Piper Jaffray Companies Announces 2013 First Quarter Results

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Piper Jaffray Companies Announces 2013 First Quarter Results

MINNEAPOLIS--(BUSINESS WIRE)-- Piper Jaffray Companies (NYS: 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 Expenses
For 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 Results
The 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 Markets
For 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 Management
For 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 Matters
In 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 transactions171622
Capital raised  $6.2 billion  $1.5 billion  $3.4 billion
Tax-exempt issuance
# of transactions152154139
Par value  $2.5 billion  $2.1 billion  $2.3 billion
Mergers & acquisitions
# of transactions3225
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 Call
Andrew 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 EndedPercent Inc/(Dec)

(Amounts in thousands, except per share data)

Mar. 31,Dec. 31,Mar. 31,1Q '131Q '13

2013

2012

2012

vs. 4Q '12

vs. 1Q '12

Revenues:
Investment banking$40,362$82,393$48,085(51.0)%(16.1)%
Institutional brokerage43,26038,01744,08013.8(1.9)
Asset management18,21116,51616,53310.310.1
Interest13,36313,10211,1462.019.9
Other income/(loss) 2,953  (11) 28 N/M N/M 
Total revenues118,149150,017119,872(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 benefits66,10587,41568,796(24.4)(3.9)
Occupancy and equipment5,8176,7836,862(14.2)(15.2)
Communications5,2324,4315,89718.1(11.3)
Floor brokerage and clearance2,1502,1202,1071.42.0
Marketing and business development4,9804,9264,8781.12.1
Outside services7,2148,1885,838(11.9)23.6
Intangible asset amortization expense1,6611,7361,736(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

18,16822,78215,222(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 income12,04711,6194,3663.7175.9
 
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 Jaf
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