UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the fiscal year ended September 30, 1994
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 1-7421
PIPER JAFFRAY COMPANIES INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 41-1233380
(State of incorporation) (IRS Employer Identification No.)
Piper Jaffray Tower, 222 South Ninth Street Minneapolis, Minnesota 55402
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 342-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, New York Stock Exchange
par value $1.00 per share Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of December 6, 1994, 17,063,980 shares of common stock were issued and
outstanding, and the aggregate market value of the shares of common stock held
by non-affiliates was approximately $90,995,000 (based upon the
closing price on the New York Stock Exchange).
DOCUMENTS INCORPORATED BY REFERENCE
Item Document of Reference
PART II
Item 5. Market for Registrant's Common "Market Prices and Dividends Per
Equity and Related Shareholder Share" from the Annual Report to
Matters Shareholders for the
fiscal year ended September 30,
1994 ("the 1994 Annual Report")
Item 6. Selected Financial Data "Financial Summary" from the 1994
Annual Report
Item 7. Management's Discussion and "Management's Financial Discussion"
Analysis Financial Condition from the 1994 Annual Report
and Results of Operation
Item 8. Financial Statements and "Consolidated Financial Statements"
Supplementary Data and "Summary of Quarterly Results"
from the 1994 Annual Report
PART III
Item 10. Directors and Executive Officers "Election of Directors" on
of the Registrant pages 2-3 and "Compliance with
Reporting Requirements"
on page 12 of the Registrant's
definitive Proxy Statement for the
Annual Meeting of Shareholders to
be held on January 25, 1995 ("the
1994 Proxy Statement") and to be
filed within 120 days after the
Registrant's fiscal year ended
September 30, 1994.
Item 11. Executive Compensation "Executive Compensation" on pages
6-10 of the 1994 Proxy Statement
Item 12. Security Ownership of Certain "Equity Securities Beneficially
Beneficial Owners and Owned by Directors and
Executive Management Officers" on page 5 of the 1994
Proxy Statement
Item 13. Certain Relationships and "Transactions with Directors and
Transactions Officers" on page 12 of the 1994
Proxy Statement
PART IV
Item 14.(a):
1. Consolidated Financial Statements "Consolidated Financial Statements"
from the 1994 Annual Report to
Shareholders, included in Exhibit
13 filed herein.
2. Financial Statement Schedules "Summary of Quarterly Results" from
Selected Quarterly Financial Data the 1994 Annual Report to
Shareholders, included in Exhibit
13 filed herein.
PART I
Item 1. Business
Piper Jaffray Companies Inc. (the "Registrant"), a Delaware corporation, is a
holding company which offers individual investor, investment banking, and
investment management services through its wholly owned subsidiaries. The
Registrant has no employees and is not engaged in any business activities other
than certain investing and administrative functions.
The Registrant's primary wholly owned subsidiaries include Piper Jaffray Inc.
(Piper Jaffray), its broker/dealer subsidiary; Piper Capital Management
Incorporated (Piper Capital), an asset management firm; Piper Trust Company
(Piper Trust); and Premier Acceptance Corporation (Premier), an issuer of
mortgage-backed bonds.
Piper Jaffray Inc.
Piper Jaffray is a Delaware corporation organized in 1969 as the successor to a
business established in 1895. Piper Jaffray is a securities broker/dealer and
investment banking firm. As such, it effects transactions in listed and
unlisted securities and options and futures contracts, underwrites corporate
and municipal securities, and sells mutual fund shares, U.S. government
securities, and other financial products and services.
Piper Jaffray is a member of the New York Stock Exchange, American Stock
Exchange, Chicago Stock Exchange, National Association of Securities Dealers,
National Futures Association, Cincinnati Stock Exchange, Minneapolis Grain
Exchange, and the New York Futures Exchange.
Piper Jaffray has 74 retail sales offices in 17 states and is licensed as a
broker/dealer in all states and Washington D.C.
Piper Capital Management Incorporated
Piper Capital, a Delaware corporation, was incorporated in 1983 and is an
investment adviser registered under the Investment Advisers Act of 1940. Piper
Capital furnishes investment advice to various clients, including pension and
profit sharing funds, corporations and individuals. Piper Capital is also the
investment adviser to 22 closed-end funds, the Piper Funds Inc. series of 12
open-end mutual funds, the Piper Institutional Funds Inc. series of three open-
end funds, and the Piper Global Funds Inc., which currently has one global
open-end fund. As of September 30, 1994, Piper Capital's total assets under
management were approximately $11.6 billion.
Piper Trust Company
Piper Trust, chartered in Minnesota in 1989, provides trust services to
individuals and institutions. Personal trust administrators assist individual
clients in planning their estates, setting investment goals, and monitoring
investment activities. Piper Trust administrators also work with institutions
and pension and profit sharing plans as an active fiduciary partner. Piper
Trust operates ten common and collective funds and had $0.8 billion in client
assets under trust as of September 30, 1994.
Premier Acceptance Corporation
Premier was incorporated in Delaware in 1988 and is an issuer of bonds
which are collateralized by GNMA and FNMA certificates. As of September
30, 1994, Premier had issued mortgage-backed bonds with an aggregate original
principal amount of $475.5 million. As of September 30, 1994, $1.6 million
remained outstanding. The issuance of six series of mortgage-backed bonds with
an aggregate original principal amount of $176.1 million and the related
purchase of collateral has been accounted for financial reporting purposes as a
sale. Accordingly, the assets, liabilities, interest income, and interest
expense relating to these series do not appear on the financial statements.
Sources of Revenues
Commissions
Piper Jaffray charges a brokerage commission when acting as agent for the
purchaser or seller of a security or futures contract. If the security is
listed on an exchange, the transaction is generally effected through an
automatic execution and clearing system or Piper Jaffray's own floor brokers.
If the security is traded on the over-the-counter market, Piper Jaffray
generally effects the transaction directly with one of the firms making a
market in that security. Piper Jaffray also acts as agent with respect to the
purchase and sale of futures and option contracts. These transactions are
effected through correspondent brokers. Piper Jaffray purchases mutual fund
shares at a specified discount from the price at which the shares are resold to
customers. Piper Jaffray is also a distributor of Piper Capital's open-end
mutual funds.
Principal Transactions
Profits on principal trading transactions represent the difference between the
cost of securities purchased by Piper Jaffray for its own account and the
proceeds received upon the sale of such securities. Such transactions occur
with respect to corporate equity and fixed income securities, municipal
securities (generally issued by states, their agencies and political
subdivisions), and U.S. government securities.
Piper Jaffray acts as a market maker for unlisted common stocks and convertible
debt securities of approximately 500 companies. As a market maker, Piper
Jaffray, for its own account, generally maintains a long or short inventory
position with respect to such securities and stands ready to effect purchase or
sale transactions with customers and other dealers.
Piper Jaffray also maintains inventories of non-convertible corporate debt
securities, preferred stocks, municipal securities, and government securities,
as well as equity and convertible securities in which Piper Jaffray does not
make a market. These inventories usually result from underwriting and other
positions that have not yet been sold to customers, but are maintained to
facilitate customers' transactions and trading.
Piper Jaffray is exposed to the possibility of a loss and has the opportunity
to profit as market prices of the securities in its inventory positions change.
The value of the common stock and convertible debt inventory positions is
primarily affected by changes in the general market for equity securities and
the financial prospects of the issuers of such securities. The value of the
corporate fixed income, municipal, and government securities inventory
positions is primarily affected by changes in market interest rates. In
general, Piper Jaffray's securities inventories are maintained to meet
customers' trading demands. Accordingly, it is the policy of Piper Jaffray to
carry as low a level of securities inventories as is necessary to conduct
customer business. Such inventories seldom include derivative securities or
mortgage-backed security derivatives. When used, the primary use of derivative
securities in Piper Jaffray's own account is in interest-rate futures to hedge
fixed-income securities inventories. This hedging is done on a limited basis
and the amount of revenues and the degree of risk incurred in such transactions
is immaterial to the consolidated financial statements. Trading activity
is monitored under policies setting overnight and intraday limits for all
trading inventories. Customer trading in derivatives is regulated under
various applicable regulations and internal policies, which are generally more
restrictive than those involving typical equity and fixed income securities.
During fiscal 1994, the Registrant invested $10 million in the Institutional
Government Income Portfolio, a fixed income mutual fund managed by Piper
Capital investing primarily in government securities, including various
derivative securities.
Investment Banking
Piper Jaffray underwrites both municipal and corporate securities. In an
underwriting, Piper Jaffray generally joins with other securities firms in
a group which commits to purchase securities from an issuer at a fixed
price and to re-offer those securities to the public. While most of Piper
Jaffray's underwriting revenues are derived from acting as manager or co-
manager, Piper Jaffray also acts as a member of underwriting groups managed by
other firms.
Participation in an underwriting exposes Piper Jaffray to certain risks.
If all of the securities that Piper Jaffray has committed to underwrite cannot
be resold at the agreed upon price, Piper Jaffray might incur losses. In
addition, federal and state securities laws and regulations affect the
activities of underwriters and impose potential liabilities in connection with
sales of securities by underwriters to the public.
It is generally more profitable to be manager or co-manager of an underwriting
than to be solely a member of the underwriting group. However, managers
usually must commit to underwrite a larger portion of the offering than other
members of the underwriting group.
In addition to the underwriting of securities, Piper Jaffray engages in other
investment banking activities. These include raising capital through the
private placement of securities, appraising corporate securities for tax or
other purposes, arranging and evaluating the terms of mergers and acquisitions,
and advising companies with respect to financing plans and related matters.
Compensation for such services is in the form of negotiated fees.
Asset Management
Piper Capital, as investment adviser to mutual funds, provides each fund with
advice and assistance in the selection and disposition of that fund's
investments. In return, each fund pays Piper Capital monthly advisory fees
generally equal to a certain percentage of the fund's average net assets.
Piper Capital also serves as investment adviser for individual and
fiduciary accounts.
Piper Capital effects a wide range of securities transactions in managed
accounts as well as within managed mutual funds. Certain managed accounts and
funds invest in derivative and/or mortgage-backed derivative securities. The
use of these and other securities in managed accounts and funds is monitored
for both eligibility of type of security and limitations on amount of security
in accordance with policies applicable to the particular accounts and funds,
including investment management agreements and fund prospectus guidelines.
Piper Trust also generates substantially all of its revenues through a
percentage fee based on the market value of total assets under management for
each client's account and through fees for estate planning and custodial and
fiduciary services.
Interest Income
Customers' purchases of listed and certain over-the-counter securities may be
effected on either a cash or margin basis. If the purchase is made on a cash
basis, full payment is due by a designated settlement date, generally five
business days following the purchase date. In a margin transaction however,
Piper Jaffray lends the customer a portion of the purchase price up to limits
set by the Federal Reserve Board. Such loans are collateralized by the
securities purchased. These receivable amounts are funded by equity capital,
bank lines of credit, and proceeds from securities lending, as well as non-
interest bearing liabilities. As collateral for short-term bank borrowings,
Piper Jaffray is generally permitted to use securities in a customer's margin
account with a total market value of up to 140% of the amount owed to Piper
Jaffray by the customer.
Other Revenues
Piper Jaffray provides other financial services and products, including
custodial services for IRA's and defined contribution plans, and various
insurance investment products through the Piper Jaffray sales force. Piper
Jaffray also derives revenue for services provided in connection with tender
and exchange offers, from dividend and interest payments on securities owned,
and other miscellaneous items.
Employees
At September 30, 1994, Piper Jaffray, Piper Capital and Piper Trust had 2,455,
157 and 46 full-time employees, respectively. Premier has no employees. There
were 1,088 employees of Piper Jaffray, including some officers, registered with
the New York Stock Exchange as investment executives involved in Piper
Jaffray's retail and institutional sales activities as of September 30, 1994.
Of these, 148 were located in the Minneapolis and the corporate headquarters
sales offices. The other 73 sales offices have from one to 58 investment
executives each.
Competition
The Registrant's subsidiaries are subject to intense competition in all aspects
of their businesses, not only from other companies in the securities industry,
but also from banks, savings and loan associations, retailers, and other firms
offering financial services. Many of these companies are larger and have
greater financial resources than the Registrant. In addition to competition
from such companies, there is competition within the securities industry in
obtaining and retaining the services of investment executives.
Regulation
The rules and regulations of the Securities and Exchange Commission, the
exchanges of which Piper Jaffray is a member, and the other regulatory bodies
under the jurisdiction of which Piper Jaffray conducts its business, are
complex and extensive. Regulated areas include the effecting of securities
transactions, the financial condition of Piper Jaffray, its record keeping and
reporting procedures, relationships with customers including the handling of
cash and margin accounts, the experience and training requirements for certain
employees, and business procedures with non-member firms.
The exchanges, the National Association of Securities Dealers, and the National
Futures Association are voluntary, self-regulatory bodies composed of members
which have agreed to abide by the respective bodies' rules and regulations.
Each of these organizations may expel, fine and otherwise discipline member
firms and their employees.
Piper Jaffray is registered as a securities broker/dealer and as an investment
adviser with the Securities and Exchange Commission. Piper Jaffray is also
registered with the Commodity Futures Trading Commission as a futures
commission merchant under the Commodity Exchange Act. In addition to being
subject to various federal laws, rules and regulations, Piper Jaffray must be
licensed as a broker/dealer in, and comply with the regulations of, the states
in which it does business.
Piper Jaffray is subject to the Uniform Net Capital Rule (the Rule) of the
Securities and Exchange Commission and the net capital rule of the New York
Stock Exchange (the Exchange). Piper Jaffray has elected to use the
alternative method permitted by the Rule which requires that it maintain
minimum net capital of 2% of aggregate debit balances arising from customer
transactions. The Exchange may prohibit a member firm from expanding its
business or paying cash dividends if resulting net capital would be less than
5% of aggregate debit balances. In addition, Piper Jaffray is subject to
certain notification requirements related to withdrawals of excess net capital.
At September 30, 1994, Piper Jaffray's net capital under the Rule was 21.0% of
aggregate debit balances.
Piper Capital is registered under the Investment Advisers Act of 1940 and
is the investment adviser for investment companies regulated under the
Investment Company Act of 1940. As such, Piper Capital and each of its funds
are subject to annual independent audits and periodic examinations by the
Securities and Exchange Commission.
Piper Capital is subject to capital requirements in several states in which it
is registered as an investment advisor. Under requirements of the most
restrictive state, excess net capital was $2.6 million at September 30, 1994.
Capital requirements also apply to Piper Capital's subsidiary in Scotland where
excess net capital was approximately $63,000 at September 30, 1994.
As a Minnesota trust company, Piper Trust is subject to the rules and
regulations of the State of Minnesota and the Minnesota Department of Commerce.
Regulatory examiners conduct periodic examinations of Piper Trust.
The laws, rules and regulations of the various federal, state and other
regulatory bodies to which the businesses of Piper Jaffray, Piper Capital, and
Piper Trust are subject are constantly changing. While management of the
Registrant and its subsidiaries believes that they are currently in compliance
in all material respects with all laws, rules and regulations applicable to its
business, the effect of any such changes cannot be predicted.
Joint Venture
During fiscal 1993, the Company entered into a 50/50 joint venture with Midland
Walwyn of Canada to develop and market an international group of mutual funds.
The joint venture, Hercules International Management L.L.C., introduced the
mutual funds in fiscal 1994. The Company is required to fund any losses from
operations or cash needs of the joint venture on a 50/50 basis in the future.
Item 2. Properties
The Registrant conducts its operations through 74 retail and capital
markets offices in 17 states, as well as London. All of its offices are leased
with various expiration dates through 2006. See Note 7 of the Notes to
Consolidated Financial Statements filed herein for information
concerning leases.
Item 3. Legal Proceedings
The Company is involved in various lawsuits or threatened lawsuits incidental
to the securities business. Some of these actions are described in more detail
below:
Institutional Government Income Portfolio
A. In Re: Piper Funds, Inc. Institutional Government Income Portfolio
Litigation (United States District Court, District of Minnesota).
This is a consolidated putative class action in which claims brought
by eleven persons or entities have been consolidated under the title
In Re: Piper Funds Inc. Institutional Government Income Portfolio
Litigation (United States District Court, District of Minnesota), pursuant
to an Amended Consolidated Class Action Complaint filed on October 5,
1994. The named plaintiffs in that Amended Consolidated Class Action
Complaint purport to represent a class of individuals and groups who
purchased shares of the Piper Jaffray Institutional Government Income
Portfolio, an open-ended fund managed by Piper Capital Management
Incorporated, during the period from July 1, 1991, through May 9, 1994.
The Amended Consolidated Class Action Complaint alleges violation of
Sections 11 and 12 (2) of the Securities Act of 1933, as amended (the
"Securities Act"); violation of Section 10(b) of the Securities Exchange
Act of 1934, as amended (the "Securities Exchange Act"), and Rule 10b-5
promulgated thereunder; violation of Sections 13(a)(3), 18(f), 34(b) and
36(b) of the Investment Company Act of 1940, as amended (the "Investment
Company Act"); violation of Section 80A.01 of the Minnesota Statutes;
negligent misrepresentation; and breach of fiduciary duty. Plaintiffs
seek rescission or damages, plus prejudgment interest, and attorneys' fees
and costs. The Amended Consolidated Complaint claims that the
Institutional Government Income Portfolio lost 24.6% of its value during
the period from January 1, 1994 to May 6, 1994. The Amended Consolidated
Complaint does not specify an amount of damages sought.
Although the plaintiffs in this consolidated action allege that it has
been brought as a class action, the Court has not yet determined whether a
class will be certified. The defendants filed an Answer to the
Consolidated Class Action Complaint on October 21, 1994, in which the
defendants deny liability.
The Company intends to defend the litigation vigorously. It is impossible
to predict the outcome of this litigation, and, at the present time, the
effect of the litigation on the consolidated financial statements cannot
be determined.
B. Other Lawsuits and Arbitration Claims Brought by Investors in
Institutional Government Income Portfolio
The Company is party to the following actions which are based on
claims similar to those asserted In Re: Piper Funds, Inc. Institutional
Government Income Portfolio Litigation. These actions are at various
stages of development.
Idaho Association of Realtors, Inc., a non-profit Idaho corporation
v. Piper Funds, Inc. Institutional Government Income Portfolio; Piper
Capital Management Incorporated; Piper Jaffray, Inc.; Piper Jaffray
Companies Inc.; William H. Ellis and Edward J. Kohler. (Putative
class action, United States District Court, District of Idaho).
Gary Pashel and Gregg S. Hayutin, Trustees of the Mae Pashel Trust;
Mae Pashel, individually; Gary Pashel and Michael H. Feinstein, Trustees
of the Robert Hayutin Insurance Trust; Dennis E. Hayutin, Gregg S. Hayutin
and Gary Pashel, Trustees of the Marie Ellen Hayutin Trust v. Piper Funds,
Inc., Piper Capital Management Incorporated, Piper Jaffray Inc. and Piper
Jaffray Companies, Inc. (Individual action, United States District Court,
District of Colorado).
Eltrax Systems, Inc. v. Piper Funds Inc. Institutional Government Income
Portfolio, Piper Capital Management Incorporated, Piper Jaffray Inc.,
Piper Jaffray Companies Inc., William H. Ellis and Edward J. Kohler.
(Individual action, United States District Court for the District of
Minnesota).
Fredrikson & Byron, P.A., Bertin A. Bisbee, William J. Brody, John P.
Byron, and Richard R. Hansen, as Trustees of the Fredrikson & Byron, P.A.
Money Purchase Pension Plan, Fredrikson & Byron, P.A. Money Purchase
Pension Trust, Fredrikson & Byron, P.A. Profit Sharing Plan and Fredrikson
& Byron, P.A. Profit Sharing Trust v. Piper Jaffray Incorporated, Piper
Capital Management Incorporated, Worth Bruntjen, and John Gibas.
(Arbitration claim, National Association of
Securities Dealers Arbitration).
The Company intends to defend these actions vigorously. It is impossible
to predict the outcome of this litigation, and, at the present time, the
effect of the litigation on the consolidated financial statements cannot
be determined.
Managers Intermediate Mortgage Fund
Florence R. Hosea, Bobby W. Hosea, Getrud B. Dale and Peter M. Dale,
Andrew Poffel and Diane Poffel as tenants by the Entireties, Myrone
Sarone, Donna M. DiPalo, Bernard B. Geltner as IRA custodian, IRA and
Bernard B. Geltner and Gail Geltner and Paul Delman v. The Managers Funds,
the Managers Funds, L.P., Robert P. Watson, Piper Capital Management
Incorporated, Piper Jaffray Inc., Worth Bruntjen,
Evaluation Associates, Inc. and Managers Intermediate Mortgage Fund
(United States District Court, District of Connecticut).
Plaintiffs filed this putative class action lawsuit on September 26, 1994.
Plaintiffs purport to represent a class of persons who purchased shares in the
Managers Intermediate Mortgage fund ("Intermediate") from May 1, 1992, through
June 14, 1994. Intermediate is a no-load, open-end mutual fund that is
generally managed by The Managers Funds, L.P. ("Managers") and is sub-managed
by Piper Capital.
Plaintiffs allege that defendants made false and misleading statements
"regarding the investment policies of Intermediate, the composition of its
portfolio, and the actual value thereof." Plaintiffs allege violation of
Sections 11 and 12(2) of the Securities Act; violation of Section 10(b) of the
Securities Exchange Act, and Rule 10b-5 promulgated thereunder; violation of
Sections 13(a)(3) and 34(b) of the Investment Company Act; negligent
misrepresentation; breach of fiduciary duty; and common law fraud. Plaintiffs
seek rescission or monetary damages, plus prejudgment interest, punitive
damages "where appropriate", and attorneys' fees and costs. The Complaint does
not specify an amount of damages sought.
Although the plaintiffs in this action allege that it has been brought as a
class action, the Court has not yet determined whether a class will be
certified. The defendants have filed a motion to dismiss the complaint in its
entirety. The defendants deny liability, and the Company intends to defend the
litigation vigorously. It is impossible to predict the outcome of this
litigation, and, at the present time, the effect of the litigation on the
consolidated financial statements cannot be determined.
Karen E. Kopelman v. The Managers Fund, The Managers Funds, L.P., Robert
P. Watson, Piper Capital Management, Inc., Piper Jaffray, Inc., Worth
Bruntjen, Evaluation Associates, Inc. and Managers Intermediate Mortgage
Fund.
Plaintiff, an investor in the Managers Intermediate Mortgage Fund
("Intermediate"), filed this putative class action lawsuit on November 4, 1994.
Plaintiff purports to represent a class of persons who purchased shares of
Intermediate during the period from May 1, 1992, through June 13, 1994, a class
subsumed within that identified in the Hosea case.
Plaintiff alleges violations of Section 11 and 12(2) of the Securities Act;
violation of Section 10(b) of the Securities Exchange Act, and Rule 10b-5
promulgated thereunder; violation of Sections 13(a)(3), 34(b) and 36(b) of the
Investment Company Act; negligent misrepresentation; breach of fiduciary duty;
and common law fraud. Plaintiff seeks rescission or monetary damages, plus
prejudgment interest, punitive damages "where appropriate", and attorneys' fees
and costs. The Complaint does not specify an amount of damages sought.
Although the plaintiff in this action alleges that it has been brought as a
class action, the Court has not yet determined whether a class will be
certified. It is expected that this action will be consolidated, at least for
the purposes of discovery, with the Hosea lawsuit described immediately above.
The defendants have filed a motion to dismiss the complaint in its entirety.
The defendants deny liability, and the Company intends to defend the litigation
vigorously. It is impossible to predict the outcome of the outstanding
litigation, and, at the present time, the effect of this litigation on the
consolidated financial statements cannot be determined.
Adjustable Rate Term Trusts 1998 and 1999
Herman D. Gordon, on Behalf of Himself and All Others Similarly Situated
v. American Adjustable Rate Term Trust Inc. 1998; American Adjustable Rate
Trust Inc. 1999; Piper Capital Management Incorporated; Piper Jaffray
Inc.; Piper Jaffray Companies Inc.; Benjamin Rinkey; Jeffrey Griffin;
Charles N. Hayssen and Edward J. Kohler.
Plaintiff, an investor in the American Adjustable Rate Term Trusts Inc. 1998
and 1999 ("Trusts"), filed this putative class action lawsuit on October 20,
1994. Plaintiff purports to represent a class of persons who purchased shares
in the Trusts during the period from January 23, 1992, through June 30, 1994.
Plaintiff alleges violation of Sections 11, 12(2) and 15 of the Securities Act;
violation of Sections 10(b) and 20(a) of the Securities Exchange Act, and Rule
10b-5 promulgated thereunder. Plaintiff seeks rescission or damages, plus
interest, and attorneys' fees and costs. The Complaint does not specify an
amount of damages sought.
Although the plaintiff in this action alleges that it has been brought as a
class action, the Court has not yet determined whether a class will be
certified. Although the defendants have not yet filed a formal answer, the
defendants deny liability. The Company intends to defend the litigation
vigorously. It is impossible to predict the outcome of the outstanding
litigation, and, at the present time, the effect of this litigation on the
consolidated financial statements cannot be determined.
Shareholder Litigation
A. Edward McDaid v. Piper Jaffray Companies Inc., Addison L. Piper
and William H. Ellis (United States District Court, District of
Delaware).
On August 26, 1994, Edward B. McDaid filed this putative class action
lawsuit against Piper Jaffray Companies Inc. ("PJCI"), Addison L. Piper,
and William H. Ellis. McDaid purports to represent a class of persons who
purchased PJCI common stock during the period from May 12, 1993, through
August 24, 1994. McDaid, an owner of 400 shares of PJCI common stock,
alleges that PJCI and the individual defendants made misleading statements
and omissions which artificially inflated the market price of PJCI common
stock throughout the class period.
Plaintiff alleges violations of Sections 10(b) and 20(a) of the Securities
Exchange Act, and Rule 10b-5 promulgated thereunder. Plaintiff seeks
damages, plus prejudgment interest, and attorneys' fees and costs. The
Complaint does not specify an amount of damages sought.
Although the plaintiff in this action alleges that it has been brought as
a class action, the Court has not yet determined whether a class will be
certified. The defendants' motion to dismiss on behalf of all defendants
was denied on December 9, 1994. The defendants deny liability, and intend
to defend this litigation vigorously. It is impossible to predict the
outcome of the outstanding litigation, and, at the present time, the
effect of this litigation on the consolidated financial statements cannot
be determined.
B. Ronald Goldstein, on behalf of himself and all others similarly
situated v. Piper Jaffray Companies Inc., Addison L. Piper, William
H. Ellis, and Charles N. Hayssen.
Plaintiff, a shareholder of Piper Jaffray Companies Inc., filed this
putative class action lawsuit against Piper Jaffray Companies Inc.,
Addison L. Piper, William H. Ellis, and Charles N. Hayssen on October 25,
1994. Mr. Goldstein purports to represent a class of persons who
purchased PJCI common stock during the period from November 2, 1993,
through August 24, 1994.
Plaintiff in this action makes similar, although not identical,
allegations to those made by the plaintiff in the McDaid lawsuit described
immediately above. Plaintiff seeks damages, plus prejudgment interest,
and attorneys' fees and costs. The Complaint does not specify an amount
of damages sought.
Although the plaintiff in this action alleges that it has been brought as
a class action, the Court has not yet determined whether a class will be
certified. It is expected that this case and McDaid will be consolidated.
Although the defendants have not yet filed a formal answer, the defendants
deny liability. The Company intends to defend the litigation vigorously.
It is impossible to predict the outcome of the outstanding litigation,
and, at the present time, the effect of this litigation on the
consolidated financial statements cannot be determined.
Managers Short Government Income Fund
Robert Fleck, on behalf of himself and all others similarly situated
v. The Managers Funds, The Managers Funds, L.P., Piper Jaffray, Inc.,
Piper Capital Management Incorporated, Worth Bruntjen, Evaluation
Associates, Inc., Robert P. Watson, John E. Rosati, William M. Graulty,
Madeline H. McWhinney, Steven J. Paggioli, Thomas R. Schneeweis and
Managers Short Government Fund, F/K/A Managers Short Government Income
Fund.
Plaintiff, a shareholder of the Managers Short Government Income Fund
("Managers Short"), filed this putative class action lawsuit on November 18,
1994. Plaintiff purports to represent a class of persons who purchased shares
of Managers Short during the period from May 1, 1993, through September 12,
1994.
Plaintiff alleges violation of Sections 11 and 12(2) of the Securities Act;
violation of Section 10(b) of the Securities Exchange Act, and Rule 10b-5
promulgated thereunder; violation of Sections 13(a)(3) and 34(b) of the
Investment Company Act; and negligent misrepresentation. Plaintiff seeks
rescission and monetary damages, plus prejudgment interest, punitive
damages if appropriate, and attorneys' fees and costs. The Complaint does not
specify an amount of damages sought.
Although the plaintiffs in this action allege that it has been brought as a
class action, the Court has not yet determined whether a class will be
certified. The defendants have filed a motion to dismiss the complaint in its
entirety. The defendants deny liability, and the Company intends to defend the
litigation vigorously. It is impossible to predict the outcome of this
litigation, and, at the present time, the effect of the litigation on the
consolidated financial statements cannot be determined.
Minnesota Orchestral Association
Minnesota Orchestral Association v. Piper Capital Management Incorporated,
Piper Jaffray Inc. and Piper Jaffray Companies Inc. (National Association
of Securities Dealers Arbitration).
The claimant, a nonprofit organization, alleges that (i) Piper Capital breached
a September 14, 1993 investment management agreement with claimant by virtue of
investments in derivative securities; (ii) Piper Capital breached its fiduciary
duties to claimant by virtue of investment in "unsuitable derivative
securities, without [claimant's] knowledge or consent and contrary to
[claimant's] directions and expectations, and by failing to disclose such
investment strategy until after the portfolio had sustained huge losses . . .;
(iii) Piper Capital misrepresented material facts to claimant and failed to
disclose to claimant that, in order to achieve higher returns than other
investment advisors on claimant's bond portfolio, Piper Capital had to invest
heavily in derivative securities; (iv) Piper Capital violated the Minnesota
Securities Act and (v) Piper Jaffray and Piper Jaffray Companies are liable
under the Minnesota securities laws as controlling persons of Piper Capital;
(vi) Piper Capital violated the Minnesota Consumer Fraud Act; and (vii) Piper
Capital violated The Investment Advisers Act. Claimant alleges that it has
incurred damages in the principal amount of at least $5,513,077, and requests
"an award of substantial damages . . . along with an award of reasonable
attorneys' fees, forum fees, costs and disbursement . . ."
The claimant has furnished the defendant with a courtesy copy of its Statement
of Claim, however, this arbitration has not yet been formally commenced.
Although the defendants have not yet filed an answer, the defendants deny
liability. The company intends to defend the arbitration vigorously. Although
it is impossible to predict the outcome of the outstanding litigation, in the
opinion of management of the Company, after consultation with counsel, the
resolution of the claims related to this arbitration will have no material
adverse effect on the consolidated financial statements.
Bonneville Pacific Corporation
Piper Jaffray has been named as one of many defendants in two lawsuits
separately filed in the United States District Court for the District of Utah
resulting from Piper Jaffray's dealings with Bonneville Pacific Corporation
("BPCO"). Other defendants include BPCO's attorneys, accountants, lenders and
other investment bankers. BPCO is currently in Chapter 11 reorganization
proceedings in Utah.
The plaintiffs in the first-filed lawsuit originally brought their
complaint as a purported class action relating to the $63.25 million offering
of convertible subordinated debentures of BPCO in August 1989, for which Piper
Jaffray was a co-managing underwriter in a syndicate led by Kidder, Peabody &
Co. and secondary trading in BPCO's Common Stock from August 1989 through the
inception of BPCO's bankruptcy proceeding in January 1992. The plaintiffs in
their complaint alleged violations of federal and state securities laws, common
law fraud and negligent misrepresentation. On March 14, 1994, the plaintiffs
filed a motion to amend their complaint seeking leave to add additional parties
and claims. The proposed amended complaint seeks to add claims under the
Racketeer Influenced and Corrupt Organizations Act ("RICO") and to expand the
class period, under a common law fraud theory, to include the $22.5 million
initial public offering of BPCO's Common Stock in August 1986, for which Piper
Jaffray acted as the sole underwriter, and the $31 million secondary offering
of BPCO's Common Stock in August 1987, for which Piper Jaffray acted as co-
managing underwriter. In addition to actual damages, the proposed amended
complaint also seeks treble damages under RICO, punitive damages, interest,
costs and attorneys' fees. On April 29, 1994, motions to dismiss brought by
Piper Jaffray and the other underwriter defendants with respect to the
plaintiffs' claims of violations of Section 10(b) of the Securities Exchange
Act and Rule 10b-5 promulgated thereunder, conspiracy, aiding and abetting,
common-law fraud and negligent misrepresentation were granted. The judge in
the case certified to the Utah Supreme Court issues related to the plaintiffs'
claims under the Utah Uniform Securities Act and further denied plaintiffs'
March 14, 1994 motion for leave to file an amended complaint as premature. The
plaintiffs were given leave to amend all dismissed claims except the conspiracy
and aiding and abetting claims under Section 10(b), which were dismissed with
prejudice. By date of June 14, 1994, plaintiffs served a second amended
complaint, realleging claims under Sections 11 and 15 of the Securities Act and
Section 10 of the Securities Exchange Act and Rule 10b-5 promulgated
thereunder. Plaintiffs also asserted RICO claims and claims under the Utah
Uniform Securities Act, among others. On August 2, 1994, Piper Jaffray and the
other defendants moved to dismiss the RICO, Securities Exchange Act and Utah
Uniform Securities Act claims and that motion is pending.
The second lawsuit was brought by the BPCO bankruptcy trustee. The most recent
amendment to the complaint filed on September 7, 1994 asserts conspiracy, RICO,
common law fraud, breach of fiduciary duty and similar theories arising out of
the activities of BPCO from approximately 1984 through the inception of its
bankruptcy proceeding. The plaintiff seeks actual damages, treble damages
under RICO, punitive damages, interest, costs and attorneys' fees. On October
7, 1994, the plaintiff served its preliminary damage calculations indicating
that it sought $647,346,549 in damages (before trebling under RICO) from the
Company. The plaintiff seeks a similar amount from the other defendant
underwriters and BPCO's accountants, attorneys, lenders and others. Piper
Jaffray and other defendants have made motions to dismiss the complaint or for
a judgment on the pleadings which are currently pending and the case is in the
discovery stage.
Management of the company intends to defend both actions vigorously and
believes that it has meritorious defenses to the claims being asserted.
Although it is impossible to predict the outcome of the outstanding litigation,
in the opinion of management of the Company, after consultation with counsel,
the resolution of the lawsuits and claims related to BPCO, as well as other
various lawsuits and claims not detailed herein, will have no material adverse
effect on the consolidated financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the fourth
quarter of the fiscal year ended September 30, 1994.
PART II
All information required in Part II, Items 5 - 8 is contained in the 1994
Annual Report to Shareholders, incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
All information required in Part III, Items 10-13 will be contained in the
Registrant's definitive Proxy Statement for the 1994 Annual Meeting of
Shareholders, incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K
(a)
1. Consolidated financial statements:
Independent Auditors' Report
Consolidated Statements of Financial Condition
Consolidated Statements of Income
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Incorporated herein by reference is the 1994 Annual Report to Shareholders,
a copy of which is filed herewith as Exhibit 13.
2. Financial statement schedules:
Schedule III - Condensed Financial Information of Registrant (filed herewith
on pages 18-20)
Schedules not listed above have been omitted because they are either not
applicable or the required information has been given in the
Consolidated Financial Statements or notes thereto.
(b)
Reports on Form 8-K
The Registrant was not required to file any reports on Form 8-K to the
Securities and Exchange Commission during the quarter ended September
30, 1994.
(c)
Exhibits:
3.1 Restated Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 of the Registrant's Form 10-K for the fiscal year
ended September 27, 1991, as amended by Form 8 dated January 30, 1992,
Commission File No. 1-7421).
3.2 Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 of the
Registrant's Form 10-K for the fiscal year ended September 27, 1991, as
amended by Form 8 dated January 30, 1992, Commission File No. 1-7421).
3.3 Certificate of Ownership & Merger dated April 8, 1992, amending the
Restated Certificate of Incorporation of the Registrant to change the
Registrant's name to Piper Jaffray Companies Inc. (incorporated by
reference to Exhibit 3.3 to the Registrant's Form 10-Q for the quarter
ended March 27, 1992, Commission File No. 1-7421).
4.1 Indenture dated July 19, 1988 between Premier Acceptance Corporation,
a wholly owned subsidiary of the Registrant, as issuer, and First
Trust National Association, as trustee, relating to the subsidiary's
issuance of mortgage-backed bonds (incorporated by reference to
Exhibit A to Premier Acceptance Corporation's Form 8-K dated July 22,
1988, Commission File No.'s 33-21775, 33-25070, 33-33261).*
4.2 Indenture dated as of November 23, 1988 between Premier Acceptance
Corporation, as issuer, and First Bank National Association , as trustee
(incorporated by reference to Exhibit 4.1 to Premier Acceptance
Corporation's Form 8-K dated November 23, 1988, Commission File No.'s 33-
21775, 33-25070, 33-33261).*
10.1 Amended and Restated Limited Liability Company Agreement among the
Registrant, Midland Walwyn Capital Corporation and Hercules International
Management L.L.C. dated October 18, 1993. (incorporated by reference to
Exhibit 10.1 of the Registrant's Form 10-K for the fiscal year ended
September 30, 1993, Commission File No. 1-7421).
10.2 Lease Agreement between the Registrant and OB Joint Venture II dated
as of March 31, 1983, including amendments thereto through September 27,
1991, (portions of the lease have been omitted pursuant to Rule 24b-2
promulgated under the Securities Exchange Act of 1934) (incorporated by
reference to Exhibit 10.2 of the Registrant's Form 10-K for the fiscal
year ended September 27, 1991, as amended by Form 8 dated January 30,
1992, Commission File No. 1-7421).
10.3 1983 Book Value Stock Purchase Plan of the Registrant (incorporated by
reference to Exhibit 10.3 of the Registrant's S-8 Registration Statement
dated January 30, 1987, Commission File No. 33-11657).
10.4 Deferred Compensation Plan of the Registrant (incorporated by
reference to Exhibit 10.4 of the Registrant's Form 10-K for the fiscal
year ended September 27, 1991, as amended by Form 8 dated January 30,
1992, Commission File No. 1-7421).
10.6 Piper Capital Management Incorporated 1988 Phantom Share Incentive Bonus
Plan (incorporated by reference to Exhibit 10.6 of the Registrant's Form
10-K for the fiscal year ended September 27, 1991, as amended by Form 8
dated February 25, 1992, Commission File No. 1-7421).
10.7 Piper Jaffray Inc. Participating Bonus Agreement for Premier Acceptance
Corporation Transactions (incorporated by reference to Exhibit 10.7 of the
Registrant's Form 10-K for the fiscal year ended September 27, 1991, as
amended by Form 8 dated February 25, 1992, Commission File No. 1-7421).
10.8 1993 Omnibus Stock Plan of the Registrant (incorporated by reference to
Appendix A to the Registrant's definitive Proxy Statement for the Annual
Meeting of Shareholders held on January 28, 1993, Commission File No. 1-
7421).
10.9 Piper Jaffray Companies Stock Investment Plan (incorporated by reference
to Exhibit 4.03 of the Registrant's Form S-8 dated June 4, 1994,
Commission File No. 033-53979).
10.10 Piper Jaffray Companies Inc. 1995 Executive Performance Bonus Plan
(incorporated by reference to Appendix A to the Registrant's
definitive Proxy Statement for the Annual Meeting of Shareholders held on
January 25, 1995, Commission File No. 1-7421)
11 Statement Re: Computation of Per Share Earnings
13 1994 Annual Report to Shareholders
22 Subsidiaries of the Registrant
23 Independent Auditors' Consent
27 Financial Data Schedule
* Premier Acceptance Corporation has filed Registration
Statements under the Securities Act pursuant to which
$900,000,000 in aggregate principal amount of mortgage-
backed bonds were registered under the Securities Act. The
bonds are issued in series pursuant to series supplements
and supplemental indentures referenced in Item 14(a)(3) of
Premier Acceptance Corporation's Form 10-K for the fiscal
year ended September 25, 1992. Norwest Bank Minnesota,
National Association was appointed successor Trustee under
the Indentures in 1991.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Piper Jaffray Companies Inc.
(Registrant)
Dated: December 21, 1994
By:
/s/ Addison L. Piper
Addison L. Piper
Chairman and Chief Executive Officer, and Director
/s/ William H. Ellis
William H. Ellis
President and Chief Operating Officer, and Director
/s/ Charles N. Hayssen
Charles N. Hayssen
Managing Director and Chief Financial Officer
/s/ Deborah K. Roesler
Deborah K. Roesler
Managing Director and Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated:
Signature Title Signature Title
/s/ Karen M. Bohn Director /s/ Gary M. Petrucci Director
Karen M. Bohn Gary M. Petrucci
/s/ David P. Crosby Director /s/ DeLos V. Steenson Director
David P. Crosby DeLos V. Steenson
/s/ Dan L. Lastavich Director /s/ Richard J. Stream Director
Dan L. Lastavich Richard J. Stream
/s/ Kathy Halbreich Director
Kathy Halbreich
Dated: December 21, 1994
INDEPENDENT AUDITORS' REPORT
Board of Directors
Piper Jaffray Companies Inc.
Minneapolis, Minnesota
We have audited the consolidated financial statements of Piper Jaffray
Companies Inc. and subsidiaries as of September 30, 1994 and 1993, and for each
of the three years in the period ended September 30, 1994, and have issued our
report thereon dated November 8, 1994 (which includes an explanatory paragraph
regarding an uncertainty relating to litigation described in Note 7); such
consolidated financial statements and report are included in your 1994 Annual
Report to Shareholders and are incorporated herein by reference. Our audits
also included the financial statement schedules of Piper Jaffray Companies Inc.
and subsidiaries, listed in Item 14(a)2. These financial statement schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
November 8, 1994
Schedule III
PIPER JAFFRAY COMPANIES INC.
Parent Company Only
(Dollars in thousands)
Condensed Statements of Income
Year Ended Year Ended Year Ended
September 30 September 30 September 25
1994 1993 1992
Revenues
Interest income $ 460 $ 350 $ 317
Land and facilities rental 698 515 371
--------- --------- ---------
1,158 865 688
Expenses
Interest expense 296 - -
Loss on investments 3,841 404 -
Employee compensation - - 192
Amortization of leasehold
improvements 548 284 164
Other operating expenses 38 3 7
--------- --------- ---------
4,723 691 363
(Loss) income before income taxes
and equity in earnings of
subsidiaries (3,565) 174 325
Income tax (benefit) expense (1,319) 70 126
--------- --------- ---------
(Loss) income before equity
in earnings of subsidiaries (2,246) 104 199
Equity in net earnings of
subsidiaries 27,528 40,883 37,328
--------- --------- ---------
Net income $25,282 $40,987 $37,527
========= ========= =========
Schedule III
PIPER JAFFRAY COMPANIES INC.
Parent Company Only
(Dollars in thousands)
Condensed Statements of Financial Condition
September 30 September 30
1994 1993
ASSETS
Cash $ 2 $ 2
Investment in subsidiaries 172,058 155,762
Leasehold improvements 1,960 2,508
Prepaid employee benefits 5,791 4,584
Firm investments, at estimated market value 13,098 4,247
Advances to subsidiaries - 3,630
Deferred income tax asset 704 -
Other assets 4 -
---------- ----------
$193,617 $170,733
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings $ 10,000 $ -
Employee benefits payable 5,791 8,448
Advances from subsidiaries 6,895 -
Federal and state income taxes 1,281 3,462
Deferred income taxes - 911
Other liabilities 1,847 -
---------- ----------
25,814 12,821
Shareholders' equity
Common stock 17,462 17,531
Additional paid-in capital 7,163 6,829
Retained earnings 146,601 133,552
Less treasury stock, at cost (3,423) -
---------- ----------
167,803 157,912
---------- ----------
$193,617 $170,733
========== ==========
Schedule III
PIPER JAFFRAY COMPANIES INC.
Parent Company Only
(Dollars in thousands)
Condensed Statements of Cash Flows
Year Ended Year Ended Year Ended
September 30 September 30 September 25
1994 1993 1992
Net cash flows from
operating activities * $ 6,667 $ 6,725 $ 5,962
Investing activities:
Other changes in investment
in subsidiaries (1,276) (1,327) (609)
Net additions to
leasehold improvements - (1,349) (440)
---------- ---------- ----------
Net cash used by investing
activities (1,276) (2,676) (1,049)
Financing activities:
Short-term borrowings 10,000 - -
Net common stock issued 1,658 4,613 2,954
Dividends paid (12,233) (8,662) (5,945)
Acquisition of treasury stock (4,816) - (1,922)
---------- ---------- ----------
Net cash used by financing activities (5,391) (4,049) (4,913)
---------- ---------- ----------
Increase (decrease) in cash - - -
Cash at beginning of year 2 2 2
---------- ---------- ----------
Cash at end of year $ 2 $ 2 $ 2
========== ========== ==========
* Net cash flows from operating activities includes dividends received from
subsidiaries of $12,233, $8,662, and $5,945 for fiscal years 1994, 1993, and
1992, respectively.
INDEX TO EXHIBITS
Exhibit Description of Exhibit Page
3.1 Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 of the Registrant's
Form 10-K for the fiscal year ended September 27, 1991, as
amended by Form 8 dated January 30, 1992, Commission File No.
1-7421). *
3.2 Bylaws of the Registrant (incorporated by reference to
Exhibit 3.2 of the Registrant's Form 10-K for the fiscal year
ended September 27, 1991, as amended by Form 8 dated January
30, 1992, Commission File No. 1-7421). *
3.3 Certificate of Ownership & Merger dated April 8, 1992,
amending the Restated Certificate of Incorporation of the
Registrant to change the Registrant's name to Piper Jaffray
Companies Inc. (incorporated by reference to Exhibit 3.3 to
the Registrant's Form 10-Q for the quarter ended March 27,
1992, Commission File No. 1-7421). *
4.1 Indenture dated July 19, 1988 between Premier Acceptance
Corporation, a wholly owned subsidiary of the Registrant, as
issuer, and First Trust National Association, as trustee,
relating to the subsidiary's issuance of mortgage-backed
bonds (incorporated by reference to Exhibit A to Premier
Acceptance Corporation's Form 8-K dated July 22, 1988,
Commission File No.'s 33-21775, 33-25070, 33-33261). ** *
4.2 Indenture dated as of November 23, 1988 between Premier
Acceptance Corporation, as issuer, and First Bank National
Association, as trustee (incorporated by reference to
Exhibit 4.1 to Premier Acceptance Corporation's Form 8-K
dated November 23, 1988, Commission File No.'s 33-21775, 33-
25070, 33-33261). ** *
10.1 Amended and Restated Limited Liability Company Agreement among
the Registrant, Midland Walwyn Capital Corporation and
Hercules International Management L.L.C. dated October 18,
1993 (incorporated by reference to Exhibit 10.1 of the
Registrant's Form 10-K for the fiscal year ended September
30, 1993, Commission File No. 1-7421). *
10.2 Lease Agreement between the Registrant and OB Joint Venture
II dated as of March 31, 1983, including amendments thereto
through September 27, 1991, (portions of the lease have been
omitted pursuant to Rule 24b-2 promulgated under the
Securities Exchange Act of 1934) (incorporated by reference
to Exhibit 10.2 of the Registrant's Form 10-K for the fiscal
year ended September 27, 1991, as amended by Form 8 dated
January 30, 1992, Commission File No. 1-7421). *
10.3 1983 Book Value Stock Purchase Plan of the Registrant
(incorporated by reference to Exhibit 10.3 of the Registrant's
S-8 Registration Statement dated January 30, 1987,
Commission File No. 33-11657). *
Exhibit Description of Exhibit Page
10.4 Deferred Compensation Plan of the Registrant (incorporated
by reference to Exhibit 10.4 of the Registrant's Form 10-K for
the fiscal year ended September 27, 1991, as amended by Form 8
dated January 30, 1992, Commission File No. 1-7421). *
10.6 Piper Capital Management Incorporated 1988 Phantom Share
Incentive Bonus Plan (incorporated by reference to Exhibit
10.6 of the Registrant's Form 10-K for the fiscal year ended
September 27, 1991, as amended by Form 8 dated February 25,
1992, Commission File No. 1-7421). *
10.7 Piper Jaffray Inc. Participating Bonus Agreement for Premier
Acceptance Corporation Transactions (incorporated by
reference to Exhibit 10.7 of the Registrant's Form 10-K for
the fiscal year ended September 27, 1991, as amended by Form
8 dated February 25, 1992, Commission File No. 1-7421). *
10.8 1993 Omnibus Stock Plan of the Registrant (incorporated by
reference to Appendix A to the Registrant's definitive Proxy
Statement for the Annual Meeting of Shareholders held on
January 28, 1993, Commission File No. 1-7421). *
10.9 Piper Jaffray Companies Stock Investment Plan (incorporated
by reference to Exhibit 4.03 of the Registrant's Form S-8
dated June 4, 1994, Commission File No. 033-53979). *
10.10 Piper Jaffray Companies Inc. 1995 Executive Performance Bonus
Plan (incorporated by reference to Appendix A to the
Registrant's definitive Proxy Statement for the Annual
Meeting of Shareholders held on January 25, 1995, Commission
File No. 1-7421) *
11 Statement Re: Computation of Per Share Earnings
13 1994 Annual Report to Shareholders
22 Subsidiaries of the Registrant
23 Independent Auditors' Consent
27 Financial Data Schedule
* Incorporated by reference
** Premier Acceptance Corporation has filed Registration Statements under the
Securities Act pursuant to which $900,000,000 in aggregate principal amount
of mortgage-backed bonds were registered under the Securities Act. The
bonds are issued in series pursuant to series supplements and supplemental
indentures referenced in Item 14(a)(3) of Premier Acceptance Corporation's
Form 10-K for the fiscal year ended September 25, 1992. Norwest Bank
Minnesota, National Association was appointed successor Trustee under the
Indentures in 1991.
Exhibit 11
PIPER JAFFRAY COMPANIES INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(Unaudited, amounts in thousands except per share data)
September 30 September 30 September 25
1994 1993 1992
PRIMARY NET INCOME PER SHARE:
Net Income $ 25,282 $ 40,987 $ 37,527
=========== =========== ============
Average number of common and common
equivalent shares outstanding:
Average common shares outstanding 17,455 17,313 17,005
Dilutive effect of CSE's:
Book Value Plan Options 312 375 *
Executive Incentive Stock Options 178 259 *
----------- ----------- ------------
17,945 17,947 17,005
=========== =========== ============
Primary earnings per share $ 1.41 $ 2.28 $ 2.21
=========== =========== ============
NET INCOME PER SHARE ASSUMING
FULL DILUTION:
Net Income $ 25,282 $ 40,987 $ 37,527
=========== =========== ============
Average number of common and common
equivalent shares outstanding:
Average common shares outstanding 17,455 17,313 17,005
Dilutive effect of CSE's:
Book Value Plan Options 312 375 *
Executive Incentive Stock Options 178 259 *
----------- ----------- ------------
17,945 17,947 17,005
=========== =========== ============
Fully diluted net income per share $ 1.41 $ 2.28 $ 2.21
=========== =========== ============
* Less than 3% dilution
Exhibit 13
Financial Summary
(Dollars in thousands, except per share amounts)
Fiscal years ending
September 1994 1993 1992 1991 1990
Revenue
Commissions $147,539 $128,940 $103,292 $ 82,290 $ 72,958
Profits on principal
transactions 101,381 95,656 85,950 72,361 55,751
Investment banking 61,146 112,829 101,521 61,367 36,152
Interest 24,792 19,110 17,994 17,941 17,978
Asset management fees 51,917 40,811 28,649 18,420 12,511
Other income 10,736 13,379 22,613 12,095 8,418
--------------------------------------------------
Total revenue 397,511 410,725 360,019 264,474 203,768
--------------------------------------------------
Expenses
Employee compensation 245,567 254,198 220,171 161,162 123,019
Other operating
expenses 104,572 83,441 74,475 66,983 57,895
Interest expense 7,242 4,774 3,956 5,558 6,154
--------------------------------------------------
Total expenses 357,381 342,413 298,602 233,703 187,068
--------------------------------------------------
Income Before
Income Taxes 40,130 68,312 61,417 30,771 16,700
Income Taxes 14,848 27,325 23,890 11,460 6,400
--------------------------------------------------
Net Income $ 25,282 $ 40,987 $ 37,527 $ 19,311 $ 10,300
==================================================
Per Share Data
Net income $1.41 $2.28 $2.21 $1.16 $ .63
Dividends .70 .50 .35 .28 .25
Shareholders' equity 9.76 9.01 7.05 5.21 4.31
Other Data (At year end)
Total assets $584,447 $535,146 $480,554 $614,859 $592,012
Shareholders' equity $167,803 $157,912 $120,447 $ 87,474 $ 71,268
Common shares
outstanding
(In thousands) 17,188 17,531 17,089 16,783 16,530
Total full-time
employees 2,658 2,427 2,165 1,928 1,933
Total retail branch
offices 74 72 67 63 63
Piper Capital assets
under management
(In billions) $11.6 $12.0 $ 8.9 $ 5.4 $ 3.6
The Company and/or its subsidiaries are defendants in lawsuits. See Note 7
to the consolidated financial statements. The dividend amount shown for 1990
excludes a special $1 per share dividend paid in January 1991.
Management's Financial Discussion
Business Environment
Piper Jaffray Companies Inc. is principally engaged in general securities
brokerage, corporate and public finance services and investment management.
These businesses are highly competitive and sensitive to many factors,
including the volatility and price level of securities markets, the volume,
size and timing of securities transactions, the demand for investment banking
services and the level and volatility of interest rates. In addition, a
significant portion of the Company's expenses, including salaries and
benefits, occupancy and communications, are relatively fixed and do not vary
with market activity. Consequently, the Company's revenue and net income have
been and may continue to be subject to wide fluctuations.
The accompanying table summarizes the changes in the major categories of
revenue and expenses for the past two years.
Increase (Decrease) Increase (Decrease)
1994 vs. 1993 1993 vs. 1992
(In thousands) Amount % Amount %
Revenue
Commissions $ 18,599 14 $ 25,648 25
Profits on
principal transactions 5,725 6 9,706 11
Investment banking (51,683) (46) 11,308 11
Interest 5,682 30 1,116 6
Asset management fees 11,106 27 12,162 42
Other income (2,643) (20) (9,234) (41)
---------- ---- ---------- ----
Total revenue (13,214) (3) 50,706 14
---------- ---- ---------- ----
Expenses
Employee compensation (8,631) (3) 34,027 15
Floor brokerage
and clearance 869 13 343 6
Interest 2,468 52 818 21
Occupancy and equipment 2,463 10 3,532 16
Communications 3,134 28 1,737 18
Travel and promotional 2,264 17 945 8
Other operating expenses 12,401 46 2,409 10
---------- ---- ---------- ----
Total expenses 14,968 4 43,811 15
---------- ---- ---------- ----
Income Before Income Taxes (28,182) (41) 6,895 11
Income Taxes (12,477) (46) 3,435 14
---------- ---- ---------- ----
Net Income $(15,705) (38) $ 3,460 9
========== ==== ========== ====
Operations
Fiscal 1994 vs. Fiscal 1993
After five consecutive years of record revenue, the Company's revenue in fiscal
1994 declined. Favorable conditions in the securities industry characterized
the first half of the fiscal year. In the second quarter of fiscal 1994,
interest rates began to rise, lowering stock and bond prices and dampening
commissions, underwriting volume and trading profits. Revenue in fiscal 1994 of
$397.5 million was down 3 percent ($13.2 million), while expenses grew 4
percent ($15.0 million), resulting in a 38 percent ($15.7 million) decline in
net income, from $41.0 million in fiscal 1993 to $25.3 million in fiscal 1994.
Earnings per share also declined 38 percent, from $2.28 to $1.41. The weighted
average number of common shares and common share equivalents outstanding was
largely unchanged at 17,945,000 shares.
Commission revenue, or the income realized in securities transactions in which
the Company acts as agent, increased 14 percent ($18.6 million) in fiscal 1994.
The growth was the result of generally favorable equity market performance and
volume during much of the fiscal year and continuing growth of the sale of
mutual funds and annuity products, which were up 22 percent ($10.7 million).
Profits on principal transactions, or the income realized in securities
transactions in which the Company acts as principal in the secondary market
trading of the securities, increased 6 percent ($5.7 million). Despite interest
rate increases during the Company's third and fourth quarter and resulting
modest losses on fixed income inventory positions, fixed income trading revenue
grew 10 percent ($4.3 million) in fiscal 1994. Investment banking revenue
declined in fiscal 1994 by 46 percent ($51.7 million) due to the absence of
closed-end bond fund underwritings, which were a significant source of revenue
in prior years, and a slowdown in municipal underwritings.
Interest income increased 30 percent ($5.7 million), consistent with both the
growth in customer margin loans receivable and an increase in interest rates
during the year. Asset management fees grew 27 percent ($11.1 million) in
fiscal 1994, reflecting the continuing strong growth of the Company's
investment management and trust businesses. Finally, other income declined
20 percent ($2.6 million) due principally to the start-up losses recognized on
the Company's joint venture in Hercules International Management L.L.C. The
Company is responsible for one-half of the joint venture's expense and
anticipates recognizing a net loss in connection with the venture during fiscal
1995.
The Company's expenses grew 4 percent ($15.0 million) in the past year, with a
slight decrease in compensation being offset by increases in all other
expenses. Compensation declined 3 percent ($8.6 million) due to decreases in
revenue-based broker compensation and profit-based incentive compensation.
Floor brokerage and clearance expenses grew 13 percent ($0.9 million), in line
with the growth in commission revenue on which they are generally based.
Interest expense increased 52 percent ($2.5 million) in fiscal 1994 as bank
borrowings grew to finance greater margin loans to customers and interest rates
increased. Reflecting a continuing upgrade and modest growth in the Company's
branch offices and depreciation on significant technology expenditures,
occupancy and equipment expense increased 10 percent ($2.5 million) this past
year. Communication expense also grew, up 28 percent ($3.1 million), largely
the result of increased market data services and related terminals.
Travel and promotional expenses were up 17 percent ($2.3 million) due to larger
and more frequent investor conferences and additional image advertising.
Finally, other operating expenses grew 46 percent ($12.4 million) in fiscal
1994 because of a $5 million cash infusion into the American Adjustable Rate
Term Trust Inc. - 1995, a closed-end mutual fund managed by Piper Capital
Management Incorporated. Other expenses also increased as a result of
additions to estimated accruals for various exposures arising from
uncollectible customer receivables, trading errors and litigation, which are
ongoing factors in the securities industry. In addition, other expenses
contain higher professional fees, including litigation expenses.
Fiscal 1993 vs. Fiscal 1992
Revenue in fiscal 1993 increased 14 percent ($50.7 million) to a record $410.7
million and was generally reflective of continuing favorable industry trends.
Net income and net income per share in fiscal 1993 were also at record levels.
Net income of $41.0 million was 9 percent ($3.5 million) higher than the
previous year, while net income per share of $2.28 represented a 3 percent
increase.
In fiscal 1993, commission revenue increased 25 percent ($25.6 million), with
most of the growth attributable to increased listed equity commissions and
mutual fund sales. Profits on principal transactions increased 11 percent ($9.7
million) due to growth in sales of over-the-counter equity securities.
Investment banking revenue was also up 11 percent ($11.3 million) because of
increased corporate equity and debt underwriting.
Despite significant growth in the Company's receivables from customers, or
interest-bearing margin loans, interest revenue grew only 6 percent ($1.1
million), reflecting a lower average interest rate charged on those loans.
Asset management fees grew 42 percent ($12.2 million) in fiscal 1993 due to
growth in assets under management at Piper Capital Management. Finally, other
income decreased 41 percent ($9.2 million) because the net gain on the call of
mortgage-backed bonds by Premier Acceptance Corporation in fiscal 1992 was not
repeated to the same extent in fiscal 1993.
The Company's expenses grew 15 percent ($43.8 million) in fiscal 1993. Employee
compensation increased 15 percent ($34.0 million) because of higher investment
executive compensation on increased commission-based revenue, salaries
associated with staff additions and higher profitability-based compensation
such as incentive bonuses and retirement plan contributions. Interest expense
increased 21 percent ($0.8 million), as bank borrowings grew on average during
the year to finance increased margin loans to customers. Occupancy and
equipment expenses grew 16 percent ($3.5 million) reflecting branch office
growth, overall rent increases and increased depreciation on information
technology equipment. Similarly, communications expenses grew 18 percent ($1.7
million) reflecting both the growth in investment executives in fiscal 1993 and
the necessary related additional market data services and terminals. Finally,
other operating expenses grew 10 percent ($2.4 million) in fiscal 1993 because
of higher postage, insurance costs and licensing costs and additions to
estimated accruals for various exposures arising from uncollectible customer
receivables, trading errors and ongoing litigation.
Liquidity and Capital Resources
The Company has a liquid balance sheet. Most of the Company's assets consist of
cash and assets readily convertible into cash. Securities inventories are
stated at market value and are generally readily marketable. Customers' margin
loans are collateralized by securities and have floating interest rates. Other
receivables and payables with customers and other brokers and dealers usually
settle within a few days. The Company's assets are financed by its equity
capital, bank lines of credit and proceeds from securities lending, in
addition to non-interest bearing liabilities such as checks and drafts payable,
payables to customers and employee compensation payable. The fluctuations in
cash flows from financing activities are directly related to operating
activities due to the liquid nature of the Company's balance sheet.
The Company's securities broker/dealer, Piper Jaffray Inc. (Piper Jaffray) is
required by Securities and Exchange Commission regulations to meet certain
liquidity and capital standards. At Sept. 30, 1994, Piper Jaffray had
net capital, as defined in the regulations, of approximately $80.2 million,
which exceeded the minimum net capital requirements by approximately $72.5
million. Piper Jaffray's regulatory capital consists entirely of shareholder's
equity.
The Company's margin loans to customers grew 19 percent in fiscal 1994 to
$339.4 million, following a 32 percent increase in fiscal 1993. The Company
regularly reviews the credit quality of these margin loans.
The Company's securities inventories consist principally of corporate and
municipal debt obligations. Inventories are maintained generally to provide
product and liquidity for the Company's customers rather than for firm
investment or market speculation purposes and are kept at relatively low levels
with relatively high turnover. At Sept. 30, 1994, approximately $3.7 million of
such inventories were aged over 30 days. The Company's trading inventories do
not contain a significant amount of securities which derive their value from
other investment products (derivatives). The Company's investment management
subsidiary, Piper Capital Management, manages mutual funds and other investment
portfolios which do contain such derivatives.
In the ordinary course of business, the Company may hold high-yield debt
obligations which are either unrated or rated below investment grade. At Sept.
30, 1994, Piper Jaffray held approximately $2.1 million of such securities in
inventory. Consistent with Piper Jaffray's inventory pricing policy, these
securities are recorded on a market value basis with unrealized gains and
losses being recognized currently in earnings. During fiscal 1994, the Company
invested $10 million in the Institutional Government Income Portfolio, a fixed
income mutual fund managed by Piper Capital Management investing primarily in
government securities, including various derivative securities. For the year
ended Sept. 30, 1994, the impact of this investment was a loss of $0.5 million
on a pre-tax basis.
The Company's growth during recent years has been financed principally by the
earnings and borrowings of Piper Jaffray. The ability of Piper Jaffray to fund
the activities of its parent or affiliates is subject to restrictions under
applicable net capital rules as previously mentioned. The Company had a $10
million unsecured committed credit line, of which $10 million was outstanding
at Sept. 30, 1994. On Oct. 7, 1994, the outstanding loan was paid in full and
the credit line terminated. At Sept. 30, 1994, Piper Jaffray had available, at
rates based on federal funds rates, up to $240 million pursuant to uncommitted
credit lines collateralized by customers' excess margin securities and by
securities inventories. In addition, Piper Jaffray had unsecured credit
arrangements totaling $35 million.
On Nov. 23, 1994, Piper Jaffray entered into committed credit agreements
totaling $185 million which are collateralized by customers' excess margin
securities and which replace $145 million of uncommitted lines. Such agreements
also include up to $45 million in uncommitted lines collateralized by
securities inventories. In addition to the committed facilities, Piper Jaffray
has up to an additional $55 million in uncommitted credit lines collateralized
by customers' excess margin securities. All credit arrangements are at rates
based on federal fund rates. Management believes that existing capital, funds
from operations and current credit lines will be sufficient to finance the
Company's business.
The Company and/or its subsidiaries are defendants in lawsuits relating to (1)
the Institutional Government Income Portfolio, (2) American Adjustable Rate
Term Trust Inc. - 1998 and American Adjustable Rate Term Trust Inc. - 1999, (3)
Managers Intermediate Mortgage Fund, and (4) alleged statements and omissions
made by Piper Jaffray Companies Inc. in public disclosures. The Company intends
to defend these actions vigorously. It is impossible to predict the outcome of
the outstanding lawsuits, and at the present time, the effect of these lawsuits
on the consolidated financial statements and the Company's liquidity and
capital resources cannot be determined. See Note 7 to the consolidated
financial statements.
Inflation
The Company's net assets are primarily monetary, consisting of cash, securities
inventories and receivables less monetary liabilities. These monetary net
assets are generally liquid in nature and turn over rapidly and thus are not
significantly affected by inflation. However, to the extent that inflation
affects the Company's costs, such costs may not be readily recoverable in the
price of its services.
Concern over inflation is one of the factors influencing the Federal Reserve's
interest rate increases in 1994. Further actions by the Federal Reserve could
cause rates to go higher, which could have an unfavorable impact on the
Company's fiscal 1995 results, similar to the last half of fiscal 1994.
Effects of Recent Accounting Standards
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 112, Employers' Accounting for Postemployment
Benefits. The Company plans to adopt this statement in the first quarter of
fiscal 1995, as required. See Notes 1 and 10 to the consolidated financial
statements.
Piper Jaffray Companies Inc.
Consolidated Statements of Income
Year Ended Year Ended Year Ended
Sept. 30 Sept. 30 Sept. 25
(In thousands, except
per share amounts) 1994 1993 1992
Revenue
Commissions $147,539 $128,940 $103,292
Profits on principal
transactions 101,381 95,656 85,950
Investment banking 61,146 112,829 101,521
Interest 24,792 19,110 17,994
Asset management fees 51,917 40,811 28,649
Other income 10,736 13,379 22,613
---------- ---------- ----------
Total revenue 397,511 410,725 360,019
---------- ---------- ----------
Expenses
Employee compensation 245,567 254,198 220,171
Floor brokerage and clearance 7,433 6,564 6,221
Interest 7,242 4,774 3,956
Occupancy and equipment 27,845 25,382 21,850
Communications 14,468 11,334 9,597
Travel and promotional 15,425 13,161 12,216
Other operating expenses 39,401 27,000 24,591
---------- ---------- ----------
Total expenses 357,381 342,413 298,602
---------- ---------- ----------
Income Before Income Taxes 40,130 68,312 61,417
Income Taxes 14,848 27,325 23,890
---------- ---------- ----------
Net Income $ 25,282 $ 40,987 $ 37,527
========== ========== ==========
Net Income Per Common
and Common Equivalent
Share (Primary and
Fully Diluted) $1.41 $2.28 $2.21
Weighted Average Number
of Common and Common
Equivalent Shares Outstanding 17,945 17,947 17,005
See accompanying notes to consolidated financial statements.
<TABLE>
Piper Jaffray Companies Inc.
Consolidated Statements of Shareholders' Equity
<CAPTION>
Additional Total
Common Stock Paid-in Retained Treasury Shareholders'
(In thousands, except Shares Amount Capital Earnings Stock Equity
share and per share
amounts)
<S> <C> <C> <C> <C> <C> <C>
Balances at
Sept. 27, 1991 16,782,852 $16,783 $1,772 $68,919 $ - $ 87,474
Net income 37,527 37,527
Net stock issued:
Book value stock
purchase plan 488,790 483 2,336 58 2,877
Executive incentive
stock option plan 18,200 18 59 77
Cash dividends -
$.35 per share (5,945) (5,945)
Tax benefit of cash
dividend to ESOP 359 359
Treasury stock acquired (201,000) (1,922) (1,922)
------------ --------- -------- ---------- --------- ----------
Balances at
Sept. 25, 1992 17,088,842 17,284 4,167 100,860 (1,864) 120,447
Net income 40,987 40,987
Net stock issued:
Book value stock
purchase plan 361,830 199 2,493 1,567 4,259
Executive incentive
stock option plan 80,200 48 169 (160) 297 354
Cash dividends -
$.50 per share (8,662) (8,662)
Tax benefit of cash
dividend to ESOP 527 527
------------ --------- -------- ---------- --------- ----------
Balances at
Sept. 30, 1993 17,530,872 17,531 6,829 133,552 - 157,912
Net income 25,282 25,282
Net stock issued:
Book value stock
purchase plan (116,839) (159) 19 708 568
Executive incentive
stock option plan 89,520 90 315 405
Stock investment plan 62,708 685 685
Cash dividends -
$.70 per share (12,233) (12,233)
Treasury stock acquired (378,100) (4,816) (4,816)
------------ --------- -------- ---------- --------- ----------
Balances at
Sept. 30, 1994 17,188,161 $17,462 $7,163 $146,601 $(3,423) $167,803
============ ========= ======== ========== ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
Piper Jaffray Companies Inc.
Consolidated Statements of Financial Condition
Sept. 30 Sept. 30
(In thousands, except per share amounts) 1994 1993
Assets
Cash (including $448 required
to be segregated under federal and
other regulations in 1994) $ 12,070 $ 19,884
Receivable from other brokers and dealers 52,821 31,425
Receivable from customers 371,163 335,830
Trading securities owned, at market 49,132 77,766
Investments pursuant to mortgage-backed bonds 1,605 3,119
Office equipment and leasehold improvements,
at cost (less accumulated depreciation of
$44,033 and $36,863, respectively) 25,979 17,842
Deferred income tax asset 4,190 -
Other assets 67,487 49,280
---------- ----------
$584,447 $535,146
========== ==========
Liabilities and Shareholders' Equity
Short-term borrowings $108,132 $ 45,554
Checks and drafts payable 43,935 38,683
Payable to other brokers and dealers 76,976 90,393
Payable to customers 72,478 73,600
Trading securities sold but not yet
purchased, at market 14,689 18,187
Capitalized lease obligation 2,139 3,422
Mortgage-backed bonds payable 1,602 3,135
Employee compensation 59,087 74,856
Federal and state income taxes 1,281 3,462
Other accounts payable and accrued expenses 36,325 25,942
---------- ----------
416,644 377,234
---------- ----------
Shareholders' equity:
Preferred stock, $1 par value; authorized,
300,000 shares; none issued and outstanding - -
Common stock, $1 par value; authorized,
40,000,000 shares; 17,461,521 and
17,530,872 shares issued, respectively 17,462 17,531
Additional paid-in capital 7,163 6,829
Retained earnings 146,601 133,552
Less treasury stock, at cost; 273,360 shares (3,423) -
---------- ----------
167,803 157,912
---------- ----------
$584,447 $535,146
========== ==========
See accompanying notes to consolidated financial statements.
Piper Jaffray Companies Inc.
Consolidated Statements of Cash Flows
Year Ended Year Ended Year Ended
Sept. 30 Sept. 30 Sept. 25
(In thousands, except 1994 1993 1992
per share amounts)
Operating Activities
Net income $ 25,282 $ 40,987 $ 37,527
Adjustments to reconcile
net income to net cash
(used in) provided by
operating activities:
Depreciation and amortization 7,246 6,622 4,275
Deferred income taxes (5,101) (604) 1,917
(Increase) decrease in:
Net receivable from customers (36,455) (38,110) (101,964)
Net trading securities 25,136 40,013 (25,922)
Other (6,913) (1,980) (11,378)
Increase (decrease) in:
Checks and drafts payable 5,252 902 7,450
Net payable to other brokers
and dealers (34,813) (20,110) 64,699
Employee compensation (15,769) 4,075 26,496
Federal and state income
taxes payable (2,181) 363 117
---------- ---------- ----------
Net cash (used in) provided by
operating activities (38,316) 32,158 3,217
---------- ---------- ----------
Financing Activities
Net change in:
Short-term borrowings 62,578 (11,777) 11,378
Mortgage-backed bonds payable (1,533) (9,330) (256,121)
Investments and funds pursuant
to mortgage-backed bonds 1,514 8,965 250,318
Payments made on capitalized
lease obligation (1,349) (1,127) (745)
Acquisition of treasury stock (4,816) - (1,922)
Net common stock issued 1,658 4,613 2,954
Dividends paid (12,233) (8,662) (5,945)
---------- ---------- ----------
Net cash provided by (used in)
financing activities 45,819 (17,318) (83)
---------- ---------- ----------
Net cash used for purchases of
office equipment and
leasehold improvements (15,317) (8,973) (6,422)
---------- ---------- ----------
(Decrease) increase in cash (7,814) 5,867 (3,288)
Cash at beginning of year 19,884 14,017 17,305
---------- ---------- ----------
Cash at end of year $ 12,070 $ 19,884 $ 14,017
========== ========== ==========
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Interest $ 6,883 $ 4,735 $ 3,949
Income taxes $ 22,130 $ 27,038 $ 21,857
Supplemental Schedule of Noncash Investing and Financing Activities
The Company incurred capital lease obligations for equipment of $66, $1,040 and
$509 during fiscal years 1994, 1993 and 1992, respectively.
See accompanying notes to consolidated financial statements.
Piper Jaffray Companies Inc.
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Piper Jaffray Companies Inc. is the parent company of Piper Jaffray Inc. (Piper
Jaffray), a securities broker/dealer and investment banking firm; Piper Capital
Management Incorporated (Piper Capital Management), an asset management firm;
Piper Trust Company; Premier Acceptance Corporation (Premier), an issuer of
mortgage-backed bonds; and other immaterial subsidiaries. All operate within or
are related to the securities industry. The consolidated financial statements
include the accounts of Piper Jaffray Companies Inc. and its subsidiaries (the
Company), all of which are wholly owned. All material intercompany accounts and
transactions have been eliminated. The Company also has a 50 percent ownership
interest in Hercules International Management L.L.C., an international
investment management joint venture. This investment is recorded under the
equity method of accounting. See Note 7 to the consolidated financial
statements.
Customer securities transactions are recorded on a settlement date basis with
the related commission revenue and expenses recorded on a trade date basis.
Principal securities transactions are also recorded on trade date. Prior to
fiscal 1994, securities transactions were recorded on a settlement date basis.
Prior year amounts were not restated as the impact on trading securities and
income, net of related expenses, was not materially different than if
transactions had been recorded on a trade date basis.
Substantially all of the Company's assets and liabilities consist of cash and
assets readily convertible to cash and liabilities which by their short-term
nature approximate current fair value. Trading securities owned and sold but
not yet purchased are stated at market value and are generally readily
marketable. Market value is determined by using published market quotes or
last-traded prices for most securities. In the event a market price is not
available for a security, other valuation methods are used depending on the
type of security and related market.
Depreciation of office equipment is provided using straight-line and
accelerated methods over estimated useful lives of three to seven years.
Leasehold improvements are amortized over the life of the lease.
Net income per common and common equivalent share is calculated by dividing net
income by the weighted average number of common shares and common share
equivalents outstanding, which includes the dilutive effect of all outstanding
stock options. In 1992, the dilutive effect of common share equivalents was
not material.
During fiscal year 1993, the Company changed its fiscal year end from the last
Friday of September to September 30. Fiscal year 1993 was a 53-week period,
whereas fiscal year 1992 was a 52-week period.
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes, effective Oct. 1, 1993. Prior years' financial
statements have not been restated to apply the provisions of SFAS No. 109. See
Note 11 to the consolidated financial statements.
Effective Oct. 1, 1993, the Company adopted SFAS No. 106, Employers' Accounting
for Postretirement Benefits Other than Pensions. See Note 10 to the
consolidated financial statements.
The Financial Accounting Standards Board has issued SFAS No. 112, Employers'
Accounting for Postemployment Benefits. Adoption of the statement will not have
a material impact on the consolidated financial statements of the Company. The
Company plans to adopt this statement in the first quarter of fiscal 1995, as
required.
2. Receivable from and Payable to Customers
(In thousands)
Amounts receivable from customers include cash accounts totaling $31,720 and
$49,609 and margin accounts totaling $339,443 and $286,221 at Sept. 30, 1994,
and 1993, respectively. Substantially all receivables from customers are
collateralized by customers' marketable securities.
Amounts payable to customers include free credit balances of $53,111 and
$44,231 at Sept. 30, 1994, and 1993, respectively.
3. Trading Securities
(In thousands)
Trading securities are as follows (at market value):
Sept. 30 Sept. 30
1994 1993
Owned:
Corporate securities
Equity $ 9,504 $ 8,532
Fixed income 8,407 24,036
Government securities 4,132 11,464
Municipal securities 27,089 33,734
--------- ---------
$49,132 $77,766
========= =========
Sold but not yet purchased:
Corporate securities
Equity $ 9,909 $17,466
Fixed income 1,467 307
Government securities 3,166 145
Municipal securities 147 269
--------- ---------
$14,689 $18,187
========= =========
4. Short-Term Borrowings
Piper Jaffray borrows from banks under various committed and uncommitted
secured lines of credit principally to finance customers' purchases on margin
and dealer trading securities. These borrowings are primarily collateralized by
securities held in customer margin accounts and trading securities owned and
bear interest at rates based on the federal funds rate. The market value of
customer securities pledged as collateral at Sept. 30, 1994, was approximately
$185 million. No formal compensating balance agreements existed as of Sept. 30,
1994.
At Sept. 30, 1994, the Company had a $10 million unsecured loan outstanding
which was paid in full in October 1994. Piper Jaffray also had $9.2 million in
letters of credit outstanding at Sept. 30, 1994, primarily representing margin
deposits on various securities exchanges. The market value of trading
securities pledged as collateral for the letters of credit at Sept. 30, 1994,
was $9.6 million.
5. Mortgage-Backed Bonds
(In thousands)
Premier periodically issues bonds which are collateralized by GNMA and FNMA
certificates. The bonds are obligations solely of Premier and bondholders' only
recourse is to the underlying series' collateral. The collateral, which was
purchased with the issuance proceeds, is held by a trustee and is carried at
par value less unamortized discount. Principal and interest payments on the
collateral are used to meet the debt service of the mortgage-backed bonds.
Premier exercised call provisions on mortgage-backed bonds aggregating $7,136
and $166,047 in fiscal years 1993 and 1992, respectively. The exercise of the
call provisions and the related liquidation of collateral resulted in pre-tax
net gains of $332 and $9,117 in 1993 and 1992, respectively. The net gains are
included in other income in the consolidated statements of income. Total
expenses include certain direct and indirect expenses associated with these
transactions of $65 and $4,651, respectively. The market value of remaining
underlying collateral at Sept. 30, 1994, was not significant.
The issuance of six series of mortgage-backed bonds with a remaining aggregate
principal amount of $34,380 and the related purchase of collateral has been
accounted for financial reporting purposes as a sale. Accordingly, the assets,
liabilities, interest income and interest expense relating to these series do
not appear on the consolidated financial statements of the Company.
Interest revenue and expense related to mortgage-backed bonds have been
recorded net in the consolidated statements of income. Gross interest revenue
was $230, $497 and $15,661, and interest expense was $205, $448 and $15,863 for
fiscal years 1994, 1993 and 1992, respectively.
6. Shareholders' Equity
In 1994, the Company authorized the repurchase of an additional 500,000 shares
of its common stock to satisfy employee benefit plan obligations. For the year
ended Sept. 30, 1994, 378,100 shares had been repurchased.
On Nov. 7, 1994, the Board of Directors elected to reduce the quarterly
dividend of 17.5 cents per share to 7.5 cents per share of its common stock,
payable on Dec. 6, 1994, to shareholders of record on Nov. 22, 1994.
Effective July 1, 1994, the Company offered the Piper Jaffray Companies Stock
Investment Plan which allows eligible employees the opportunity to purchase the
Company's common stock at a discount through after-tax payroll deductions. Each
month the payroll deductions are used to purchase the Company's common stock
at 85 percent of the closing market price on the last day of the month. The
plan provides for no more than 1,000,000 shares of common stock to be purchased
by employees under the plan. The Company satisfies the share obligations by
issuing common shares from the treasury share balance. At Sept. 30, 1994,
62,708 common shares had been issued. Compensation expense charged to
operations as a result of the plan was $102,000 for fiscal year 1994.
The Company's book value stock purchase plan provided for up to 3,200,000
shares to be sold. Effective Nov. 9, 1993, the Board suspended offerings under
this plan and no additional shares are expected to be issued, but the status of
the outstanding shares and options under the plan is unchanged. The plan
allowed certain employees the right to purchase the Company's common stock at a
price equal to the book value per share at the time of sale. These shares are
entitled to full dividend and voting rights. Within seven years from date of
issuance, the shares must have been sold back to the Company at the current
book value per share or exchanged for a specific number of freely transferable
shares based on the relative market and book values at the date of purchase.
Any shares repurchased or exchanged by the Company may be reissued under the
plan. Stock options also have been granted under the plan for additional book
value shares. Shares acquired by an employee upon the exercise of an option
would generally be subject to the same rights and restrictions described above.
Compensation expense charged to operations as a result of the increase in book
value of shares issued under the plan was $2,400,000, $1,600,000 and $1,825,000
for fiscal years 1994, 1993 and 1992, respectively.
The Company also issues executive incentive stock options to certain employees
to purchase shares of the Company's common stock under the 1993 Piper Jaffray
Companies Inc. Omnibus Stock Plan. The purchase price of each share subject to
an option is fixed, but is not less than 100 percent of the fair market value
at the time the option is granted. Options may be granted through Nov. 1, 1995,
and expire 10 years from the date of grant or earlier as determined by the
Company. No charges have been made to operations under this plan.
The following table summarizes activity for the book value shares and options
and the executive incentive stock option plan for the three years ended Sept.
30, 1994:
Fiscal Years Ending September 1994 1993 1992
Book value plan shares
outstanding:
Beginning of year 2,255,850 2,199,250 1,792,800
Sold to participants - 433,000 499,200
Options exercised 94,600 71,300 19,400
Converted to market shares (523,975) (408,650) (102,850)
Repurchased (106,675) (39,050) (9,300)
----------- ----------- -----------
End of year 1,719,800 2,255,850 2,199,250
=========== =========== ===========
Participants' cost per share $3.80 $3.67 $2.81
outstanding at end of year to $7.45 to $7.45 to $5.57
Book value plan shares
available under options:
Beginning of year 529,850 505,850 403,900
Granted - 108,250 124,800
Exercised (94,600) (71,300) (19,400)
Canceled (8,250) (12,950) (3,450)
----------- ----------- -----------
End of year 427,000 529,850 505,850
=========== =========== ===========
Exercise price per share $2.85 $2.67 $2.67
to $7.45 to $7.45 to $5.57
Executive incentive stock options
outstanding and exercisable:
Beginning of year 945,740 431,940 387,040
Granted 164,000 594,000 63,100
Exercised (89,520) (80,200) (18,200)
----------- ----------- -----------
End of year 1,020,220 945,740 431,940
=========== =========== ===========
Exercise price per share $4.25 $4.25 $4.25
to $16.50 to $15.25 to $15.25
7. Commitments and Contingent Liabilities
(In thousands)
The Company and its subsidiaries lease office space and equipment under various
noncancelable leases. Certain leases have renewal options and clauses for
escalation and operating cost adjustments. The capitalized leases have
expiration dates through 1997 and at Sept. 30, 1994, and 1993, had equipment
costs of $5,673 and $5,607, less accumulated amortization of $4,388 and $3,498,
respectively.
Aggregate minimum lease commitments as of Sept. 30, 1994, are approximately as
follows for the fiscal years ending in September:
Capital Operating
Leases Leases
1995 $1,645 $ 17,675
1996 548 17,729
1997 144 17,180
1998 - 16,340
1999 - 16,176
Thereafter - 26,011
-------- ----------
Total minimum lease payments 2,337 $111,111
Less amount representing ==========
imputed interest (11%) 198
--------
Present value of net minimum
capital lease payments $2,139
========
Rental expense, including operating costs and real estate taxes, charged to
operations was $25,010, $22,893 and $20,998, in fiscal years 1994, 1993 and
1992, respectively.
In the normal course of business, Piper Jaffray enters into underwriting and
other commitments. The ultimate settlement of such transactions open at year
end is not expected to have a material effect on the consolidated financial
statements.
The Company and/or its subsidiaries are defendants in lawsuits relating to (1)
the Institutional Government Income Portfolio, (2) American Adjustable Rate
Term Trust Inc. - 1998 and American Adjustable Rate Term Trust Inc. - 1999, (3)
Managers Intermediate Mortgage Fund, and (4) alleged statements and omissions
made by Piper Jaffray Companies Inc. in public disclosures. The Company
intends to defend these actions vigorously. It is impossible to predict the
outcome of the outstanding lawsuits, and at the present time, the effect of
these lawsuits on the consolidated financial statements cannot be determined.
Accordingly, no provision for liability, if any, that may result has been
recorded in the consolidated financial statements.
The Company is involved in various other lawsuits or threatened lawsuits
incidental to its securities business. Management of the Company, after
consultation with counsel, believes the resolution of these various lawsuits
and claims will have no material adverse effect on the consolidated financial
statements.
During fiscal 1993, the Company entered into a 50/50 joint venture in Hercules
International Management L.L.C. with Midland Walwyn of Canada to develop and
market an international group of mutual funds. For fiscal year 1994, the
Company contributed capital of $3,025 and recorded a loss on investment of
$2,750. The Company is required to fund any future losses from operations or
cash needs of the joint venture on a 50/50 basis.
8. Financial Instruments with Off-Balance-Sheet Risk
In the normal course of business, the Company's customer, trading and
correspondent clearance activities involve the execution, settlement and
financing of various securities transactions. These activities may expose the
Company to off-balance-sheet risk in the event the other party to the
transaction is unable to fulfill its contractual obligations. The Company
utilizes financial futures contracts to a limited extent to hedge fixed income
inventories against market interest rate fluctuations. Such transactions are
subject to the same controls as all trading for the Company's own account. The
Company also enters into government reverse repurchase agreements to facilitate
hedging. The Company does not, and has no plans to enter into for either
hedging or speculative purposes the following types of transactions: interest
rate swaps, foreign currency contracts or significant amounts of futures,
options, forwards, mortgage-backed derivatives, or other securities whose value
is derived from other investment products (derivatives).
The Company's financing and customer securities activities involve the Company
using securities as collateral. In the event the counterparty does not meet its
contractual obligation to return securities used as collateral or customers do
not deposit additional securities or cash for margin when required, the Company
may be exposed to the risk of reacquiring the securities or selling the
securities at unfavorable market prices in order to satisfy its obligations to
its customers or counterparties . The Company controls this risk, as does the
securities industry, by monitoring the market value of securities pledged or
used as collateral on a daily basis and requiring adjustments in the event of
excess market exposure.
The Company sells securities not yet purchased (short sales) for its own
account. The establishment of short positions exposes the Company to off-
balance-sheet risk in the event prices increase, as the Company may be
obligated to acquire the securities at unfavorable market prices.
Concentrations of Credit Risk:
The Company provides investment, financing and related services to a diverse
group of domestic and foreign customers including governments, corporations,
and institutional and individual investors. The Company's exposure to credit
risk associated with the nonperformance of customers in fulfilling their
contractual obligations pursuant to securities transactions can be directly
impacted by volatile securities markets, credit markets and regulatory changes.
This exposure is measured on an individual customer basis, as well as for
groups of customers that share similar attributes. To alleviate the potential
for risk concentrations, credit limits are established and continually
monitored in light of changing customer and market conditions.
As of Sept. 30, 1994, the Company did not have significant concentrations of
credit risk with any one single or group of customers or counterparties.
9. Net Capital Requirements
(In thousands)
Piper Jaffray is subject to the Uniform Net Capital Rule (the Rule) of the
Securities and Exchange Commission (SEC) and the net capital rule of the New
York Stock Exchange (the Exchange). Piper Jaffray has elected to use the
alternative method permitted by the Rule, which requires that it maintain
minimum net capital of 2 percent of aggregate debit balances arising from
customer transactions. The Exchange may prohibit a member firm from expanding
its business or paying cash dividends if resulting net capital would be less
than 5 percent of aggregate debit balances. In addition, Piper Jaffray is
subject to certain notification requirements related to withdrawals of excess
net capital.
At Sept. 30, 1994, net capital under the Rule was $80,158 or 21 percent of
aggregate debit balances and $72,535 in excess of the minimum required net
capital.
10. Employee Benefit Plans
(In thousands)
The Company has a qualified employee stock ownership plan (ESOP) and 401(k)
plans which cover substantially all employees. The plans are self-administered
and may be altered or terminated at any time by the Company. The Company's
contributions to the plans are determined by the Board of Directors within
limits to qualify as deductions for income tax purposes. Charges to operations
for contributions to the ESOP were $16,735, $27,399 and $24,547 in fiscal years
1994, 1993 and 1992, respectively. Contribution expense for the 401(k) plan
was $1,599, $1,293 and $1,279 in fiscal years 1994, 1993 and 1992,
respectively.
Postretirement Benefits Other than Pensions
Effective Oct. 1, 1993, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 106, Employers' Accounting for Postretirement Benefits
Other than Pensions. SFAS No. 106 requires the Company to accrue the estimated
cost of retiree benefits during the years the employee provides services. The
Company offers health care benefits for substantially all of its retired
employees. The accumulated postretirement benefit obligation represents the
difference between the actuarially computed claims experience of retirees and
the premiums paid by retirees. SFAS No. 106 allows recognition of the
cumulative effect of the liability in the year of adoption or the amortization
of the obligation over a period of up to 20 years. The Company elected to
recognize this obligation of approximately $1,300 over a period of 20 years.
The Company's cash flows are not affected by implementation of the statement,
and implementation did not have a material impact on income from continuing
operations for fiscal year 1994.
The Financial Accounting Standards Board has issued SFAS No. 112, Employers'
Accounting for Postemployment Benefits. Adoption of the statement will not have
a material impact on the consolidated financial statements of the Company. The
Company plans to adopt this statement in the first quarter of fiscal 1995, as
required.
11. Income Taxes
(In thousands)
The Company adopted SFAS No. 109, Accounting for Income Taxes, effective Oct.
1, 1993. Implementation resulted in no material effect on shareholders' equity
or results of operations for the year ended Sept. 30, 1994. Prior years'
financial statements have not been restated to apply the provisions of SFAS
109.
Year Ended Year Ended Year Ended
Sept. 30 Sept. 30 Sept. 25
1994 1993 1992
The provision for income
taxes consists of:
Current:
Federal $16,240 $23,042 $18,059
State 3,709 4,887 3,914
--------- --------- ---------
19,949 27,929 21,973
Changes in deferred taxes:
Federal (4,463) (522) 1,662
State (638) (82) 255
--------- --------- ---------
$14,848 $27,325 $23,890
========= ========= =========
The sources of the changes
in deferred taxes are:
Deferred employee compensation $(1,086) $(1,078) $(785)
Partnership investment losses 320 506 835
Capital infusion for
proprietary fund (2,000) - -
Other, principally accruals or
their reversal, not currently
deductible for tax purposes (2,335) (32) 1,867
--------- --------- ---------
$(5,101) $(604) $1,917
========= ========= =========
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes using enacted tax rates
in effect in the years in which the differences are expected to reverse. The
tax effects of significant items comprising the Company's net deferred tax
asset as of Sept. 30, 1994, are as follows:
Deferred tax assets:
Accruals not currently deductible $10,606
Other, including mark-to-market
accounting and depreciation 3,449
---------
14,055
Deferred tax liabilities: =========
Partnership investments 7,588
Other, including mark-to-market
accounting and prepaid expenses 2,277
9,865
---------
Net deferred tax asset $ 4,190
=========
Reconciliations of the expected federal income tax provision and the actual
income taxes provided on earnings are as follows:
Year Ended Year Ended Year Ended
Sept. 30 Sept. 30 Sept. 25
1994 1993 1992
Computed federal income tax
at the weighted statutory
rate of 35%, 34.75% and
34% for 1994, 1993 and 1992,
respectively $14,046 $23,738 $20,882
Increase (reduction) in taxes
resulting from:
State income taxes
net of federal tax benefit 1,879 3,267 2,821
Net tax-exempt municipal
bond interest (654) (485) (745)
Other (423) 805 932
--------- --------- ---------
Income taxes provided $14,848 $27,325 $23,890
========= ========= =========
Effective tax rate 37.0% 40.0% 38.9%
Report of Management
Financial Reporting Responsibility
Management is responsible for the content of the consolidated financial
statements of Piper Jaffray Companies Inc. The statements have been prepared
in accordance with generally accepted accounting principles and include
amounts based on management's estimates and judgments. The financial
information throughout the Annual Report is consistent with that in the
financial statements.
To meet its responsibility for the integrity of the financial statements,
management relies on an internal control structure that recognizes that there
are inherent limitations in all internal control structures, and that the cost
of such a structure should never exceed the benefits to be derived. Management
believes its internal control structure provides reasonable assurance that the
consolidated financial statements are free of material misstatement.
The internal control structure is reviewed by the internal audit staff and the
independent auditors, Deloitte & Touche LLP. The Audit Committee of the Board
of Directors, comprised of outside directors, also provides an oversight review
of the internal control structure. The Audit Committee meets periodically with
the director of internal audit and with Deloitte & Touche LLP to review matters
related to the internal control structure, and to discuss the nature, extent
and results of audit efforts. Such meetings are held with and without
management present.
The consolidated financial statements have been audited by Deloitte & Touche
LLP. Their report expresses their independent professional opinion as to the
fairness of the financial statements and is based upon audits made in
accordance with generally accepted auditing standards.
/s/ Addison L. Piper
Addison L. Piper
Chairman of the Board and Chief Executive Officer
/s/ William H. Ellis
William H. Ellis
President and Chief Operating Officer
/s/ Charles N. Hayssen
Charles N. Hayssen
Managing Director and Chief Financial Officer
Report of Independent Auditors
Board of Directors and Shareholders
Piper Jaffray Companies Inc.
Minneapolis, Minnesota
We have audited the accompanying consolidated statements of financial condition
of Piper Jaffray Companies Inc. and subsidiaries as of Sept. 30, 1994, and
1993, and the related consolidated statements of income, shareholders' equity
and of cash flows for each of the three years in the period ended Sept. 30,
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Piper Jaffray
Companies Inc. and subsidiaries as of Sept. 30, 1994, and 1993, and the results
of their operations and cash flows for each of the three years in the period
ended Sept. 30, 1994, in conformity with generally accepted accounting
principles.
As discussed in paragraph 5 of Note 7 to the consolidated financial statements,
the Company and/or its subsidiaries are defendants in lawsuits, the ultimate
outcome of which cannot presently be determined. Accordingly, no provision for
any loss that may result upon resolution of these matters has been recorded in
the accompanying consolidated financial statements.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
Nov. 8, 1994
Summary of Quarterly Results (Unaudited)
(In thousands, except per share
amounts) First Second Third Fourth
Fiscal 1994
Revenue $106,188 $102,833 $ 91,830 $ 96,660
Income before income taxes 16,627 11,032 7,938 4,533
Net income 9,976 6,896 4,842 3,568
Net income per share .55 .38 .27 .20
Fiscal 1993
Revenue $ 89,902 $108,128 $ 98,916 $113,779
Income before income taxes 14,881 18,369 15,129 19,933
Net income 8,929 11,187 9,032 11,839
Net income per share .52 .63 .50 .65
Market Prices and Dividends Per Share
Fiscal 1994
Market Price Range
High $18.50 $18.25 $15.88 $14.25
Low 15.88 14.88 11.88 9.88
Dividends Paid .175 .175 .175 .175
Fiscal 1993
Market Price Range
High $14.00 $15.94 $15.63 $16.75
Low 10.50 13.38 13.25 14.50
Dividends Paid .125 .125 .125 .125
The common stock of Piper Jaffray Companies Inc. (NYSE: PJC) is listed on the
New York Stock Exchange. At Nov. 21, 1994, there were approximately 991
registered shareholders of the Company's common stock.
Cash dividends have been paid on common shares in each year since 1971. The
Company's policy is to pay regular quarterly dividends on the common stock in
March, June, September, and December. On Nov. 7, 1994, the Board of Directors
elected to reduce the quarterly dividend of 17.5 cents per share to 7.5 cents
per share of its common stock.
Exhibit 22
PIPER JAFFRAY COMPANIES INC.
SUBSIDIARIES OF THE REGISTRANT
September 30, 1994
Percentage
of Voting
State of Securities
Subsidiary Name Incorporation Owned
Piper Jaffray Inc. Delaware 100%
Piper Jaffray International Inc. Delaware 100%
(a wholly owned subsidiary of
Piper Jaffray Inc.)
Piper Capital Management Incorporated Delaware 100%
Piper Trust Company Minnesota 100%
Premier Acceptance Corporation Delaware 100%
Piper Realty Management Incorporated Delaware 100%
Piper Mortgage Incorporated Delaware 100%
Piper Jaffray Ventures, Inc. Delaware 100%
Piper Mortgage Acceptance Corporation Delaware 100%
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No. 2-
88699, No. 33-4542 and No. 33-11657 on Form S-8, of our reports dated November
8, 1994 (which includes an explanatory paragraph regarding an uncertainty
relating to litigation described in Note 7), appearing in and incorporated by
reference in the Annual Report on Form 10-K of Piper Jaffray Companies Inc. for
the fiscal year ended September 30, 1994.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
December 21, 1994
EXHIBIT 27
[ARTICLE] BD
[LEGEND]
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF PIPER JAFFRAY COMPANIES INC. AS OF AND FOR
THE YEAR ENDED SEPTEMBER 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
[/LEGEND]
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] SEP-30-1994
[PERIOD-END] SEP-30-1994
[CASH] 12,070
[RECEIVABLES] 423,984
[SECURITIES-RESALE] 0
[SECURITIES-BORROWED] 0
[INSTRUMENTS-OWNED] 50,737
[PP&E] 25,979
[TOTAL-ASSETS] 584,447
[SHORT-TERM] 108,132
[PAYABLES] 288,801
[REPOS-SOLD] 0
[SECURITIES-LOANED] 0
[INSTRUMENTS-SOLD] 14,689
[LONG-TERM] 3,741
[COMMON] 17,462
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 150,341
[TOTAL-LIABILITY-AND-EQUITY] 584,447
[TRADING-REVENUE] 101,381
[INTEREST-DIVIDENDS] 24,792
[COMMISSIONS] 147,539
[INVESTMENT-BANKING-REVENUES] 61,146
[FEE-REVENUE] 62,653
[INTEREST-EXPENSE] 7,242
[COMPENSATION] 245,567
[INCOME-PRETAX] 40,130
[INCOME-PRE-EXTRAORDINARY] 40,130
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 25,282
[EPS-PRIMARY] 1.41
[EPS-DILUTED] 1.41
</TABLE>
