Exhibit 99.2
Piper Jaffray Companies
Unaudited Pro Forma Consolidated Statement of Financial Condition
June 30, 2006
Unaudited Pro Forma Consolidated Statement of Financial Condition
June 30, 2006
Pro Forma | Pro Forma | Pro Forma | ||||||||||||||||||
As | Adjustments | Adjustments | Adjustments | As | ||||||||||||||||
Reported | (Note 2) | (Note 2) | (Note 2) | Adjusted | ||||||||||||||||
(Amounts in thousands, except share data) | ||||||||||||||||||||
Assets | ||||||||||||||||||||
Cash and cash equivalents | $ | 138,167 | $ | 787,717 | (a) | $ | — | $ | (227,726) | (h) | $ | 698,158 | ||||||||
Receivables: | ||||||||||||||||||||
Customers (net of allowance of $1,665) | 60,627 | — | — | — | 60,627 | |||||||||||||||
Brokers, dealers and clearing organizations | 136,503 | — | — | — | 136,503 | |||||||||||||||
Deposits with clearing organizations | 58,340 | — | — | — | 58,340 | |||||||||||||||
Securities purchased under agreements to resell | 243,883 | — | — | — | 243,883 | |||||||||||||||
Trading securities owned | 789,946 | — | — | — | 789,946 | |||||||||||||||
Fixed assets, net | 37,520 | — | — | — | 37,520 | |||||||||||||||
Goodwill (net of accumulated amortization of $52,531) | 317,167 | (85,600) | (b) | — | — | 231,567 | ||||||||||||||
Intangible assets (net of accumulated amortization of $2,533) | 2,267 | — | — | — | 2,267 | |||||||||||||||
Other receivables | 38,269 | — | — | — | 38,269 | |||||||||||||||
Other assets | 89,399 | — | — | — | 89,399 | |||||||||||||||
Assets held for sale | 419,855 | (419,855) | (c) | — | — | — | ||||||||||||||
Total assets | $ | 2,331,943 | $ | 282,262 | $ | — | $ | (227,726 | ) | $ | 2,386,479 | |||||||||
Liabilities and Shareholders’ Equity | ||||||||||||||||||||
Payables: | ||||||||||||||||||||
Customers | $ | 111,299 | — | — | — | $ | 111,299 | |||||||||||||
Checks and drafts | 36,141 | — | — | — | 36,141 | |||||||||||||||
Brokers, dealers and clearing organizations | 259,816 | — | — | (227,726) | (h) | 32,090 | ||||||||||||||
Securities sold under agreements to repurchase | 198,175 | — | — | — | 198,175 | |||||||||||||||
Trading securities sold, but not yet purchased | 328,049 | — | — | — | 328,049 | |||||||||||||||
Accrued compensation | 118,617 | — | — | — | 118,617 | |||||||||||||||
Other liabilities and accrued expenses | 171,602 | 192,572 | (d) | 28,535 | (g) | — | 392,709 | |||||||||||||
Liabilities held for sale | 120,815 | (120,815) | (e) | — | — | — | ||||||||||||||
Total liabilities | 1,344,514 | 71,757 | 28,535 | (227,726 | ) | 1,217,080 | ||||||||||||||
Subordinated debt | 180,000 | — | — | — | 180,000 | |||||||||||||||
Shareholders’ equity: | ||||||||||||||||||||
Common stock, $0.01 par value; | ||||||||||||||||||||
Shares authorized: 100,000,000 | ||||||||||||||||||||
Shares issued: 19,487,319 | ||||||||||||||||||||
Shares outstanding: 18,556,143 | 195 | — | — | — | 195 | |||||||||||||||
Additional paid-in capital | 721,660 | — | — | — | 721,660 | |||||||||||||||
Retained earnings | 118,425 | 210,505 | (f) | (28,535) | (g) | — | 300,395 | |||||||||||||
Less common stock held in treasury, at cost: 931,176 shares | (29,429 | ) | — | — | — | (29,429 | ) | |||||||||||||
Other comprehensive loss | (3,422 | ) | — | — | — | (3,422 | ) | |||||||||||||
Total shareholders’ equity | 807,429 | 210,505 | (28,535 | ) | — | 989,399 | ||||||||||||||
Total liabilities and shareholders’ equity | $ | 2,331,943 | $ | 282,262 | $ | — | $ | (227,726 | ) | $ | 2,386,479 | |||||||||
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
Piper Jaffray Companies
Unaudited Pro Forma Condensed Consolidated Statements of Operations
For the year ended December 31, 2005
Unaudited Pro Forma Condensed Consolidated Statements of Operations
For the year ended December 31, 2005
Pro Forma | ||||||||||||
As | Adjustments | As | ||||||||||
(Amounts in thousands, except per share data) | Reported | (Note 3) | Adjusted | |||||||||
Revenues: | ||||||||||||
Investment banking | $ | 243,347 | $ | — | $ | 243,347 | ||||||
Institutional brokerage | 162,068 | — | 162,068 | |||||||||
Interest | 44,857 | — | 44,857 | |||||||||
Other income | 3,530 | — | 3,530 | |||||||||
Total revenues | 453,802 | — | 453,802 | |||||||||
Interest expense | 32,494 | — | 32,494 | |||||||||
Net revenues | 421,308 | — | 421,308 | |||||||||
Non-interest expenses: | ||||||||||||
Compensation and benefits | 243,833 | — | 243,833 | |||||||||
Occupancy and equipment | 30,808 | — | 30,808 | |||||||||
Communications | 23,987 | — | 23,987 | |||||||||
Floor brokerage and clearance | 14,785 | — | 14,785 | |||||||||
Marketing and business development | 21,537 | — | 21,537 | |||||||||
Outside services | 23,881 | — | 23,881 | |||||||||
Cash award program | 4,205 | — | 4,205 | |||||||||
Restructuring-related expense | 8,595 | — | 8,595 | |||||||||
Other operating expenses | 13,646 | — | 13,646 | |||||||||
Total non-interest expenses | 385,277 | — | 385,277 | |||||||||
Income from continuing operations before income tax expense | 36,031 | — | 36,031 | |||||||||
Income tax expense | 10,863 | — | 10,863 | |||||||||
Net income from continuing operations | $ | 25,168 | $ | — | $ | 25,168 | ||||||
Earnings per basic common share | $ | 1.34 | $ | 1.34 | ||||||||
Earnings per diluted common share | $ | 1.32 | $ | 1.32 | ||||||||
Weighted average number of common shares outstanding | ||||||||||||
Basic | 18,813 | 18,813 | ||||||||||
Diluted | 19,081 | 19,081 |
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
Piper Jaffray Companies
Unaudited Pro Forma Condensed Consolidated Statements of Operations
For the Six Months Ended June 30, 2006
Unaudited Pro Forma Condensed Consolidated Statements of Operations
For the Six Months Ended June 30, 2006
Pro Forma | ||||||||||||
As | Adjustments | As | ||||||||||
(Amounts in thousands, except per share data) | Reported | (Note 3) | Adjusted | |||||||||
Revenues: | ||||||||||||
Investment banking | $ | 131,000 | $ | — | $ | 131,000 | ||||||
Institutional brokerage | 87,172 | — | 87,172 | |||||||||
Interest | 28,065 | — | 28,065 | |||||||||
Other income | 11,268 | — | 11,268 | |||||||||
Total revenues | 257,505 | — | 257,505 | |||||||||
Interest expense | 17,296 | — | 17,296 | |||||||||
Net revenues | 240,209 | — | 240,209 | |||||||||
Non-interest expenses: | ||||||||||||
Compensation and benefits | 133,577 | — | 133,577 | |||||||||
Occupancy and equipment | 14,827 | — | 14,827 | |||||||||
Communications | 10,976 | — | 10,976 | |||||||||
Floor brokerage and clearance | 6,048 | — | 6,048 | |||||||||
Marketing and business development | 11,301 | — | 11,301 | |||||||||
Outside services | 13,128 | — | 13,128 | |||||||||
Cash award program | 2,161 | — | 2,161 | |||||||||
Restructuring-related expense | — | — | — | |||||||||
Other operating expenses | 7,347 | — | 7,347 | |||||||||
Total non-interest expenses | 199,365 | — | 199,365 | |||||||||
Income from continuing operations before income tax expense | 40,844 | — | 40,844 | |||||||||
Income tax expense | 14,209 | — | 14,209 | |||||||||
Net income from continuing operations | $ | 26,635 | $ | — | $ | 26,635 | ||||||
Earnings per basic common share | $ | 1.44 | $ | 1.44 | ||||||||
Earnings per diluted common share | $ | 1.37 | $ | 1.37 | ||||||||
Weighted average number of common shares outstanding | ||||||||||||
Basic | 18,509 | 18,509 | ||||||||||
Diluted | 19,408 | 19,408 |
See Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
Piper Jaffray Companies
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
Note 1Basis of Presentation
Basis of Presentation
The following unaudited pro forma condensed consolidated financial statements are based upon and should be read in conjunction with our historical consolidated financial statements and accompanying notes of Piper Jaffray Companies (the “Company”).
The unaudited pro forma consolidated statement of financial condition of the Company as of June 30, 2006 and the statements of operations for the six months ended June 30, 2006 and the year ended December 31, 2005, give effect to the sale of the Company’s Private Client Services (“PCS”) branch network as if the sale had occurred on June 30, 2006 for balance sheet purposes and January 1, 2005 for purposes of the statements of operations.
The unaudited pro forma condensed consolidated financial statements have been prepared based upon currently available information, estimates and assumptions that are deemed appropriate by the Company’s management. The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of the results that would have been reported had such transaction actually occurred on the dates specified, nor are they indicative of our future results of operations of financial condition.
Note 2Statement of Financial Condition Pro Forma Adjustments
The unaudited pro forma consolidated statement of financial condition as of June 30, 2006 reflects the following adjustments:
a) | Represents gross cash proceeds from the sale of the PCS branch network. The Company anticipates utilizing these proceeds to repay all $180 million in subordinated debt currently outstanding, repurchase up to $180 million in common stock, pay approximately $185 million in income taxes associated with the gain on sale of the branch network and repay other outstanding short-term financing liabilities. | ||
b) | Adjustment to write-off the goodwill assigned to the PCS branch network. | ||
c) | Adjustment to reflect the sale of Company assets comprised of $394.9 million in customer receivables, $14.8 million in fixed assets, $8.7 million in employee forgivable loans and $1.5 million in other receivables. | ||
d) | Adjustment to reflect an increase in other liabilities for income taxes payable of $184.4 million related to the estimated gain on sale of the PCS branch network and estimated additional transaction costs of $8.2 million related to the sale. | ||
e) | Adjustment to reflect the sale of Company liabilities comprised of $118.2 million in customer payables and $2.6 million in other payables. | ||
f) | Adjustment to increase retained earning for the estimated gain, net of tax, on the sale of the PCS branch network. | ||
g) | Adjustment to reflect additional restructuring expenses, net of tax, recorded at the time of sale. | ||
h) | Adjustment to reflect payment of PCS stock loan liabilities due to the Company no longer having access to PCS customer excess margin securities. |
Note 3Statements of Operations Pro Forma Adjustments
There were no adjustments to any items on the unaudited condensed consolidated statement of operations in calculating the income from continuing operation as the sale of the PCS branch network was reflected as discontinued operations in the Company’s Quarterly Report on Form 10-Q as of and for the three months ended June 30, 2006 and in the Company’s Form 8-K filed on July 19, 2006. For the six months ended June 30, 2006, the Company reported income from discontinued operations of $1.4 million, or $0.07 per diluted share. For the year ended December 31, 2005, the Company reported income from discontinued operations of $14.9 million, or $0.78 per diluted share. The pro forma results exclude the impact of the gain on sale of the PCS branch network.