Piper Jaffray Companies Announces Third Quarter Results

Business Wire, Oct 15, 2008

MINNEAPOLIS -- Piper Jaffray Companies (NYSE: PJC) today announced a net loss from continuing operations of $26.5 million, or $1.68 per share, for the quarter ended September 30, 2008. The results included a $13.4 million after tax loss, or $0.85 per share, which the company previously announced on October 7, 2008, related to its tender option bond (TOB) program. Results from continuing operations in the year-ago period were net income of $4.8 million, or $0.28 per diluted share, and in the second quarter of 2008, a net loss of $5.1 million, or $0.32 per share.

For the third quarter of 2008, continuing operations generated net revenues of $72.7 million, which included the $21.7 million pre-tax loss related to the TOB program. Revenues were down 22 percent from the third quarter of 2007 and down 23 percent from the second quarter of 2008.

For the first nine months of 2008, the company recorded a net loss from continuing operations of $35.0 million, or $2.20 per share, compared to net income from continuing operations of $29.9 million, or $1.70 per diluted share, for the year-ago period. Net revenues of $263.3 million year-to-date represent a 25 percent decrease over the same period last year. The decrease was mainly due to lower equity and debt financing revenues, lower high yield and structured products sales and trading revenues, and the loss related to the TOB program. This decrease has been partially offset by stronger revenues from equities sales and trading revenues and a contribution from asset management.

"During the third quarter, particularly in September, the financial markets experienced unprecedented events and volatility, and our financial results were negatively impacted, particularly fixed income sales and trading revenues. Against a weak capital markets environment, investment banking revenues held up reasonably well, and equities sales and trading revenues were solid," said Chairman and Chief Executive Officer Andrew S. Duff. "We believe that amidst this unprecedented reshaping of the investment banking landscape, we have a unique opportunity to selectively extend our franchise and enhance our talent base. We are diligently balancing historic opportunities with appropriate expense actions to better position our firm during a difficult operating environment, which could extend well into 2009."

Results of Continuing Operations

Net Revenues

Investment Banking

For the third quarter of 2008, total investment banking revenues were $50.5 million, down 4 percent compared to the third quarter of 2007 and up 43 percent, compared to the second quarter of 2008. Despite the weak capital markets environment, investment banking revenues held up reasonably well but are below the company's historical run rate, and the current market fundamentals remain weak.

* Equity financing revenues were $11.4 million, down 37 percent compared to the year-ago period primarily due to fewer completed IPO transactions driven by the weaker industry environment. Equity financing revenues rose 31 percent compared to a weak second quarter of 2008.

* Advisory services revenues were $21.4 million, up 33 percent compared to the year-ago period and up 90 percent compared to the second quarter of 2008. The increase was due to higher average revenues per transaction.

* Debt financing revenues were $17.8 million, down 2 percent compared to the third quarter of 2007, and up 16 percent compared to the second quarter of 2008. The increase relative to the sequential quarter was mainly due to improved spreads on public finance underwritings.

The following is a recap of the company's completed deal information for the third quarter of 2008:

* 13 equity financings raising capital of $2.4 billion. Of the completed transactions, 6 were U.S. public offerings.

* 13 merger and acquisition transactions with an aggregate enterprise value of $7.3 billion. The number of deals and the enterprise value include disclosed and undisclosed transactions.

* 93 tax-exempt issues with a total par value of $2.0 billion.

Institutional Sales and Trading

For the quarter ended September 30, 2008, institutional sales and trading generated revenues of $18.0 million, down 54 percent and 68 percent compared to the same quarter last year and the second quarter of 2008, respectively. Solid equity sales and trading revenues were mitigated by weak fixed income sales and trading revenues.

* Equities sales and trading revenues were $35.3 million, up 40 percent compared to the third quarter of 2007 and essentially the same as the second quarter of 2008. The solid results were due primarily to strong client activity and improved trading results.

* Fixed income sales and trading revenues were negative $17.3 million, compared to positive $13.7 million in the year-ago period and positive $20.8 million in the strong second quarter of 2008. The lower performance was mainly driven by the $21.7 million loss, related to the firm's TOB program, which it previously disclosed on October 7, 2008. In addition, distressed credit markets negatively impacted revenues from structured products and public finance proprietary trading.