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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