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, 1994 Commission file number 1-7421
PIPER JAFFRAY COMPANIES INC.
(Exact name of Registrant as specified in its charter)
Delaware 41-1233380
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
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
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, 1994, 17,045,358 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 7
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
Index of Exhibits 18
Exhibits 19
PART I.FINANCIAL INFORMATION
Item 1.Financial Statements
PIPER JAFFRAY COMPANIES INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In Thousands)
December 31, September 30,
1994 1994
(Unaudited)
ASSETS
Cash (including $3,944 and $448
respectively, required to be
segregated under federal and
other regulations) $ 27,669 $ 12,070
Receivable from other brokers and dealers 68,002 52,821
Receivable from customers 388,333 371,163
Trading securities owned, at market 75,501 49,132
Investments pursuant to mortgage-backed bonds 41,015 1,605
Office equipment and leasehold improvements,
at cost, less accumulated depreciation of
$45,804 and $44,033, respectively 25,715 25,979
Deferred income tax asset 1,478 4,190
Other assets 70,892 67,487
---------- ----------
$ 698,605 $ 584,447
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings $ 163,463 $ 108,132
Checks and drafts payable 49,909 43,935
Payable to other brokers and dealers 80,402 76,976
Payable to customers 91,864 72,478
Trading securities sold but not yet
purchased, at market 18,524 14,689
Mortgage-backed bonds payable 41,899 1,602
Employee compensation 48,820 59,087
Federal and state income taxes 508 1,281
Other accounts payable and accrued expenses 32,614 38,464
---------- ----------
528,003 416,644
---------- ----------
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; issued and outstanding
17,310,751 and 17,461,521 shares,
respectively 17,311 17,462
Additional paid-in capital 6,664 7,163
Retained earnings 149,970 146,601
Less treasury stock, at cost;
265,393 and 273,360 shares, respectively (3,343) (3,423)
---------- ----------
170,602 167,803
---------- ----------
$ 698,605 $ 584,447
========== ==========
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,
1994 1993
REVENUE
Commissions $ 32,158 $ 37,753
Profits on principal transactions 25,935 25,912
Investment banking 11,408 20,662
Interest 7,936 5,559
Asset management fees 11,803 13,388
Other income 3,259 2,914
---------- ----------
Total revenue 92,499 106,188
---------- ----------
EXPENSES
Employee compensation 55,974 66,336
Floor brokerage and clearance 1,705 1,818
Interest 2,847 1,276
Occupancy and equipment 6,709 6,436
Communications 3,880 3,298
Travel and promotional 3,752 3,678
Other operating expenses 10,010 6,719
---------- ----------
Total expenses 84,877 89,561
---------- ----------
Income before income taxes 7,622 16,627
Income taxes 2,972 6,651
---------- ----------
Net income $ 4,650 $ 9,976
========== ==========
Net income per common and common equivalent
share (primary and fully diluted) $ .27 $ .55
Weighted average number of common and common
equivalent shares outstanding 17,400 18,270
Dividends per share $ .075 $ .175
See accompanying notes to consolidated financial statements.
PIPER JAFFRAY COMPANIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
December 31,
1994 1993
Operating activities:
Net income $ 4,650 $ 9,976
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 1,771 1,470
Deferred income taxes 2,712 (908)
(Increase) decrease in:
Net receivable from customers 2,216 (27,991)
Net trading securities (22,534) (25,333)
Other (9,255) (2,960)
Increase (decrease) in:
Checks and drafts payable 5,974 10,899
Net payable to other brokers
and dealers (11,755) (23,981)
Employee compensation (10,267) (30,544)
Federal and state income taxes payable (773) 3,199
---------- ----------
Net cash used in
operating activities (37,261) (86,173)
---------- ----------
Financing activities:
Net Change in:
Short-term borrowings 55,331 91,159
Mortgage-backed bonds payable 40,297 (365)
Investments and funds pursuant to
mortgage-backed bonds (39,410) 360
Acquisition of treasury stock (360) -
Net common stock issued (210) 281
Dividends paid (1,281) (3,074)
---------- ----------
Net cash provided by
financing activities 54,367 88,361
---------- ----------
Net cash used for purchases of office
equipment and leasehold improvements (1,507) (3,436)
---------- ----------
Increase (decrease) in cash 15,599 (1,248)
Cash at beginning of period 12,070 19,884
---------- ----------
Cash at end of period $ 27,669 $ 18,636
========== ==========
Supplemental disclosure of cash flow information
Cash paid during the three months ended for:
Interest $ 2,542 $ 1,217
Income taxes $ 1,034 $ 4,361
See accompanying notes to consolidated financial statements.
PIPER JAFFRAY COMPANIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended December 31, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements of Piper Jaffray Companies
Inc. and its subsidiaries (the "Company") have been prepared in conformity
with generally accepted accounting principles and should be read in
conjunction with the Company's Annual Report to Shareholders for the year
ended September 30, 1994. The results of operations for the three months
ended December 31, 1994 are not necessarily indicative of the results to be
expected for the year ending September 30, 1995.
The consolidated statement of financial condition as of December 31, 1994, and
the other consolidated financial information for the three months ended
December 31, 1994 and 1993, is unaudited. Management of the Company 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.
2. NET CAPITAL REQUIREMENTS
At December 31, 1994, the Company's broker-dealer subsidiary's net capital
under applicable regulations was $74.3 million, or 19% of aggregate debit
balances and $66.4 million in excess of the minimum required net capital.
3. CONTINGENCIES
See Part II, Item 1. "Legal Proceedings".
4. SHAREHOLDERS' EQUITY
During the three months ended December 31, 1994, 35,900 shares of the
Company's common stock were repurchased by the Company pursuant to the Board
of Directors' authorizations to repurchase common stock to satisfy employee
benefit plan obligations.
Common shares authorized for repurchase - fiscal years:
1992 400,000
1994 500,000
---------
900,000
Common shares repurchased - fiscal years:
1992 201,000
1993 -
1994 378,100
1995 35,900
---------
615,000
---------
Common shares available at December 31, 1994, for
repurchase pursuant to authorizations 285,000
=========
Total common shares repurchased 615,000
Treasury shares reissued - fiscal years:
1992 6,262
1993 194,738
1994 104,740
1995 43,867
---------
349,607
---------
Treasury shares held at December 31, 1994 265,393
=========
On January 25, 1995, the Board of Directors authorized the $15 million ESOP
contribution for fiscal year 1994 to be made 50 percent in cash and 50 percent
in the Company's newly issued common stock, thus adding approximately $7.5
million in additional shareholders' equity during the second quarter of fiscal
1995.
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 Company's Annual Report to Shareholders for the year ended
September 30, 1994.
OPERATIONS
The Company's revenue for the three months ended December 31, 1994 decreased
13% over the same period of fiscal year 1994 to $92.5 million. Net income for
the first three months of fiscal 1995 was $4.7 million, a decrease of 53%
compared to the same period of the prior fiscal year. Net income per share for
the quarter ended December 31, 1994 was $0.27 compared to $0.55 from the same
period of the prior fiscal year.
Decreases in commission revenue, investment banking revenue and asset
management fees contributed to the decrease in revenue. Mutual fund
commissions for the first quarter were down 36% ($4.6 million) over the same
period in fiscal year 1994. Investment banking revenue decreased 45% over the
same period of fiscal year 1994 to $11.4 million. Asset management fees were
down 12% ($1.6 million) from the first quarter of fiscal year 1994. As of
December 31, 1994, assets under management by the Company's asset management
subsidiary, Piper Capital Management Incorporated, decreased 18% ($2.3
billion) from the end of the first quarter of the prior fiscal year to $10.3
billion. Interest income for the first quarter of fiscal 1995 was up 43% ($2.4
million), to $7.9 million compared to the first quarter of fiscal 1994 due
primarily to higher interest rates.
Employee compensation decreased 16% ($10.4 million) compared to the first
quarter of fiscal 1994, in line with revenue. Employee compensation declined
due to decreases in revenue-based broker compensation and profit-based
compensation. Overall operating expenses decreased 5% over the same period
last year reflecting, in part, slight increases in essentially all other
expenses offset by the decrease in employee compensation. Interest expense
for the quarter increased 123% ($1.6 million) compared to the first quarter of
fiscal 1994 due to higher borrowing levels and higher interest rates.
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. Management believes that
existing capital, funds from operations and current credit lines will be
sufficient to finance the Company's business. 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.
During the first quarter of fiscal year 1995, the Company's subsidiary Premier
Acceptance Corporation ("Premier") issued two series of mortgage-backed bonds
with an aggregate principal amount of approximately $40 million. Premier has
one other issue pending and may issue additional series of bonds during the
remainder of fiscal year 1995.
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 intends to continue to repurchase shares of its common stock
periodically, as market conditions warrant, to satisfy obligations to present
and future employee benefit plans. See Note 4 to the consolidated financial
statements.
There were no material commitments for capital expenditures as of December 31,
1994, however, during the remainder of fiscal year 1995, the Company plans to
invest approximately $12 million in personal computer hardware and software
for a new workstation system for investment executives.
The Company is currently a defendant in several different lawsuits related to
various funds or assets managed by Piper Capital Management Incorporated. The
Company intends to defend these actions vigorously. It is impossible to
predict the outcome of these lawsuits and, at the present time, the effect of
the outstanding lawsuits on the consolidated financial statements and the
Company's liquidity and capital resources cannot be determined. Accordingly,
no provision for liability, if any, that may result has been recorded in the
consolidated financial statements. See Part II, Item 1. "Legal Proceedings"
below.
PART II. OTHER INFORMATION
Item 1. 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 parties are engaged in discovery. The Company intends to defend the
litigation vigorously. It is impossible to predict the outcome of the
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(R), 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).
Ramirez v. Daniel Ball and Piper Jaffray Inc., et al. (National
Association of Securities Dealers, Inc. Arbitration File No. 94-03321).
(Includes investments in addition to Institutional Government Income
Portfolio).
Arvold v. Piper Jaffray Inc., et al. (National Association of
Securities Dealers, Inc. Arbitration File No. 95-90). (Includes
investments in addition to Institutional Government Income Portfolio).
Egan v. Piper Jaffray Inc., Piper Capital Management, Inc. and Piper
Funds, Inc. (National Association of Securities Dealers, Inc.
Arbitration File No. 95-11).
South Dakota School of Mines and Technology Foundation, Inc., v. Piper
Jaffray Inc., Piper Jaffray Companies, Inc., Piper Capital Management
Incorporated, Addison L. Piper, Wiliam H. Ellis, Dan L. Lastavich,
DeLos V. Steenson, Worth V. Bruntjen, Jaye F. Dyer, Edward J. Kohler,
John T. Golle, and David T. Bennett. (New York Stock Exchange, Inc.,
Department of Arbitration; Arbitration No. 1995-4529).
Park-Nicollet Medical Foundation v. Piper Capital Management
Incorporated and Piper Jaffray Inc. (National Association of Securities
Dealers, Inc. Arbitration File No. 95-139).
The Company denies liability and intends to defend these actions
vigorously. It is impossible to predict the outcome of these actions,
and, at the present time, the effect of these actions 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
Barone, 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 and Managers
Intermediate Mortgage Fund (United States District Court, District of
Connecticut).
Karen E. Kopelman v. The Managers Fund, The Managers Funds, L.P., Robert
P. Watson, Piper Capital Management Incorporated., Piper Jaffray Inc.,
Worth Bruntjen and Managers Intermediate Mortgage Fund (United States
District Court, District of Connecticut).
By court order, these two putative class action lawsuits were consolidated.
The plaintiffs purport to represent a class of persons who purchased shares in
the Managers Intermediate Mortgage Fund ("Managers Intermediate") during the
period from May 1, 1992, through June 13, 1994. Managers Intermediate is a
no-load, open-end mutual fund that was generally managed by The Managers
Funds, L.P. and was sub-managed by Piper Capital Management Incorporated.
Plaintiffs allege that defendants Piper Capital Management Incorporated, Piper
Jaffray Inc. and Worth Bruntjen (the "Piper Defendants") violated Sections 11,
12(2) and 15 of the Securities Act; Section 10(b) of the Securities Exchange
Act, and Rule 10b-5 promulgated thereunder; Sections 13(a)(3), 34(b) and
36(b) of the Investment Company Act; and engaged in 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 Complaints do
not specify an amount of damages sought.
Although the plaintiffs in this consolidated action allege that they have been
brought as class actions, the Court has not yet determined whether a class
will be certified. The Piper Defendants deny liability, and intend to defend
the litigation vigorously. The defendants have filed a motion to dismiss the
consolidated action in its entirety. It is impossible to predict the outcome
of the litigation, and, at the present time, the effect of the litigation on
the consolidated financial statements cannot be determined.
Adjustable Rate Term Trusts 1998 and 1999
A. 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. The defendants have filed a motion to dismiss the claims
against them, which motion is scheduled to be heard on May 24, 1995.
The Company denies liability and 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.
B. Other Arbitration Claims Brought by Investors in Adjustable Rate Term
Trusts 1998 and 1999
The Company is a party to the following action which is based on claims
similar to those asserted in Gordon v. American Adjustable Rate Term
Trust 1998, et al.:
Charles P. Belgarde and Mary E. Belgarde v. American Adjustable Rate
Term Trust, Inc.-1998; Piper Capital Management Incorporated; Piper
Jaffray, Inc.; and Piper Jaffray Companies, Inc. (National Association
of Securities Dealers, Arbitration File No. 94-5005).
The Company denies liability and intends to defend this arbitration
vigorously. On January 20, 1995, the respondents moved to dismiss this
arbitration. It is impossible to predict the outcome of this
arbitration, and, at the present time, the effect of this arbitration on
the consolidated financial statements cannot be determined.
Shareholder Litigation
Edward B. McDaid and Ronald Goldstein v. Piper Jaffray Companies Inc.,
Addison L. Piper, William H. Ellis and Charles N. Hayssen (United States
District Court, District of Delaware).
This putative class action lawsuit consolidates separate lawsuits previously
filed by Edward McDaid and Ronald Goldstein. Plaintiffs purport to represent
a class of persons who purchased Piper Jaffray Companies Inc. ("PJCI") common
stock during the period from May 12, 1993, through August 24, 1994.
In their consolidated complaint filed January 9, 1995, plaintiffs allege 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. Plaintiffs allege that the defendants violated Sections
10(b) and 20(a) of the Securities Exchange Act, and Rule 10b-5 promulgated
thereunder.
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. Discovery in the consolidated action is proceeding.
The defendants deny liability and intend to defend the litigation vigorously.
It is impossible to predict the outcome of the outstanding litigation, and, at
the present time, the effect of the 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. Managers Short is a no-load, open-end mutual fund that was generally
managed by The Managers Funds, L.P. and was sub-managed by Piper Capital
Management Incorporated.
Plaintiff alleges that defendants Piper Jaffray Inc., Piper Capital Management
Incorporated and Worth Bruntjen (the "Piper Defendants") violated Section
10(b) of the Securities Exchange Act, and Rule 10b-5 promulgated thereunder;
and engaged in 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 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. On January 24, 1995, the Piper Defendants filed a motion to
dismiss the claims against them, which motion is scheduled to be heard on June
30, 1995. The Piper Defendants deny liability and intend to defend the
litigation vigorously. It is impossible to predict the outcome of the
outstanding 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
Management Incorporated ("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 Inc. and Piper Jaffray Companies Inc. 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 respondents filed an answer on December 30, 1994, in which the respondents
deny liability. No hearing date for the arbitration has yet been set. The
Company intends to defend the arbitration vigorously. Although it is
impossible to predict the outcome of this arbitration, 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 February 3, 1995 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
The following matters were approved by shareholders at the Company's Annual
Meeting of Shareholders held on January 25, 1995:
1. Election of Directors
Authority
For Withheld
Addison L. Piper 11,930,311 302,438
William H. Ellis 11,847,018 385,731
Ralph W. Burnet 11,965,872 266,877
Kathy Halbreich 11,602,151 630,598
John L. McElroy, Jr. 12,084,321 148,428
Robert S. Slifka 12,057,224 175,525
David Stanley 11,966,470 266,279
2. Proposal to approve the Piper Jaffray Companies Inc. 1995 Executive
Performance Bonus Plan:
For 9,084,988
Against 2,304,879
Abstain 820,169
3. Proposal to approve the Piper Jaffray Companies Inc. Stock Investment
Plan:
For 10,984,766
Against 874,593
Abstain 577,239
4. Proposal to approve the appointment of Deloitte & Touche LLP as the
independent auditors of the Company for the fiscal year ending September
30, 1995:
For 12,345,521
Against 188,009
Abstain 108,897
Broker non-votes were: 206,717
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
11 Statement Re: Computation of Per Share Earnings.
27 Financial Data Schedule (filed electronically).
(b) Reports on Form 8-K
The Company was not required to file any reports on Form 8-K to
the Securities and Exchange Commission during the quarter ended
December 31, 1994.
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 7, 1995 /s/ William H. Ellis
WILLIAM H. ELLIS
President and Chief Operating Officer
Dated February 7, 1995 /s/ Charles N. Hayssen
CHARLES N. HAYSSEN
Chief Financial Officer and Managing Director
PIPER JAFFRAY COMPANIES INC.
INDEX OF EXHIBITS TO QUARTERLY REPORT ON FORM 10-Q
Exhibit Page
Exhibit 11 Statement Re: Computation of Per Share Earnings 19
Exhibit 27 Financial Data Schedule (filed electronically)
Exhibit 11
PIPER JAFFRAY COMPANIES INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended
December 31,
1994 1993
PRIMARY NET INCOME PER SHARE:
Net income $ 4,650 $ 9,976
========== ==========
Average number of common and common
equivalent shares outstanding:
Average common shares outstanding 17,084 17,554
Dilutive effect of CSE's:
Book value plan options 201 372
Executive incentive stock options 109 313
---------- ----------
17,394 18,239
========== ==========
Primary net income per share $ 0.27 $ 0.55
========== ==========
NET INCOME PER SHARE
ASSUMING FULL DILUTION:
Net income $ 4,650 $ 9,976
========== ==========
Average number of common and common
equivalent shares outstanding:
Average common shares outstanding 17,084 17,554
Dilutive effect of CSE's:
Book value plan options 206 377
Executive incentive stock options 110 339
---------- ----------
17,400 18,270
========== ==========
Fully diluted net income per share $ 0.27 $ 0.55
========== ==========
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF PIPER JAFFRAY COMPANIES INC. AS OF
AND FOR THE QUARTER ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> DEC-31-1994
<CASH> 27,669
<RECEIVABLES> 456,335
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 116,516
<PP&E> 25,715
<TOTAL-ASSETS> 698,605
<SHORT-TERM> 163,463
<PAYABLES> 301,864
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 18,524
<LONG-TERM> 43,644
<COMMON> 17,311
0
0
<OTHER-SE> 153,291
<TOTAL-LIABILITY-AND-EQUITY> 698,605
<TRADING-REVENUE> 25,935
<INTEREST-DIVIDENDS> 7,936
<COMMISSIONS> 32,158
<INVESTMENT-BANKING-REVENUES> 11,408
<FEE-REVENUE> 15,062
<INTEREST-EXPENSE> 2,847
<COMPENSATION> 55,974
<INCOME-PRETAX> 7,622
<INCOME-PRE-EXTRAORDINARY> 7,622
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,650
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
