MINNEAPOLIS, Oct. 18 /PRNewswire-FirstCall/ -- Piper Jaffray
Companies (NYSE:PJC) today announced net income from continuing
operations of $9.5 million, or $0.50 per diluted share, for the
quarter ended Sept. 30, 2006, down from $10.9 million, or $0.57 per
diluted share in the year-ago period and up from $7.9 million, or
$0.40 per diluted share in the second quarter of 2006. For the
quarter ended Sept. 30, 2006, net income including both continuing
and discontinued operations was $186.6 million, which includes the
gain from the sale of the company's Private Client Services branch
network that closed in Aug. 2006. Total net income was up from
$15.1 million in the comparable quarter a year ago and $4.1 million
in the quarter ending June 30, 2006. For the quarter ended Sept.
30, 2006, diluted earnings per share totaled $9.79, up from $0.79
in the same quarter last year and $0.21 in the sequential quarter.
For the first nine months of 2006, net income from continuing
operations was $36.2 million, or $1.87 per diluted share, up from
$13.2 million, or $0.70 per diluted share, for the year-ago period.
Net revenues from continuing operations of $356.3 million
year-to-date represent an 18 percent increase over the year-ago
period, due to increases across all capital markets businesses. "We
are pleased with our third quarter financial results given the more
challenging market conditions," said Chairman and Chief Executive
Officer Andrew S. Duff. "During the quarter we closed the sale of
the Private Client Services branch network, paid off $180 million
in subordinated debt and executed a $100 million accelerated share
repurchase agreement. We continue to execute our growth strategy
with investments in our business and the expansion of our
international presence with the addition of locations in Madrid and
Shanghai." Results of Continuing Operations Net Revenues For the
third quarter of 2006, net revenues from continuing operations
totaled $116.1 million, down 3 percent from $120.1 million for the
third quarter of 2005 and up 10 percent compared to the second
quarter of 2006. Investment Banking For the third quarter of 2006,
total investment banking revenues were $72.1 million, down 2
percent, compared to the third quarter of 2005, and up 18 percent
compared to the second quarter of 2006. * Equity financing revenues
were $27.8 million, up 53 percent compared to the third quarter of
2005, resulting from higher convertibles revenues and higher
average revenues per transaction on other equity financings.
Compared to the second quarter of 2006, equity financing revenues
increased 8 percent, as higher average revenues per transaction
more than offset fewer completed equity financings. * Advisory
services revenues were $25.4 million, down 36 percent compared to
record revenues in the year-ago period. Compared to the second
quarter of 2006, advisory services revenues increased 28 percent,
mainly driven by higher average revenues per transaction. * Fixed
income underwriting revenues were $18.9 million, up 20 percent and
21 percent compared to the year-ago period and the second quarter
of 2006, respectively. The improvement in revenues compared to both
periods primarily resulted from higher average public finance
revenues per transaction. Following is a recap of completed deal
information for the third quarter of 2006: * 17 equity financings
raising a total of $1.9 billion in capital, and the company was
bookrunner on 8 of the equity financings. Of the completed
transactions, 12 were U.S. public offerings, placing the company
12th nationally, based on the number of completed transactions.
(Source: Dealogic) * 8 mergers and acquisitions transactions with
an aggregate enterprise value of $1.2 billion. The number of deals
and the enterprise value include disclosed and undisclosed
transactions. (Source: Piper Jaffray) * 111 tax-exempt issues with
a total par value of $1.5 billion, ranking the company fourth
nationally, based on the number of completed transactions. (Source:
Thomson Financial) Institutional Sales and Trading For the quarter
ended Sept. 2006, institutional sales and trading generated
revenues of $43.3 million, down 10 percent from both the same
quarter in 2005 and the second quarter of 2006. The main drivers of
the declines compared to both periods were more challenging equity
market conditions and lower revenues from interest rate products. *
Equities sales and trading revenues were $28.6 million, down 12
percent from the year-ago period and down 9 percent compared to the
second quarter of 2006. The declines compared to both periods were
primarily driven by lower volumes. Partially offsetting the
declines in the cash equities business were increased revenues from
growth initiatives, specifically, algorithmic and program trading
and convertibles. * Fixed income sales and trading revenues were
$14.7 million, down 6 percent compared to the year-ago period and
down 11 percent compared to the second quarter of 2006. The
declines compared to both periods were attributable to lower
revenues from interest rate products, which were partially offset
by stronger revenues from high-yield and structured products.
Non-Interest Expenses For the third quarter of 2006, compensation
and benefits expense was $69.1 million, down 5 percent compared to
the prior-year period, primarily attributable to decreased variable
compensation driven by lower net revenues and profitability.
Compared to the second quarter of 2006, compensation and benefits
expense increased 14 percent, mainly due to higher variable
compensation driven by higher net revenues and profitability and
due to investments in personnel. Non-compensation expenses were
$32.0 million for the current quarter, essentially flat compared to
the third quarter of 2005 and the second quarter of 2006. For the
three months ended Sept. 30, 2006, pre-tax operating margin from
continuing operations was 13.0 percent, down from 13.2 percent for
the year- ago period and up from 11.6 percent for the second
quarter of 2006. On Aug. 17, 2006, Piper Jaffray announced that it
had entered into an accelerated share repurchase (ASR) agreement to
repurchase $100 million of the company's common stock. Piper
Jaffray completed the ASR on Oct. 2, 2006, pursuant to which the
company repurchased a total of approximately 1.6 million shares of
common stock. The ASR is part of a previously announced repurchase
program authorized by the company's board of directors to
repurchase up to $180 million of common shares commencing with the
closing of the company's sale of its Private Client Services branch
network on Aug. 11, 2006 and ending on Dec. 31, 2007. Results of
Discontinued Operations Discontinued operations include the
operating results of the Private Client Services business, the gain
on the sale of the Private Client Services branch network, and
restructuring and transaction costs incurred in connection with the
sale. The sale of the private client branch network to UBS AG
closed on Aug. 11, 2006. For the quarter ended Sept. 30, 2006, net
income from discontinued operations was $177.1 million, or $9.29
per diluted share, up from $4.2 million, or $0.22 per diluted
share, in the third quarter of 2005 and up from a loss of $3.8
million, or $0.19 per diluted share, in the second quarter of 2006.
Additional Shareholder Information As of September 30, As of June
30, As of September 30, 2006 2006 2005 Full time employees: 1,134
2,638 2,879 Shareholders' equity: $893 million $807 million $734
million Annualized Return on Average Tangible Shareholders'
Equity(1) NM 3.4% 14.8% Book value per share: $52.66 $43.51 $39.96
Tangible book value per share: $38.90 $26.30 $22.51 NM-Not
Meaningful (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 Ended Three Months Ended As of (Dollars in thousands)
Sept. 30, 2006 Sept. 30, 2005 Sept. 30, 2006 Shareholders' equity
$883,007 $729,848 $893,187 Deduct: Goodwill and identifiable
intangible assets 276,434 320,834 233,434 Tangible shareholders'
equity $606,572 $409,013 $659,753 Conference Call Andrew S. Duff,
chairman and chief executive officer, and Thomas P. Schnettler,
vice chairman and chief financial officer, will host a conference
call to discuss third quarter 2006 financial results on Wednesday,
October 18, 2006, at 11 a.m. ET (10 a.m. CT). The call can be
accessed via live audio webcast available through the company's web
site at http://www.piperjaffray.com/ or by dialing (866) 244-9933,
or (706) 758-0864 internationally, and referring to conference ID
7532300 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 October 18, 2006 at the same web address or by calling (800)
642-1687, or (706) 645-9291 internationally. About Piper Jaffray
Piper Jaffray Companies 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; high-yield and structured products; institutional equity
and fixed- income sales and trading; and equity and high-yield
research. With headquarters in Minneapolis, Piper Jaffray has 24
offices across the United States and international locations in
London, Madrid and Shanghai. Piper Jaffray & Co. is the firm's
principal operating subsidiary. (NYSE:PJC)
(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) the expected benefits of the sale of our Private Client
Services branch network, including the growth of our Capital
Markets business, increased profitability and shareholder returns,
may take longer than anticipated to achieve and may not be achieved
in their entirety or at all; (2) strategies with respect to the
deployment of sale proceeds may take longer than anticipated to be
realized or may not be achieved in their entirety or at all; (3)
developments in market and economic conditions have in the past
adversely affected, and may in the future adversely affect, our
business and profitability, (4) developments in specific sectors of
the economy have in the past adversely affected, and may in the
future adversely affect, our business and profitability, (5) 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, (6) we have experienced significant
pricing pressure in areas of our business, which may impair our
revenues and profitability, (7) our ability to attract, develop and
retain highly skilled and productive employees is critical to the
success of our business, (8) our underwriting and market-making
activities may place our capital at risk, (9) the volume of
anticipated investment banking transactions may differ from actual
results, (10) an inability to readily divest or transfer trading
positions may result in financial losses to our business, (11) 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, (12) 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, (13) 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 and may not yield the
benefits we expect, (14) 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, (15) 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, (16) 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, (17) our exposure to
legal liability is significant, and could lead to substantial
damages, (18) the business operations that we conduct outside of
the United States subject us to unique risks, (19) we may suffer
losses if our reputation is harmed, (20) our stock price may
fluctuate as a result of several factors, including but not limited
to changes in our revenues and operating results, (21) 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 (22) 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. Piper Jaffray
Companies Preliminary Unaudited Results of Operations For the Three
Months Ended Percent Inc/(Dec) Sept. 30, June 30, Sept. 30, 3Q06
vs. 3Q06 vs. 2006 2006 2005 2Q06 3Q05 (Amounts in thousands, except
per share data) Revenues: Investment banking $72,107 $61,236
$73,407 17.8% (1.8)% Institutional brokerage 34,964 40,898 42,476
(14.5) (17.7) Interest 16,663 13,521 11,357 23.2 46.7 Other income
863 (1,262) 949 N/M (9.1) Total revenues 124,597 114,393 128,189
8.9 (2.8) Interest expense 8,490 9,143 8,064 (7.1) 5.3 Net revenues
116,107 105,250 120,125 10.3 (3.3) Non-interest expenses:
Compensation and benefits 69,079 60,653 72,649 13.9 (4.9) Occupancy
and equipment 6,878 6,718 7,710 2.4 (10.8) Communications 5,761
5,593 5,683 3.0 1.4 Floor brokerage and clearance 3,759 3,373 3,887
11.4 (3.3) Marketing and business development 5,887 6,122 4,827
(3.8) 22.0 Outside services 6,344 6,836 5,237 (7.2) 21.1 Cash award
program 512 886 1,004 (42.2) (49.0) Restructuring- related expense
- - - N/M N/M Other operating expenses 2,838 2,910 3,319 (2.5)
(14.5) Total non- interest expenses 101,058 93,091 104,316 8.6
(3.1) Income from continuing operations before income tax expense
15,049 12,159 15,809 23.8 (4.8) Income tax expense 5,521 4,230
4,871 30.5 13.3 Net income from continuing operations 9,528 7,929
10,938 20.2 (12.9) Discontinued operations: Income/ (loss) from
discontinued operations, net of tax 177,085 (3,792) 4,210 N/M
4106.3 Net Income $186,613 $4,137 $15,148 4410.8% 1131.9% Earnings
per basic common share Income from continuing operations $0.53
$0.43 $0.58 23.3% (8.6)% Income/(loss) from discontinued operations
9.82 (0.20) 0.22 N/M 4363.6% Earnings per basic common share $10.35
$0.22 $0.80 4,604.6% 1193.8% Earnings per diluted common share
Income from continuing operations $0.50 $0.40 $0.57 25.0% (12.3)%
Income/(loss) from discontinued operations 9.29 (0.19) 0.22 N/M
4,122.7% Earnings per diluted common share $9.79 $0.21 $0.79
4,561.9% 1,139.2% Weighted average number of common shares Basic
18,031 18,556 18,841 (2.8)% (4.3)% Diluted 19,071 19,669 19,107
(3.0)% (0.2)% N/M - Not meaningful For the Nine Months Ended Sept.
30, Sept. 30, Percent 2006 2005 Inc/(Dec) (Amounts in thousands,
except per share data) Revenues: Investment banking $203,107
$169,909 19.5% Institutional brokerage 122,136 121,699 0.4 Interest
44,728 32,015 39.7 Other income 12,131 2,403 404.8 Total revenues
382,102 326,026 17.2 Interest expense 25,786 23,332 10.5 Net
revenues 356,316 302,694 17.7 Non-interest expenses: Compensation
and benefits 202,656 177,262 14.3 Occupancy and equipment 21,705
22,912 (5.3) Communications 16,737 18,081 (7.4) Floor brokerage and
clearance 9,807 11,336 (13.5) Marketing and business development
17,188 15,793 8.8 Outside services 19,472 16,911 15.1 Cash award
program 2,673 3,201 (16.5) Restructuring-related expense - 8,595
N/M Other operating expenses 10,185 9,516 7.0 Total non-interest
expenses 300,423 283,607 5.9 Income from continuing operations
before income tax expense 55,893 19,087 192.8 Income tax expense
19,730 5,854 237.0 Net income from continuing operations 36,163
13,233 173.3 Discontinued operations: Income/(loss) from
discontinued operations, net of tax 178,444 10,487 1,601.6 Net
Income $214,607 $23,720 804.8% Earnings per basic common share
Income from continuing operations $1.97 $0.70 181.4% Income/(loss)
from discontinued operations 9.73 0.56 1637.5% Earnings per basic
common share $11.70 $1.26 828.6% Earnings per diluted common share
Income from continuing operations $1.87 $0.70 167.1% Income/(loss)
from discontinued operations 9.25 0.55 1581.8% Earnings per diluted
common share $11.12 $1.25 789.6% Weighted average number of common
shares Basic 18,348 18,814 (2.5)% Diluted 19,294 19,007 1.5% N/M -
Not meaningful Piper Jaffray Companies Preliminary Unaudited
Revenue From Continuing Operations (Detail) For the Three Months
Ended Percent Inc/(Dec) September 30, June 30, September 30, 3Q06
vs. 3Q06 vs. 2006 2006 2005 2Q06 3Q05 (Dollars in thousands)
Institutional sales and trading Fixed income $14,723 $16,621
$15,616 (11.4)% (5.7)% Equities 28,591 31,530 32,455 (9.3) (11.9)
Total institutional sales and trading 43,314 48,151 $48,071 (10.0)
(9.9) Investment banking Underwriting Fixed income 18,920 15,675
15,809 20.7 19.7 Equities 27,792 25,648 18,166 8.4 53.0 Advisory
services 25,395 19,913 39,432 27.5 (35.6) Total investment banking
72,107 61,236 73,407 17.8 (1.8) Other income 686 (4,137) (1,353)
N/M N/M Net revenues $116,107 $105,250 $120,125 10.3% (3.3)% N/M -
Not meaningful For the Nine Months Ended September 30, September
30, Percent 2006 2005 Inc/(Dec) (Dollars in thousands)
Institutional sales and trading Fixed income $53,959 $47,275 14.1%
Equities 92,880 89,322 4.0 Total institutional sales and trading
146,839 136,597 7.5 Investment banking Underwriting Fixed income
50,347 47,199 6.7 Equities 83,483 55,464 50.5 Advisory services
69,277 67,246 3.0 Total investment banking 203,107 169,909 19.5
Other income 6,370 (3,812) N/M Net revenues $356,316 $302,694 17.7%
N/M - Not meaningful DATASOURCE: Piper Jaffray Companies CONTACT:
Jennifer A. Olson-Goude, Investor Relations, +1-612-303-6277, or
Rob Litt, Media Relations, +1-612-303-8266, both of Piper Jaffray
Companies Web site: http://www.piperjaffray.com/
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