Piper Jaffray Cos. will become a leaner operation in the coming months even as the economy shows signs of strengthening momentum.
The Minneapolis-based investment banker and asset manager said Wednesday it will trim its workforce by 2 to 3 percent and also review its office-space needs in an attempt to reduce expenses.
Speaking with Wall Street analysts during a first-quarter earnings conference call, Chief Financial Officer Debbra Schoneman said the restructuring would result in a charge of $4 million to $5 million in the second quarter.
Head count at Piper, which has about 1,000 employees, could decline by about 30 employees. The company's real estate footprint that's now under review spans 33 offices in the United States, London, Zurich and Hong Kong.
"We're very focused on improving productivity and profitability as we move forward," Schoneman said.
The company, meanwhile, reported a 60 percent decline in profits year-over-year during the first quarter, citing additional income-tax expenses for deferred-tax-asset write-offs. But the first-quarter results were better than in the fourth quarter, when it reported a net loss of $116.4 million. Revenue in the first quarter rose 19 percent to $117.7 million from $99.2 million during the fourth quarter of 2011.
Net income was $2.9 million, or 15 cents per share, including the $3.4 million write-off.
"Against a more positive operating environment, we were pleased with our improved first-quarter results," said Andrew Duff, the company's chairman and CEO said in a statement. "Stronger fixed-income sales and trading and equity financing revenues, and solid asset management and public finance results drove the improved performance."
In comments to analysts, Duff said, "We are reasonably optimistic about business but we know market conditions can change rapidly."
Deal pipeline grows
Piper's earnings rebound came as the stock market delivered its best first quarter in 14 years as consumer confidence and spending were on the rise. The Standard & Poor's 500, for example, rose 12 percent from January through March.
Duff said public finance activity rose for state and local government. The market for initial public offerings also rose, as did merger and acquisition activity.
The investment banking group at Piper Jaffray was busy in the first quarter as members helped underwrite eight initial public offerings -- including Maple Plain-based Proto Labs, one of the best-performing IPOs of the year. Piper also participated in nine follow-on offerings, including the $1.2 billion offering for Michael Kors Holdings Ltd., the Hong Kong-based men's and women's luxury lifestyle brand.
But, Duff cautioned, "Markets are still in the early stage of recovery."
Jerry Caruso, a former investment banker who now runs an $18 million fund in the Carlson Funds Enterprise, said he sees several positive economic trends that could bode well for Piper Jaffray and other players in the financial services sector, particularly in the mergers and acquisitions arena.
"The pipeline [of deals] is bigger," said Caruso, a member of the finance faculty at the University of Minnesota's Carlson School of Management. "There's a large amount of capital out there and pent-up demand, especially by sellers."
Caruso said he also sees more recruiting and hiring of students, which suggests that companies are in a growth mode. "That's encouraging," he said.
Minneapolis-based Piper, which was founded in 1895, was the subject of a report last month that an unnamed Chinese firm was in talks to acquire all or part of the U.S. company. Piper neither confirmed nor denied the report in Deal Reporter and said it plans to remain independent.
Duff did not address that subject nor was he asked about it Wednesday during his comments to analysts.
Piper Jaffray's shares dropped 96 cents, or 3.8 percent, to $24.45.
David Phelps 612-673-7269