MINNEAPOLIS, April 19 /PRNewswire-FirstCall/ -- Piper Jaffray
Companies (NYSE:PJC) today announced net income of $23.9 million,
or $1.25 per diluted share, for the quarter ended March 31, 2006,
up from net income of $7.3 million, or $0.38 per diluted share, for
the quarter ended March 31, 2005. Net income for the current
quarter included a gain of $6.6 million after tax, or $.35 per
diluted share, from the company's ownership of two seats on the New
York Stock Exchange, Inc. (NYSE), which were exchanged for cash and
shares of the NYSE Group, Inc. in its initial public offering in
March 2006. Net income totaled $16.4 million, or $0.87 per diluted
share, for the quarter ended Dec. 31, 2005. Business Highlights --
Generated total quarterly net revenues of $227.6 million, up 27.1
percent from the year-ago period -- Recorded a 16.2 percent
quarterly pre-tax operating margin -- Announced the signing of a
definitive agreement to sell 100% of the Private Client Services
branch network and related net assets to UBS AG for total cash
consideration of approximately $800 million -- Completed a senior
managed $309 million municipal underwriting for the Baltimore
Convention Centre Hotel, one of the largest municipal transactions
ever for Piper Jaffray measured by par value -- Acted as
co-bookrunner on the $239 million Crocs, Inc. IPO, the third best
performing consumer transaction in the first quarter -- Added a
six-member restructuring team in New York to provide advisory
services to financially distressed companies and their creditor and
shareholder constituents "We are very pleased to report another
strong quarter of financial results and continued margin
expansion," said chairman and chief executive officer Andrew S.
Duff. "All businesses, including our expanded healthcare franchise
in London and our new high yield and structured products
initiative, contributed to the year-over-year improvement in top-
and bottom-line performance. With the additional capital we will
deploy from the sale of the Private Client Services branch network,
we will be able to accelerate the momentum in our Capital Markets
business." Results of Operations Net Revenues Net revenues for the
first quarter were $227.6 million, up 27.1 percent and 10.0 percent
from the first quarter of 2005 and the fourth quarter of 2005,
respectively. The increase compared to one year ago was driven by
strong performance across all revenue types, including a gain
related to the company's ownership of two seats on the NYSE.
Non-Interest Expenses For the quarter, non-interest expenses were
$190.7 million, up 13.8 percent from the first quarter of 2005 and
up 4.8 percent compared to the sequential quarter. Compensation
expense was $133.1 million, up 21.6 percent and 8.5 percent
compared to the prior-year period and the fourth quarter of 2005,
respectively. The increase compared to both periods was
attributable to increased variable compensation driven by higher
net revenues and profitability. Non-compensation expenses were
$57.6 million, down slightly compared to both periods. For the
quarter, pre-tax operating margin was 16.2 percent, up from 6.4
percent in the comparable prior-year period and 12.1 percent in the
preceding quarter. Excluding the gain related to the company's
ownership of two NYSE seats, pre-tax operating margin would have
been 12.3 percent for the quarter. For the first quarter of 2006,
annualized return on average tangible shareholders' equity(1) was
21.1 percent compared to 7.1 percent for the first quarter of 2005
and 15.4 percent for the preceding quarter. Excluding the gain
related to the company's ownership of two NYSE seats, annualized
return on average tangible shareholders' equity would have been
15.3 percent. Business Segment Review On April 11, 2006 Piper
Jaffray Companies announced the signing of a definitive agreement
to sell 100 percent of its Private Client Services branch network
to UBS AG. The sale is expected to close early in the third
quarter. In accordance with U.S. generally accepted accounting
principles related to the disposal of long-lived assets, the
operations of Private Client Services will be presented in the
financial statements as discontinued operations beginning in the
second quarter of 2006. The company has completed an analysis of
its interest bearing assets and liabilities to determine how they
are related to and driven by each business segment. As a result of
this analysis, Piper Jaffray has restated net interest of its
segments for each of the four quarters of 2005 and the full year of
2004. The restatement did not affect the company's aggregate
financial results for those periods. A supplemental schedule
showing the restated figures is included at the end of this
release. Capital Markets Capital Markets recorded $126.1 million in
net revenues for the quarter, up $35.6 million, or 39.4 percent,
from the first quarter of 2005. Segment pre-tax operating income
for the quarter was $23.8 million, up 137.6 percent compared to the
first quarter of 2005. Improved results in all businesses
contributed to the increase. Institutional Sales and Trading For
the first quarter of 2006, institutional sales and trading net
revenues were $55.4 million, up 34.7 percent from the year-ago
period and up 18.8 percent compared to the fourth quarter of 2005.
-- Equity sales and trading revenues were $32.8 million, an
increase of 22.1 percent from the year-ago period and an increase
of 16.8 percent compared to the fourth quarter of 2005. The
increase compared to both periods was primarily attributable to
higher convertibles net revenues and higher revenues in U.S. and
U.K. equity sales and trading. -- Fixed income sales and trading
revenues were $22.6 million, up 58.5 percent from the year-ago
period and up 22.0 percent from the sequential quarter. The
increase compared to both periods was mainly driven by high yield
and structured products and interest rate products. Investment
Banking Total investment banking revenues were $69.8 million, up
43.7 percent compared to the first quarter of 2005 and down 5.0
percent compared to the preceding quarter. -- Equity underwriting
revenues were $30.0 million, up 47.7 percent compared to the first
quarter of 2005 and up 53.6 percent from the sequential quarter.
The increase compared to both periods was mainly due to the
completion of more IPOs and follow-on transactions, offset in part
by lower revenues from convertible underwritings. -- Advisory
services revenues were $24.0 million, up 44.6 percent compared to
the first quarter of last year driven by an increased number of
transactions. Advisory services revenues declined 28.3 percent
compared to a very strong fourth quarter of last year. -- Fixed
income underwriting revenues were $15.8 million, up 35.4 percent
compared to the first quarter of 2005 mainly driven by the
Baltimore Convention Centre underwriting. Underwriting revenues
declined 23.0 percent compared to the fourth quarter of 2005, which
included higher revenues from structured products. Segment
operating expenses for the quarter were $102.3 million, an increase
of $21.9 million, or 27.2 percent, from the same period a year ago.
The increase is primarily attributable to higher variable
compensation expense due to increased net revenue and
profitability. For the first quarter of 2006, segment pre-tax
operating margin was 18.8 percent, up from 11.1 percent in the same
quarter of last year and up 17.9 percent from the sequential
quarter. The increase compared to both periods was mainly due to
containing non-compensation expenses on increased revenues.
Following is a recap of completed deal information for the first
quarter of 2006. -- 24 equity offerings, raising a total of $4.0
billion in capital, placing the firm 13th nationally, based on the
number of completed transactions. (Source: Dealogic) -- 14 mergers
and acquisitions transactions with an aggregate enterprise value of
$2.2 billion, ranking the firm 19th nationally, based on the number
of completed transactions. (Source: Mergerstat and Piper Jaffray)
-- 90 tax-exempt issues with a total par value of $1.4 billion,
ranking the firm 6th nationally. In the Upper Midwest, the firm
completed 47 public finance issues for the quarter with a total par
value of $413 million, again ranking the firm the lead underwriter
of Upper Midwest tax-exempt issues. Rankings are based on the
number of completed transactions. (Source: Thomson Financial)
Private Client Services Private Client Services recorded net
revenues of $92.6 million for the quarter, up 2.1 percent compared
to the first quarter of 2005 and up 4.8 percent compared to the
fourth quarter of last year. Increased revenues from fee-based
accounts were offset in part by fewer financial advisors. Segment
pre-tax operating income was $8.2 million, up 29.2 percent from the
first quarter of 2005 and up 2.1 percent sequentially. The increase
compared to both periods was mainly attributable to containing
non-compensation expenses on modestly increased revenues. Segment
operating expense was $84.4 million for the quarter, essentially
unchanged from the first quarter of 2005. Segment pre-tax operating
margin was 8.9 percent, up from 7.0 percent in the same quarter of
last year and down from 9.1 percent in the fourth quarter of 2005.
Corporate Support and Other Corporate Support and Other pre-tax
operating income was $6.2 million for the first quarter, compared
to a loss of $3.7 million in the year-ago period and a loss of $3.6
million in the fourth quarter of last year. The increase was
primarily attributable to a gain related to the company's ownership
of two seats on the NYSE, which were exchanged for cash and shares
of the NYSE Group, Inc. in its initial public offering in March
2006. Additional Shareholder Information As of As of As of March
31, Dec. 31, March 31, 2006 2005 2005 Full time employees: 2,793
2,871 2,976 Financial advisors: 817 842 866 Client assets: $54
billion $52 billion $50 billion Shareholders' equity: $794.5
million $754.8 million $736.6 million Book value per share: $42.82
$41.10 $38.01 Tangible book value per share: $25.58 $23.66 $21.43
(1) Tangible shareholders' equity equals total shareholders' equity
less goodwill and identifiable intangible assets. Annualized return
on average tangible shareholders' equity is computed by dividing
annualized net earnings by average monthly tangible shareholders'
equity. Management believes that annualized return on tangible
shareholders' equity is a meaningful measure of performance because
it reflects the tangible equity deployed in our businesses. This
measure excludes the portion of our shareholders' equity
attributable to goodwill and identifiable intangible assets. The
majority of our goodwill is a result of the 1998 acquisition of our
predecessor company, Piper Jaffray Companies Inc., and its
subsidiaries by U.S. Bancorp. The following table sets forth a
reconciliation of shareholders' equity to tangible shareholders'
equity. Shareholders' equity is the most directly comparable GAAP
financial measure to tangible shareholders' equity. Average for the
Three Months Three Months Ended Ended As of March 31, 2006 March
31, 2005 March 31, 2006 (Dollars in thousands) Shareholders' equity
$771,335 $732,787 $794,512 Deduct: Goodwill and identifiable
intangible assets 320,034 321,634 319,834 Tangible shareholders'
equity $451,301 $411,153 $474,678 Conference Call Andrew S. Duff,
chairman and chief executive officer, and Sandra G. Sponem, chief
financial officer, will host a conference call to discuss first
quarter 2006 financial results on Wednesday, April 19, 2006, at 11
a.m. ET (10 a.m. CT). The call can be accessed via live audio
webcast available through the firm's web site at
http://www.piperjaffray.com/ or by dialing (866) 244- 9933, or
(706) 758-0864 internationally, and referring to conference ID
6993879 and the leader's name, Andrew Duff. Callers should dial in
at least 15 minutes early to receive instructions. A replay of the
conference call will be available beginning at approximately 1 p.m.
ET on April 19, 2006 at the same web address or by calling (800)
642-1687, or (706) 645-9291 internationally. About Piper Jaffray
Companies Piper Jaffray Companies (NYSE:PJC) is a focused
securities firm dedicated to delivering superior financial advice,
investment products and transaction execution within selected
sectors of the financial services marketplace. The company
currently operates through two primary revenue-generating segments:
Capital Markets and Private Client Services. The sale of the
company's Private Client Services branch network, announced April
11, 2006, is currently pending. The company's Capital Markets
business generates revenue through two groups, Corporate and
Institutional Services and Public Finance Services. Through its
chief operating subsidiary, Piper Jaffray & Co., the firm has
served corporations, government and non-profit entities,
institutional investors and the financial advisory needs of private
individuals since 1895. Headquartered in Minneapolis, Piper Jaffray
currently has approximately 2,800 employees in 107 offices in 23
states across the country and in London. For more information about
Piper Jaffray, visit us online at http://www.piperjaffray.com/ .
Cautionary Note Regarding Forward-Looking Statements This press
release contains forward-looking statements. Statements that are
not historical or current facts, including statements about beliefs
and expectations, are forward-looking statements. These
forward-looking statements cover, among other things, the future
prospects of Piper Jaffray Companies. Forward-looking statements
involve inherent risks and uncertainties, and important factors
could cause actual results to differ materially from those
anticipated, including the following: (1) developments in market
and economic conditions have in the past adversely affected, and
may in the future adversely affect, our business and profitability,
(2) developments in specific sectors of the economy have in the
past adversely affected, and may in the future adversely affect,
our business and profitability, (3) we may not be able to compete
successfully with other companies in the financial services
industry who are often larger and better capitalized than we are,
(4) we have experienced significant pricing pressure in areas of
our business, which may impair our revenues and profitability, (5)
our ability to attract, develop and retain highly skilled and
productive employees is critical to the success of our business,
(6) our underwriting and market-making activities may place our
capital at risk, (7) an inability to readily divest or transfer
trading positions may result in financial losses to our business,
(8) use of derivative instruments as part of our risk management
techniques may place our capital at risk, while our risk management
techniques themselves may not fully mitigate our market risk
exposure, (9) 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, (10) we may make
strategic acquisitions of businesses, engage in joint ventures or
divest or exit existing businesses, which could cause us to incur
unforeseen expense and have disruptive effects on our business but
may not yield the benefits we expect, (11) our technology systems,
including outsourced systems, are critical components of our
operations, and failure of those systems or other aspects of our
operations infrastructure may disrupt our business, cause financial
loss and constrain our growth, (12) our business is subject to
extensive regulation that limits our business activities, and a
significant regulatory action against our company may have a
material adverse financial effect or cause significant reputational
harm to our company, (13) regulatory capital requirements may limit
our ability to expand or maintain present levels of our business or
impair our ability to meet our financial obligations, (14) our
exposure to legal liability is significant, and could lead to
substantial damages, (15) the business operations that we conduct
outside of the United States subject us to unique risks, (16) we
may suffer losses if our reputation is harmed, (17) our stock price
may fluctuate as a result of several factors, including but not
limited to changes in our revenues and operating results, (18)
provisions in our certificate of incorporation and bylaws and of
Delaware law may prevent or delay an acquisition of our company,
which could decrease the market value of our common stock, and (19)
other factors identified under "Risk Factors" in Part I, Item 1A of
our Annual Report on Form 10-K for the year ended December 31,
2005, and updated in our subsequent reports filed with the SEC.
These reports are available at our Web site at
http://www.piperjaffray.com/ and at the SEC Web site at
http://www.sec.gov/ . Forward-looking statements speak only as of
the date they are made, and we undertake no obligation to update
them in light of new information or future events. Since 1895.
Member SIPC and NYSE. Piper Jaffray Companies Preliminary Unaudited
Results of Operations Percent Inc/(Dec) For the Three Months Ended
1Q06 1Q06 (Amounts in thousands, March 31, Dec. 31, March 31, vs.
vs. except per share data) 2006 2005 2005 4Q05 1Q05 Revenues:
Commissions and fees $78,300 $72,397 $70,160 8.2 % 11.6 % Principal
transactions 38,566 34,732 34,864 11.0 10.6 Investment banking
74,904 78,321 56,322 (4.4) 33.0 Interest 22,587 20,586 15,602 9.7
44.8 Other income 23,660 12,358 10,727 91.5 120.6 Total revenues
238,017 218,394 187,675 9.0 26.8 Interest expense 10,463 11,435
8,607 (8.5) 21.6 Net revenues 227,554 206,959 179,068 10.0 27.1
Non-interest expenses: Compensation and benefits 133,087 122,693
109,402 8.5 21.6 Occupancy and equipment 14,678 14,886 14,027 (1.4)
4.6 Communications 9,443 9,725 10,405 (2.9) (9.2) Floor brokerage
and clearance 3,042 4,160 4,203 (26.9) (27.6) Marketing and
business development 9,631 9,956 10,650 (3.3) (9.6) Outside
services 11,909 13,071 10,639 (8.9) 11.9 Cash award program 1,275
1,004 1,136 27.0 12.2 Other operating expenses 7,608 6,494 7,127
17.2 6.7 Total non-interest expenses 190,673 181,989 167,589 4.8
13.8 Income before income tax expense 36,881 24,970 11,479 47.7
221.3 Income tax expense 13,024 8,607 4,144 51.3 214.3 Net income
$23,857 $16,363 $7,335 45.8 % 225.2 % Earnings Per Common Share
Basic $1.29 $0.89 $0.38 44.9 % 239.5 % Diluted $1.25 $0.87 $0.38
43.7 % 228.9 % Weighted average number of common shares Basic
18,462 18,365 19,378 0.5 % (4.7)% Diluted 19,146 18,850 19,523 1.6
% (1.9)% Piper Jaffray Companies Preliminary Unaudited Segment Data
Percent Inc/(Dec) For the Three Months Ended 1Q06 1Q06 March 31,
Dec. 31, March 31, vs. vs. (Dollars in thousands) 2006 2005 2005
4Q05 1Q05 Capital Markets Institutional sales and trading Fixed
income $22,615 $18,541 $14,268 22.0 % 58.5 % Equities 32,759 28,058
26,838 16.8 22.1 Total institutional sales and trading 55,374
46,599 41,106 18.8 34.7 Investment banking Underwriting Fixed
income 15,752 20,450 11,632 (23.0) 35.4 Equities 30,043 19,562
20,338 53.6 47.7 Advisory services 23,969 33,426 16,574 (28.3) 44.6
Total investment banking 69,764 73,438 48,544 (5.0) 43.7 Other
income 922 275 763 235.3 20.8 Net revenues 126,060 120,312 90,413
4.8 39.4 Operating expenses 102,309 98,723 80,418 3.6 27.2 Segment
pre-tax operating income $23,751 $21,589 $9,995 10.0 % 137.6 %
Segment pre-tax operating margin 18.8 % 17.9 % 11.1 % Private
Client Services Net revenues $92,595 $88,345 $90,731 4.8 % 2.1 %
Operating expenses 84,399 80,319 84,388 5.1 0.0 Segment pre-tax
operating income $8,196 $8,026 $6,343 2.1 % 29.2 % Segment pre-tax
operating margin 8.9 % 9.1 % 7.0 % Corporate Support and Other Net
revenues $8,899 $(1,698) $(2,076) N/M N/M Operating expenses 2,690
1,943 1,647 38.4 % 63.3 % Segment pre-tax operating income (loss)
$6,209 $(3,641) $(3,723) N/M N/M Segment pre-tax operating margin
N/M N/M N/M Reconciliation to total income before taxes: Total
segment pre-tax operating income $38,156 $25,974 $12,615 46.9 %
202.5 % Cash award program 1,275 1,004 1,136 27.0 12.2 Total income
before tax expense $36,881 $24,970 $11,479 47.7 % 221.3 % Pre-tax
operating margin 16.2 % 12.1 % 6.4 % N/M - Not Meaningful Piper
Jaffray Companies Preliminary Unaudited Segment Data For the Three
Months Ended March 31, Dec. 31, Sept. 30, June 30, March 31,
(Dollars in thousands) 2006 2005 2005 2005 2005 Capital Markets
Institutional sales and trading Fixed income $22,615 $18,541
$15,616 $17,391 $14,268 Equities 32,759 28,058 32,455 30,029 26,838
Total institutional sales and trading 55,374 46,599 48,071 47,420
41,106 Investment banking Underwriting Fixed income 15,752 20,450
15,809 19,758 11,632 Equities 30,043 19,562 18,166 16,960 20,338
Advisory services 23,969 33,426 39,432 11,240 16,574 Total
investment banking 69,764 73,438 73,407 47,958 48,544 Other income
922 275 565 868 763 Net revenues 126,060 120,312 122,043 96,246
90,413 Operating expenses 102,309 98,723 101,355 84,726 80,418
Segment pre-tax operating income $23,751 $21,589 $20,688 $11,520
$9,995 Segment pre-tax operating margin 18.8 % 17.9 % 17.0 % 12.0 %
11.1 % Private Client Services Net revenues $92,595 $88,345 $89,236
$85,433 $90,731 Operating expenses 84,399 80,319 81,980 81,983
84,388 Segment pre-tax operating income $8,196 $8,026 $7,256 $3,450
$6,343 Segment pre-tax operating margin 8.9 % 9.1 % 8.1 % 4.0 % 7.0
% Corporate Support and Other Net revenues $8,899 $(1,698) $(1,918)
$(2,014) $(2,076) Operating expenses 2,690 1,943 1,956 1,708 1,647
Segment pre-tax operating income (loss) $6,209 $(3,641) $(3,874)
$(3,722) $(3,723) Segment pre-tax operating margin N/M N/M N/M N/M
N/M Reconciliation to total income before taxes: Total segment
pre-tax operating income $38,156 $25,974 $24,070 $11,248 $12,615
Cash award program 1,275 1,004 1,005 1,061 1,136 Restructuring
related expense - - - 8,595 - Total income before tax expense
$36,881 $24,970 $23,065 $1,592 $11,479 Pre-tax operating margin
16.2 % 12.1 % 11.0 % 0.9 % 6.4 % N/M - Not Meaningful Piper Jaffray
Companies Preliminary Unaudited Segment Data For the Year Ended
December 31, December 31, (Dollars in thousands) 2005 2004 Capital
Markets Institutional sales and trading Fixed income $65,816
$80,188 Equities 117,380 118,150 Total institutional sales and
trading 183,196 198,338 Investment banking Underwriting Fixed
income 67,649 62,096 Equities 75,026 87,505 Advisory services
100,672 78,066 Total investment banking 243,347 227,667 Other
income 2,471 1,678 Net revenues 429,014 427,683 Operating expenses
365,222 363,249 Segment pre-tax operating income $63,792 $64,434
Segment pre-tax operating margin 14.9 % 15.1 % Private Client
Services Net revenues $353,745 $363,292 Operating expenses 328,670
332,709 Segment pre-tax operating income $25,075 $30,583 Segment
pre-tax operating margin 7.1 % 8.4 % Corporate Support and Other
Net revenues $(7,706) $6,523 Operating expenses 7,254 17,202
Segment pre-tax operating income (loss) $(14,960) $(10,679) Segment
pre-tax operating margin N/M N/M Reconciliation to total income
before taxes: Total segment pre-tax operating income $73,907
$84,338 Cash award program 4,206 4,717 Restructuring related
expense 8,595 - Total income before tax expense $61,106 $79,621
Pre-tax operating margin 7.9 % 10.0 % N/M - Not Meaningful
DATASOURCE: Piper Jaffray Companies CONTACT: Investor Relations,
Jennifer A. Olson-Goude, +1-612 303-6277, or Media Relations, Susan
L. Beatty, +1-612-303-5680, both of Piper Jaffray Companies Web
site: http://www.piperjaffray.com/
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