)859-2056 and referencing
reservation #29572054 .

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, the environment and prospects for capital markets
transactions (including corporate advisory transactions), anticipated
financial results from strategic trading activities within fixed income
institutional brokerage, the closing of the sale of the FAMCO division of our
asset management business, 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)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)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)our ability to manage expenses may be limited by the fixed nature
of certain expenses as well as the impact from unanticipated expenses, (5)the
sale of the FAMCO business may not close, or could cause us to incur
unforeseen expenses and have disruptive effects on our business, (6)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, (7)our stock price may fluctuate as a result of
several factors, including but not limited to, changes in our revenues and
operating results, and (8)the other factors described under “Risk Factors” in
PartI, Item1A of our Annual Report on Form 10-K for the year ended
December31, 2012 and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in PartII, Item7 of our Annual Report
on Form 10-K for the year ended December31, 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 800, Minneapolis,
Minnesota 55402-7020

                
Piper Jaffray Companies
Preliminary Unaudited Results of Operations
                                                                  
                                                                                
                  Three Months Ended                        Percent Inc/(Dec)
(Amounts in       Mar. 31,      Dec. 31,      Mar. 31,      1Q '13      1Q '13
thousands,
except per        2013          2012          2012          vs. 4Q      vs. 1Q
share data)                                                 '12         '12
Revenues:
Investment        $ 40,362      $ 82,393      $ 48,085      (51.0 ) %   (16.1 ) %
banking
Institutional       43,260        38,017        44,080      13.8        (1.9  )
brokerage
Asset               18,211        16,516        16,533      10.3        10.1
management
Interest            13,363        13,102        11,146      2.0         19.9
Other              2,953       (11     )    28         N/M        N/M   
income/(loss)
Total revenues      118,149       150,017       119,872     (21.2 )     (1.4  )
                                                                                
Interest           8,616       9,106       6,434      (5.4  )     33.9  
expense
                                                                                
Net revenues       109,533     140,911     113,438    (22.3 )     (3.4  )
                                                                                
Non-interest
expenses:
Compensation        66,105        87,415        68,796      (24.4 )     (3.9  )
and benefits
Occupancy and       5,817         6,783         6,862       (14.2 )     (15.2 )
equipment
Communications      5,232         4,431         5,897       18.1        (11.3 )
Floor brokerage     2,150         2,120         2,107       1.4         2.0
and clearance
Marketing and
business            4,980         4,926         4,878       1.1         2.1
development
Outside             7,214         8,188         5,838       (11.9 )     23.6
services
Intangible
asset               1,661         1,736         1,736       (4.3  )     (4.3  )
amortization
expense
Other operating    (1,794  )    2,530       2,102      N/M        N/M   
expenses
Total
non-interest       91,365      118,129     98,216     (22.7 )     (7.0  )
expenses
                                                                                
Income from
continuing
operations          18,168        22,782        15,222      (20.3 )     19.4
before income
tax expense
                                                                                
Income tax         5,600       7,422       7,553      (24.5 )     (25.9 )
expense
                                                                                
Income from
continuing         12,568      15,360      7,669      (18.2 )     63.9  
operations
                                                                                
Discontinued
operations:
Loss from
discontinued       (521    )    (3,741  )    (3,303  )   (86.1 )     (84.2 )
operations, net
of tax
                                                                                
Net income          12,047        11,619        4,366       3.7         175.9
                                                                                
Net
income/(loss)
applicable to      1,901       (205    )    1,437      N/M        32.3  
noncontrolling
interests
                                                                                
Net income
applicable to     $ 10,146     $ 11,824     $ 2,929      (14.2 ) %   246.4  %
Piper Jaffray
Companies (1)

Net income
applicable to
Piper Jaffray
Companies'        $ 8,966      $ 10,198     $ 2,480      (12.1 ) %   261.5  %
common
shareholders
(1)
                                                                                
Amounts
applicable to
Piper Jaffray
Companies
Income from
continuing        $ 10,667      $ 15,565      $ 6,232       (31.5 ) %   71.2    %
operations
Loss from
discontinued       (521    )    (3,741  )    (3,303  )   (86.1 )     (84.2 )
operations, net
of tax
Net income
applicable to     $ 10,146      $ 11,824      $ 2,929       (14.2 ) %   246.4   %
Piper Jaffray
Companies
                                                                                
Earnings/(loss)
per basic
common share
Income from
continuing        $ 0.60        $ 0.88        $ 0.33        (31.8 ) %   81.8    %
operations
Loss from
discontinued       (0.03   )    (0.21   )    (0.17   )   (85.7 )     (82.4 )
operations
Earnings per
basic common      $ 0.58        $ 0.67        $ 0.15        (13.4 ) %   286.7   %
share
                                                                                
Earnings/(loss)
per diluted
common share
Income from
continuing        $ 0.60        $ 0.88        $ 0.33        (31.8 ) %   81.8    %
operations
Loss from
discontinued       (0.03   )    (0.21   )    (0.17   )   (85.7 )     (82.4 )
operations
Earnings per
diluted common    $ 0.57        $ 0.67        $ 0.15        (14.9 ) %   280.0   %
share
                                                                                
Weighted
average number
of common
shares
outstanding
Basic               15,582        15,253        16,072      2.2     %   (3.0  ) %
Diluted             15,610        15,256        16,072      2.3     %   (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)
(Dollars in     Mar. 31,      Dec. 31,      Mar. 31,      1Q '13      1Q '13
thousands)      2013          2012          2012          vs. 4Q      vs. 1Q
                                                          '12         '12
Capital
Markets
                                                                              
Investment
banking
Financing
Equities        $ 14,303      $ 18,039      $ 23,228      (20.7 ) %   (38.4 ) %
Debt              17,032        20,504        14,769      (16.9 )     15.3
Advisory         9,556       44,495      10,722     (78.5 )     (10.9 )
services
Total
investment        40,891        83,038        48,719      (50.8 )     (16.1 )
banking
                                                                              
Institutional
sales and
trading
Equities          20,735        20,134        20,980      3.0         (1.2  )
Fixed income     28,043      23,480      28,463     19.4       (1.5  )
Total
institutional     48,778        43,614        49,443      11.8        (1.3  )
sales and
trading
                                                                              
Other            1,540       (2,144  )    (1,367  )   N/M        N/M   
income/(loss)
                                                                              
Net revenues      91,209        124,508       96,795      (26.7 )     (5.8  )
                                                                              
Operating        78,458      105,099     86,055     (25.3 )     (8.8  )
expenses
                                                                              
Segment
pre-tax         $ 12,751     $ 19,409     $ 10,740     (34.3 ) %   18.7   %
operating
income
                                                                              
Segment
pre-tax           14.0    %     15.6    %     11.1    %
operating
margin
                                                                              
                                                                              
Asset
Management
                                                                              
Management
and
performance
fees
Management      $ 17,098      $ 16,083      $ 15,849      6.3     %   7.9     %
fees
Performance      351         121         424        190.1      (17.2 )
fees
Total
management
and               17,449        16,204        16,273      7.7         7.2
performance
fees
                                                                              
Other income     875         199         370        339.7      136.5 
                                                                              
Net revenues      18,324        16,403        16,643      11.7        10.1
                                                                              
Operating        12,907      13,030      12,161     (0.9  )     6.1   
expenses
                                                                              
Segment
pre-tax         $ 5,417      $ 3,373      $ 4,482      60.6   %   20.9   %
operating
income
                                                                              
Segment
pre-tax           29.6    %     20.6    %     26.9    %
operating
margin
                                                                              
                                                                              
Total
                                                                              
Net revenues    $ 109,533     $ 140,911     $ 113,438     (22.3 ) %   (3.4  ) %
                                                                              
Operating        91,365      118,129     98,216     (22.7 )     (7.0  )
expenses
                                                                              
Total segment
pre-tax         $ 18,168     $ 22,782     $ 15,222     (20.3 ) %   19.4   %
operating
income
                                                                              
Pre-tax
operating         16.6    %     16.2    %     13.4    %
margin
                                                                              
N/M - Not meaningful
                                                                              
Segment pre-tax operating income 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           Mar. 31, 2013     Dec. 31, 2012     Mar. 31, 2012
      thousands)
      Common
      shareholders'         $  752,434        $  733,292        $  721,779
      equity
      Deduct: goodwill
      and identifiable        238,819         240,480         251,739  
      intangible assets
                                                                            
      Tangible common
      shareholders'         $  513,615       $  492,812       $  470,040  
      equity
                                                                            

Contact:

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