Piper Jaffray Companies Announces 2012 Fourth Quar
Piper Jaffray Companies Announces 2012 Fourth Quarter and Year-end Results
1/30/2013 8:00:29 AM
MINNEAPOLIS--(BUSINESS WIRE)--Jan. 30, 2013-- Piper Jaffray Companies (NYSE: PJC) today announced that for the quarter ended Dec. 31, 2012, net income from continuing operations was $15.6 million, or $0.88 per diluted common share. These results compared to non-GAAP net income from continuing operations of $2.4 million (1) or $0.13 (1) per diluted common share, in the year-ago period. The references to non-GAAP figures in the year-ago period exclude the effects of a $118.4 million after tax goodwill impairment charge. On a GAAP basis, net loss from continuing operations in the year-ago period was $116.0 million, or $7.35 per diluted common share. In the third quarter of 2012, net income from continuing operations was $14.5 million, or $0.82 per diluted common share.
For the fourth quarter of 2012, net revenues from continuing operations were $140.9 million, compared to $93.1 million in the fourth quarter of 2011, and $131.5 million in the third quarter of 2012.
For the quarter ended Dec. 31, 2012, net income, including continuing and discontinued operations, was $11.8 million, or $0.67 per diluted common share, compared to non-GAAP net income of $2.1 million(2), or $0.11 (2) per diluted common share, in the year-ago period, and $19.7 million, or $1.11 per diluted common share in the third quarter of 2012. On a GAAP basis, net loss from continuing and discontinued operations in the year-ago period was $116.4 million, or $7.38 per diluted common share. Discontinued operations includes the operating results of the Hong Kong capital markets business, which we have shut down, and FAMCO, a division of the asset management segment. The firm is actively pursuing a sale of the FAMCO business.
For the year ended Dec. 31, 2012, net income from continuing operations was $47.1 million, or $2.58 per diluted common share, compared to non-GAAP net income of $27.7 million(1), or $1.44 (1) per diluted common share in the prior year (and a net loss of $90.8 million, or $5.79 per diluted common share in the prior year on a GAAP basis). For 2012, net revenues from continuing operations were $489.0 million up 13% compared to 2011, due to higher revenues across our fixed income and advisory services businesses.
“We produced solid results for the quarter and the year despite adverse market conditions facing several of our businesses,” said Andrew S. Duff, chairman and chief executive officer. “Compared to the prior quarter, strong performance in M&A and public finance, and improved results in equities, more than offset weaker results in our fixed income trading businesses, while our equity capital raising and asset management businesses were flat sequentially.”
Duff continued, “Our strategy served us well as we focused our resources on our businesses where we are strongest, working to generate higher margins and improving our return on equity. Key execution steps in 2012 included adding resources in public finance, fixed income and M&A, creating more flexibility with our lenders, reducing costs, and exiting businesses that lacked sustainability or did not contribute meaningfully to our results. These efforts contributed to an improvement in ROE to 5.7%(6) in 2012 compared to 2.3%(6) in 2011.”
Fourth Quarter Results from Continuing Operations
Consolidated Expenses
For the fourth quarter of 2012, compensation and benefits expenses were $87.4 million, up 44% and 12% compared to the fourth quarter of 2011 and the third quarter of 2012, respectively, due to improved financial results.
For the fourth quarter of 2012, compensation and benefits expenses were 62.0% of net revenues, compared to 65.2% for the fourth quarter of 2011 and 59.4% for the third quarter of 2012. The compensation ratio decreased compared to the fourth quarter of 2011 due to higher revenues, and increased compared to the third quarter of 2012 primarily due to changes in our mix of revenues.
For the fourth quarter of 2012, non-compensation expenses were $30.7 million, compared to non-GAAP non-compensation expenses of $30.5 million(3) in the year-ago period, and $28.1 million in the third quarter of 2012. In the year ago period, non-compensation expenses on a GAAP basis were $150.8 million.
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 the Hong Kong capital markets business, and FAMCO, a division of the 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 $19.4 million, compared to a non-GAAP pre-tax operating loss of $2.1 million(4) in the year-ago period and pre-tax operating income of $20.6 million in the third quarter of 2012. On a GAAP basis, with the goodwill impairment charge, this segment generated a pre-tax operating loss of $122.4 million in the year-ago period.
Net revenues were $124.5 million, up 61% and 8% compared to the year-ago period and the third quarter of 2012, respectively.
Equity financing revenues of $18.0 million increased 17% compared to the fourth quarter of 2011 and were similar to the third quarter of 2012. Revenues were higher compared to the year-ago period due to more completed transactions.
Fixed income financing revenues of $20.5 million increased 35% and 24% compared to the fourth quarter of 2011 and the third quarter of 2012, respectively. Revenues were favorable compared to the year-ago period due to higher revenue per transaction, and favorable compared to the third quarter of 2012 due to more completed transactions. We continue to gain market share and expand our national footprint in the public finance space.
Advisory services revenues were a record $44.5 million, up 139% and 173% compared to the fourth quarter of 2011 and the third quarter of 2012, respectively. Advisory services revenues were extremely strong in the current quarter as sellers were motivated to complete deals prior to year-end. In addition to favorable market conditions, recent additions to our M&A team also contributed to our results.
Equity institutional brokerage revenues of $20.1 million were in line with the fourth quarter of 2011 and up 12% compared to the third quarter of 2012.
Fixed income institutional brokerage revenues were $23.5 million up 112% compared to the fourth quarter of 2011 and down 50% compared to the third quarter of 2012. Revenues were favorable compared to the year-ago period due to more favorable market conditions in the current quarter. Revenues were lower compared to the third quarter of 2012 due to lower results in our strategic trading activities, following an exceptionally strong third quarter.
Operating expenses were $105.1 million for the fourth quarter of 2012, compared to non-GAAP operating expenses of $79.4 million(5) in the prior year quarter ($199.7 million on a GAAP basis in the prior year quarter), and $94.7 million in the third quarter of 2012. Operating expenses increased relative to the comparable quarters due to higher compensation expense resulting from improved operating results.
For the fourth quarter of 2012, the segment pre-tax operating margin was 15.6%, compared to a negative 2.7%(4) on a non-GAAP basis in the year-ago period, and a 17.9% operating margin in the third quarter of 2012. Pre-tax operating margin in the current quarter was significantly higher compared to the year-ago period due to higher revenues, and lower than the third quarter of 2012 due to higher compensation expense driven by the business mix for the quarter.
Asset Management
For the quarter ended Dec. 31, 2012, asset management generated pre-tax operating income of $3.4 million, down 16% and 29%, compared to the fourth quarter of 2011 and the third quarter of 2012, respectively.
Net revenues were $16.4 million, up 4% and 1%, compared to the fourth quarter of 2011 and the third quarter of 2012, respectively.
Operating expenses for the current quarter were $13.0 million, up 11% and 14%, compared to the year-ago period, and the third quarter of 2012, respectively. Segment pre-tax operating margin was 20.6%, compared to 25.6% in the year-ago period, and 29.4% in the third quarter of 2012. Segment pre-tax margin was lower relative to the comparable quarters due to higher compensation expense within our asset management division.
Assets under management (AUM) were $9.1 billion in the fourth quarter of 2012, compared to $8.6 billion in the year-ago period, and $9.2 billion in the third quarter of 2012.
Other Matters
In the fourth quarter of 2012, the firm repurchased $4.7 million, or 158,332 shares, of its common stock at an average price of $29.37 per share. The firm has $95.4 million remaining on its share repurchase authorization, which expires on Sept. 30, 2014.
Fourth Quarter Results from Discontinued Operations
Discontinued operations includes the operating results of the Hong Kong capital markets business, which we have shut down, and FAMCO, a division of the asset management segment. The firm is actively pursuing a sale of the FAMCO business.
For the quarter ended Dec. 31, 2012, net loss from discontinued operations was $3.7 million, or $0.21 per diluted common share, compared to a net loss of $0.4 million in the fourth quarter of 2011, or $0.02 per diluted share, and net income of $5.2 million, or $0.29 per diluted share, in the third quarter of 2012. Included in the current quarter is a $3.4 million after-tax, non-cash goodwill impairment charge related to FAMCO.
Full-Year 2012 Results from Continuing Operations
Consolidated Expenses
For 2012, compensation and benefits expenses were $296.9 million, up 12% compared to 2011, due to improved financial performance. Compensation and benefits expenses were 60.7% of net revenues, down from 61.3% in 2011.
For 2012, non-compensation expenses were $123.1 million compared to $127.0 million(3) in 2011 on a non-GAAP basis (and $247.3 million on a GAAP basis).
Business Segment Results
The firm’s Hong Kong capital markets and FAMCO businesses are presented as discontinued operations for all periods presented.
Capital Markets
For 2012, Capital Markets generated pre-tax operating income of $52.5 million, compared to non-GAAP pre-tax operating income of $25.0 million(4) in 2011 (and pre-tax operating loss of $95.3 million on a GAAP basis). Net revenues were $424.1 million, up 15% compared to 2011 due to higher revenues in our fixed income and advisory businesses.
For 2012, operating expenses were $371.6 million, up 8% compared to non-GAAP operating expenses for 2011 of $344.0 million (5) (and $464.3 million on a GAAP basis). Segment pre-tax operating margin improved to 12.4%, compared to a non-GAAP pre-tax operating margin of 6.8%(4) in 2011. Pre-tax operating margin increased significantly in 2012 due to operating leverage related to increased revenues.
Asset Management
For 2012, asset management generated pre-tax operating income of $16.5 million, up 9% compared to 2011. Net revenues were $64.8 million, up 3% compared to 2011.
Operating expenses for the year were $48.3 million, up 1% compared to 2011. Segment pre-tax operating margin was 25.5%, up slightly from 2011.
Other Matters
For the full year 2012, the firm repurchased $47.2 million, or 2.0 million shares, of its common stock, at an average price of $23.22.
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