16.07.2008 12:00:00
|
Piper Jaffray Companies Announces Second Quarter Results
Piper Jaffray Companies (NYSE: PJC) today announced a net loss from
continuing operations of $5.1 million, or $0.32 per share, for the
quarter ended June 30, 2008. Results from continuing operations in the
year-ago period were net income of $10.4 million, or $0.58 per diluted
share, and in the first quarter of 2008, a net loss of $3.4 million, or
$0.22 per share.
For the second quarter of 2008, continuing operations generated net
revenues of $94.9 million, down 23 percent from $122.6 million for the
second quarter of 2007 and down 1 percent from the first quarter of 2008.
For the first six months of 2008, the company recorded a net loss from
continuing operations of $8.5 million, or $0.53 per share, compared to
net income from continuing operations of $25.1 million, or $1.40 per
diluted share, for the year-ago period. Net revenues of $190.6 million
year-to-date represent a 27 percent decrease over the same period last
year mainly driven by lower investment banking revenues.
"We are disappointed to report a loss in the
second quarter, which was primarily driven by very challenging market
conditions for IPOs and M&A transactions. Partially mitigating the
weakness in investment banking, was strong performance in institutional
brokerage, particularly fixed income,” said
Chairman and Chief Executive Officer Andrew S. Duff. "We
now believe that the current capital markets downturn will continue
through the rest of 2008 and could extend into 2009. We are carefully
managing our business with the goal of establishing a stronger market
position once the market cycle corrects. At the same time, we are
evaluating the appropriate actions to position our firm for a more
prolonged market downturn.” Results of Continuing Operations Second Quarter Net Revenues Investment Banking
For the second quarter of 2008, total investment banking revenues were
$35.3 million, down 54 percent and 42 percent, compared to the second
quarter of 2007 and the first quarter of 2008, respectively.
Equity financing revenues were $8.7 million, down 78 percent compared
to the year-ago period and down 47 percent compared to the first
quarter of 2008. The weak performance was driven by significantly
lower activity within the sectors that the company participates.
Advisory services revenues were $11.3 million, down 4 percent compared
to the year-ago period. Revenues decreased 56 percent compared to the
first quarter of 2008, mainly resulting from fewer completed U.S.
transactions.
Debt financing revenues were $15.3 million, down 39 percent compared
to the second quarter of 2007, primarily due to a lower average spread
on completed public finance transactions. Debt financing revenues
declined 21 percent compared to the first quarter of 2008, mainly due
to lower interest rate product revenues and lower taxable debt
revenues.
The following is a recap of the company’s
completed deal information for the second quarter of 2008:
9 equity financings raising capital of $1.5 billion. Of the completed
transactions, 3 were U.S. public offerings.
9 merger and acquisition transactions with an aggregate enterprise
value of $600 million. The number of deals and the enterprise value
include disclosed and undisclosed transactions.
97 tax-exempt issues with a total par value of $2.5 billion.
Institutional Sales and Trading
For the quarter ended June 30, 2008, institutional sales and trading
generated revenues of $56.1 million, up 23 percent and 68 percent
compared to the same quarter last year and the first quarter of 2008,
respectively.
Equities sales and trading revenues were $35.3 million, up 23 percent
and 13 percent from the year-ago period and the first quarter of 2008,
respectively. The stronger results were mainly driven by solid
performance in U.S. equities and improved results from proprietary
trading strategies.
Fixed income sales and trading revenues were $20.8 million, up 22
percent compared to the year-ago period and a strong rebound from the
weak performance in the first quarter of 2008. Compared to the
year-ago period, the increased revenues were driven by higher
municipal revenues, offset in part by lower high yield and structured
products results. Compared to the sequential first quarter, the
increased revenues were primarily driven by significantly improved
performance in the municipal business and high yield and structured
products.
Asset Management
For the quarter ended June 30, 2008, asset management revenues were $4.7
million. In the prior-year period, the company had nominal asset
management revenues. Revenues rose 18 percent compared to the sequential
first quarter, mainly due to a loss recorded in that period related to
the Goldbond asset management business, which the company has now exited.
Non-Interest Expenses
For the second quarter of 2008, compensation and benefits expense was
$65.9 million, down 8 percent compared to the prior-year period and up 1
percent compared to the first quarter of 2008. Compensation expense
included a $2.8 million charge related to additional severance actions
taken in the second quarter. The compensation ratio for the second
quarter was 69.4 percent, up from 58.5 percent in the year-ago period,
mainly due to the severance charge and fixed compensation costs, over a
lower revenue base. The compensation ratio increased from 68.2 percent
in the first quarter of 2008.
Non-compensation expenses were $43.3 million for the current quarter, up
21 percent and 24 percent, compared to the year-ago period and the
sequential first quarter, respectively. The increases were due in large
part to litigation-related expenses. In addition, the firm experienced a
higher number of deals that were not completed, causing it to write off
certain travel expenses and legal fees associated with those deals.
For the second quarter of 2008, pre-tax operating margin from continuing
operations was negative 15.1 percent, compared to positive 12.4 percent
in the year-ago period. The decline was driven by lower revenues due to
weaker capital markets and higher non-compensation expenses. Pre-tax
operating margin was negative 4.6 percent in the first quarter of 2008.
Additional Shareholder Information
As of June 30, 2008
As of Mar. 31, 2008
As of June 30, 2007 Full time employees:
1,246
1,224
1,095 FAMCO AUM
$8.1 billion
$8.3 billion
$9.1 billion Shareholders’ equity:
$924 million
$916 million
$947 million Annualized Return on Average Tangible Shareholders’
Equity1
(2.4)%
(2.3)%
5.3% Book value per share:
$57.41
$57.11
$55.46 Tangible book value per share:
$38.73
$38.33
$41.86 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
Dollars in thousands)
Three Months Ended
Three Months Ended
As of
30-Jun-08
30-Jun-07
30-Jun-08
Shareholders' equity
$
918,944
$
938,091
$
923,886
Deduct: Goodwill and identifiable intangible assets
300,965
232,434
300,638
Tangible shareholders' equity
$
617,979
$
705,657
$
623,248
Conference Call
Andrew S. Duff, chairman and chief executive officer, and Debbra L.
Schoneman, chief financial officer, will host a conference call to
discuss first quarter results on Wednesday, July 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 54396231 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 July 16, 2008 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, Shanghai and Hong Kong. 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) Six Months Ended Jun. 30, Mar. 31, Jun. 30, 2Q '08 2Q '08 Jun. 30, Jun. 30, Percent (Amounts in thousands, except per share data) 2008 2008 2007 vs.1Q '08 vs.2Q '07 2008 2007 Inc/(Dec)
Revenues:
Investment banking
$
32,184
$
55,265
$
74,872
(41.8
)
%
(57.0
)
%
$
87,449
$
158,605
(44.9
)
%
Institutional brokerage
51,196
29,812
38,597
71.7
32.6
81,008
80,291
0.9
Interest
13,114
15,159
13,816
(13.5
)
(5.1
)
28,273
31,226
(9.5
)
Asset management
4,697
3,973
72
18.2
N/M
8,670
199
N/M
Other income/(loss)
(460
)
(1,600
)
(364
)
(71.3
)
26.4
(2,060
)
324
N/M
Total revenues
100,731
102,609
126,993
(1.8
)
(20.7
)
203,340
270,645
(24.9
)
Interest expense
5,826
6,878
4,417
(15.3
)
31.9
12,704
11,119
14.3
Net revenues
94,905
95,731
122,576
(0.9
)
(22.6
)
190,636
259,526
(26.5
)
Non-interest expenses:
Compensation and benefits
65,885
65,251
71,707
1.0
(8.1
)
131,136
151,823
(13.6
)
Occupancy and equipment
8,133
8,110
8,849
0.3
(8.1
)
16,243
16,571
(2.0
)
Communications
5,869
6,739
5,997
(12.9
)
(2.1
)
12,608
12,256
2.9
Floor brokerage and clearance
3,899
2,654
4,176
46.9
(6.6
)
6,553
7,691
(14.8
)
Marketing and business development
7,381
6,096
6,380
21.1
15.7
13,477
12,061
11.7
Outside services
11,431
8,817
9,122
29.6
25.3
20,248
16,439
23.2
Other operating expenses
6,603
2,474
1,194
166.9
N/M
9,077
4,950
83.4
Total non-interest expenses
109,201
100,141
107,425
9.0
1.7
%
209,342
221,791
(5.6
)
%
Income/(loss) from continuing operations before income tax
expense/(benefit)
(14,296
)
(4,410
)
15,151
224.2
N/M
(18,706
)
37,735
N/M
Income tax expense/(benefit)
(9,223
)
(973
)
4,774
N/M
N/M
(10,196
)
12,636
N/M
Net income/(loss) from continuing operations
(5,073
)
(3,437
)
10,377
47.6
N/M
(8,510
)
25,099
N/M
Income/(loss) from discontinued operations, net of tax
1,439
-
(1,051
)
N/M
N/M
1,439
(2,355
)
N/M
Net income/(loss)
$
(3,634
)
$
(3,437
)
$
9,326
5.7
%
N/M
$
(7,071
)
$
22,744
N/M
Earnings per basic common share
Income/(loss) from continuing operations
$
(0.32
)
$
(0.22
)
$
0.61
45.5
%
N/M
$
(0.53
)
$
1.47
N/M
Income/(loss) from discontinued operations
0.09
-
(0.06
)
N/M
N/M
0.09
(0.14
)
N/M
Earnings per basic common share
$
(0.23
)
$
(0.22
)
$
0.55
4.5
%
N/M
$
(0.44
)
$
1.33
N/M
Earnings per diluted common share
Income from continuing operations
N/A
N/A
$
0.58
N/M
N/M
N/A
$
1.40
N/M
Loss from discontinued operations
N/A
-
(0.06
)
N/M
N/M
N/A
(0.13
)
N/M
Earnings per diluted common share
N/A
(1
)
N/A
(1
)
$
0.52
N/M
N/M
N/A
(1
)
$
1.27
N/M
Weighted average number of common shares outstanding
Basic
16,072
15,829
17,073
1.5
%
(5.9
)
%
15,951
17,072
(6.6
)
%
Diluted
16,709
16,634
17,919
0.5
%
(6.8
)
%
16,671
17,969
(7.2
)
%
N/M - Not meaningful N/A - Not applicable
(1) In accordance with SFAS 128, earnings per diluted common share
is not calculated in periods a loss is incurred.
Piper Jaffray Companies Preliminary Unaudited Revenues From Continuing Operations (Detail)
Three Months Ended Percent Inc/(Dec) Six Months Ended Jun. 30, Mar. 31, Jun. 30, 2Q '08 2Q '08 Jun. 30, Jun. 30, Percent (Dollars in thousands) 2008 2008 2007 vs. 1Q '08 vs. 2Q '07 2008 2007 Inc/(Dec)
Investment banking
Financing
Equities
$
8,705
$
16,518
$
40,075
(47.3
)
%
(78.3
)
%
$
25,223
$
80,785
(68.8
)
%
Debt
15,297
19,370
25,194
(21.0
)
(39.3
)
34,667
45,163
(23.2
)
Advisory services
11,256
25,325
11,706
(55.6
)
(3.8
)
36,581
36,582
-
Total investment banking
35,258
61,213
76,975
(42.4
)
(54.2
)
96,471
162,530
(40.6
)
Institutional sales and trading
Equities
35,345
31,180
28,735
13.4
23.0
66,525
59,857
11.1
Fixed income
20,804
2,339
17,116
N/M
21.5
23,143
36,285
(36.2
)
Total institutional sales and trading
56,149
33,519
45,851
67.5
22.5
89,668
96,142
(6.7
)
Asset management
4,697
3,973
72
18.2
N/M
8,670
199
N/M
Other income/(loss)
(1,199
)
(2,974
)
(322
)
(59.7
)
272.4
(4,173
)
655
N/M
Net revenues
$
94,905
$
95,731
$
122,576
(0.9
)
%
(22.6
)
%
$
190,636
$
259,526
(26.5
)
%
N/M - Not meaningful Piper Jaffray Companies Selected Municipal Securities Information
Market Value Mar. 31,
Jun. 30,
Jul. 14, 2008 2008 2008
Selected Trading Securities Information:
Variable Rate Demand Notes
$
135.5
$
43.2
$
62.9
Auction Rate Municipal Securities
$
249.7
$
85.0
$
50.3
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