Piper Jaffray Companies Announces 2004 First Quarter Results Net
Revenues Up 24 Percent Over Prior Year; Diluted EPS Up 196 Percent
MINNEAPOLIS, April 21 /PRNewswire-FirstCall/ -- Piper Jaffray
Companies today announced net income of $13.8 million, or $.71 per
diluted share, for the quarter ended March 31, 2004 compared to a
net loss of $3.3 million, or $0.17 per diluted share in the fourth
quarter of 2003, and net income of $4.7 million, or $.24 per
diluted share, for the year-ago period. Net revenues for the first
quarter were $209.4 million, a 3.8 percent increase over the prior
quarter and a 23.8 percent increase over the first quarter of 2003.
"We delivered a solid first quarter as a newly independent public
company, growing revenues and expanding margins in both business
segments," said Chairman and CEO Andrew S. Duff. "We were
particularly encouraged by the signs of improvement in Private
Client Services." Results of Operations Net Revenues First quarter
net revenues increased 3.8 percent over the prior quarter, and
increased 23.8 percent over the year-ago period, reflecting the
equity market's continuing improvement. Contributing to the
increase in net revenues over the prior quarter were increased
equity underwriting activity and increased commissions and fees due
to higher demand for equities and equity- related products in the
Private Client Services business. These increases were offset in
part by lower revenues from fixed-income institutional sales
activity. Non-Interest Expenses For the quarter, non-interest
expenses were $187.2 million, a 9.6 percent decrease from the prior
quarter and a 15.4 percent increase over the first quarter of 2003.
Non-interest expenses decreased $19.9 million from the prior
quarter, which had included a $24.0 million charge for cash awards
granted as part of the spin-off from U.S. Bancorp and a $4.1
million charge for disposal of software related to the
implementation of a new fixed income trading system. Additionally,
litigation-related costs decreased from the fourth quarter of 2003.
Partially offsetting these decreases were higher variable
compensation due to increased revenues and higher benefits costs,
as 401(k) matching contributions and payroll tax limits were reset
for the new year. For the quarter, pre-tax operating margin was
10.6 percent, compared to negative 2.7 percent for the fourth
quarter of 2003 and 4.1 percent for the prior year period. Business
Segment Review Capital Markets Capital Markets recorded $111.9
million in net revenues for the quarter, a 1.0 percent increase
over the prior quarter, while segment pre-tax operating income for
the quarter increased 9.7 percent to $19.6 million. The net revenue
increase reflects higher equity underwriting activity and equity
institutional sales volumes, which were offset primarily by lower
fixed-income institutional sales activity due to compressed spreads
in our corporate products. Compared to the year-ago period, segment
net revenues increased 33.6 percent, resulting in an increase in
pre-tax segment operating income of 141.2 percent, primarily driven
by an improved equity underwriting market. Segment operating
expenses were $92.2 million for the quarter, essentially flat
relative to the prior quarter. Segment pre-tax operating margin
increased to 17.6 percent, compared to 16.2 percent for the prior
quarter due to a reduction in non-compensation expense as the prior
quarter included a $4.1 million software disposal charge. Capital
Markets pre-tax operating margin improved over the prior year
period, again due to the improved equity underwriting market and
diligent management of non-compensation expenses. Private Client
Services Private Client Services recorded $95.5 million in net
revenues for the quarter, representing a 7.6 percent increase over
the prior quarter and a 12.6 percent increase over the same quarter
last year. The increase over both periods was primarily due to
higher private client demand for equities and equity-related
products. Segment pre-tax operating income was $12.3 million,
representing a 46.6 percent increase over the prior quarter and an
89.8 percent increase over the year-ago period. Segment operating
expenses were $83.3 million, which was 3.5 percent above fourth
quarter 2003 expenses due primarily to higher variable compensation
costs, which were partly offset by lower litigation-related costs.
Segment pre-tax operating margin was 12.8 percent, which reflected
an improvement over last quarter and the year-ago period. Corporate
Support and Other Corporate Support and Other pre-tax operating
loss increased by $1.8 million from the fourth quarter of 2003 to a
loss of $8.7 million for the first quarter, primarily due to costs
incurred as a result of being an independent public company.
Additional Shareholder Information As of As of As of March 31, Dec.
31, March 31, 2004 2003 2003 Full Time Employees: 3,019 2,991 3,139
Financial Advisors: 867 874 969 Client Assets: $51 billion $50
billion $44 billion Shareholders' equity: $685.0 million $669.8
million $613.6 million Book value per share: $35.43 $34.75 $31.97
Tangible book value per share: $19.62 $18.89 $16.05 Conference Call
The company will hold a conference call to discuss its 2004 first
quarter financial results on Wednesday, April 21, 2004, at 11 a.m.
Eastern Time (10 a.m. Central Time; time subject to change). Andrew
S. Duff, Chairman and CEO, and Sandra G. Sponem, Chief Financial
Officer, will host the call. To access the call, please dial (800)
374-0255, or (706) 643-7489 international, and refer to conference
ID 6518209 and the leader's name, Jennifer Olson- Goude. Callers
should dial in at least 15 minutes early to receive instructions. A
replay of the conference call will be available through midnight
Friday, May 14, 2004 by calling (800) 642-1687 or (706) 645-9291
international. Headquartered in Minneapolis, Piper Jaffray
Companies 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 operates through two primary revenue-
generating segments -- Capital Markets and Private Client Services.
Investment Research, an independent group reporting to the CEO,
supports clients of both segments. The firm serves corporations,
government and non-profit entities, and institutional investors on
a national basis and serves the financial advisory needs of private
individuals predominantly across the western half of the United
States. The firm has approximately 3,000 employees in 111 offices
in 23 states across the country and in London, England. 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) we may experience increased costs resulting from decreased
purchasing power and size compared to that previously provided by
our association with U.S. Bancorp, (2) we compete with U.S. Bancorp
with respect to clients we both serviced prior to our spin-off from
U.S. Bancorp and may not be able to retain these clients, (3) the
continued ownership of U.S. Bancorp common stock and options by our
executive officers and some of our directors will create, or will
appear to create, conflicts of interest, (4) we have agreed to
certain restrictions to preserve the tax treatment of the spin-off,
which reduce our strategic and operating flexibility, (5) we have
agreed to indemnify U.S. Bancorp for taxes and related losses
resulting from any actions we take that cause the spin-off to fail
to qualify as a tax-free transaction, (6) the separation and
distribution agreement entered into between U.S. Bancorp and us
contains cross-indemnification obligations of U.S. Bancorp and us
that either party may be unable to satisfy, (7) developments in
market and economic conditions have in the past adversely affected,
and may in the future adversely affect, our business and
profitability, (8) we may not be able to compete successfully with
other companies in the financial services industry, (9) our
underwriting and market-making activities may place our capital at
risk, (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) our technology systems are critical
components of our operations and the failure of those systems may
disrupt our business, cause financial loss and constrain our
growth, (14) 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, (15) regulatory capital
requirements may adversely affect our ability to expand or maintain
present levels of our business or impair our ability to meet our
financial obligations, (16) our exposure to legal liability is
significant, and could lead to substantial damages and restrictions
on our business going forward, (17) we may suffer losses if our
reputation is harmed, (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 common stock, and (19) other factors identified in the
document entitled "Risk Factors" filed as Exhibit 99.1 to our 2003
Annual Report on Form 10-K and 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's 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) March Dec. March 1Q04 1Q04 (Amounts
in thousands, 31, 31, 31, vs. vs. except per share data) 2004 2003
2003 4Q03 1Q03 Revenues: Commissions and fees $69,512 $67,608
$59,897 2.8% 16.1% Principal transactions 52,076 53,065 50,267
(1.9) 3.6 Investment banking 64,862 59,195 38,106 9.6 70.2 Interest
12,463 11,611 11,496 7.3 8.4 Other income 14,400 14,851 14,868
(3.0) (3.1) Total revenues 213,313 206,330 174,634 3.4 22.1
Interest expense 3,913 4,532 5,427 (13.7) (27.9) Net revenues
209,400 201,798 169,207 3.8 23.8 Non-interest expenses:
Compensation and benefits 129,707 116,966 108,906 10.9 19.1
Occupancy and equipment 13,732 17,728 14,078 (22.5) (2.5)
Communications 10,458 10,015 8,946 4.4 16.9 Floor brokerage and
clearance 4,800 5,228 5,923 (8.2) (19.0) Marketing and business
development 10,662 11,746 9,346 (9.2) 14.1 Outside services 9,158
11,456 8,634 (20.1) 6.1 Cash award program 1,071 24,000 - (95.5)
N/M Royalty fee - 804 946 (100.0) (100.0) Other operating expenses
7,640 9,229 5,453 (17.2) 40.1 Total non-interest expenses 187,228
207,172 162,232 (9.6) 15.4 Income (loss) before income tax expense
(benefit) 22,172 (5,374) 6,975 N/M 217.9 Income tax expense
(benefit) 8,382 (2,028) 2,282 N/M 267.3 Net income (loss) $13,790
$(3,346) $4,693 N/M 193.8% Earnings per common share Basic $0.71
$(0.17) $0.24 N/M 195.8% Diluted $0.71 $(0.17) $0.24 N/M 195.8%
Weighted average number of common shares Basic 19,333 19,273 19,190
0.3% 0.7% Diluted 19,366 19,273 19,190 0.5% 0.9% N/M - Not
Meaningful Piper Jaffray Companies Preliminary Segment Data
(unaudited) For the Three Months Ended March 31, Dec. 31, March 31,
(Dollars in thousands) 2004 2003 2003 Capital Markets Net revenue
$111,880 $110,739 $83,742 Operating expense 92,241 92,841 75,599
Segment pre-tax operating income $19,639 $17,898 $8,143 Segment
operating margin 17.6% 16.2% 9.7% Private Client Services Net
revenue $95,542 $88,821 $84,866 Operating expense 83,272 80,453
78,400 Segment pre-tax operating income $12,270 $8,368 $6,466
Segment operating margin 12.8% 9.4% 7.6% Corporate Support and
Other Net revenue $1,978 $2,238 $599 Operating expense 10,644 9,074
7,287 Segment pre-tax operating loss $(8,666) $(6,836) $(6,688)
Segment operating margin N/M N/M N/M Reconciliation to total income
(loss) before taxes: Total segment pre-tax operating income $23,243
$19,430 $7,921 Royalty fee - 804 946 Cash award plan 1,071 24,000 -
Total income (loss) before taxes $22,172 $(5,374) $6,975 Pre-tax
operating margin 10.6% -2.7% 4.1% N/M - Not Meaningful Piper
Jaffray Companies Preliminary Unaudited Supplemental Information
(Dollars in thousands) For the Three Months Ended Percent Inc/(Dec)
March Dec. March 1Q04 1Q04 Capital Markets 31, 31, 31, vs. vs. 2004
2003 2003 4Q03 1Q03 Institutional Sales Fixed Income $15,729 19,009
21,187 (17.3)% (25.8)% Equities 33,765 32,801 26,204 2.9 28.9 Total
Institutional Sales 49,494 51,810 47,391 (4.5) 4.4 Investment
Banking Underwriting Fixed Income 14,721 14,900 12,859 (1.2) 14.5
Equities 26,918 22,802 4,534 18.1 493.7 Mergers and Acquisitions
13,152 14,388 13,249 (8.6) (0.7) Total Investment Banking 54,791
52,090 30,642 5.2 78.8 Net Interest 6,595 5,355 4,605 23.2 43.2
Other Revenue 1,000 1,484 1,104 (32.6) (9.4) Capital Markets Net
Revenue $111,880 $110,739 $83,742 1.0% 33.6% DATASOURCE: Piper
Jaffray Companies CONTACT: Jennifer A. Olson-Goude, Investor
Relations, +1-612-303-6277, or Dana H. Wade, Public Affairs and
Media Relations, +1-415-277-1557, both of Piper Jaffray Companies
Web site: http://www.piperjaffray.com/
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