Piper Jaffray Companies (NYSE: PJC) today announced a net loss from
continuing operations of $3.4 million, or a loss of $0.22 per
share, for the quarter ended March 31, 2008. In the year-ago period
net income from continuing operations was $14.7 million, or $0.82
per diluted share, and $15.1 million, or $0.91 per diluted share,
in the fourth quarter of 2007. For the first quarter of 2008,
continuing operations generated net revenues of $95.7 million, down
30 percent from $137.0 million for the first quarter of 2007 and
down 35 percent from the fourth quarter of 2007. �We are
disappointed to report a loss for the first quarter. This
performance was driven by the lowest equity underwriting activity
in the industry in the past five years, and a net loss in high
yield and structured products sales and trading. In addition, our
first quarter results included a severance charge related to
reducing headcount in certain areas of the firm,� said Chairman and
Chief Executive Officer Andrew S. Duff. �We believe the weakness in
the equity environment will carry through the second quarter of
2008. That said, we remain focused on our long-term strategy and
growth objectives. We also intend to seize opportunities presented
by the market downturn�including selectively hiring talent to
enhance our franchise�that can place us in an even stronger
competitive position when conditions turn more favorable. We remain
confident about the strength of our franchise and market position
in the industry.� The company also announced today that its board
of directors has authorized the repurchase of up to $100 million of
the company�s outstanding common stock. The principal purpose of
the share repurchase program is to manage the company�s equity
capital relative to the growth of its business and to offset the
dilutive effect of employee equity-based compensation. The
authorization expires June 30, 2010. As of March 10, 2008, Piper
Jaffray Companies had 18.8 million common shares outstanding.
Results of Continuing Operations First Quarter Net Revenues
Investment Banking For the first quarter of 2008, total investment
banking revenues were $61.2 million, down 29 percent and down 37
percent, compared to robust activity in the first and fourth
quarters of 2007, respectively. Equity financing revenues were
$16.5 million, down 59 percent and 62 percent compared to the
year-ago period and the fourth quarter of 2007, respectively. The
reduced performance was driven by significantly lower financing
activity. Industry-wide, the number of completed transactions was
down nearly 50 percent versus the comparative periods. (Source:
Dealogic) Advisory services revenues were $25.3 million,
essentially the same as the year-ago period, and down 31 percent
compared to a robust fourth quarter of 2007. Debt financing
revenues were $19.4 million, down 3 percent compared to the first
quarter of 2007, and up 16 percent compared to the fourth quarter
of 2007. While taxable financing revenues declined year-over-year,
public finance-related revenues rose compared to the year-ago
period and the sequential quarter. Higher revenues related to
short-term municipal products and higher interest rate product
revenues associated with public finance underwritings led to the
increase. The following is a recap of completed deal information
for the first quarter of 2008: 15 equity financings raising capital
of $2.3 billion, excluding the $19.7 billion of capital raised from
the VISA IPO, on which the company was a co-lead manager. The
company was bookrunner on 2 of the 15 equity financings. Of the
completed transactions, 10 were U.S. public offerings, placing the
company 15th nationally, based on the number of completed
transactions. (Source: Dealogic) 16 merger and acquisition
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) 69 tax-exempt
issues with a total par value of $1.6 billion, ranking the company
eighth nationally, based on the number of completed transactions.
(Source: Thomson Financial) Institutional Sales and Trading For the
quarter ended March 31, 2008, institutional sales and trading
generated revenues of $33.5 million, down 33 percent and 27 percent
compared to the same quarter last year and the fourth quarter of
2007, respectively. The reduced performance was mainly driven by a
loss recorded in high yield and structured products sales and
trading. Equities sales and trading revenues were $31.2 million,
essentially the same as the year-ago period and down 10 percent
compared to the fourth quarter of 2007. Increases in U.S. equities
were offset by lower results in Europe and convertibles trading.
Fixed income sales and trading revenues were $2.3 million, down 88
percent and 79 percent compared to the year-ago period and the
fourth quarter of 2007, respectively. The declines were mainly
attributable to a $4.6 million net loss in high yield and
structured products sales and trading driven by lower commission
revenues and trading losses. Public finance sales and trading
results were a positive contributor to the quarter, although down
from the comparative periods, mainly due to losses incurred in the
company�s tender option bond program. Asset Management For the
quarter ended March 31, 2008, asset management revenues were $4.0
million. In the prior-year period, the company had nominal asset
management revenues. Revenues were down 26 percent compared to the
sequential fourth quarter, mainly due to a loss related to the
Goldbond asset management business, which the company is now
exiting. Non-Interest Expenses For the first quarter of 2008,
compensation and benefits expense was $65.3 million, down 19
percent compared to the prior-year period and down 24 percent
compared to the fourth quarter of 2007. Compensation expense
included a $2.5 million severance charge for a headcount reduction.
The compensation ratio for the first quarter was 68.2 percent, up
from 58.5 percent in the year-ago period and the fourth quarter of
2007. The increase was attributable to the severance charge and
fixed compensation costs. Non-compensation expenses were $34.9
million for the current quarter, down 2 percent compared to the
year-ago period, and down 16 percent compared to the fourth quarter
of 2007. For the first quarter of 2008, pre-tax operating margin
from continuing operations was a negative 4.6 percent, compared to
a positive 16.5 percent in the year-ago period, and a positive 13.1
percent for the fourth quarter of 2007. Additional Shareholder
Information � � As of Mar. 31, 2008 � As of Dec. 31, 2007 � As of
Mar. 31, 2007 Full time employees: � 1,224(a) � 1,238 � 1,091 FAMCO
AUM � $8.3 billion � $9.0 billion � $9.0 billion Shareholders�
equity: � $916 million � $913 million � $931 million Annualized
Return on Average Tangible Shareholders� Equity1 � (2.3%) � 10.2% �
7.7% Book value per share: � $57.11 � $58.26 � $54.56 Tangible book
value per share: � $38.33 � $38.99 � $40.92 (a)Only a portion of
the employees included in the headcount reduction had left the
company as of quarter end. 1Tangible 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) Mar. 31, 2008 Mar. 31, 2007 Mar. 31, 2008 �
Shareholders' equity $ 911,903 $ 929,232 $ 915,974 Deduct: Goodwill
and identifiable intangible assets � 301,620 � 232,834 � 301,293
Tangible shareholders' equity $ 610,283 � 696,398 $ 614,681
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 first
quarter results on Wednesday, April 16 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 www.piperjaffray.com or by dialing (866)
244-9933, or (706) 758-0864 internationally, and referring to
conference ID 41879262 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 April 18, 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 25 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 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, our current deal
pipelines, the environment and prospects for capital markets
transactions and activity, management expectations, anticipated
financial results, the expected benefits of acquisitions,
expectations regarding the size of inventory positions for certain
municipal products, 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 (including market fluctuations or volatility) may
adversely affect the environment for capital markets transactions
and activity and our business 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)�acquisitions may not yield the
benefits we anticipate or yield them within expected timeframes,
(4)�we may not be able to compete successfully with other companies
in the financial services industry, (5)�an inability to readily
divest or transfer inventory positions�of certain municipal
products may result in future inventory levels that differ from
management�s expectations and potential�financial losses from a
decline in value of illiquid positions, and (6)�the other factors
described under �Risk Factors� in Part�I, Item�1A of our Annual
Report on Form 10-K for the year ended December�31, 2007 and
�Management�s Discussion and Analysis of Financial Condition and
Results of Operations� in Part�II, Item�7 of our Annual Report on
Form 10-K for the year ended December�31, 2007, 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. � 2008 Piper Jaffray & Co., 800 Nicollet
Mall, Suite 800, Minneapolis, Minnesota 55402-7020 Piper Jaffray
Companies Preliminary Unaudited Results of Operations � � Three
Months Ended Percent Inc/(Dec) Mar. 31 Dec. 31 Mar. 31 1Q '08 1Q
'08 (Amounts in thousands, except per share data) 2008 2007 2007
vs. 4Q '07 vs. 1Q '07 Revenues: Investment banking $ 55,265 $
93,547 $ 83,733 (40.9 ) % (34.0 ) % Institutional brokerage 29,812
39,549 41,694 (24.6 ) (28.5 ) Interest 15,159 14,644 17,410 3.5
(12.9 ) Asset management 3,973 5,344 127 (25.7 ) N/M Other
income/(loss) � (1,600 ) � 341 � 688 � N/M � N/M � Total revenues
102,609 153,425 143,652 (33.1 ) (28.6 ) � Interest expense � 6,878
� � 6,923 � 6,702 � (0.7 ) 2.6 � � Net revenues � 95,731 � �
146,502 � 136,950 � (34.7 ) (30.1 ) � Non-interest expenses:
Compensation and benefits 65,251 85,704 80,116 (23.9 ) (18.6 )
Occupancy and equipment 8,110 8,710 7,722 (6.9 ) 5.0 Communications
6,739 6,476 6,259 4.1 7.7 Floor brokerage and clearance 2,654 3,446
3,515 (23.0 ) (24.5 ) Marketing and business development 6,096
8,494 5,681 (28.2 ) 7.3 Outside services 8,817 10,021 7,317 (12.0 )
20.5 Cash award program - 481 356 (100.0 ) (100.0 ) Other operating
expenses � 2,474 � � 4,025 � 3,400 � (38.5 ) (27.2 ) Total
non-interest expenses � 100,141 � � 127,357 � 114,366 � (21.4 ) %
(12.4 ) % � Income/(loss) from continuing operations before income
tax expense/(benefit) (4,410 ) 19,145 22,584 N/M N/M � Income tax
expense/(benefit) � (973 ) � 4,029 � 7,862 � N/M � N/M � � Net
income/(loss) from continuing operations � (3,437 ) � 15,116 �
14,722 � N/M � N/M � � Loss from discontinued operations, net of
tax � - � � - � (1,304 ) N/M � N/M � � Net income/(loss) $ (3,437 )
$ 15,116 $ 13,418 � N/M � N/M � � Earnings per basic common share
Income/(loss) from continuing operations $ (0.22 ) $ 0.97 $ 0.86
N/M N/M Loss from discontinued operations � - � � - � (0.08 ) N/M �
N/M � Earnings per basic common share $ (0.22 ) $ 0.97 $ 0.79 N/M
N/M � Earnings per diluted common share Income/(loss) from
continuing operations N/A (1 ) $ 0.91 $ 0.82 N/M N/M Loss from
discontinued operations � - � � - � (0.07 ) N/M � N/M � Earnings
per diluted common share N/A (1 ) $ 0.91 $ 0.74 N/M N/M � Weighted
average number of common shares outstanding Basic 15,829 15,663
17,071 1.1 % (7.3 ) % Diluted 16,634 16,587 18,018 0.3 % (7.7 ) % �
N/M - Not meaningful N/A - Not applicable � (1) In accordance with
SFAS 128, earnings per diluted common share is not calculated in
periods where a loss is incurred. Piper Jaffray Companies
Preliminary Unaudited Revenues From Continuing Operations (Detail)
� � � Three Months Ended Percent Inc/(Dec) Mar. 31 Dec. 31 Mar. 31
1Q '08 1Q '08 (Dollars in thousands) 2008 2007 2007 vs. 4Q '07 vs.
1Q '07 Investment banking Financing Equities $ 16,518 $ 42,985 $
40,710 (61.6 ) % (59.4 ) % Debt 19,370 16,713 19,969 15.9 (3.0 )
Advisory services � 25,325 � � 36,747 � � 24,876 (31.1 ) 1.8 �
Total investment banking 61,213 96,445 85,555 (36.5 ) (28.5 ) �
Institutional sales and trading Equities 31,180 34,639 31,122 (10.0
) 0.2 Fixed income � 2,339 � � 11,185 � � 19,169 (79.1 ) (87.8 )
Total institutional sales and trading 33,519 45,824 50,291 (26.9 )
(33.3 ) � Asset management 3,973 5,344 127 (25.7 ) N/M � Other
income/(loss) (2,974 ) (1,111 ) 977 167.7 N/M � � � � � Net
revenues $ 95,731 � $ 146,502 � $ 136,950 (34.7 ) % (30.1 ) % � N/M
- Not meaningful Piper Jaffray Companies � � Selected Municipal
Securities Information Market Value Dec. 31 Feb. 15 Mar. 31 2007
2008 2008 � Selected Trading Securities Information: Variable Rate
Demand Notes $ 32.5 $ 179.7 (1 ) $ 135.5 � Auction Rate Municipal
Securities $ 202.5 $ 359.9 (1 ) $ 249.7 � Par Value Dec. 31 Feb. 15
Mar. 31 2007 2008 2008 � Special Purpose Entities: Off Balance
Sheet Tender Option Bond $ 276.5 Not Disclosed $ 256.1 On Balance
Sheet Tender Option Bond $ 49.1 Not Disclosed $ 43.3 Total Tender
Option Bond Program $ 325.6 $ 299.4 � � � � (1) As disclosed in the
Company's 12/31/07 Form 10-K.
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