ITG Reports Second Quarter 2012 Results GAAP Results Include Non-cash Goodwill Impairment Charge

NEW YORK, Aug. 9, 2012 /PRNewswire/ -- ITG (NYSE: ITG), an independent execution and research broker, today reported results for the quarter ended June 30, 2012.

(Logo:  http://photos.prnewswire.com/prnh/20120123/NY39237LOGO )

Second quarter 2012 highlights included:

  • A GAAP net loss of $247.1 million, or $6.40 per diluted share compared to a GAAP net loss of $196.1 million, or $4.77 per diluted share in the second quarter of 2011.  The GAAP net loss for the second quarter of 2012 included a non-cash impairment charge for the balance of ITG's goodwill of $274.3 million, or $6.45 per diluted share after taxes.  The GAAP net loss for the second quarter of 2011 included (i) a non-cash goodwill impairment charge attributable to ITG's U.S. business of $225.0 million, or $4.61 per diluted share after taxes; (ii) cost reduction restructuring charges of $17.7 million, or $0.27 per diluted share after taxes; and (iii) charges related to the Ross Smith Energy Group acquisition of $2.5 million, or $0.04 per diluted share after taxes.
  • Adjusted net income of $1.9 million, or $0.05 per diluted share, compared to adjusted net income of $5.8 million, or $0.14 per diluted share in the second quarter of 2011.
  • Revenues of $126.9 million, compared to $142.6 million in the second quarter of 2011.
  • Expenses of $397.5 million compared to expenses of $377.2 million in the second quarter of 2011.
  • Adjusted expenses of $123.2 million compared to adjusted expenses of $132.0 million in the second quarter of 2011.
  • Average daily trading volume in the U.S. of 183 million shares, down 4% from the second quarter of 2011.  POSIT average daily U.S. volume was 89.5 million shares, up 8% from the second quarter of 2011.  In Europe, average daily value traded in POSIT was $377 million, up 79% from the second quarter of 2011.
  • The repurchase of 450,000 shares of common stock under ITG's authorized share repurchase program for a total of $4.1 million.  Repurchases since the first quarter of 2010 have totaled $102.4 million for 7.4 million shares, resulting in a decrease in shares outstanding, net of new issuances, of more than 12%. 

Revenues from U.S. operations were $81.9 million in the second quarter of 2012 compared to $93.9 million in the second quarter of 2011.  ITG's U.S. operations posted a GAAP net loss of $220.9 million in the second quarter of 2012 and adjusted net income of $0.4 million in the second quarter of 2012, compared to a GAAP net loss of $196.3 million and adjusted net income of $3.7 million in the second quarter of 2011.  Sell-side client volume represented 50% of total U.S. volumes, up from 48% in the first quarter of 2012. 

ITG's International revenues were $45.0 million in the second quarter of 2012 compared to $48.7 million in the second quarter of 2011. ITG's International operations posted a GAAP net loss of $26.2 million and adjusted net income of $1.5 million in the second quarter of 2012, compared to GAAP net income of $0.1 million and adjusted net income of $2.1 million in the second quarter of 2011.

"Depressed levels of overall institutional trading activity in the U.S. and lower market turnover in all of our international regions significantly impacted our profitability in the second quarter," said Bob Gasser, ITG's Chief Executive Officer and President.  "Despite the higher percentage of sell-side volume, our overall average U.S. revenue capture has remained steady for the past few quarters, demonstrating the value our products, including research, deliver to our institutional clients.  In the face of these challenging conditions we remain focused on disciplined expense management, improved operating leverage through POSIT® and a continued share buyback program."

Year-to-Date Results

For the first six months of 2012, revenues were $263.3 million, GAAP net loss was $241.6 million, or $6.22 per diluted share, and adjusted net income was $7.3 million, or $0.18 per diluted share. For the first six months of 2011, revenues were $292.7 million, GAAP net loss was $186.6 million, or $4.52 per diluted share, and adjusted net income was $15.4 million, or $0.37 per diluted share.

The discussion above includes adjusted expenses and adjusted net income and related per share amounts, which are non-GAAP financial measures that are described in the attached tables along with a reconciliation of these non-GAAP financial measures to GAAP results.

Conference Call

ITG has scheduled a conference call today at 11:00 am ET to discuss second quarter results.  Those wishing to listen to the call should dial 1-866-510-0712 (1-617-597-5380 outside the U.S.) and enter the passcode 79292301 at least 10 minutes prior to the start of the call to ensure connection.  The webcast and accompanying slideshow presentation can be downloaded from ITG's website at investor.itg.com.  For those unable to listen to the live broadcast of the call, a replay will be available for one week by dialing 1-888-286-8010 (1-617-801-6888 outside the U.S.) and entering the passcode 83527277.  The replay will be available starting approximately two hours after the completion of the conference call.

About ITG

ITG is an independent execution and research broker that partners with global portfolio managers and traders to provide unique data-driven insights throughout the investment process. From investment decision through settlement, ITG helps clients understand market trends, improve performance, mitigate risk and navigate increasingly complex markets. ITG is headquartered in New York with offices in North America, Europe, and Asia Pacific. For more information, please visit www.itg.com.

In addition to historical information, this press release may contain "forward-looking" statements that reflect management's expectations for the future.  A variety of important factors could cause results to differ materially from such statements.  Certain of these factors are noted throughout ITG's 2011 Annual Report on Form 10-K, and its Form 10-Qs and include, but are not limited to, general economic, business, credit and financial market conditions, internationally and nationally, financial market volatility, fluctuations in market trading volumes, effects of inflation, adverse changes or volatility in interest rates, fluctuations in foreign exchange rates, evolving industry regulations, changes in tax policy or accounting rules, the actions of both current and potential new competitors, changes in commission pricing, the volatility of our stock price, rapid changes in technology, errors or malfunctions in our systems or technology, cash flows into or redemptions from equity mutual funds, ability to meet liquidity requirements related to the clearing of our customers' trades, customer trading patterns, the success of our products and service offerings, our ability to continue to innovate and meet the demands of our customers for new or enhanced products, our ability to successfully integrate acquired companies and our ability to attract and retain talented employees. The forward-looking statements included herein represent ITG's views as of the date of this release. ITG undertakes no obligation to revise or update publicly any forward-looking statement for any reason unless required by law.

ITG Media/Investor Contact:
J.T. Farley
1-212-444-6259
corpcomm@itg.com

 

INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Condensed Consolidated Statements of Operations (unaudited)


(In thousands, except per share amounts)






Three Months Ended
June 30,


Six Months Ended
June 30,




2012


2011


2012


2011


Revenues:










Commissions and fees


$

94,883


$

111,850


$

200,147


$

230,526


Recurring


28,034


26,514


55,466


53,735


Other


3,993


4,253


7,672


8,434


Total revenues


126,910


142,617


263,285


292,695












Expenses:










Compensation and employee benefits


49,540


55,679


102,127


113,157


Transaction processing


19,649


23,104


41,872


46,130


Occupancy and equipment


15,063


15,063


29,712


30,005


Telecommunications and data
      processing services


14,712


14,870


29,779


29,941


Other general and administrative


23,597


22,762


46,274


44,922


Goodwill impairment


274,285


225,035


274,285


225,035


Restructuring charges



17,678



17,678


Acquisition related costs



2,523



2,523


Interest expense


624


494


1,302


764


Total expenses


397,470


377,208


525,351


510,155


Loss before income tax benefit


(270,560)


(234,591)


(262,066)


(217,460)


Income tax benefit


(23,464)


(38,448)


(20,428)


(30,866)


Net loss


$

(247,096)


$

(196,143)


$

(241,638)


$

(186,594)












Loss per share:










Basic


$

(6.40)


$

(4.77)


$

(6.22)


$

(4.52)


Diluted


$

(6.40)


$

(4.77)


$

(6.22)


$

(4.52)












Basic weighted average number of common shares
outstanding


38,607


41,112


38,859


41,272


Diluted weighted average number of common
shares outstanding


38,607


41,112


38,859


41,272


 

INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES


Condensed Consolidated Statements of Financial Condition






June 30,
2012


December 31,
2011




(unaudited)




Assets






Cash and cash equivalents


$

228,828


$

284,188


Cash restricted or segregated under regulations and other


65,718


71,496


Deposits with clearing organizations


25,583


25,538


Securities owned, at fair value


5,763


5,277


Receivables from brokers, dealers and clearing organizations


944,125


871,315


Receivables from customers


589,334


472,509


Premises and equipment, net


42,590


43,023


Capitalized software, net


47,691


51,258


Goodwill



274,292


Other intangibles, net


37,844


39,594


Income taxes receivable


6,919


6,838


Deferred taxes


34,534


16,493


Other assets


20,452


16,248


Total assets


$

2,049,381


$

2,178,069








Liabilities and Stockholders' Equity






Liabilities:






Accounts payable and accrued expenses


$

148,069


$

181,224


Short-term bank loans


8,415


1,606


Payables to brokers, dealers and clearing organizations


1,004,906


1,079,773


Payables to customers


440,396


207,738


Securities sold, not yet purchased, at fair value


1,757


438


Income taxes payable


8,659


11,460


Deferred taxes


382


719


Term debt


22,375


23,997


Total liabilities


1,634,959


1,506,955








Commitments and contingencies












Stockholders' Equity:






Preferred stock, $0.01 par value; 1,000,000 shares authorized; no shares issued or outstanding 




Common stock, $0.01 par value; 100,000,000 shares authorized; 51,961,710 and 51,899,229 shares issued at June 30, 2012 and December 31, 2011, respectively


520


519


Additional paid-in capital


239,575


249,469


Retained earnings


411,706


653,344


Common stock held in treasury, at cost; 13,595,310 and 12,679,948 shares at June 30, 2012 and December 31, 2011, respectively


(245,572)


(240,559)


Accumulated other comprehensive income (net of tax)


8,193


8,341


Total stockholders' equity


414,422


671,114


Total liabilities and stockholders' equity


$

2,049,381


$

2,178,069



 

INVESTMENT TECHNOLOGY GROUP, INC.
Reconciliation of U.S. GAAP Results to Adjusted Results

In evaluating ITG's financial performance, management reviews results from operations which excludes non-operating or one-time charges.  Adjusted expenses and adjusted net income and related per share amounts are non-GAAP performance measures, but the Company believes that they are useful to assist investors in gaining an understanding of the trends and operating results for ITG's core businesses. These measures should be viewed in addition to, and not in lieu of, ITG's reported results under GAAP.

The following is a reconciliation of GAAP results to adjusted results for the periods presented (in thousands except per share amounts):


Three Months Ended June 30,


Six Months Ended June 30,


2012

2011


2012

2011


(unaudited)

(unaudited)


(unaudited)

(unaudited)

Total revenues

$

126,910

$

142,617


$

263,285

$

292,695







Total expenses

397,470

377,208


525,351

510,155

   Less:






   Goodwill impairment (1)(2)

(274,285)

(225,035)


(274,285)

(225,035)

   Acquisition related costs (3)

(2,523)


(2,523)

   Restructuring charges (4)

(17,678)


(17,678)

Adjusted operating expenses

123,185

131,972


251,066

264,919







Loss before income tax benefit

(270,560)

(234,591)


(262,066)

(217,460)

  Effect of adjustments

274,285

245,236


274,285

245,236

Adjusted pre-tax operating
  income

3,725

10,645


12,219

27,776







Income tax benefit

(23,464)

(38,448)


(20,428)

(30,866)

   Tax effect of adjustments

25,322

43,260


25,322

43,260

Adjusted operating income tax expense

1,858

4,812


4,894

12,394







Net loss

(247,096)

(196,143)


(241,638)

(186,594)

    Net effect of adjustments

248,963

201,976


248,963

201,976

Adjusted operating net income

$

1,867

$

5,833


$

7,325

$

15,382











Diluted loss per share

$

(6.40)

$

(4.77)


$

(6.22)

$

(4.52)

Net effect of adjustments

6.45

4.91


6.40

4.89

Adjusted diluted operating
  earnings per share

$

0.05

$

0.14


$

0.18

$

0.37




















U.S.


International


Three Months Ended June 30,

Three Months Ended June 30,



2012

2011


2012

2011



(unaudited)

(unaudited)


(unaudited)

(unaudited)


Total revenues

$

81,915

$

93,893


$

44,995

$

48,724









Total expenses

325,824

330,143


71,646

47,065


   Less:







   Goodwill impairment (1)(2)

(245,103)

(225,035)


(29,182)


   Acquisition related costs (3)

(2,523)



   Restructuring charges (4)

(15,444)


(2,234)


Adjusted operating expenses

80,721

87,141


42,464

44,831









Loss before income tax benefit

(243,909)

(236,250)


(26,651)

1,659


  Effect of adjustments

245,103

243,002


29,182

2,234


Adjusted pre-tax operating
  income

1,194

6,752


2,531

3,893









Income tax benefit

(23,022)

(39,966)


(442)

1,518


   Tax effect of adjustments

23,837

43,041


1,485

219


Adjusted operating income tax expense

815

3,075


1,043

1,737









Net loss

(220,887)

(196,284)


(26,209)

141


    Net effect of adjustments

221,266

199,961


27,697

2,015


Adjusted operating net income

$

379

$

3,677


$

1,488

$

2,156













Diluted loss per share

$

(5.72)

$

(4.77)


$

(0.68)

$


    Net effect of adjustments

5.73

4.86


0.72

0.05


Adjusted diluted operating
  earnings per share

$

0.01

$

0.09


$

0.04

$

0.05









Notes:

  1. In the second quarter of 2012, goodwill with a carrying value of $274.3 million was deemed fully impaired.
  2. In the second quarter of 2011, goodwill with a carrying value of $470.1 million in the U.S. operating segment was deemed impaired and its fair value was determined to be $245.1 million, resulting in an impairment charge of $225.0 million.
  3. During the second quarter of 2011, ITG acquired Ross Smith Energy Group Ltd, a Calgary-based independent provider of research on the oil and gas industry. In connection with the acquisition, ITG incurred approximately $2.5 million of acquisition related costs, including legal fees, contract settlement costs and other professional fees.
  4. During the second quarter of 2011, ITG implemented a restructuring plan primarily focused on reducing costs in the workforce. The cost reduction plan resulted in a restructuring charge totaling $17.7 million. These costs included employee separation and related costs of $17.4 million and lease consolidation costs of $0.3 million.

SOURCE ITG



RELATED LINKS
http://www.itg.com

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

 

PR Newswire Membership

Fill out a PR Newswire membership form or contact us at (888) 776-0942.

Learn about PR Newswire services

Request more information about PR Newswire products and services or call us at (888) 776-0942.