UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1993 Commission file number 1-7421
PIPER JAFFRAY COMPANIES INC.
(Exact name of Registrant as specified on its charter)
Delaware 41-1233380
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Piper Jaffray Tower, 222 South 9th Street, Minneapolis, Minnesota 55402
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (612) 342-6000
(Not Applicable)
(Former name, former address and former fiscal year,
if changed since last report)
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
As of December 31, 1993, 17,587,309 shares of common stock were issued and
outstanding.
PIPER JAFFRAY COMPANIES INC.
INDEX
Page
Number
Part I.FINANCIAL INFORMATION
Item 1.Financial Statements
Consolidated Statements of Financial Condition 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2.Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II.OTHER INFORMATION
Item 4.Submission of Matters to a Vote of Security Holders 9
Item 6.Exhibits and Reports on Form 8-K 10
Signatures 11
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PIPER JAFFRAY COMPANIES INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands)
December 31, September 30,
1993 1993
(Unaudited)
ASSETS
Cash $ 18,636 $ 19,884
Receivable from other brokers and dealers 29,020 31,425
Receivable from customers 362,247 335,830
Trading securities owned, at market 101,197 77,766
Office equipment and leasehold improvements,
at cost, less accumulated depreciation of
$38,333 and $36,863, respectively 19,874 17,842
Other assets 44,161 52,399
$ 575,135 $ 535,146
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings $ 136,713 $ 45,554
Checks and drafts payable 49,582 38,683
Payable to other brokers and dealers 64,007 90,393
Payable to customers 72,026 73,600
Trading securities sold but not yet
purchased, at market 16,285 18,187
Employee compensation 44,312 74,856
Income taxes 6,664 4,373
Other accounts payable and accrued expenses 20,451 31,588
410,040 377,234
Shareholders' equity
Common stock, $1 par value; authorized
40,000,000 shares; issued and outstanding
17,587,309 and 17,530,872 shares, respectively 17,587 17,531
Additional paid-in capital 7,054 6,829
Retained earnings 140,454 133,552
165,095 157,912
$ 575,135 $ 535,146
See accompanying notes to consolidated financial statements.
PIPER JAFFRAY COMPANIES INC.
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended
December 31, December 31,
1993 1992
REVENUES
Commissions $ 37,753 $ 28,748
Profits on principal transactions 25,912 23,260
Investment banking 20,662 22,308
Asset management fees 13,388 8,063
Interest 5,559 4,725
Other income 2,914 2,798
Total revenues 106,188 89,902
EXPENSES
Employee compensation 66,336 55,001
Floor brokerage and clearance 1,818 1,410
Interest 1,276 1,539
Occupancy and equipment 6,436 5,865
Communications 3,298 2,333
Travel and promotional 3,678 2,836
Other operating expenses 6,719 6,037
Total expenses 89,561 75,021
Income before income taxes 16,627 14,881
Income taxes 6,651 5,952
Net income $ 9,976 $ 8,929
Net income per common and common equivalent
share (primary and fully diluted) $ .55 $ .52
Weighted average number of common and common
equivalent shares outstanding 18,270 17,101
Dividends per share $ .175 $ .125
See accompanying notes to consolidated financial statements.
PIPER JAFFRAY COMPANIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
December 31, December 31,
1993 1992
Operating activities:
Net income $ 9,976 $ 8,929
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation and amortization 1,470 1,156
Deferred income taxes (908) (51)
(Increase) decrease in:
Net receivable from customers (27,991) (16,643)
Net trading securities (25,333) 14,918
Other (2,965) 2,094
Increase (decrease) in:
Net payable to other brokers and dealers (23,981) (55,025)
Checks and drafts payable 10,899 11,923
Employee compensation (30,544) (31,931)
Federal and state income taxes payable 3,199 385
Net cash used by operating activities (86,178) (64,245)
Financing activities:
Increase in short-term borrowings 91,159 74,058
Net common stock issued 281 349
Dividends paid (3,074) (2,140)
Net cash provided by financing activities 88,366 72,267
Net cash used for purchase of office
equipment and leasehold improvements (3,436) (2,640)
(Decrease) increase in cash (1,248) 5,382
Cash at beginning of period 19,884 14,017
Cash at end of period $ 18,636 $ 19,399
Supplemental disclosure of cash flow information
Cash paid during the three months ended for:
Interest $ 1,217 $ 1,505
Income taxes $ 4,361 $ 5,618
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended December 31, 1993
1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles and should be read in
conjunction with the Registrant's Annual Report for the year ended
September 30, 1993. The results of operations for the three months ended
December 31, 1993, are not necessarily indicative of the results to be expected
for the year ending September 30, 1994.
The consolidated statement of financial condition as of December 31, 1993 and
the other consolidated financial information for the three months ended
December 31, 1993 and 1992, is unaudited, but management of the Registrant
believes that all adjustments (consisting only of normal recurring accruals)
necessary for a fair statement of the results of operations for the periods
have been included.
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. Prior to the quarter ended March 31, 1993, the dilutive effect
of common share equivalents was not material.
All share and per share amounts have been restated to reflect the two-for-one
stock split declared November 9, 1993.
2.NET CAPITAL REQUIREMENTS
(In thousands)
At December 31, 1993, the broker-dealer subsidiary's net capital under
applicable regulations was $73,049 or 20% of aggregate debit balances and
$65,689 in excess of the minimum required net capital.
3.INCOME TAXES
(In thousands)
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes, effective October 1, 1993. Implementation
resulted in no material effect on shareholders' equity or results of operations
for the three months ended December 31, 1993.
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
liability as of October 1, 1993 are as follows:
Deferred tax liabilities:
Partnership investments $ 7,180
Other 1,817
8,997
Deferred tax assets:
Reserves not currently deductible 6,744
Other 1,342
8,086
Net deferred tax liability $ 911
The provision for income tax expense for the three months ended December 31,
1993 was $6,651, of which $7,559 is current tax expense and $908 is deferred
tax benefit.
4.Postretirement Benefits Other Than Pensions
(In thousands)
Effective October 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 Company does not incur direct out-of-pocket costs for
retirees as premiums are paid solely by each retiree. The accumulated
postretirement benefit obligation represents the portion of costs paid by the
Company for current employees which is actuarially determined to be
attributable to the cost of including retirees in the group plans.
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 twenty years. The Company has elected to recognize this obligation of
approximately $1.3 million over a period of twenty years. The Company's cash
flows are not affected by implementation of the Statement, however,
implementation decreased income from continuing operations for the three months
ended December 31, 1993 by an immaterial amount.
The following table sets forth information as of October 1, 1993.
Accumulated postretirement benefit obligation:
Retirees $ 185
Fully eligible plan participants 538
Other active plan participants 588
1,311
Fair value of plan assets 0
Accumulated postretirement benefit obligations
in excess of plan assets 1,311
Unrecognized transition obligation 1,311
Accrued postretirement benefit cost $ 0
The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation as of October 1, 1993 was 10.9% to 12.9% for
fiscal 1994 depending on the applicable benefit program under which the
employee is covered, decreasing each successive year until it reaches 5%, after
which it remains constant. A one-percentage-point increase in the assumed
health care cost trend rate for each year would increase the accumulated
postretirement benefit obligation as of October 1, 1993 and net postretirement
health care cost by approximately 13%. The assumed discount rate used in
determining the accumulated postretirement benefit obligation was 7%.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This discussion should be read in conjunction with Management's Financial
Discussion in the Registrant's Annual Report for the year ended September 30,
1993.
OPERATIONS
Revenues for the Registrant in the quarter ended December 31, 1993 were $106.2
million, up 18% ($16.3 million) from the comparable period of the previous
year. Expenses increased 19% ($14.6 million) to $89.6 million. Net income was
$10.0 million, compared to $8.9 million the previous year, up 12%
($1.1 million), while net income per share was $0.55 versus $0.52 in the first
quarter of fiscal 1993, an increase of 6%, due primarily to the increased
dilutive effect of common share equivalents (stock options).
Increases in commission revenues, asset management fees and equity underwriting
fees contributed to the increase in revenues. Mutual fund commissions for the
first quarter were up 34% ($3.2 million) over the same period in fiscal year
1993. Asset management fees were up 66% ($5.3 million) from the first quarter
of fiscal year 1993. Assets under management by the Registrant's asset
management subsidiary, Piper Capital Management Incorporated, grew 35%
($3.3 billion), to $12.6 billion from the first quarter of last year.
Employee compensation, including broker compensation and employee incentives,
increased 21% ($11.3 million) compared to the first quarter of fiscal 1993, in
line with revenue and profit growth. Because of continued steady growth,
additional employees have been added to support the increase in business and
to allow for future growth. Overall operating expenses increased 19% over the
same period last year reflecting, in part, the increased costs of personnel and
branch expansion in fiscal 1993. Communications expense increased 41%
($1.0 million), primarily due to additional personnel and higher trade volumes.
LIQUIDITY AND CAPITAL RESOURCES
The Registrant has a liquid balance sheet. Most of the Registrant's assets
consist of cash and assets readily convertible into cash. Management believes
that existing capital, funds from operations and current credit lines will be
sufficient to finance the Registrant's business. The fluctuations in cash
flows from financing activities are directly related to operating activities
due to the liquid nature of the Registrant's balance sheet.
There are no known trends or uncertainties which would cause a material change
in the Registrant's capital structure. There were no material commitments for
capital expenditures as of December 31, 1993.
PART II. OTHER INFORMATION
Item 4.Submission of Items to a Vote of Security Holders
The following matters were approved by shareholders at the Registrant's Annual
Meeting of Shareholders held on January 26, 1994:
1. Election of Directors
Authority
For Withheld
Addison L. Piper 12,908,433 231,892
William H. Ellis 12,906,201 234,124
Edward N. Bennett 12,917,255 223,070
Karen M. Bohn 12,888,027 252,298
Ralph W. Burnet 12,823,771 316,554
David P. Crosby 12,833,882 306,443
Dan L. Lastavich 12,597,694 542,631
Robert J. Magnuson 12,287,638 852,687
John L. McElroy, Jr. 12,868,497 271,828
Gary M. Petrucci 12,544,153 596,172
Robert S. Slifka 12,895,085 245,240
David Stanley 12,867,595 272,730
DeLos V. Steenson 12,802,819 337,506
Richard J. Stream 12,746,331 393,994
2. Proposal to approve amendments to Piper Jaffray Companies Inc. 1993 Omnibus
Stock Plan:
For 10,883,425
Against 1,240,688
Abstain 146,929
3. Proposal to amend Article IV of the Registrant's Restated Certificate of
Incorporation to increase the number of authorized shares of common stock,
par value $1.00 per share, from 20,000,000 to 40,000,000.
For 12,746,706
Against 311,901
Abstain 81,718
4. Proposal to approve the appointment of Deloitte & Touche as the independent
auditors of the Registrant for the 1994 fiscal year:
For 13,029,006
Against 70,509
Abstain 40,810
Broker non-votes were: 750,994
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 - Statement Regarding Computation of Per Share Earnings.
(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 December
31, 1993.
SIGNATURES
Pursuant to the requirements 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 February 8, 1994 /s/ Charles N. Hayssen
CHARLES N. HAYSSEN
Chief Financial Officer and
Managing Director
Dated February 8, 1994 /s/ William H. Ellis
WILLIAM H. ELLIS
President and Chief Operating Officer
Exhibit 11
PIPER JAFFRAY COMPANIES INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(Unaudited, amounts in thousands except per share data)
Three Months Ended
December 31, December 31,
1993 1992
PRIMARY NET INCOME PER SHARE:
Net Income $ 9,976 $ 8,929
Average number of common and common
equivalent shares outstanding:
Average common shares outstanding 17,554 17,101
Dilutive effect of CSE's:
Book Value Plan Options 372 *
Executive Incentive Stock Options 313 *
18,239 17,101
Primary net income per share $ 0.55 $ 0.52
NET INCOME PER SHARE
ASSUMING FULL DILUTION:
Net Income $ 9,976 $ 8,929
Average number of common and common
equivalent shares outstanding:
Average common shares outstanding 17,554 17,101
Dilutive effect of CSE's:
Book Value Plan Options 377 *
Executive Incentive Stock Options 339 *
18,270 17,101
Fully diluted net income per share $ 0.55 $ 0.52
* Less than 3% dilution
