MINNEAPOLIS, Jan. 24 /PRNewswire-FirstCall/ -- Piper Jaffray
Companies (NYSE:PJC) today announced net income from continuing
operations of $26.7 million, or $1.49 per diluted share, for the
quarter ended Dec. 31, 2006, up from $11.9 million, or $0.63 per
diluted share, in the year-ago period and up from $9.5 million, or
$0.50 per diluted share, in the third quarter of 2006. Net income
from continuing operations for the quarter ended Dec. 31, 2006
included a benefit of $0.73 per diluted share due to a reduction of
the reserve related to developments in a particular industry-wide
litigation matter. For the quarter ended Dec. 31, 2006, net income
(including discontinued operations) was $20.6 million, or $1.15 per
diluted share, up from $16.4 million, or $0.87 per diluted share,
in the same quarter last year, and down from $186.6 million, or
$9.79 per diluted share, in the third quarter of 2006, which
included the gain from the sale of the company's Private Client
Services branch network. For the full year of 2006, net income from
continuing operations was $62.9 million, or $3.32 per diluted
share, up from $25.2 million, or $1.32 per diluted share, in the
prior year. Net revenues from continuing operations of $502.9
million represent a 19 percent increase over 2005, driven by
increases across all capital markets businesses. "We are extremely
pleased to deliver a solid year of financial results, with strong
top-line growth and improved profitability," said Chairman and
Chief Executive Officer Andrew S. Duff. "2006 was a pivotal year
for Piper Jaffray as we repositioned our company to focus all our
resources on our capital markets businesses. Our financial results
demonstrate our strategy is sound, and we are confident about our
prospects to deepen our sector expertise, broaden our product
offerings and expand our geographic presence. We thank our clients
for placing their trust in us and our employees for their hard work
and dedication to our clients." Results of Continuing Operations
Fourth Quarter Net Revenues For the fourth quarter of 2006,
continuing operations generated net revenues of $146.6 million, up
24 percent from $118.6 million for the fourth quarter of 2005 and
up 26 percent compared to the third quarter of 2006. Investment
Banking For the fourth quarter of 2006, total investment banking
revenues were $91.7 million, up 25 percent compared to the fourth
quarter of 2005, and up 27 percent compared to the third quarter of
2006. -- Equity financing revenues were $31.3 million, up 60
percent compared to the fourth quarter of 2005, mainly driven by
more completed transactions. Equity financing revenues increased 13
percent compared to the third quarter of 2006, primarily due to
more completed transactions, offset in part by lower convertibles
revenues and lower average revenues per transaction. -- Advisory
services revenues were $36.0 million, up 8 percent compared to the
year-ago period, and up 42 percent compared to the third quarter of
2006, mainly driven by higher average revenues per transaction. --
Fixed income financing revenues were $24.4 million, up 19 percent
and 29 percent compared to the year-ago period and the third
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 fourth quarter of 2006: -- 30 equity
financings raising a total of $4.3 billion in capital, and the
company was bookrunner on 13 of the equity financings. Of the
completed transactions, 24 were U.S. public offerings, placing the
company 15th nationally, based on the number of completed
transactions. (Source: Dealogic) -- 10 mergers and acquisitions
transactions with an aggregate enterprise value of $2.1 billion.
The number of deals and the enterprise value include disclosed and
undisclosed transactions. (Source: Piper Jaffray) -- 126 tax-exempt
issues with a total par value of $2.0 billion, ranking the company
fifth nationally, based on the number of completed transactions.
(Source: Thomson Financial) Institutional Sales and Trading For the
quarter ended Dec. 31, 2006, institutional sales and trading
generated revenues of $50.8 million, up 9 percent from the same
quarter last year and up 17 percent compared to the third quarter
of 2006. -- Equities sales and trading revenues were $29.5 million,
up 5 percent from the year-ago period and up 3 percent compared to
the third quarter of 2006. -- Fixed income sales and trading
revenues were $21.2 million, up 14 percent compared to the year-ago
period, primarily due to higher revenues from high-yield and
structured products. Compared to the third quarter of 2006,
revenues rose 44 percent, resulting from higher revenues from
high-yield and structured products, interest rate products, and
cash trading. Fourth Quarter Non-Interest Expenses For the fourth
quarter of 2006, compensation and benefits expense was $88.6
million, up 33 percent and 28 percent, compared to the prior-year
period and the third quarter of 2006, respectively. The increases
compared to both periods were mainly attributable to increased
variable compensation driven by higher profitability and
investments in personnel. Non-compensation expenses were $16.0
million for the current quarter, down 54 percent compared to the
year-ago period and down 50 percent compared to the third quarter
of 2006, mainly driven by a benefit from a reduction of the reserve
for a particular litigation matter. For the fourth quarter of 2006,
pre-tax operating margin from continuing operations was 28.6
percent, of which 14.5 percentage points was due to a benefit from
the litigation reserve reduction. Excluding that benefit, pre-tax
operating margin from continuing operations was 14.1 percent,
comparable to 14.3 percent for the year-ago period and up from 13.0
percent for the third quarter of 2006. Full Year 2006 Net Revenues
For the year, net revenues from continuing operations were $502.9
million, up 19 percent compared to 2005. Revenues increased across
all businesses and were particularly strong in equity financings.
Following is a recap of completed deal information for the full
year of 2006: -- 99 equity financings raising a total of $13.6
billion in capital, and the company was bookrunner on 41 of the
equity financings. Of the completed transactions, 80 were U.S.
public offerings, placing the company 14th nationally, based on the
number of completed transactions. (Source: Dealogic) -- 41 mergers
and acquisitions transactions with an aggregate enterprise value of
$7.3 billion. The number of deals and the enterprise value include
disclosed and undisclosed transactions. (Source: Piper Jaffray) --
452 tax-exempt issues with a total par value of $6.6 billion,
ranking the company fourth nationally, based on the number of
completed transactions. (Source: Thomson Financial) Full Year 2006
Non-Interest Expenses For the full year of 2006, compensation and
benefits expense was $291.3 million, up 20 percent compared to
2005, mainly attributable to increased variable compensation driven
by higher profitability and investments in personnel.
Non-compensation expenses for the full year were $113.8 million,
down 20 percent from $141.4 million in 2005. The decrease was
mainly due to a reduction of the reserve for a particular
litigation matter in 2006 and the restructuring charge recorded in
2005. For the full year of 2006, pre-tax operating margin from
continuing operations was 19.5 percent, up from 8.6 percent in
2005. The significant improvement was driven by stronger net
revenues, a benefit from the litigation reserve reduction,
disciplined expense management, and the restructuring charge
recorded in 2005. Results of Discontinued Operations Fourth Quarter
Discontinued operations include the restructuring and transaction
costs incurred in connection with the company's sale of its Private
Client Services branch network to UBS AG, which closed on Aug. 11,
2006. For the quarter ended Dec. 31, 2006, discontinued operations
recorded a loss of $6.1 million, or $0.34 per diluted share, which
included costs primarily for occupancy, severance and
litigation-related expense. The company anticipates it will incur
additional restructuring expenses in the first and second quarters
of 2007 related to a system conversion. Additional Shareholder
Information As of As of As of Dec. 31, Sept. 30, Dec. 31, 2006 2006
2005 Full time employees: 1,108 1,134 2,871 Shareholders' equity:
$924 million $893 million $755 million Annualized Return on Average
Tangible Shareholders' Equity(1) 12.3% NM 15.4% Book value per
share: $54.43 $52.66 $41.10 Tangible book value per share: $40.71
$38.90 $23.66 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 Three Months Ended Ended As of Dec. 31, Dec. 31, Dec.
31, 2006 2005 2006 (Dollars in thousands) Shareholders' equity
$904,403 $745,648 $924,439 Deduct: Goodwill and identifiable
intangible assets 233,234 320,434 233,034 Tangible shareholders'
equity $671,169 $425,214 $691,405 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 fourth quarter and full year 2006 financial results
on Wednesday, January 24, 2007, at 9 a.m. ET (8 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 5543041 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 11 a.m. ET on January 24, 2007 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 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) it is inherently difficult to predict
accurately the timing and outcome of legal proceedings and the
amounts of legal reserves are difficult to determine and subject to
future revision; accordingly future results of operations could be
adversely affected if reserves are required to be increased or
legal proceedings are resolved in excess of established reserves,
(15) 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, (16) 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, (17) 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, (18) our exposure to legal liability is
significant, and could lead to substantial damages, (19) the amount
and timing of restructuring expenses associated with acquisition
and divestiture activity are difficult to predict accurately, and
our estimates may differ from actual results, (20) the business
operations that we conduct outside of the United States subject us
to unique risks, (21) we may suffer losses if our reputation is
harmed, (22) our stock price may fluctuate as a result of several
factors, including but not limited to changes in our revenues and
operating results, (23) 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, (24) increases in capital commitments in
our proprietary trading, principal investing and similar activities
increase the potential for significant losses, and (25) 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
4Q06 4Q06 (Amounts in thousands, Dec. 31, Sept. 30, Dec. 31, vs.
vs. except per share data) 2006 2006 2005 3Q06 4Q05 Revenues:
Investment banking $91,701 $72,107 $73,438 27.2 % 24.9 %
Institutional brokerage 40,270 34,964 40,369 15.2 (0.2) Interest
19,241 16,663 12,842 15.5 49.8 Other income 1,923 863 1,127 122.8
70.6 Total revenues 153,135 124,597 127,776 22.9 19.8 Interest
expense 6,517 8,490 9,162 (23.2) (28.9) Net revenues 146,618
116,107 118,614 26.3 23.6 Non-interest expenses: Compensation and
benefits 88,609 69,079 66,571 28.3 33.1 Occupancy and equipment
8,955 6,878 7,896 30.2 13.4 Communications 6,452 5,761 5,906 12.0
9.2 Floor brokerage and clearance 3,485 3,759 3,449 (7.3) 1.0
Marketing and business development 7,543 5,887 5,744 28.1 31.3
Outside services 8,581 6,344 6,970 35.3 23.1 Cash award program 307
512 1,004 (40.0) (69.4) Restructuring-related expense - - - N/M N/M
Other operating expenses (19,294) 2,838 4,130 N/M N/M Total
non-interest expenses 104,638 101,058 101,670 3.5 2.9 Income from
continuing operations before income tax expense 41,980 15,049
16,944 179.0 147.8 Income tax expense 15,244 5,521 5,009 176.1
204.3 Net income from continuing operations 26,736 9,528 11,935
180.6 124.0 Discontinued operations: Income/(loss) from
discontinued operations, net of tax (6,090) 177,085 4,428 N/M N/M
Net Income $20,646 $186,613 $16,363 (88.9) % 26.2 % Earnings per
basic common share Income from continuing operations $1.58 $0.53
$0.65 198.1 % 143.1 % Income/(loss) from discontinued operations
(0.36) 9.82 0.24 N/M N/M Earnings per basic common share $1.22
$10.35 $0.89 (88.2) % 37.1 % Earnings per diluted common share
Income from continuing operations $1.49 $0.50 $0.63 198.0 % 136.5 %
Income/(loss) from discontinued operations (0.34) 9.29 0.23 N/M N/M
Earnings per diluted common share $1.15 $9.79 $0.87 (88.3) % 32.2 %
Weighted average number of common shares Basic 16,973 18,031 18,365
(5.9) % (7.6) % Diluted 18,004 19,071 18,850 (5.6) % (4.5) % For
the Year Ended (Amounts in thousands, except per Dec. 31, Dec. 31,
Percent share data) 2006 2005 Inc/(Dec) Revenues: Investment
banking $294,808 $243,347 21.1 % Institutional brokerage 162,406
162,068 0.2 Interest 63,969 44,857 42.6 Other income 14,054 3,530
298.1 Total revenues 535,237 453,802 17.9 Interest expense 32,303
32,494 (0.6) Net revenues 502,934 421,308 19.4 Non-interest
expenses: Compensation and benefits 291,265 243,833 19.5 Occupancy
and equipment 30,660 30,808 (0.5) Communications 23,189 23,987
(3.3) Floor brokerage and clearance 13,292 14,785 (10.1) Marketing
and business development 24,731 21,537 14.8 Outside services 28,053
23,881 17.5 Cash award program 2,980 4,205 (29.1)
Restructuring-related expense - 8,595 N/M Other operating expenses
(9,109) 13,646 N/M Total non-interest expenses 405,061 385,277 5.1
Income from continuing operations before income tax expense 97,873
36,031 171.6 Income tax expense 34,974 10,863 222.0 Net income from
continuing operations 62,899 25,168 149.9 Discontinued operations:
Income/(loss) from discontinued operations, net of tax 172,354
14,915 1,055.6 Net Income $235,253 $40,083 486.9 % Earnings per
basic common share Income from continuing operations $3.49 $1.34
160.4 % Income/(loss) from discontinued operations 9.57 0.79 1111.4
% Earnings per basic common share $13.07 $2.13 513.6 % Earnings per
diluted common share Income from continuing operations $3.32 $1.32
151.5 % Income/(loss) from discontinued operations 9.09 0.78
1,065.4 % Earnings per diluted common share $12.40 $2.10 490.5 %
Weighted average number of common shares Basic 18,002 18,813 (4.3)
% Diluted 18,968 19,081 (0.6) % N/M - Not meaningful Piper Jaffray
Companies Preliminary Unaudited Revenue From Continuing Operations
(Detail) Percent Inc/(Dec) For the Three Months Ended 4Q06 4Q06
Dec. 31, Sept. 30, Dec. 31, vs. vs. (Dollars in thousands) 2006
2006 2005 3Q06 4Q05 Institutional sales and trading Fixed income
$21,211 $14,723 $18,541 44.1 % 14.4 % Equities 29,542 28,591 28,058
3.3 5.3 Total institutional sales and trading 50,753 43,314 46,599
17.2 8.9 Investment banking Underwriting Fixed income 24,404 18,920
20,450 29.0 19.3 Equities 31,253 27,792 19,562 12.5 59.8 Advisory
services 36,044 25,395 33,426 41.9 7.8 Total investment banking
91,701 72,107 73,438 27.2 24.9 Other income 4,164 686 (1,423) 507.0
N/M Net revenues $146,618 $116,107 $118,614 26.3 % 23.6 % For the
Year Ended Dec. 31, Dec. 31, Percent (Dollars in thousands) 2006
2005 Inc/(Dec) Institutional sales and trading Fixed income $75,170
$65,816 14.2 % Equities 122,422 117,380 4.3 Total institutional
sales and trading 197,592 183,196 7.9 Investment banking
Underwriting Fixed income 74,751 67,649 10.5 Equities 114,736
75,026 52.9 Advisory services 105,321 100,672 4.6 Total investment
banking 294,808 243,347 21.1 Other income 10,534 (5,235) N/M Net
revenues $502,934 $421,308 19.4 % N/M - Not meaningful DATASOURCE:
Piper Jaffray Companies CONTACT: Investor Relations, Jennifer A.
Olson-Goude, +1-612-303-6277, or Media Relations, Rob Litt,
+1-612-303-8266, both of Piper Jaffray Companies Web site:
http://www.piperjaffray.com/
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