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 ExpensesFor 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 ResultsThe 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 MarketsFor 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 ManagementFor 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 MattersIn 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, 2013
Dec. 31, 2012 Mar. 31, 2012 Number
of employees 911 907
915 Equity financings
# of transactions 17
16 22 Capital raised $6.2
billion $1.5 billion $3.4
billion Tax-exempt issuance # of transactions
152 154 139 Par value
$2.5 billion $2.1 billion
$2.3 billion Mergers & acquisitions # of
transactions 3 22 5 Aggregate deal
value $0.5 billion $6.8
billion $0.7 billion Asset Management
AUM $10.2 billion
$9.1 billion
$9.1 billion Common shareholders’
equity $752.4 million
$733.3 million $721.8 million
Annualized qtrly. return on avg. common shareholders’ equity
** 5.5%
6.5%
1.6%
Book value per share: $47.02
$48.20 $44.15 Tangible book
value per share(1):
$32.10
$32.39
$28.75
*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 CallAndrew 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
Part I, Item 1A of our Annual Report on Form 10-K for the
year ended December 31, 2012 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, 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 thousands, except per share
data)
Mar. 31, Dec. 31, Mar. 31, 1Q '13 1Q
'13
2013
2012
2012
vs. 4Q '12
vs. 1Q '12
Revenues: Investment banking $ 40,362 $ 82,393 $ 48,085
(51.0 ) % (16.1 ) % Institutional brokerage 43,260 38,017 44,080
13.8 (1.9 ) Asset management 18,211 16,516 16,533 10.3 10.1
Interest 13,363 13,102 11,146 2.0 19.9 Other income/(loss)
2,953 (11 ) 28 N/M N/M
Total revenues 118,149 150,017 119,872 (21.2 ) (1.4 )
Interest expense 8,616 9,106
6,434 (5.4 ) 33.9 Net revenues 109,533
140,911 113,438 (22.3 ) (3.4 )
Non-interest expenses: Compensation and benefits
66,105 87,415 68,796 (24.4 ) (3.9 ) Occupancy and equipment 5,817
6,783 6,862 (14.2 ) (15.2 ) Communications 5,232 4,431 5,897 18.1
(11.3 ) Floor brokerage and clearance 2,150 2,120 2,107 1.4 2.0
Marketing and business development 4,980 4,926 4,878 1.1 2.1
Outside services 7,214 8,188 5,838 (11.9 ) 23.6 Intangible asset
amortization expense 1,661 1,736 1,736 (4.3 ) (4.3 ) Other
operating expenses (1,794 ) 2,530 2,102
N/M N/M Total non-interest expenses
91,365 118,129 98,216 (22.7 )
(7.0 )
Income from continuing operations
before income tax expense
18,168 22,782 15,222 (20.3 ) 19.4 Income tax expense
5,600 7,422 7,553 (24.5 ) (25.9
)
Income from continuing operations 12,568
15,360 7,669 (18.2 ) 63.9
Discontinued operations: Loss from discontinued
operations, net of tax (521 ) (3,741 ) (3,303
) (86.1 ) (84.2 )
Net income 12,047 11,619 4,366 3.7
175.9 Net income/(loss) applicable to noncontrolling
interests 1,901 (205 ) 1,437 N/M
32.3
Net income applicable to Piper Jaffray
Companies (1)
$ 10,146 $ 11,824 $ 2,929 (14.2 ) % 246.4
%
Net income applicable to Piper Jaffray
Companies' common shareholders (1)
$ 8,966 $ 10,198 $ 2,480 (12.1 ) % 261.5
%
Amounts applicable to Piper Jaffray
Companies Income from continuing operations $ 10,667 $ 15,565 $
6,232 (31.5 ) % 71.2 % Loss from discontinued operations, net of
tax (521 ) (3,741 ) (3,303 ) (86.1 ) (84.2 )
Net income applicable to Piper Jaffray Companies $ 10,146 $ 11,824
$ 2,929 (14.2 ) % 246.4 %
Earnings/(loss) per basic
common share Income from continuing operations $ 0.60 $ 0.88 $
0.33 (31.8 ) % 81.8 % Loss from discontinued operations
(0.03 ) (0.21 ) (0.17 ) (85.7 ) (82.4 ) Earnings per
basic common share $ 0.58 $ 0.67 $ 0.15 (13.4 ) % 286.7 %
Earnings/(loss) per diluted common share Income from
continuing operations $ 0.60 $ 0.88 $ 0.33 (31.8 ) % 81.8 % Loss
from discontinued operations (0.03 ) (0.21 )
(0.17 ) (85.7 ) (82.4 ) Earnings per diluted common share $ 0.57 $
0.67 $ 0.15 (14.9 ) % 280.0 %
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 thousands)
Mar. 31, Dec. 31, Mar. 31, 1Q '13 1Q
'13 2013 2012 2012 vs. 4Q '12
vs. 1Q '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 services
9,556 44,495 10,722 (78.5 )
(10.9 ) Total investment banking 40,891 83,038 48,719 (50.8 ) (16.1
) 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
sales and trading 48,778 43,614 49,443 11.8 (1.3 ) Other
income/(loss) 1,540 (2,144 ) (1,367 )
N/M N/M Net revenues 91,209 124,508 96,795
(26.7 ) (5.8 ) Operating expenses 78,458
105,099 86,055 (25.3 ) (8.8 )
Segment pre-tax operating income $ 12,751 $ 19,409 $
10,740 (34.3 ) % 18.7 % Segment pre-tax
operating margin 14.0 % 15.6 % 11.1 %
Asset
Management Management and performance fees Management
fees $ 17,098 $ 16,083 $ 15,849 6.3 % 7.9 % Performance fees
351 121 424 190.1 (17.2 )
Total management and performance fees 17,449 16,204 16,273 7.7 7.2
Other income 875 199 370
339.7 136.5 Net revenues 18,324 16,403
16,643 11.7 10.1 Operating expenses 12,907
13,030 12,161 (0.9 ) 6.1
Segment pre-tax operating income $ 5,417 $ 3,373 $
4,482 60.6 % 20.9 % Segment pre-tax
operating margin 29.6 % 20.6 % 26.9 %
Total
Net revenues $ 109,533 $ 140,911 $ 113,438 (22.3 ) % (3.4 )
% Operating expenses 91,365 118,129
98,216 (22.7 ) (7.0 ) Total segment
pre-tax operating income $ 18,168 $ 22,782 $ 15,222
(20.3 ) % 19.4 % Pre-tax operating margin 16.6
% 16.2 % 13.4 % 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 thousands) Mar. 31, 2013 Dec. 31, 2012 Mar.
31, 2012 Common shareholders' equity $ 752,434 $ 733,292 $ 721,779
Deduct: goodwill and identifiable
intangible assets
238,819 240,480 251,739
Tangible common shareholders' equity $ 513,615 $
492,812 $ 470,040
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