Good morning, ladies and gentlemen, and welcome to the Piper Jaffray Companies Conference Call to discuss the financial results for the fourth quarter and full year of 2011. [Operator Instructions] The company has asked that I remind you that statements on this call that are not historical or current facts, including statements about beliefs and expectations, are forward-looking statements that involve inherent risks and uncertainties. Factors that could cause actual results to differ materially from those anticipated are identified in the company's earnings release and reports on file with the SEC, which are available on the company's website at www.piperjaffray.com and on the SEC website at www.sec.gov. As a reminder, this call is being recorded. And now I'd like to turn the call over to Mr. Andrew Duff. Mr. Duff, you may begin your call.

Good morning, and thank you for joining us to review our fourth quarter and full year results. It was a difficult second half to 2011, and our fourth quarter results were similar to the third quarter with modest profitability excluding the goodwill impairment charge. Compared to the third quarter, Asset Management revenues improved; public finance revenues rebounded; M&A revenues, while down, were solid. Equity financing revenues improved from the low level in the third quarter, but capital raising for IPOs was still largely on hold. Offsetting these improvements was lower institutional brokerage revenues. We navigated reasonably well against a challenging and volatile operating environment in 2011, achieving positive pretax earnings in each quarter during the year on a non-GAAP basis. For the full year, our ROE was 2.3% compared to 3.4% for 2010. We reduced incentive compensation commensurate with our performance, and we further reduced our non-compensation expenses. However, we were not able to offset the impact of lower revenues and losses in Asia. Deb will provide more detail on our financial performance. I'd like to focus the rest of my remarks on the strategic initiatives that we established in 2010 and our outlook for 2012. We remain committed to our strategy, and we made progress against it in 2011. Also, we remain focused on our key objective to increase the proportion of higher-margin, higher-return businesses in order to improve our return on equity. These businesses are public finance, Asset Management and M&A. In 2011, they represented 53% of our revenues, up from 50% in 2010. I'll begin with public finance. With historically strong margins and returns, our public finance business made solid progress toward our goal of building a national franchise. Since 2009, we have expanded into the Northeast and Southeast and continued to deepen our presence in Texas.…

Thank you, Andrew. For the fourth quarter, we generated $99 million in revenues and non-GAAP net income of $2.1 million or $0.11 per diluted common share. These results exclude the goodwill impairment charge. We have a reconciliation to GAAP in our earnings release. In the fourth quarter, we performed our annual impairment test of goodwill, which resulted in a $120.3 million pretax impairment charge. The charge will have no effect on our cash position or the regulatory capital position of our broker-dealer subsidiaries. A substantial majority of the impaired goodwill was attributable to the 1998 acquisition of our predecessor company by U.S. Bancorp. The impairment represents 100% of the goodwill related to our Capital Markets segment. There was no goodwill impairment associated with the Asset Management segment. For the fourth quarter, our business mix shifted more to investment banking and Asset Management and away from institutional brokerage compared to the sequential third quarter. We maintained our focus on managing our costs to achieve profitability even at lower revenue levels. Macro-issues continued to weigh heavily on industry activity levels. Compared to the sequential third quarter however, we raised more equity capital in the U.S. and we completed 2 equity financings in Hong Kong. Public finance par issuance increased 25%, and M&A revenues were solid. Institutional brokerage revenues declined to $32 million, down 17% compared to the sequential third quarter. Similar to the industry, we experienced slow client activity in the cash equities business. In addition, fixed income revenues were also lower, though results were mixed, including a negative impact on our aircraft business due to American Airlines’ bankruptcy in November. Our strategic trading results were profitable but lower compared to the third quarter due to several factors, including wider spreads on Build America Bond positions and upgrading the credit quality of the tax exempt portion of the portfolio to mitigate risk in the uncertain credit market. Now I'll comment on expenses. Fourth quarter compensation and benefits expenses were $64 million, down 2% compared to the third quarter of 2011. Our compensation ratio was 64.4%, down from 66.5%, mainly due to lower variable compensation. For the fourth quarter, non-compensation expenses were $34 million on a non-GAAP basis, and in line with our stated goal. For the fourth quarter, we realized a tax benefit of $2.9 million, of which $1.8 million was attributable to the goodwill impairment charge. The remainder of the benefit mainly resulted from the tax exemption on municipal interest. In the fourth quarter, we repurchased $6 million or 294,000 shares of our common stock at an average price per share of $20.40. For the full year, we acquired $26.5 million or 803,500 shares of our common stock, 510,000 shares of which was related to employee tax obligations on vesting of equity awards. We have $51.4 million remaining on a share repurchase authorization, which expires in September 30, 2012.

That concludes our formal remarks. Operator, we will now open the line for questions.

[Operator Instructions] Your first question comes from Devin Ryan, Sandler O'Neill.

So within the fixed income results, appreciate some of the additional color you just gave. But is it possible to give us any sense of what results would've looked like without the mark within the aircraft business? I'm just trying to get a flavor of maybe what that core business did versus last quarter. I know that there are some different moving parts there. So any additional color would be really helpful to try to think about our run rate going forward.

Looking at the quarter-over-quarter delta, the negative aircraft marks were a significant part of that. They weren't all of that impact, although as I mentioned, they were significant. We also experienced a decline in both municipals and other taxable securities really coming from a challenging trading environment. So it was very mixed across the product.

Maybe I'll just add to that, Devin. The tax exempt market was reasonably volatile in the fourth quarter, too. The ratio to the AAA tax exempts to treasuries backed up from high 80s, 90 to almost 120 at the end of November. And that's now reverting. So during the quarter itself, it was relatively challenged.

Okay. Got you. Yes, I was just a little bit surprised given generally rising markets that -- just so I'm clear, the core principal investing, if you will, part of the business was down from last quarter outside of the aircraft mark?

Correct. That is correct.

Okay. Got it. Great. And then just moving on with some new regulations that have been -- obviously will be impacting some of your larger peers like Volcker and just higher risk weightings on capital in general, love to get a sense of, as you're planning for 2012 and beyond, are you planning for any knock-on impacts on your business as a result of some of those? Maybe one would be lower volumes if liquidity doesn't come back into the system or even any positives. Just any color from new regulations would help.

As you know, a lot of those are oriented towards systemically important organizations and their capital ratios and/or activities that they’re able to continue in. Most of those don't apply directly to us or have a direct impact. The amount of capital in the various asset classes and activity, we cautiously look at potentially an opportunity if there’s going to be fewer participants in areas that we know very well. It may infer increased volatility.

Got you. Okay. Great. And then can you provide additional color on the other income loss within Capital Markets? I think it was $3.2 million. You guys had a gain there. Just anything additional would be helpful.

Yes. So with within that line item there are a couple things. A portion of our long-term debt cost goes there. And typically, it is more than offset by revenues and profits on our firm investments, both merchant banking and other firm investments. In the fourth quarter, we had losses on firm investments outside of merchant banking that is what caused that loss. And just, I guess I would just add there, those were unrealized marks on some fund investments that we had.

Okay. And then lastly, just on the comp ratio, obviously, this was a challenging revenue year. And the comp ratio, I think, was higher than what you would have liked. Can you give us any sense of where in kind of more normalized revenue environments, is something around 60 or below still the target, and how we should think about that assuming 2012 is a better revenue year for you guys?

The short answer to that is yes. If you look at our history, we hovered around 60. And over time, as we remix the business, particularly Asset Management, as well as some of the principaling activity, the opportunity there is for that to be lower over time. And that's our intention.

Your next question comes from Joel Jeffrey of KBW.

Just to follow up quickly on Devin's question, I guess kind of looking at it in a different way. You talked about the reduction in variable comp expense. Sort of the number that came out this quarter, is that how we should sort of think about sort of the bottom, the baseline fixed number going forward in terms of comp?

I wouldn't say that is accurate because there are still definitely variable compensation that's within that number that is dependent on overall revenue and profitability levels. I do think what you're seeing, though, in this quarter is the impact of those fixed components of compensation, whether it be our support infrastructure or benefits or certain salary levels in businesses with lower revenues impacting that comp ratio. But I wouldn't say it's been ultimately that level of comping before.

Okay. And then just in terms of your repurchase activity, I mean, you bought back some shares this quarter. And it looks like you got about $51 million remaining on your current authorization that expires in September. Is it likely if the stock valuation sort of stays at this level that you guys might be more aggressive in terms of repurchase activity?

We -- as we've talked about before, our primary goal is to offset dilution from employee equity awards, which we have done. And we are looking for additional ways to go beyond just offsetting dilution.

Okay. And then just lastly, in terms of the -- I appreciate the color you guys gave us on the equity Capital Markets activity. But can you talk a little bit more about why you guys seem to be picking up more bookrun deals? Is there anything specific that you guys have been focusing on?

Yes. That's a multiyear transitioning effort that I'd say it probably goes back 4 or 5 years now. It's our belief and conclusion that over time to really succeed and have the appropriate share to be long-term successful in the business, you have to bookrun a majority of the activity. Increasingly what's available to co-managers has been on a decline for years. So it's critical that we get in the bookrun position. It also reflects the quality of your relationship being a primary advisor to the client. So we have been mindful of that. And all the various industry teams are well aware of that, that that's our objective and we -- the component of the discussion of commitment committee, and it's the focus of the business over time.

The next question comes from David Trone, JMP Securities.

The quick question I had on -- was on marketing and business development. I know that tends to be activity linked. But revenue was flat sequentially, and that was up -- marketing and development was up about 12%. Is there anything -- any color there?

The biggest reason for the delta in the increase there is related to some busted deal expenses, so transactions that were not able to come to the market as the market has been slow here for a period of time.

So you ate the expenses that you normally pass along to the client, right?

Correct.

Okay. The other thing, too, that I had a question on, on the aircraft mark that you mentioned, I presume that's not something would be reversible at any point, that's pretty much set in stone?

So the -- when we talk about the marks on the aircraft, some of that was on American Airlines positions, but also on our overall EETC aircraft business. And the majority of those marks were not realized.

Okay. And then it looks like over the last 2 quarters, if you strip out all of the unusual tax items and things like that, looks like $100 million is kind of your breakeven point. In terms of top line, you're pretty much going to breakeven. So how are you thinking about the year? I know you mentioned some headcount reductions. What would you -- how would you react if this is a year with kind of $400 million in revenue?

So we have, I think, shown some meaningful progress in our ability to lower our expenses, both comp and non-comp. We remain focused on that, and we are wholly committed to being profitable every quarter and year-in, year-out and improving our ROE over time. We do believe that this potentially is another difficult year with some volatility, and we're going to continue to look at that.

So you feel like you're willing and able to reduce the franchise a bit more if necessary?

Yes.

Okay. And on that, as a related point, some of the -- admittedly, they're very different companies. But some of the bigger guys that reported have been cautiously optimistic that the pace of activities seems like it's starting out a little bit better. Are you seeing that in your business or not so much?

You know what, we'd have a similar view. I need to comment -- it's awfully early. And frankly, January can tend to be relatively slow. But there are some trends that suggest the potential here is for improvement. Look at the capital raising in the U.S. We've already done a bookrun IPO and 2 co-managed follow-ons. Where the ratios are in public finance, that would open up the possibility of a fair amount of refundings. In fact, the forward calendar is growing. Yes. It's early, but yes.

Your next question comes from Matt Fischer of CLSA.

To follow up on that, just in terms of the backlogs, you said the forward calendar is growing. Maybe by product, if you can give us a little more granularity in the pipeline. And also, what's in the pipeline? Is this -- how much of it is new versus just deals that have kind of been sitting there, waiting for the markets to stabilize before they would be executed?

So the equity capital pipeline that I would refer to is recent, meaning there’s an extended one that's 180 days older, and I'm not going to refer to that. There's still some possibility in that. But the more current one has 10 on file, 6 of which we're book running. Our public finance calendar is in reasonable shape. That is sensitive to interest rates and the ratios. Those are trending favorably. Again, it's early in January, but they are trending favorably to where that calendar could start to grow meaningfully.

And versus where you were, let's say at the start of 2011, any color there?

Well, in public finance, I guess I'd note that, that was an unusually low quarter for the entire industry. The run rate in capital raised was just under $200 billion, and the prior year had been $430 million. We ended the year as an industry at $295 billion. So year-over-year, that was a particularly difficult calendar, a lot of it driven by all the budget issues that started with the federal government and went to the state and local level. That feels more constructive currently. Again, it's early.

Okay. And then M&A?

Our M&A backlog feels solid. We're reasonably confident. Good dialogues going on with the clients. The mandates recently feel solid.

Okay. Great. And then looking at Asset Management, the assets under management up 10%. You mentioned the $900 million in net new assets. How does that, and I may have missed this, how does this break down versus kind of asset class?

So the bulk of that I was referring to specifically was our MLP product, and they had $900 million of net new assets, which was the lion's share of their growth year-over-year, which a north of that, some of that being market. The mix on the rest of the products kind of netted out relatively even; some net losses. Having said that, the 5 new mutual funds, which we have ceded, did grow their assets. They're building longer-term track records. All the products in their track records are actually very strong throughout the year, leaving us in a good position for asset growth.

Your next question comes from Brian Hagler of Kennedy Capital.

I guess my main question had to do with kind of what you've seen so far year-to-date in the backlog, which you've addressed. But just a couple more questions. Is there any way you could get more specific on the aircraft mark?

I guess as I had mentioned earlier, that is -- it was on our entire EETC business as the entire aircraft market got hit. Once American Airlines filed for bankruptcy, we did take marks on both AMR positions that we held, as well as other aircraft position. The majority of the losses were unrealized, although we did realize some losses for certain positions that we chose to get out of. And it was a significant part of the quarter-over-quarter delta.

Okay. And then maybe just switching gear to Asia. You mentioned you've taken action to try to improve profitability or improve or lose less money there. Can you just talk about how much more flexibility you have and kind of what the time frame is if things don't recover there in a more -- in a stronger way, when you'll take action?

So it's a priority and a clear focus of ours. It was amazing reversal in business activity, 2010 to 2011. As I commented, we did take meaningful action in the fourth quarter. That's complete and in place. We do have additional plans should the activity not pick up. We have a backlog there. We don't anticipate much of it can come in the first quarter. So it's being very mindful that the run rate expense improvements are in place, and we're tracking to them in that we have a keen eye on those recovering markets and what kind of activity we believe can come. So we are very focused on it, believe we've improved our position based on lower revenues meaningfully. But we will watch it very closely, and we'll take more action if we need to. I do -- and maybe the final thing I'd want to say there is I do believe in the longer-term opportunity there. It's a very unique market with substantial equity capital needs, and we are well positioned.

Your next question comes from Devin Ryan of Sandler O'Neill.

I just had a quick follow-up on the fixed income business. When I'm just looking at this quarter versus last quarter and then what you guys have been doing previous to maybe these past couple of tough quarters, I mean, is there anything that's changed structurally within your Europe business? I understand that volumes have been way off and that it's been a really tough time for a lot of businesses and products within fixed income. But have you decreased headcount there? Is there anything else outside of just slower volumes that would be negatively impacting your business relative to the industry? Just trying to get any additional flavor there.

No, I don't think there are any other factors there, Devin. I might take you back to the principaling activity, the strategic trading. The volatility in the tax exempts was pretty material, coupled with, I think Deb mentioned this, a decision we made to upgrade the quality in the portfolio now, 92% or 93% AA, AAA; that has proven to be a good decision for us. Additionally, BABs, which were one of the few active participants in that market still, widened very substantially in the quarter as well. We managed through that. So it was more challenging. Profitable in the quarter, but it was more challenging versus other times in the year. I don't think there’s something fundamentally different, if I'm understanding your question.

Yes, that was all. And yes, I'm just trying to think about kind of where that business is and its potential. So those comments are helpful.

Okay. We have a lot of confidence in those strategies over time. It was not our most profitable quarter.

[Operator Instructions] And there are no further questions at this time.

Okay. Then why don't I close the call saying we recognize the potential for ongoing volatility in difficult markets. We'll take the actions we need to continue our profitability quarter-to-quarter in improving our performance. We are confident of the strategy, and we are making progress against it. So thank you all for joining us today.

This concludes today's conference call. You may now disconnect.