MINNEAPOLIS, Jan. 25 /PRNewswire-FirstCall/ -- Piper Jaffray Companies
(NYSE: PJC) today announced net income of $16.4 million, or $0.87 per diluted
share, for the quarter ended Dec. 31, 2005, up from net income of
$11.8 million, or $0.61 per diluted share, for the quarter ended Dec. 31,
2004. Net income totaled $15.1 million, or $0.79 per diluted share, in the
third quarter of 2005.
For the full year, net income was $40.1 million, or $2.10 per diluted
share, compared to $50.3 million and $2.60 per diluted share in the prior
year. Net revenues were $775.1 million for the full year, down 2.8 percent
compared to 2004.
Business Highlights
-- Generated total quarterly net revenues of $207.0 million, up
6.4 percent from the year-ago period
-- Recorded a 12.1 percent quarterly pre-tax operating margin, the
strongest level since becoming a public company
-- Achieved the highest level ever for full-year fee-based revenues at
21 percent of total private client revenues
-- Generated record full-year advisory services net revenues of
$100.7 million
"We are pleased to deliver strong back-to-back quarterly financial
results. Strong Capital Markets performance was the key contributor to these
results, and in particular, robust activity in advisory services," said
chairman and chief executive officer Andrew S. Duff. "In the second half of
2005 we continued to strengthen our businesses and reduce costs. We remain
intensely focused on driving the primary advisor strategy in our private
client business to achieve consistent competitive performance and create
shareholder value."
Consolidated Expenses
For the quarter, non-interest expenses were $182.0 million, up 3.2 percent
from the fourth quarter of 2004, and down 2.3 percent compared to the third
quarter of 2005. Compensation expense was $122.7 million, up 5.0 percent
compared with the prior year due to increased variable compensation expenses
driven by higher net revenues and profitability. Non-compensation expenses
were $59.3 million, essentially unchanged compared to the year-ago period.
For the quarter, pre-tax operating margin was 12.1 percent, the highest
level achieved since becoming a public company, up from 9.3 percent for the
year-ago period, and 11.0 percent for the third quarter of 2005. For the
fourth quarter, annualized return on average tangible shareholders' equity(1)
was 15.4 percent, compared to 11.6 percent on an annualized basis for the same
period last year.
For the full year, non-interest expenses were $713.9 million, essentially
unchanged compared to last year. Compensation expense was $471.7 million,
down $16.7 million, or 3.4 percent, compared to last year due to lower net
revenues and profitability and the savings from the restructuring actions
taken earlier this year. Non-compensation expenses were $242.3 million, up
$12.8 million, or 5.6 percent, from the prior-year period, primarily resulting
from the $8.6 million restructuring charge recorded in the second quarter of
2005 and higher litigation-related expenses.
For the full year, pre-tax operating margin was 7.9 percent, a decline
from 10.0 percent last year. Return on average tangible shareholders'
equity(1) was 9.7 percent compared to 12.9 percent for the prior year.
Business Segment Review
Capital Markets
Fourth Quarter
Capital Markets generated $122.3 million in net revenues for the quarter,
up $18.0 million, or 17.2 percent, from the prior-year period. Segment pre-
tax operating income for the quarter improved 46.3 percent compared to the
fourth quarter of 2004, to $23.6 million, and rose 4.1 percent compared to the
third quarter of 2005.
Institutional Sales and Trading
For the fourth quarter of 2005, institutional sales and trading net
revenues were $48.6 million, down 4.5 percent from the year-ago period.
-- Equity sales and trading revenues were $27.5 million, an increase of
5.0 percent from the year-ago period, as a result of increased
revenues from algorithmic and program trading. Compared to the third
quarter of 2005, equity sales and trading revenues declined 13.0
percent, largely driven by lower trading volumes.
-- Fixed income sales and trading revenues were $21.1 million, down 14.6
percent from the year-ago period, reflecting the negative impact on
corporate bond spreads of TRACE (Trade Reporting and Compliance
Engine) and lower customer volumes resulting from increased interest
rates and a flattened yield curve. Compared to the quarter ended
September 30, 2005, fixed income sales and trading revenues rose 14.4
percent, driven largely by stronger municipal sales and trading
activity.
Investment Banking
For the fourth quarter of 2005, investment banking revenues were
$73.4 million, an increase of $20.5 million, or 38.8 percent, compared to the
fourth quarter of 2004, driven by robust advisory services activity and
stronger fixed income underwriting.
-- Advisory services revenues were $33.4 million, up $18.0 million, or
116.6 percent, compared to the year-ago period. The number of
transactions declined year-over-year from 14 to 12, but this was more
than offset by a higher average fee per transaction than in the same
period last year. Advisory services revenues decreased 15.2 percent
compared to the third quarter of 2005.
-- Fixed income underwriting revenues were $20.5 million, up
$5.8 million, or 39.9 percent, compared to the year-ago period, and up
$4.6 million, or 29.4 percent, compared to the third quarter of 2005.
The increase compared to both periods resulted from higher public
finance underwriting activity and additional revenue from structured
products.
-- Equity underwriting revenues were $19.6 million, down 14.4 percent
compared to the fourth quarter of 2004, mainly due to decreased
revenues from convertible transactions. The decline in the number of
IPO and follow on transactions year-over-year (from 18 to 12) was
almost entirely offset by higher average revenue per transaction than
the previous year. Equity underwriting revenues were up 7.7 percent
compared to the sequential quarter, largely driven by higher
convertible underwriting.
Segment operating expenses for the quarter were $98.7 million, an increase
of $10.5 million, or 11.9 percent, from the same period a year ago, primarily
due to higher variable compensation expenses from increased net revenues and
profitability. For the quarter, segment pre-tax operating margin was very
strong at 19.3 percent, up from 15.4 percent achieved in the same quarter last
year and 18.3 percent in the third quarter of 2005. The improvement compared
to last year stemmed from higher revenues and the benefit of the restructuring
actions taken earlier in the year.
Full Year
For the year, Capital Markets recorded net revenues of $435.8 million, up
1.0 percent compared to 2004. Robust mergers and acquisitions revenues and
stronger fixed income underwriting revenues were offset by lower institutional
fixed income sales and trading and equity underwriting.
Segment pre-tax operating income was $70.6 million, up 3.7 percent
compared to the prior year. Segment operating expenses were $365.2 million,
essentially flat compared to 2004. Segment pre-tax operating margin was 16.2
percent, compared to 15.8 percent last year.
Following is a recap of completed deals and industry rankings (based on
the number of transactions completed) for the full year of 2005.
-- 48 M&A transactions with an enterprise value of $8.1 billion, ranking
the firm 15th nationally. Last year the firm completed 49
transactions with an enterprise value of $6.8 billion, which ranked
the firm 20th. (Source: Thomson Financial)
-- 64 equity offerings, raising a total of $8.7 billion in capital, and
placing the firm 15th nationally. These results compare to a ranking
of 13th last year with the completion of 94 equity offerings for a
total of $12.9 billion in capital raised. (Source: Dealogic)
-- 473 tax-exempt issues with a total par value of $6.1 billion, ranking
the firm fourth nationally. Last year the firm also ranked fourth
nationally, completing 504 tax-exempt issues, with a total par value
of $5.9 billion. In the Upper Midwest, the firm completed 290 public
finance issues for the year with a total par value of $2.5 billion,
again ranking the firm the lead underwriter of Upper Midwest tax-
exempt issues. (Source: Thomson Financial)
Private Client Services
Fourth Quarter
For the fourth quarter of 2005, Private Client Services recorded net
revenues of $86.4 million, down 2.8 percent compared to the fourth quarter of
2004, resulting from fewer financial advisors, offset in part by an increase
in revenues from fee-based accounts. Net revenues declined 1.0 percent
compared to the third quarter of 2005. Segment pre-tax operating income was
$6.1 million, up 5.8 percent from the fourth quarter of 2004, and up 14.1
percent compared to the third quarter of 2005. The increase compared to the
prior-year period was largely due to lower compensation expenses from lower
revenues, the cost reductions from restructuring actions and lower litigation-
related expenses.
Segment operating expenses were $80.3 million for the quarter, down 3.4
percent from the prior-year period. Segment pre-tax operating margin for the
quarter was 7.0 percent, up from the 6.4 percent margin in the fourth quarter
of 2004, and up from 6.1 percent in the third quarter of 2005.
Full Year
For the year, segment net revenues were $347.0 million, down 3.5 percent
compared to the prior-year period. Segment pre-tax operating income was
$18.3 million, down $8.7 million, or 32.2 percent, reflecting the decrease in
net revenues and higher litigation-related expenses compared to 2004. Segment
pre-tax operating margin was 5.3 percent for the year, compared to 7.5 percent
for 2004.
Corporate Support and Other
Corporate Support and Other pre-tax operating loss was $3.6 million for
the fourth quarter, an increase of $1.2 million compared to the fourth quarter
of 2004. For the full year, pre-tax operating loss was $15.0 million,
compared to a loss of $10.7 million in 2004. The increase in pre-tax
operating loss for both periods was due primarily to increasing interest rates
on subordinated debt and lower gains on private equity investments.
Additional Shareholder Information
As of Dec. 31, As of Sept. 30, As of Dec. 31,
2005 2005 2004
Full time employee: 2,871 2,879 3,027
Financial advisors: 842 856 860
Client assets: $52 billion $52 billion $51 billion
Shareholders' equity: $754.8 million $734.2 million $725.4 million
Book value per share: $41.10 $39.96 $37.52
Tangible book value per
share: $23.66 $22.51 $20.88
(1) Tangible shareholders' equity equals total shareholders' equity less
goodwill and identifiable intangible assets. Return on average
tangible shareholders' equity is calculated by dividing trailing
12-month net income, for each period presented, by the average
quarterly tangible common equity for the trailing 12-month period.
Management believes that return on tangible shareholders' equity is a
meaningful measure of performance as 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
Three Months Ended Three Months Ended As of
(Dollars in thousands) Dec. 31, 2005 Dec. 31, 2004 Dec. 31, 2005
Shareholders' equity $745,648 $721,342 $754,827
Deduct: Goodwill and
identifiable intangible
assets 320,434 313,716 320,234
Tangible shareholders'
equity $425,214 $407,626 $434,593
Average for the
Twelve Months Ended Twelve Months Ended As of
(Dollars in thousands) Dec. 31, 2005 Dec. 31, 2004 Dec. 31, 2005
Shareholders' equity $735,580 $699,747 $754,827
Deduct: Goodwill and
identifiable intangible
assets 321,034 308,122 320,234
Tangible shareholders'
equity $414,546 $391,625 $434,593
Conference Call
Andrew S. Duff, chairman and chief executive officer, and Sandra G.
Sponem, chief financial officer, will host a conference call to discuss fourth
quarter and full year 2005 financial results on Wednesday, Jan. 25, 2006, at
11 a.m. ET (10 a.m. CT). The call can be accessed via live audio webcast
available through the firm's web page, http://www.piperjaffray.com , or by
dialing (866) 244-9933, or (706) 758-0864 international, and referring to
conference ID 3973254 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 1 p.m. ET Jan. 25
at the same web address or by calling (800) 642-1687 or (706) 645-9291
international.
About Piper Jaffray Companies
Piper Jaffray Companies (NYSE: PJC) 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. Through its chief operating subsidiary,
Piper Jaffray & Co., the firm has served corporations, government and non-
profit entities, institutional investors and the financial advisory needs of
private individuals since 1895. Headquartered in Minneapolis, Piper Jaffray
has approximately 2,900 employees in 107 offices in 23 states across the
country and in London. 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) developments
in market and economic conditions have in the past adversely affected, and may
in the future adversely affect, our business and profitability, (2) we may not
be able to compete successfully with other companies in the financial services
industry, (3) our underwriting and market-making activities may place our
capital at risk, (4) an inability to readily divest or transfer trading
positions may result in financial losses to our business, (5) 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 risk exposure, (6) 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, (7) we may make strategic acquisitions of
businesses, engage in joint ventures or divest or exit existing businesses,
which could cause us to incur unforeseen expense and have disruptive effects
on our business but may not yield the benefits we expect, (8) 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, (9) 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 to our company, (10) 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, (11) our exposure to legal
liability is significant and could lead to substantial damages, (12) we may
suffer losses if our reputation is harmed, (13) 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 our
common stock, and (14) other factors identified in the document entitled "Risk
Factors" filed as Exhibit 99.1 to our Quarterly Report on Form 10-Q for the
quarter ended September 30, 2005, and updated 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 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.
Since 1895. Member SIPC and NYSE.
Piper Jaffray Companies
Preliminary Unaudited Results of Operations
For the Three Months Ended Percent Inc/(Dec)
Dec. 31, Sept. 30, Dec. 31, 4Q05 vs. 4Q05 vs.
(Amounts in thousands, 2005 2005 2004 3Q05 4Q04
except per share data)
Revenues:
Commissions and fees $72,397 $73,045 $67,255 (0.9)% 7.6 %
Principal transactions 34,732 35,637 46,394 (2.5) (25.1)
Investment banking 78,321 81,091 59,686 (3.4) 31.2
Interest 20,586 18,231 14,627 12.9 40.7
Other income 12,358 11,336 13,589 9.0 (9.1)
Total revenues 218,394 219,340 201,551 (0.4) 8.4
Interest expense 11,435 9,979 6,981 14.6 63.8
Net revenues 206,959 209,361 194,570 (1.1) 6.4
Non-interest expenses:
Compensation and
benefits 122,693 129,196 116,800 (5.0) 5.0
Occupancy and equipment 14,886 14,295 14,683 4.1 1.4
Communications 9,725 9,362 10,470 3.9 (7.1)
Floor brokerage and
clearance 4,160 4,473 3,882 (7.0) 7.2
Marketing and business
development 9,956 9,243 10,952 7.7 (9.1)
Outside services 13,071 10,894 11,182 20.0 16.9
Cash award program 1,004 1,005 1,158 (0.1) (13.3)
Restructuring-related
expense - - - N/M N/M
Other operating expenses 6,494 7,828 7,259 (17.0) (10.5)
Total non-interest
expenses 181,989 186,296 176,386 (2.3) 3.2
Income before income tax
expense 24,970 23,065 18,184 8.3 37.3
Income tax expense 8,607 7,917 6,375 8.7 35.0
Net income $16,363 $15,148 $11,809 8.0 % 38.6 %
Earnings Per Common Share
Basic $0.89 $0.80 $0.61 11.3 % 45.9 %
Diluted $0.87 $0.79 $0.61 10.1 % 42.6 %
Weighted average number of
common shares
Basic 18,365 18,841 19,333 (2.5)% (5.0)%
Diluted 18,850 19,107 19,445 (1.3)% (3.1)%
For the Year Ended
Dec. 31, Dec. 31, Percent
(Amounts in thousands, except per 2005 2004 Inc/(Dec)
share data)
Revenues:
Commissions and fees $283,481 $263,730 7.5 %
Principal transactions 143,391 188,526 (23.9)
Investment banking 270,758 257,932 5.0
Interest 71,471 54,784 30.5
Other income 45,688 57,967 (21.2)
Total revenues 814,789 822,939 (1.0)
Interest expense 39,736 25,441 56.2
Net revenues 775,053 797,498 (2.8)
Non-interest expenses:
Compensation and benefits 471,674 488,394 (3.4)
Occupancy and equipment 57,627 57,066 1.0
Communications 39,791 42,198 (5.7)
Floor brokerage and clearance 17,568 17,309 1.5
Marketing and business development 39,863 42,468 (6.1)
Outside services 46,978 41,477 13.3
Cash award program 4,206 4,717 (10.8)
Restructuring-related expense 8,595 - N/M
Other operating expenses 27,645 24,248 14.0
Total non-interest expenses 713,947 717,877 (0.5)
Income before income tax expense 61,106 79,621 (23.3)
Income tax expense 21,023 29,273 (28.2)
Net income $40,083 $50,348 (20.4)%
Earnings Per Common Share
Basic $2.13 $2.60 (18.1)%
Diluted $2.10 $2.60 (19.2)%
Weighted average number of common shares
Basic 18,813 19,333 (2.7)%
Diluted 19,081 19,399 (1.6)%
Piper Jaffray Companies
Preliminary Unaudited Segment Data
For the Three Months Ended Percent Inc/(Dec)
Dec. 31, Sept. 30, Dec. 31, 4Q05 vs. 4Q05 vs.
(Dollars in thousands) 2005 2005 2004 3Q05 4Q04
Capital Markets
Institutional Sales
Fixed Income $21,090 $18,439 $24,683 14.4 % (14.6)%
Equities 27,475 31,576 26,157 (13.0) 5.0
Total Institutional
Sales 48,565 50,015 50,840 (2.9) (4.5)
Investment Banking
Underwriting
Fixed Income 20,450 15,809 14,613 29.4 39.9
Equities 19,562 18,166 22,863 7.7 (14.4)
Advisory Services 33,426 39,432 15,432 (15.2) 116.6
Total Investment
Banking 73,438 73,407 52,908 0.0 38.8
Other Income 275 565 546 (51.3) (49.6)
Net revenues 122,278 123,987 104,294 (1.4) 17.2
Operating expenses 98,723 101,355 88,192 (2.6) 11.9
Segment pre-tax
operating income $23,555 $22,632 $16,102 4.1 % 46.3 %
Segment pre-tax
operating margin 19.3 % 18.3 % 15.4 %
Private Client Services
Net revenues $86,379 $87,292 $88,895 (1.0)% (2.8)%
Operating expenses 80,319 81,980 83,166 (2.0) (3.4)
Segment pre-tax operating
income $6,060 $5,312 $5,729 14.1 % 5.8 %
Segment pre-tax operating
margin 7.0 % 6.1 % 6.4 %
Corporate Support and Other
Net revenues $(1,698) $(1,918) $1,381 (11.5)% N/M
Operating expenses 1,943 1,956 3,870 (0.7) (49.8)%
Segment pre-tax
operating loss $(3,641) $(3,874) $(2,489) (6.0)% 46.3 %
Segment pre-tax
operating margin N/M N/M N/M
Reconciliation to total
income before taxes:
Total segment pre-tax
operating income $25,974 $24,070 $19,342 7.9 % 34.3 %
Cash award program 1,004 1,005 1,158 (0.1) (13.3)
Restructuring-related
expense - - - N/M N/M
Total income before tax
expense $24,970 $23,065 $18,184 8.3 % 37.3 %
Pre-tax operating margin 12.1 % 11.0 % 9.3 %
For the Year Ended
Dec. 31, Dec. 31, Percent
(Dollars in thousands) 2005 2004 Inc/(Dec)
Capital Markets
Institutional Sales
Fixed Income $75,201 $84,685 (11.2)%
Equities 114,789 117,272 (2.1)
Total Institutional Sales 189,990 201,957 (5.9)
Investment Banking
Underwriting
Fixed Income 67,649 62,096 8.9
Equities 75,026 87,505 (14.3)
Advisory Services 100,672 78,066 29.0
Total Investment Banking 243,347 227,667 6.9
Other Income 2,471 1,678 47.3
Net revenues 435,808 431,302 1.0
Operating expenses 365,222 363,249 0.5
Segment pre-tax operating income $70,586 $68,053 3.7 %
Segment pre-tax operating margin 16.2 % 15.8 %
Private Client Services
Net revenues $346,951 $359,668 (3.5)%
Operating expenses 328,670 332,709 (1.2)
Segment pre-tax operating income $18,281 $26,959 (32.2)%
Segment pre-tax operating margin 5.3 % 7.5 %
Corporate Support and Other
Net revenues $(7,706) $6,528 N/M
Operating expenses 7,254 17,202 (57.8)%
Segment pre-tax operating loss $(14,960) $(10,674) 40.2 %
Segment pre-tax operating margin N/M N/M
Reconciliation to total income before taxes:
Total segment pre-tax operating income $73,907 $84,338 (12.4)%
Cash award program 4,206 4,717 (10.8)
Restructuring-related expense 8,595 - N/M
Total income before tax expense $61,106 $79,621 (23.3)%
Pre-tax operating margin 7.9 % 10.0 %
N/M - Not Meaningful
SOURCE Piper Jaffray Companies
 back to top
Related links:
http://www.piperjaffray.com
CONTACT:
Jennifer A. Olson-Goude, Investor Relations,
+1-612-303-6277, or Susan L. Beatty, Media Relations,
+1-612-303-5680, both of Piper Jaffray Companies
|
