Piper Jaffray : Quarterly report which provides a continuing view of a company's financial position

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2018

OR

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission File No. 001-31720

PIPER JAFFRAY COMPANIES

(Exact Name of Registrant as specified in its Charter)

DELAWARE	30-0168701
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)
800 Nicollet Mall, Suite 1000
Minneapolis, Minnesota	55402
(Address of Principal Executive Offices)	(Zip Code)

[phone]

(Registrant's Telephone Number, Including Area Code)

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. YesþNo¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YesþNo¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	þ	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨Noþ

As of October 31, 2018, the registrant had 14,827,021 shares of Common Stock outstanding.

Piper Jaffray Companies

Index to Quarterly Report on Form 10-QPART I. FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS	3
Consolidated Statements of Financial Condition as of September 30, 2018 (Unaudited) and December 31,	3
2017
Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and	4
September 30, 2017 (Unaudited)
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2018	5
and September 30, 2017 (Unaudited)
Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and September 30,	6
2017 (Unaudited)
Notes to the Consolidated Financial Statements (Unaudited)	8
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF	39
OPERATIONS
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	68
ITEM 4.	CONTROLS AND PROCEDURES	68
ITEM 1.	68
ITEM 1A.	68
ITEM 2.	69
ITEM 6.	69
70

PART II. OTHER INFORMATION

LEGAL PROCEEDINGS RISK FACTORS

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS EXHIBITS

SIGNATURES

Table of Contents

PART I.

FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS.

(Amounts in thousands, except share data)

Assets

Cash and cash equivalents

Consolidated Statements of Financial Condition

Receivables from brokers, dealers and clearing organizations

Piper Jaffray Companies

September 30, 2018

(Unaudited)

December 31, 2017

$

68,774$ 33,793

174,065145,394

Financial instruments and other inventory positions owned

Financial instruments and other inventory positions owned and pledged as collateral

Total financial instruments and other inventory positions owned

Fixed assets (net of accumulated depreciation and amortization of $61,897 and $55,944, respectively)

Goodwill

Intangible assets (net of accumulated amortization of $93,262 and $85,417, respectively)

Investments

Net deferred income tax assets Other assets

Total assets

Liabilities and Shareholders' Equity

Short-term financing

Senior notes

Payables to brokers, dealers and clearing organizations

Financial instruments and other inventory positions sold, but not yet purchased Accrued compensation

Other liabilities and accrued expenses

Total liabilities

798,1201,383,377

31,26725,179

81,85581,855

14,98922,834

152,380176,212

103,287101,205

68,69954,834

$

635,893663,330

162,227720,047

$

1,493,436$

49,957$ 289,937

125,000125,000

6,37119,392

254,585399,227

252,448400,092

57,66049,800

746,021

2,024,683

1,283,448

Shareholders' equity:

Common stock, $0.01 par value:

Shares authorized: 100,000,000 at September 30, 2018 and December 31, 2017;

Shares issued: 19,517,285 at September 30, 2018 and 19,512,914 at December 31, 2017;

Shares outstanding: 13,366,703 at September 30, 2018 and 12,911,149 at December 31, 2017

Additional paid-in capital

Retained earnings (1)

Less common stock held in treasury, at cost: 6,150,582 shares at September 30, 2018 and 6,601,765 shares at

December 31, 2017

Accumulated other comprehensive loss

Total common shareholders' equity

195

195

801,417791,970

169,894176,270

(270,046)(273,824)

(1,249)(1,279)

700,211693,332

Noncontrolling interests

Total shareholders' equity

47,20447,903

747,415

741,235

Total liabilities and shareholders' equity

(1) Includes the cumulative effect adjustment upon adoption of ASU 2014-09, as amended. See Note 2 for further discussion.

See Notes to the Consolidated Financial Statements

3

$

1,493,436

$

2,024,683

Table of Contents

(Amounts in thousands, except per share data)

Revenues:

Investment banking Institutional brokerage Asset management Interest

Investment income/(loss)

Piper Jaffray Companies Consolidated Statements of Operations

(Unaudited)

Three Months Ended

September 30,2018

$

• 166,458$

31,738

13,377

6,592

3,068

2017

• 190,482$

34,873

12,818

7,164

(422)

Nine Months Ended

September 30,2018

2017

411,203$ 461,260

92,415111,083

38,70644,011

25,18322,649

6,70615,406

Total revenues

221,233

244,915

574,213654,409

Interest expense

3,705

4,348

14,14215,568

Net revenues

217,528

Non-interest expenses:

Compensation and benefits Outside services Occupancy and equipment Communications

Marketing and business development Deal-related expenses

Trade execution and clearance Restructuring costs

Goodwill impairment Intangible asset amortization Back office conversion costs Other operating expenses

139,151

9,521

8,967

7,561

6,718

7,671

2,049- -

2,615 -

3,640

240,567

169,469

7,495

8,127

7,136

6,683-

2,125-

114,363

3,822

1,293

2,290

560,071

638,841

369,895438,161

29,02427,612

26,47624,846

24,11222,025

21,70222,512

18,888 6,2403,770

- 5,864-

-114,363

7,84511,466

-3,027

9,1878,525

Total non-interest expenses

187,893

322,803

517,139

678,401

Income/(loss) before income tax expense/(benefit)

Income tax expense/(benefit)

29,635 7,365

(82,236)

(31,423)

42,932(39,560)

5,351(26,912)

Net income/(loss)

22,270

(50,813)

37,581

(12,648)

Net income/(loss) applicable to noncontrolling interests

247

(1,100)

(1,271)

3,217

Net income/(loss) applicable to Piper Jaffray Companies

$

22,023

$

(49,713)

$

38,852

$

(15,865)

Net income/(loss) applicable to Piper Jaffray Companies' common shareholders

$

19,377

$

(50,415)(1)

Earnings/(loss) per common share

Basic

Diluted

$ $ $

1.45$1.43$

(3.91)$

(3.91)(2)

Dividends declared per common share

0.38$ 0.31

$ $

Weighted average number of common shares outstanding

Basic

Diluted

(1) No allocation of undistributed income was made due to loss position. See Note 14.

13,34312,898

13,50812,975

$

33,650

$

(18,106)(1)

2.54$2.50$

(1.42)

2.75$ 0.94

13,24812,774

(2)

13,44412,945

(2)Earnings per diluted common share is calculated using the basic weighted average number of common shares outstanding for periods in which a loss is incurred.

(1.42)(2)

(2)

See Notes to the Consolidated Financial Statements

4