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

 For the Quarterly Period Ended March 31, 2010

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

 For the transition period from                      to                     

(Exact Name of Registrant as specified in its Charter)

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

(612) 303-6000
(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. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes o No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer: þ		Accelerated filer: o		Non-accelerated filer: o		Smaller reporting company: o
		(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes o No þ

     As of May 3, 2010, the registrant had 20,758,423 shares of Common Stock outstanding.

 

 

Piper Jaffray Companies

Index to Quarterly Report on Form 10-Q

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements				3
Consolidated Statements of Financial Condition as of March 31, 2010 and December 31, 2009				3
Consolidated Statements of Operations for the three months ended March 31, 2010 and March 31, 2009				4
Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and March 31, 2009				5
Notes to Consolidated Financial Statements				6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations				25
Item 3. Quantitative and Qualitative Disclosures About Market Risk				41
Item 4. Controls and Procedures				41
PART II. OTHER INFORMATION
Item 1. Legal Proceedings				41
Item 1A. Risk Factors				41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds				42
Item 6. Exhibits				42
Signatures				43
Exhibit Index				44
EX-10.1
EX-10.2
EX-10.3
EX-31.1
EX-31.2
EX-32.1

		March 31,				December 31,
		2010				2009
(Amounts in thousands, except share data)		(Unaudited)
Assets
Cash and cash equivalents		$	40,483			$	43,942
Cash and cash equivalents segregated for regulatory purposes			8,006				9,006
Receivables:
Customers			48,713				71,859
Brokers, dealers and clearing organizations			185,838				244,051
Deposits with clearing organizations			26,439				18,010
Securities purchased under agreements to resell			366,284				149,682
Financial instruments and other inventory positions owned			547,456				662,618
Financial instruments and other inventory positions owned and pledged as collateral			397,545				137,371
Total financial instruments and other inventory positions owned			945,001				799,989
Fixed assets (net of accumulated depreciation and amortization of $61,266 and $59,563, respectively)			16,022				16,596
Goodwill			317,034				164,625
Intangible assets (net of accumulated amortization of $11,662 and $10,686, respectively)			66,050				12,067
Other receivables			40,890				33,868
Other assets			126,112				139,635
Total assets		$	2,186,872			$	1,703,330
Liabilities and Shareholders’ Equity
Short-term financing		$	93,520			$	90,079
Variable rate senior notes			120,000				120,000
Payables:
Customers			40,458				48,179
Checks and drafts			6,235				8,622
Brokers, dealers and clearing organizations			59,668				71,818
Securities sold under agreements to repurchase			451,585				36,134
Financial instruments and other inventory positions sold, but not yet purchased			493,395				335,795
Accrued compensation			36,090				157,022
Other liabilities and accrued expenses			47,498				57,065
Total liabilities			1,348,449				924,714
Shareholders’ equity:
Common stock, $0.01 par value:
Shares authorized: 100,000,000 at March 31, 2010 and December 31, 2009;
Shares issued: 19,504,948 at March 31, 2010 and December 31, 2009;
Shares outstanding: 16,046,337 at March 31, 2010 and 15,633,690 at December 31, 2009			195				195
Additional paid-in capital			843,786				803,553
Retained earnings			155,703				155,193
Less common stock held in treasury, at cost: 3,458,611 shares at March 31, 2010 and 3,871,258 shares at December 31, 2009			(161,728	)			(181,443	)
Other comprehensive income			467				1,118
Total shareholders’ equity			838,423				778,616
Total liabilities and shareholders’ equity		$	2,186,872			$	1,703,330

		Three Months Ended March 31,
(Amounts in thousands, except per share data)		2010				2009
Revenues:
Investment banking		$	43,748			$	24,350
Institutional brokerage			49,095				55,027
Interest			11,120				7,288
Asset management			9,154				3,009
Other income/(loss)			2,927				(3,599	)
Total revenues			116,044				86,075
Interest expense			6,458				2,193
Net revenues			109,586				83,882
Non-interest expenses:
Compensation and benefits			65,096				50,324
Occupancy and equipment			7,669				6,518
Communications			6,489				6,099
Floor brokerage and clearance			2,617				2,882
Marketing and business development			5,322				4,445
Outside services			8,004				7,519
Other operating expenses			5,234				2,551
Total non-interest expenses			100,431				80,338
Income before income tax expense			9,155				3,544
Income tax expense			8,645				6,269
Net income/(loss)		$	510			$	(2,725	)
Net income applicable to common shareholders		$	409				N/A
Earnings per basic common share
Earnings/(loss) per basic common share		$	0.03			$	(0.17	)
Earnings per diluted common share
Earnings/(loss) per diluted common share		$	0.03			$	(0.17	)  (1)
Weighted average number of common shares outstanding
Basic			15,837				15,868
Diluted			15,924				15,868	(1)

		Three Months Ended March 31,
(Dollars in thousands)		2010				2009
Operating Activities:
Net income/(loss)		$	510			$	(2,725	)
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
Depreciation and amortization of fixed assets			1,847				1,763
Deferred income taxes			16,133				13,762
Stock-based compensation			27,187				6,837
Amortization of intangible assets			976				614
Decrease/(increase) in operating assets:
Cash and cash equivalents segregated for regulatory purposes			1,000				(7,001	)
Receivables:
Customers			23,569				(7,018	)
Brokers, dealers and clearing organizations			58,170				61,225
Deposits with clearing organizations			(8,429	)			(9,084	)
Securities purchased under agreements to resell			(216,602	)			15,211
Securitized municipal tender option bonds			-				45,740
Net financial instruments and other inventory positions owned			12,519				(81,423	)
Other receivables			1,733				514
Other assets			(2,417	)			34,062
Increase/(decrease) in operating liabilities:
Payables:
Customers			(7,681	)			7,778
Checks and drafts			(2,387	)			250
Brokers, dealers and clearing organizations			(8,976	)			86,550
Securities sold under agreements to repurchase			(200	)			(91	)
Tender option bond trust certificates			-				(49,267	)
Accrued compensation			(111,806	)			(45,442	)
Other liabilities and accrued expenses			(12,407	)			(12,735	)
Net cash provided by/(used in) operating activities			(227,261	)			59,520
Investing Activities:
Business acquisition, net of cash acquired			(181,906	)			-
Purchases of fixed assets, net			(952	)			(431	)
Net cash used in investing activities			(182,858	)			(431	)
Financing Activities:
Decrease in securities loaned			(3,652	)			-
Increase/(decrease) in securities sold under agreements to repurchase			415,651				(102,756	)
Increase in short-term financing			3,441				50,000
Repurchase of common stock			(8,316	)			(4,074	)
Reduced tax benefits from stock-based compensation			-				(2,941	)
Proceeds from stock option transactions			98				-
Net cash provided by/(used in) financing activities			407,222				(59,771	)
Currency adjustment:
Effect of exchange rate changes on cash			(562	)			(164	)
Net decrease in cash and cash equivalents			(3,459	)			(846	)
Cash and cash equivalents at beginning of period			43,942				49,848
Cash and cash equivalents at end of period		$	40,483			$	49,002
Supplemental disclosure of cash flow information -
Cash paid/(received) during the period for:
Interest		$	6,089			$	1,962
Income taxes		$	257			$	(36,642	)
Non-cash investing activities -
Issuance of common stock for acquisition of Advisory Research Holdings, Inc.:
893,105 shares for the three months ended March 31, 2010		$	31,822			$	-
Non-cash financing activities -
Issuance of common stock for retirement plan obligations:
81,696 shares and 134,700 shares for the three months ended March 31, 2010 and 2009, respectively		$	3,634			$	3,756
Issuance of restricted common stock for annual equity award:
699,673 shares and 585,198 shares for the three months ended March 31, 2010 and 2009, respectively		$	31,121			$	16,331

Piper Jaffray Companies

Note 1 Background

Piper Jaffray Companies is the parent company of Piper Jaffray & Co. (“Piper Jaffray”), a securities broker dealer and investment banking firm; Piper Jaffray Ltd., a firm providing securities brokerage and investment banking services in Europe headquartered in London, England; Piper Jaffray Asia Holdings Limited, an entity providing investment banking services in China headquartered in Hong Kong; Fiduciary Asset Management, LLC (“FAMCO”) and Advisory Research Holdings, Inc. (“ARI”), entities providing asset management services to separately managed accounts, closed end funds and partnerships; Piper Jaffray Financial Products Inc., Piper Jaffray Financial Products II Inc. and Piper Jaffray Financial Products III Inc., entities that facilitate derivative transactions; and other immaterial subsidiaries. Piper Jaffray Companies and its subsidiaries (collectively, the “Company”) currently operate as one reporting segment providing investment banking services, institutional sales, trading and research services, and asset management services. Beginning in the second quarter of 2010, the Company will provide segment results for capital markets and asset management.

Basis of Presentation

The consolidated financial statements include the accounts of Piper Jaffray Companies, its wholly owned subsidiaries and other entities in which the Company has a controlling financial interest. All material intercompany balances have been eliminated. Certain financial information for prior periods has been reclassified to conform to the current period presentation.

The consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) with respect to Form 10-Q and reflect all adjustments that in the opinion of management are normal and recurring and that are necessary for a fair statement of the results for the interim periods presented. In accordance with these rules and regulations, certain disclosures that are normally included in annual financial statements have been omitted. The consolidated financial statements included in this Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

The consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles. These principles require management to make certain estimates and assumptions that may affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The nature of the Company’s business is such that the results of any interim period may not be indicative of the results to be expected for a full year.

Note 2 Summary of Significant Accounting Policies

Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, for a full description of the Company’s significant accounting policies. Changes to the Company’s significant accounting policies are described below.

Principles of Consolidation

The consolidated financial statements include the accounts of Piper Jaffray Companies, its wholly owned subsidiaries, and all other entities in which the Company has a controlling financial interest. All material intercompany balances have been eliminated. The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity or a variable interest entity (“VIE”).

Voting interest entities are entities in which the total equity investment at risk is sufficient to enable each entity to finance itself independently and provides the equity holders with the obligation to absorb losses, the right to receive residual returns and the right or power to make decisions about or direct the entity’s activities that most significantly impact the entity’s economic performance. Voting interest entities, where we have a majority interest, are consolidated in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 810, “Consolidations” (“ASC 810”). ASC 810 states that the usual condition for a controlling financial interest in an entity is ownership of a majority voting interest. Accordingly, the Company consolidates voting interest entities in which it has all, or a majority of, the voting interest.

As defined in ASC 810, VIEs are entities that lack one or more of the characteristics of a voting interest entity described above. With the exception of entities eligible for the deferral codified in FASB Accounting Standards Update (“ASU”) No. 2010-10,

“Consolidation: Amendments for Certain Investment Funds,” (“ASU 2010-10”) (generally asset managers and investment companies); ASC 810 states that a controlling financial interest in an entity is present when an enterprise has a variable interest, or combination of variable interests, that have both the power to direct the activities of the entity that most significantly impact the entity’s economic performance and the obligation to absorb losses of the entity or the rights to receive benefits from the entity that could potentially be significant to the entity. Accordingly, the Company consolidates VIEs in which the Company has a controlling financial interest.

Entities meeting the deferral provision defined by ASU 2010-10 are evaluated under the historical VIE guidance. Under the historical guidance, a controlling financial interest in an entity is present when an enterprise has a variable interest, or combination of variable interests, that will absorb a majority of the entity’s expected losses, receive a majority of the entity’s expected residual returns, or both. The enterprise with a controlling financial interest, known as the primary beneficiary, consolidates the VIE. Accordingly, the Company consolidates VIEs subject to the deferral provisions defined by ASU 2010-10 in which the Company is deemed to be the primary beneficiary.

When the Company does not have a controlling financial interest in an entity but exerts significant influence over the entity’s operating and financial policies (generally defined as owning a voting or economic interest of between 20 percent to 50 percent), the Company accounts for its investment in accordance with the equity method of accounting prescribed by FASB Accounting Standards Codification Topic 323, “Investments – Equity Method and Joint Ventures” (“ASC 323”). If the Company does not have a controlling financial interest in, or exert significant influence over, an entity, the Company accounts for its investment at cost.

Note 3 Recent Accounting Pronouncements

Adoption of New Accounting Standards

Accounting for Transfers of Financial Assets

In June 2009, the FASB issued guidance amending the Accounting Standards Codification Topic 860, “Transfers and Servicing,” (“ASC 860”) designed to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. Additionally, the new guidance eliminates the qualifying special-purpose entity (“QSPE”) concept. The updates were effective for the Company January 1, 2010. The recognition and measurement provisions were effective for prospective transfers with the exception of existing QSPEs which must be evaluated at the time of adoption. The disclosures required by ASC 860 are applied to both retrospective and prospective transfers. The adoption of ASC 860 did not have an impact on the Company’s consolidated financial statements.

Consolidation of Variable Interest Entities

In June 2009, the FASB updated the accounting standards related to the consolidation of variable interest entities (“VIE”). The standard requires, among other things, a qualitative rather than quantitative analysis to determine the primary beneficiary (“PB”) of the VIE, continuous assessments of whether the entity is the PB of the VIE, and enhanced disclosures about involvement with VIEs. This standard was effective for the Company January 1, 2010 and is applicable to all entities with which the enterprise has involvement, regardless of when that involvement arose. The adoption of the new standard did not have an impact on the Company’s consolidated financial statements.

In February 2010, the FASB issued ASU 2010-10, which addresses the application of the amendments to VIE consolidation described above by reporting entities in the asset management industry by deferring the effective date of the standard’s new recognition and measurement requirements for certain investment funds. However, the standard’s new disclosure requirements will continue to apply to all entities. ASU 2010-10 was effective for the Company January 1, 2010. The adoption of this standard led to the deferral of the application of the updated consolidation guidance in ASC 810 to certain of the Company’s investment funds within the scope of ASU 2010-10.

Fair Value Measurements

In January 2010, the FASB issued ASU No. 2010-06, “Improving Disclosures about Fair Value Measurements,” (“ASU 2010-06”) amending FASB Accounting Standards Codification Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”). The amended guidance requires entities to disclose additional information regarding assets and liabilities that are transferred between

levels of the fair value hierarchy and to disclose information in the Level III rollforward about purchases, sales, issuances and settlements on a gross basis. ASU 2010-06 also further clarifies existing guidance pertaining to the level of disaggregation at which fair value disclosures should be made and the requirements to disclose information about the valuation techniques and inputs used in estimating Level II and Level III fair value measurements. The guidance in ASU 2010-06 was effective for the Company January 1, 2010, except for the requirement to separately disclose purchases, sales, issuances, and settlements on a gross basis in the Level III rollforward, which becomes effective for fiscal years (and for interim periods within those fiscal years) beginning after December 15, 2010. While the adoption of ASU 2010-06 did not change accounting requirements, it did impact the Company’s disclosures about fair value measurements.

On March 1, 2010, the Company completed the purchase of all the issued and outstanding shares of common stock, junior subordinated debentures, senior subordinated notes and promissory notes of Advisory Research Holdings, Inc. (“ARI”), an asset management firm based in Chicago, Illinois. The acquisition expanded the Company’s existing asset management business supporting the Company’s strategy of diversifying its revenues. The purchase was completed pursuant to the securities purchase agreement dated December 20, 2009. The fair value as of the acquisition date was $211.9 million, consisting of $180.1 million in cash and 893,105 shares (881,846 of which vest ratably over four years) of the Company’s common stock valued at $31.8 million. The fair value of the 881,846 shares of common stock with vesting restrictions was determined using the market price of the Company’s common stock on the date of the acquisition discounted for the liquidity restrictions in accordance with the valuation principles of ASC 820. The remaining 11,259 shares have no vesting restrictions and the fair value was determined using the market price of the Company’s common stock on the date of the acquisition. A portion of the purchase price payable in cash was funded by proceeds from the issuance of variable rate senior notes (“Notes”) in the amount of $120 million pursuant to the note purchase agreement (“Note Purchase Agreement”) dated December 31, 2009 with certain entities advised by Pacific Investment Management Company LLC (“PIMCO”).

The acquisition was accounted for under the acquisition method of accounting in accordance with FASB ASC 805, “Business Combinations.” Accordingly, goodwill was measured as the excess of the acquisition-date fair value of the consideration transferred over the amount of acquisition-date identifiable assets acquired net of assumed liabilities. The Company recorded $152.4 million of goodwill as an asset in the consolidated statement of financial condition, which is expected to be deductible for tax purposes. The final goodwill recorded on the Company’s consolidated statement of financial condition may differ from that reflected herein as a result of measurement period adjustments. In management’s opinion, the goodwill represents the reputation and expertise of ARI in the asset management business.

Identifiable intangible assets purchased by the Company consisted of customer relationships and the ARI trade name with acquisition-date fair values of $52.1 million and $2.9 million, respectively. Acquisition costs of $1.5 million were incurred in the fourth quarter of 2009 and $44,000 of acquisition costs were incurred in the three months ended March 31, 2010, and are included in outside services on the consolidated statement of operations.

The following table summarizes the estimated fair value of assets acquired and liabilities assumed at the date of the acquisition:

(Dollars in thousands)
Assets:
Cash and cash equivalents		$	2,008
Other receivables			8,861
Fixed assets			377
Goodwill			152,382
Intangible assets			54,959
Other assets			244
Total assets acquired			218,831
Liabilities:
Accrued compensation			149
Other liabilities and accrued expenses			6,744
Total liabilities assumed			6,893
Net assets acquired		$	211,938

ARI’s results of operations have been included in the Company’s financial statements prospectively beginning on the date of acquisition. Since the date of acquisition, ARI had net revenues of $4.5 million and net income of $1.2 million. The following unaudited pro forma financial data assumes the acquisition had occurred at the beginning of each period presented. Pro forma results have been prepared by adjusting the Company’s historical results to include ARI’s results of operations adjusted for the following changes: depreciation and amortization expenses were adjusted as a result of acquisition-date fair value adjustments to fixed assets, intangible assets, deferred acquisition costs and lease obligations; interest expense was adjusted for revised debt structures; and the income tax effect of applying the Company’s statutory tax rates to ARI’s results. The unaudited pro forma information presented does not necessarily reflect the results of operations that would have resulted had the acquisition been completed at the beginning of the applicable periods presented, nor does it indicate the results of operations in future periods.

		Three Months Ended
		March 31,
(Dollars in thousands)		2010				2009
Net revenues		$	117,631			$	90,724
Net income/(loss)		$	2,257			$	(2,135	)

Note 5		Financial Instruments and Other Inventory Positions Owned and Financial Instruments and Other Inventory Positions Sold, but Not Yet Purchased

Financial instruments and other inventory positions owned and financial instruments and other inventory positions sold, but not yet purchased were as follows:

		March 31,				December 31,
(Dollars in thousands)		2010				2009
Financial instruments and other inventory positions owned:
Corporate securities:
Equity securities		$	2,421			$	3,070
Convertible securities			70,431				75,295
Fixed income securities			138,158				112,825
Municipal securities:
Taxable securities			242,128				151,144
Tax-exempt securities			118,826				147,809
Short-term securities			76,029				25,204
Asset-backed securities			44,121				70,425
U.S. government agency securities			204,039				125,576
U.S. government securities			25,121				70,111
Derivative contracts			23,727				18,530
		$	945,001			$	799,989
Financial instruments and other inventory positions sold, but not yet purchased:
Corporate securities:
Equity securities		$	40,140			$	26,474
Convertible securities			3,737				3,678
Fixed income securities			112,479				122,339
Asset-backed securities			6,299				8,937
U.S. government agency securities			92,281				67,001
U.S. government securities			231,755				102,911
Derivative contracts			6,704				4,455
		$	493,395			$	335,795

At March 31, 2010, and December 31, 2009, financial instruments and other inventory positions owned in the amount of $397.5 million and $137.4 million, respectively, had been pledged as collateral for the Company’s repurchase agreements, secured borrowings and securities loaned.

Inventory positions sold, but not yet purchased represent obligations of the Company to deliver the specified security at the contracted price, thereby creating a liability to purchase the security in the market at prevailing prices. The Company is obligated to acquire the securities sold short at prevailing market prices, which may exceed the amount reflected on the consolidated statements of financial condition. The Company economically hedges changes in market value of its financial instruments and other inventory positions owned utilizing inventory positions sold, but not yet purchased, interest rate derivatives, futures and exchange-traded options.

The Company uses interest rate swaps, interest rate locks, and forward contracts to facilitate customer transactions and as a means to manage risk in certain inventory positions. The following describes the Company’s derivatives by the type of transaction or security the instruments are economically hedging.

Customer matched-book derivatives: The Company enters into interest rate derivative contracts in a principal capacity as a dealer to satisfy the financial needs of its customers. The Company simultaneously enters into an interest rate derivative contract with a third party for the same notional amount to hedge the interest rate risk of the initial client interest rate derivative contract. In certain limited instances, the Company has not entered into a hedging arrangement with a third party, and retains uncollateralized credit risk as described below. The instruments use interest rates based upon either the London Interbank Offer Rate (“LIBOR”) index or the Securities Industry and Financial Markets Association (“SIFMA”) index.

Trading securities derivatives: The Company enters into interest rate derivative contracts to hedge interest rate and market value risks associated with its fixed income securities. The instruments use interest rates based upon either the Municipal Market Data (“MMD”) index or the SIFMA index.

The following table presents the total absolute notional contract amount associated with the Company’s outstanding derivative instruments:

(Dollars in thousands)						March 31,				December 31,
Derivative Instrument		Derivative Category				2010				2009
Customer matched-book		Interest rate derivative contract				$	6,676,105			$	6,795,186
Trading securities		Interest rate derivative contract					229,500				234,500
						$	6,905,605			$	7,029,686

The Company’s interest rate derivative contracts do not qualify for hedge accounting, therefore, unrealized gains and losses are recorded on the consolidated statements of operations. The following table presents the Company’s unrealized gains/(losses) on derivative instruments:

(Dollars in thousands)

Three Months Ended

Derivative Category

Revenue Category

March 31, 2010

March 31, 2009

Interest rate derivative contract

Institutional brokerage

$

(1,041

)

$

9,716

The gross fair market value of all derivative instruments and their location on the Company’s consolidated statements of financial condition prior to counterparty netting are shown below by asset or liability position (1):

(Dollars in thousands)

Asset Value at

Liability Value at

Derivative Category

Financial Condition Location

March 31, 2010

Financial Condition Location

March 31, 2010

Interest rate derivative contract

Financial intruments and other inventory positions owned

$

301,218

Financial intruments and other inventory positions sold, but not yet purchased

$

267,161

The Company’s derivative contracts are recorded at fair value. These derivatives are valued using pricing models based on the net present value of estimated future cash flows. The valuation models inputs include contractual terms, market prices, yield curves, credit curves and measures of volatility. Derivatives are reported on a net basis by counterparty when legal right of offset exists, and on a net basis by cross product when applicable provisions are stated in master netting agreements. Cash collateral received or paid is netted on a counterparty basis, provided a legal right of offset exists.

Credit risk associated with the Company’s derivatives is the risk that a derivative counterparty will not perform in accordance with the terms of the applicable derivative contract. Credit exposure associated with the Company’s derivatives is driven by uncollateralized market movements in the fair value of the contracts with counterparties and is monitored regularly by its market and credit risk committee. The Company reflects counterparty credit risk in calculating derivative contract fair value. The majority of the Company’s derivative contracts are substantially collateralized by its counterparties, which are major financial institutions. The Company has a limited number of counterparties who are not required to post collateral. Based on market movements, the uncollateralized amounts representing the fair value of the derivative contract can become material, exposing the Company to the credit risk of these counterparties. As of March 31, 2010, the Company had $16.3 million of uncollateralized credit exposure with these counterparties (notional contract amount of $270.5 million), including $9.0 million of uncollateralized credit exposure with one counterparty.

The Company records financial instruments and other inventory positions owned and financial instruments and other inventory positions sold, but not yet purchased at fair value on the consolidated statements of financial condition with unrealized gains and losses reflected in the consolidated statements of operations.

The degree of judgment used in measuring the fair value of financial instruments generally correlates to the level of pricing observability. Pricing observability is impacted by a number of factors, including the type of financial instrument, whether the financial instrument is new to the market and not yet established and other characteristics specific to the instrument. Financial instruments with readily available active quoted prices for which fair value can be measured from actively quoted prices generally will have a higher degree of pricing observability and a lesser degree of judgment used in measuring fair value. Conversely, financial instruments rarely traded or not quoted will generally have less, or no, pricing observability and a higher degree of judgment used in measuring fair value.

The following is a description of the valuation techniques used to measure fair value.

Cash equivalents include highly liquid investments with original maturities of 90 days or less. Actively traded money market funds are measured at their net asset value and classified as Level I.

Equity securities – Equity securities are valued based on quoted prices from the exchange for identical assets or liabilities as of the report date. To the extent these securities are actively traded, valuation adjustments are not applied and they are categorized as Level I.

Convertible securities – Convertible securities are valued based on observable trades, when available. Accordingly, these convertible securities are categorized as Level II. When observable price quotations are not available, fair value is determined based upon model-based valuation techniques with observable market inputs, such as specific company stock price and volatility and unobservable inputs such as credit default rates. These instruments are categorized as Level III.

Corporate fixed income securities – Fixed income securities include corporate bonds which are valued based on pricing services or broker quotes, when available. Accordingly, these corporate bonds are categorized as Level II. When observable price quotations are not available, fair value is determined based upon model-based valuation techniques with observable inputs such as specific security contractual terms and yield curves and unobservable inputs such as credit spreads. These instruments are categorized as Level III.

Taxable municipal securities – Taxable municipal securities are valued using recently executed observable trades or market price quotations and therefore are generally categorized as Level II.

Tax-exempt municipal securities – Tax-exempt municipal securities are valued using recently executed observable trades or market price quotations and therefore are generally categorized as Level II.

Short-term municipal securities – Short-term municipal securities include auction rate securities, variable rate demand notes, and other short-term municipal securities. Auction rate securities were historically traded and valued as floating rate notes, priced at par due to the auction mechanism. Beginning in 2008, the auction rate securities market experienced dislocation due to uncertainties in the credit markets. During 2009, certain areas of the auction rate market began to function; however, lower credit issuers remain illiquid. Accordingly, auction rate securities with limited liquidity are valued based upon the Company’s expectations of issuer refunding plans and using internal models with observable inputs such as specific security contractual terms and yield curves and unobservable inputs such as yield curves and liquidity discounts and are categorized as Level III. Variable rate demand notes and other short-term municipal securities are valued using recently executed observable trades or market price quotations and therefore categorized as Level II.

Asset-backed securities – Asset backed securities are valued using observable trades, when available. Certain asset-backed securities are valued using models where inputs to the model are directly observable in the market, or can be derived principally from or corroborated by observable market data. These asset-backed securities are categorized as Level II. Other asset-backed securities, which are principally collateralized by aircraft and have experienced low volumes of executed transactions, result in less observable transaction data. These assets are valued using cash flow models that utilize unobservable inputs including airplane lease rates, aircraft valuation, trust costs, and other factors impacting security cash flows. The Company’s aircraft asset-backed securities had a weighted average yield of 11.8% at March 31, 2010. The Company also has a minimal amount of asset-backed securities collateralized by residential mortgages. These are valued using cash flow models that utilize unobservable inputs including credit default rates ranging from 7-10%, prepayment rates ranging from 6-7% of CPR, severity ranging from 60-75% and valuation yields ranging from 6.6%-10.5%. These asset-backed securities are categorized as Level III.

U.S. government agency securities – U.S. government agency securities include agency debt bonds and mortgage bonds. Agency debt bonds are valued by using either direct price quotes or price quotes for comparable bond securities. Agency debt bonds are categorized as Level II. Mortgage bonds include mortgage pass-through securities and agency collateralized mortgage-obligations (“CMO”). Mortgage pass-through securities and CMO securities are valued using recently executed observable trades or other observable inputs, such as prepayment speeds and therefore, generally are categorized as Level II. Mortgage bonds are valued using observable market inputs, such as market yields ranging from 95–145 basis point spreads to treasury securities, or models based upon prepayment expectations ranging from 161-274 PSA prepayment levels, which are then categorized as Level II.

U.S. government securities – U.S. government securities include highly liquid U.S. treasury securities which are generally valued using quoted prices and therefore categorized as Level I.

Derivatives – Derivative contracts are financial instruments such as forwards, futures, swaps or option contracts that derive their value from underlying assets, reference rates, indices or a combination of these factors. A derivative contract generally represents future commitments to purchase or sell financial instruments at specified terms on a specified date or to exchange currency or interest payment streams based on the contract or notional amount. Derivative contracts exclude certain cash instruments, such as mortgage-backed securities, interest-only and principal-only obligations and indexed debt instruments that derive their values or contractually required cash flows from the price of some other security or index. The Company’s derivatives are principally interest rate derivatives and valued using market standard pricing models based on the net present value of estimated future cash flows. The valuation models used require market observable inputs, including contractual terms, yield curves and measures of volatility. These measurements are classified as Level II within the fair value hierarchy and are used to value interest rate swaps, interest rate locks, and forward contracts. In addition, the Company has a limited number of interest rate derivatives valued using valuation models that utilize market observable inputs, including contractual terms, yield curves and measures of volatility and unobservable inputs including credit default rates. These instruments are classified as Level III within the fair value hierarchy.

Investments

The Company’s investments valued at fair value include investments in public companies, warrants of public or private companies and investments in certain illiquid municipal bonds. Investments in public companies are valued based on quoted prices on active markets and reported in Level I. Company owned warrants, which have a cashless exercise option, are valued using the Black-Scholes option-pricing model and reported as Level III assets. Investments in certain illiquid municipal bonds that the Company is holding for investment are reported as Level III assets.

The following table summarizes the valuation of our financial instruments by pricing observability levels defined in ASC 820 as of March 31, 2010:

														Counterparty
														Collateral
(Dollars in thousands)		Level I				Level II				Level III				Netting (1)				Total
Assets:
Financial instruments and other inventory positions owned:
Corporate securities:
Equity securities		$	2,421			$	-			$	-			$	-			$	2,421
Convertible securities			-				55,746				14,685				-				70,431
Fixed income securities			-				136,012				2,146				-				138,158
Municipal securities:
Taxable securities			-				242,128				-				-				242,128
Tax-exempt securities			-				118,826				-				-				118,826
Short-term securities			-				58,205				17,824				-				76,029
Asset-backed securities			-				16,829				27,292				-				44,121
U.S. government agency securities			-				204,039				-				-				204,039
U.S. government securities			25,121				-				-				-				25,121
Derivative instruments			-				46,928				9,046				(32,247	)			23,727
Total financial instruments and other inventory positions owned:			27,542				878,713				70,993				(32,247	)			945,001
Cash equivalents			9,915				-				-				-				9,915
Investments			1,065				-				3,042				-				4,107
Total assets		$	38,522			$	878,713			$	74,035			$	(32,247	)		$	959,023
Liabilities:
Financial instruments and other inventory positions sold, but not yet purchased:
Corporate securities:
Equity securities		$	40,140			$	-			$	-			$	-			$	40,140
Convertible securities			-				3,737				-				-				3,737
Fixed income securities			-				106,863				5,616				-				112,479
Asset-backed securities			-				1,920				4,379				-				6,299
U.S. government agency securities			-				92,281				-				-				92,281
U.S. government securities			231,755				-				-				-				231,755
Derivative instruments			-				21,917				-				(15,213	)			6,704
Total financial instruments and other inventory positions sold, but not yet purchased:			271,895				226,718				9,995				(15,213	)			493,395
Investments			-				-				19				-				19
Total liabilities		$	271,895			$	226,718			$	10,014			$	(15,213	)		$	493,414

The following table summarizes the valuation of our financial instruments by pricing observability levels defined in ASC 820 as of December 31, 2009:

														Counterparty
														Collateral
(Dollars in thousands)		Level I				Level II				Level III				Netting (1)				Total
Assets:
Financial instruments and other inventory positions owned:
Corporate securities:
Equity securities		$	3,070			$	-			$	-			$	-			$	3,070
Convertible securities			-				75,295				-				-				75,295
Fixed income securities			-				112,825				-				-				112,825
Municipal securities:
Taxable securities			-				151,144				-				-				151,144
Tax-exempt securities			-				147,809				-				-				147,809
Short-term securities			-				7,379				17,825				-				25,204
Asset-backed securities			-				46,186				24,239				-				70,425
U.S. government agency securities			-				125,576				-				-				125,576
U.S. government securities			70,111				-				-				-				70,111
Derivative instruments			-				54,391				-				(35,861	)			18,530
Total financial instruments and other inventory positions owned:			73,181				720,605				42,064				(35,861	)			799,989
Cash equivalents			13,352				-				-				-				13,352
Investments			1,139				-				2,240				-				3,379
Total assets		$	87,672			$	720,605			$	44,304			$	(35,861	)		$	816,720
Liabilities:
Financial instruments and other inventory positions sold, but not yet purchased:
Corporate securities:
Equity securities		$	26,474			$	-			$	-			$	-			$	26,474
Convertible securities			-				3,678				-				-				3,678
Fixed income securities			-				114,568				7,771				-				122,339
Asset-backed securities			-				6,783				2,154				-				8,937
U.S. government agency securities			-				67,001				-				-				67,001
U.S. government securities			102,911				-				-				-				102,911
Derivative instruments			-				19,294				-				(14,839	)			4,455
Total financial instruments and other inventory positions sold, but not yet purchased:			129,385				211,324				9,925				(14,839	)			335,795
Investments			-				-				19				-				19
Total liabilities		$	129,385			$	211,324			$	9,944			$	(14,839	)		$	335,814

The Company’s Level III assets were $74.0 million and $44.3 million, or 7.7 percent and 5.4 percent of financial instruments measured at fair value at March 31, 2010, and December 31, 2009, respectively. Transfers between levels are recognized at the beginning of the reporting period. There were $21.4 million of transfers from Level II to Level III during the quarter ended March 31, 2010 related to convertible securities, asset backed securities and derivatives for which external prices and valuation inputs became unobservable. Transfers between Level I and Level II were not material for the three months ended March 31, 2010.

The following tables summarize the changes in fair value associated with Level III financial instruments during the three months ended March 31, 2010 and 2009:

		Balance at																				Balance at
		December 31,				Purchases/				Net transfers				Realized gains/				Unrealized gains/				March 31,
(Dollars in thousands)		2009				(sales), net				in/(out)				(losses) (1)				(losses) (1)				2010
Assets:
Financial instruments and other inventory positions owned:
Corporate securities:
Convertible securities		$	-			$	7,590			$	4,292			$	1,836			$	967			$	14,685
Fixed income securities			-				1,937				-				211				(2	)			2,146
Municipal securities:
Short-term securities			17,825				-				-				-				(1	)			17,824
Asset-backed securities			24,239				(7,924	)			8,796				1,688				493				27,292
Derivative instruments			-				-				8,279				-				767				9,046
Total financial instruments and other inventory positions owned:			42,064				1,603				21,367				3,735				2,224				70,993
Investments			2,240				-				-				-				802				3,042
Total assets		$	44,304			$	1,603			$	21,367			$	3,735			$	3,026			$	74,035
Liabilities:
Financial instruments and other inventory positions sold, but not yet purchased:
Corporate securities:
Fixed income securities		$	7,771			$	(2,310	)		$	-			$	46			$	109			$	5,616
Asset-backed securities			2,154				1,586				507				18				114				4,379
Total financial instruments and other inventory positions sold, but not yet purchased:			9,925				(724	)			507				64				223				9,995
Investments			19				-				-				-				-				19
Total liabilities		$	9,944			$	(724	)		$	507			$	64			$	223			$	10,014
		Balance at																				Balance at
		December 31,				Purchases/				Net transfers				Realized gains/				Unrealized gains/				March 31,
(Dollars in thousands)		2008				(sales), net				in/(out)				(losses) (1)				(losses) (1)				2009
Assets:
Financial instruments and other inventory positions owned:
Corporate securities:
Convertible securities		$	3,671			$	-			$	(3,671	)		$	-			$	-			$	-
Fixed income securities			2,138				1,740				4,899				7				375				9,159
Municipal securities:
Short-term securities			17,750				25				(100	)			-				-				17,675
Asset-backed securities			22,560				(1,129	)			(157	)			234				(316	)			21,192
U.S. government agency securities			6				(1	)			(1	)			-				-				4
Total financial instruments and other inventory positions owned:			46,125				635				970				241				59				48,030
Investments			433				-				-				-				(348	)			85
Total assets		$	46,558			$	635			$	970			$	241			$	(289	)		$	48,115
Liabilities:
Investments		$	366			$	-			$	-			$	-			$	(347	)		$	19
Total liabilities		$	366			$	-			$	-			$	-			$	(347	)		$	19

Some of the Company’s financial instruments are not measured at fair value on a recurring basis, but are recorded at amounts that approximate fair value due to their liquid or short-term nature. Such financial assets and financial liabilities include cash, securities either purchased or sold under agreements to resell, receivables and payables either from or to customers and brokers, dealers and clearing organizations and short-term financings.

Note 7 Variable Interest Entities

In the normal course of business, the Company periodically creates or transacts with entities that may be variable interest entities (“VIEs”). The Company has investments in and/or acts as the managing partner or member to approximately 38 partnerships and limited liability companies (“LLCs”). These entities were established for the purpose of investing in equity and debt securities of public and private investments and were initially financed through the capital commitments of the members. At March 31, 2010, the Company’s aggregate net investment in these partnerships and LLCs totaled $13.7 million. The Company’s remaining capital commitment to these partnerships and LLCs was $3.6 million at March 31, 2010.

Effective January 1, 2010, the Company adopted the guidance amending ASC 810. The Company evaluated 21 of its 38 partnerships and LLCs under the new VIE guidance and the remaining 17 partnerships and LLCs were evaluated under the historical VIE guidance as these entities met the deferral provisions defined by ASU 2010-10. The determination as to whether an entity is a VIE is based on the amount and nature of the members’ equity investment in the entity. Under the new guidance, the Company also considers other characteristics such as the power through voting or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance. Under the historical guidance, the Company considers characteristics such as the ability to influence the decision making about the entity’s activities and how the entity is financed. The Company has identified 21 out of the Company’s 38 partnerships and LLC entities described above as VIEs. These VIEs had net assets approximating $991.0 million at March 31, 2010. The Company’s exposure to loss from these entities is $5.6 million, which is the value of its capital contributions recorded in other assets on the consolidated statement of financial condition at March 31, 2010. The Company had no liabilities related to these entities at March 31, 2010.

The Company is required to consolidate all VIEs for which it is considered to be the primary beneficiary. Under the new guidance, the determination as to whether the Company is considered to be the primary beneficiary is based on whether the Company has both the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Under the historical guidance, the determination as to whether the Company is considered to be the primary beneficiary is based on whether the Company will absorb a majority of the VIE’s expected losses, receive a majority of the VIE’s expected residual returns, or both. It was determined the Company is not the primary beneficiary of these 21 VIEs.

The Company has not provided financial or other support to their VIEs that it was not previously contractually required to provide as of March 31, 2010.

Note 8 Receivables from and Payables to Brokers, Dealers and Clearing Organizations

Amounts receivable from brokers, dealers and clearing organizations at March 31, 2010 and December 31, 2009 included:

		March 31,				December 31,
(Dollars in thousands)		2010				2009
Receivable arising from unsettled securities transactions, net		$	21,763			$	35,324
Deposits paid for securities borrowed			138,503				166,399
Receivable from clearing organizations			12,557				21,388
Securities failed to deliver			6,448				13,102
Other			6,567				7,838
		$	185,838			$	244,051

Amounts payable to brokers, dealers and clearing organizations at March 31, 2010 and December 31, 2009 included:

		March 31,				December 31,
(Dollars in thousands)		2010				2009
Deposits received for securities loaned		$	22,336			$	25,988
Payable to clearing organizations			28,445				11,975
Securities failed to receive			217				22,118
Other			8,670				11,737
		$	59,668			$	71,818

Deposits paid for securities borrowed and deposits received for securities loaned approximate the market value of the securities. Securities failed to deliver and receive represent the contract value of securities that have not been delivered or received by the Company on settlement date.

Note 9 Other Assets

Other assets include investments in public companies valued at fair value, investments in private companies and bridge-loans valued at cost, investments in private equity partnerships that are valued using the equity method of accounting, net deferred tax assets, income tax receivables and prepaid expenses.

Other assets at March 31, 2010 and December 31, 2009 included:

		March 31,				December 31,
(Dollars in thousands)		2010				2009
Investments at fair value		$	4,107			$	3,379
Investments at cost			29,233				33,687
Investments valued using equity method			15,178				14,825
Net deferred income tax assets			63,925				80,058
Income tax receivables			5,680				453
Prepaid expenses			6,637				5,840
Other			1,352				1,393
Total other assets		$	126,112			$	139,635

Note 10 Goodwill and Intangible Assets

The following table presents the changes in the carrying value of goodwill and intangible assets for the three months ended March 31, 2010:

(Dollars in thousands)
Goodwill
Balance at December 31, 2009		$	164,625
Goodwill recorded in purchase of ARI			152,382
FAMCO earn-out payment			27
Balance at March 31, 2010		$	317,034

(Dollars in thousands)
Intangible assets
Balance at December 31, 2009		$	12,067
Intangible assets acquired in purchase of ARI			54,959
Amortization of intangible assets			(976	)
Balance at March 31, 2010		$	66,050

The addition of goodwill and intangible assets during the three months ended March 31, 2010, primarily related to the acquisition of ARI, as discussed in Note 4. Management identified $55.0 million of intangible assets, consisting primarily of the customer relationships ($52.1 million), which will be amortized over a weighted average life of 9 years, and the ARI trade name ($2.9 million), which has an indefinite life and will not be amortized.

The following table summarizes the aggregate future amortization of the Company’s intangible assets:

(Dollars in thousands)
Years Ended December 31,		Amortization
Remainder of 2010		$	6,737
2011			8,571
2012			8,038
2013			7,768
2014			7,432
Thereafter			24,645
Total		$	63,191

Note 11 Short-Term Financing

The following is a summary of short-term financing and the weighted average interest rates on borrowings as of March 31, 2010 and December 31, 2009:

										Weighted Average
		Outstanding Balance								Interest Rate
		March 31,				December 31,				March 31,				December 31,
(Dollars in thousands)		2010				2009				2010				2009
Bank lines (secured)		$	54,000			$	68,000				1.61	%			1.35	%
Commercial paper (secured)			39,520				22,079				1.24	%			1.25	%
Total short-term financing		$	93,520			$	90,079

The Company has committed short-term bank line financing available on a secured basis and uncommitted short-term bank line financing available on both a secured and unsecured basis. The Company uses these credit facilities in the ordinary course of business to fund a portion of its daily operations and the amount borrowed under these credit facilities varies daily based on the Company’s funding needs.

The Company’s committed short-term bank line financing at March 31, 2010, consisted of a $250 million committed revolving credit facility with U.S. Bank, N.A. Advances under this facility are secured by certain marketable securities. The unpaid principal amount of all advances under this facility will be due on September 30, 2010. The Company pays a nonrefundable commitment fee on the unused portion of the facility on a quarterly basis.

The Company’s uncommitted secured lines at March 31, 2010, totaled $275 million with three banks and are dependent on having appropriate collateral, as determined by the bank agreement, to secure an advance under the line. The availability of the Company’s uncommitted lines are subject to approval by the individual banks each time an advance is requested and may be denied. In addition, the Company has established arrangements to obtain financing by another broker dealer at the end of each business day related specifically to its convertible inventory.

In 2009, the Company initiated a secured commercial paper program to provide another funding source for its securities inventory. The senior secured commercial paper notes (“Series A CP Notes”) are secured by the Company’s securities inventory with maturities on the Series A CP Notes ranging from twenty-seven days to two hundred seventy days from the date of issuance. The Series A CP Notes are interest-bearing or sold at a discount to par with an interest rate based on the London Interbank Offered Rate (“LIBOR”) plus an applicable margin.

As part of these short-term financing arrangements, the Company is subject to various financial and operational covenants. At March 31, 2010, the Company was in compliance with all covenants related to its financing facilities.

Note 12 Variable Rate Senior Notes

On December 31, 2009, the Company issued unsecured variable rate senior notes (“Notes”) in the amount of $120 million. The initial holders of the Notes are certain entities advised by PIMCO. Interest is based on an annual rate equal to LIBOR plus 4.10%, adjustable and payable quarterly. The weighted average interest rate for the three months ended March 31, 2010, was 4.39%. The proceeds from the Notes were used to fund a portion of the ARI acquisition discussed further in Note 4 to our consolidated financial statements. The unpaid principal amount of the Notes will be due on December 31, 2010.

Note 13 Legal Contingencies

The Company has been named as a defendant in various legal actions, including complaints and litigation and arbitration claims arising from its business activities. Such activities include claims related to securities brokerage and investment banking activities, and certain class actions that primarily allege violations of securities laws and seek unspecified damages, which could be substantial. Also, the Company is involved from time to time in investigations and proceedings by governmental agencies and self-regulatory organizations. The Company has established reserves for potential losses that are probable and reasonably estimable that may result from pending and potential legal actions, investigations and regulatory proceedings.

Given uncertainties regarding the timing, scope, volume and outcome of pending and potential legal actions, investigations and regulatory proceedings and other factors, the amounts of reserves are difficult to determine and of necessity subject to future revision. Subject to the foregoing, management of the Company believes, based on its current knowledge, after consultation with outside legal counsel and taking into account its established reserves, that pending legal actions, investigations regulatory and proceedings will be resolved with no material adverse effect on the consolidated financial condition of the Company. However, if during any period a potential adverse contingency should become probable or resolved for an amount in excess of the established reserves, the results of operations in that period could be materially adversely affected.

Note 14 Restructuring

On August 11, 2006, the Company completed the sale of its Private Client Services (“PCS”) branch network and certain related assets to UBS Financial Services, Inc., a subsidiary of UBS AG (“UBS”), thereby exiting the PCS business. In connection with the sale of the Company’s PCS branch network, the Company initiated a plan to significantly restructure the Company’s support infrastructure. All restructuring costs related to the sale of the PCS branch network were included within discontinued operations. In 2008, the

Company implemented certain expense reduction measures as a means to better align its cost infrastructure with its revenues. The following table presents a summary of activity with respect to the restructuring-related liabilities included in other liabilities and accrued expenses on the consolidated statements of financial condition:

		Other				PCS
(Dollars in thousands)		Restructuring				Restructuring
Balance at December 31, 2009		$	1,892			$	7,565
Provision charged to continuing operations			173				-
Cash outlays			(637	)			(624	)
Non-cash write-downs			(33	)			-
Balance at March 31, 2010		$	1,395			$	6,941