Investment Technology Group Reports Fourth Quarter 2009 Results
NEW YORK, Feb. 3 /PRNewswire-FirstCall/ -- Investment Technology Group, Inc. (NYSE: ITG), a leading agency broker and financial technology firm, today announced that for the quarter ended December 31, 2009, it incurred a net loss of $7.8 million, or $0.18 per diluted share, compared to net income of $28.7 million, or $0.66 per diluted share for the quarter ended December 31, 2008. Excluding restructuring charges, fourth quarter pro forma operating net income was $8.6 million, or $0.19 per diluted share, compared to pro forma operating net income of $29.6 million, or $0.68 per diluted share, in the fourth quarter of 2008. ITG's revenues for the fourth quarter of 2009 were $151.0 million compared to $190.1 million for the fourth quarter of 2008.
Included in the fourth quarter of 2009 operating results were after-tax expenses of $3.5 million, or $0.08 per diluted share, in employee separation costs unrelated to the restructuring plan. This compares to after-tax expenses of $3.1 million, or $0.07 per diluted share, in the fourth quarter of 2008 related to employee separation costs and write downs of capitalized costs pertaining to discontinued non-core products.
"The fall in volatility, combined with continued weakness in the equity asset management business, resulted in lower institutional trading volumes. However, our fourth quarter restructuring has improved our cost structure and sharpened our business focus, positioning us to benefit as trading conditions and market volumes improve," said Bob Gasser, ITG's Chief Executive Officer and President.
ITG's non-US revenues increased to $47.6 million in the fourth quarter of 2009, compared to $46.0 million in the fourth quarter of 2008. The net loss from non-US operations was $6.2 million during the fourth quarter of 2009, which included $3.3 million of after-tax restructuring charges, compared to non-US net income of $0.7 million in the fourth quarter of 2008.
"Our European business continues to gain market share and drive down transaction processing costs, and in Canada the core business remains strong," said Mr. Gasser. "In the Asia Pacific region, the continued downturn in overall market activity impacted our margins, but we believe our investments in the region will benefit us when market conditions improve."
For the full year, ITG's revenues were $633.1 million compared to $763.0 million in the prior year. Net income was $42.8 million, or $0.97 per diluted share in 2009 compared to net income of $114.6 million, or $2.61 per diluted share in 2008. Pro forma operating net income for the year was $59.2 million, or $1.34 per diluted share, compared to pro forma operating net income of $115.5 million, or $2.63 per diluted share in 2008. ITG's non-US revenues were $175.7 million for the full year compared to $191.7 million for 2008. The full year non-US net loss was $5.9 million, which included $3.3 million of restructuring charges, compared to non-US net income of $4.6 million for 2008.
The discussion above includes pro forma operating 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.
Conference Call
ITG has scheduled a conference call today at 11:00 a.m. ET to discuss fourth quarter results. Those wishing to listen to the call should dial 800-299-7928 and enter the pass code 89562833 at least 10 minutes prior to the start of the call to ensure connection. The conference call and webcast will also be accessible through ITG's website at www.itg.com. For those unable to listen to the live broadcast of the call, a replay will be available for one week by dialing 888-286-8010 and entering the pass code 75045575. The replay will be available starting approximately two hours after the completion of the conference call.
About ITG
Investment Technology Group, Inc., is an independent agency broker and financial technology firm that partners with asset managers globally to improve performance throughout the investment process. A leader in electronic trading since launching the POSIT® crossing network in 1987, ITG takes a consultative approach in delivering the highest quality institutional liquidity and market-leading execution services, measurement tools, and proprietary data. Asset managers rely on ITG's independence, experience, and intellectual capital to help mitigate risk, improve performance, and navigate increasingly complex markets. The firm is headquartered in New York with offices in North America, Europe, and the Asia Pacific region. For more information on ITG, 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. These factors are noted throughout ITG's 2008 Annual Report, on its Form 10-K, and on its Form 10-Qs and include, but are not limited to, the actions of both current and potential new competitors, fluctuations in market trading volumes, financial market volatility, changes in commission pricing, evolving industry regulations, errors or malfunctions in our systems or technology, rapid changes in technology, cash flows into or redemptions from equity funds, effects of inflation, 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 companies we have acquired, changes in tax policy or accounting rules, fluctuations in foreign exchange rates, adverse changes or volatility in interest rates, as well as general economic, business, credit and financial market conditions, internationally or nationally. 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 Contact: |
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J.T. Farley |
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(212) 444-6259 |
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INVESTMENT TECHNOLOGY GROUP, INC.
Consolidated Statements of Income
(In thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
(unaudited) (unaudited) (unaudited) (audited)
----------- ----------- ----------- ---------
Revenues:
Commissions and fees (1) $124,885 $163,362 $531,998 $654,889
Recurring 22,193 22,103 87,483 87,991
Other 3,921 4,605 13,588 20,103
----- ----- ------ ------
Total revenues 150,999 190,070 633,069 762,983
------- ------- ------- -------
Expenses:
Compensation and employee
benefits 59,685 62,473 235,518 256,511
Transaction processing 23,568 21,975 95,618 95,078
Occupancy and equipment 15,254 15,075 59,950 57,816
Telecommunications and data
processing services 13,497 14,029 54,549 53,243
Other general and
administrative 22,323 28,019 83,028 97,556
Restructuring charges 25,444 - 25,444 -
Interest expense 291 1,660 2,511 7,253
--- ----- ----- -----
Total expenses 160,062 143,231 556,618 567,457
------- ------- ------- -------
(Loss) income before income
tax (benefit) expense (9,063) 46,839 76,451 195,526
Income tax (benefit) expense (1,270) 18,096 33,617 80,884
------ ------ ------ ------
Net (loss) income $(7,793) $28,743 $42,834 $114,642
======= ======= ======= ========
(Loss) earnings per share:
Basic $(0.18) $0.67 $0.98 $2.64
Diluted $(0.18) $0.66 $0.97 $2.61
Basic weighted average
number of common shares
outstanding 43,716 43,221 43,538 43,503
Diluted weighted average
number of common shares
outstanding 43,716 43,498 44,018 43,987
(1) ITG has changed the revenues caption commissions revenues to
commissions and fee revenues to better reflect the commission
equivalent fees earned on spread-based trades.
INVESTMENT TECHNOLOGY GROUP, INC.
Consolidated Statements of Financial Condition
(In thousands, except share amounts)
December 31, December 31,
2009 2008
---- ----
(unaudited) (audited)
----------- ---------
Assets
Cash and cash equivalents $330,879 $352,960
Cash restricted or segregated
under regulations and other 95,787 73,218
Deposits with clearing organizations 14,891 43,241
Securities owned, at fair value 6,768 6,399
Receivables from brokers,
dealers and clearing organizations 364,436 328,528
Receivables from customers 298,342 300,158
Premises and equipment, net 41,437 48,321
Capitalized software, net 68,913 62,821
Goodwill 425,301 423,896
Other intangibles, net 27,263 31,094
Income taxes receivable 13,897 -
Deferred taxes 2,910 2,591
Other assets 12,279 12,226
------ ------
Total assets $1,703,103 $1,685,453
---------- ----------
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable and accrued expenses $209,496 $221,582
Short-term bank loans - 24,900
Payables to brokers, dealers and
clearing organizations 248,664 232,527
Payables to customers 299,200 287,515
Securities sold, not yet purchased,
at fair value 31 2,479
Income taxes payable 14,113 25,646
Deferred taxes 16,999 8,924
Long term debt 46,900 94,500
------ ------
Total liabilities 835,403 898,073
------- -------
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; 51,682,153 and
51,582,306 shares issued at
Dec. 31, 2009 and Dec. 31,
2008, respectively, and
43,790,436 and 43,244,184
shares outstanding at Dec.
31, 2009 and Dec. 31, 2008,
respectively 517 516
Additional paid-in capital 233,374 219,830
Retained earnings 809,153 766,319
Common stock held in
treasury, at cost; 7,891,717
and 8,338,122 shares at Dec.
31, 2009 and Dec. 31, 2008,
respectively (182,743) (193,206)
Accumulated other
comprehensive income (loss)
(net of tax) 7,399 (6,079)
----- ------
Total stockholders’ equity 867,700 787,380
------- -------
Total liabilities and
stockholders’ equity $1,703,103 $1,685,453
---------- ----------
INVESTMENT TECHNOLOGY GROUP, INC.
Reconciliation of US GAAP Results to Pro Forma Operating Results
In evaluating ITG's financial performance, management reviews pro forma operating results, which exclude non-operating or one-time charges. Pro forma operating net income and related per share amounts are non-GAAP (generally accepted accounting principles) performance measures that ITG believes are useful to assist investors in gaining an understanding of the trends and operating results for ITG's core businesses. Pro forma operating net income and related earnings per share should be viewed in addition to, and not in lieu of, reported results under US GAAP.
The following is a reconciliation of the most directly comparable US GAAP results to the pro forma operating results for the periods presented (in thousands except per share amounts):
Three Months Ended Year Ended
December 31, December 31,
------------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
(unaudited) (unaudited) (unaudited) (audited)
----------- ----------- ----------- ---------
Total revenues $150,999 $190,070 $633,069 $762,983
Total expenses 160,062 143,231 556,618 567,457
Less:
Unrealized loss on
NYSE Euronext common
stock (1) - (1,519) - (1,519)
Restructuring charges (2) (25,444) - (25,444) -
Pro forma operating expenses 134,618 141,712 531,174 565,938
(Loss) income before income
tax (benefit) expense (9,063) 46,839 76,451 195,526
Effect of pro forma
adjustment 25,444 1,519 25,444 1,519
Pro forma pre-tax operating
income 16,381 48,358 101,895 197,045
Income tax (benefit) expense (1,270) 18,096 33,617 80,884
Tax effect of pro forma
adjustment 9,101 621 9,101 621
Pro forma operating income
tax expense 7,831 18,717 42,718 81,505
Net (loss) income (7,793) 28,743 42,834 114,642
Net effect of pro forma
adjustment 16,343 898 16,343 898
Pro forma operating net income $8,550 $29,641 $59,177 $115,540
Diluted (loss) earnings
per share $(0.18) $0.66 $0.97 $2.61
Net effect of pro forma
adjustment 0.37 0.02 0.37 0.02
Pro forma diluted operating
earnings per share $0.19 $0.68 $1.34 $2.63
Notes:
(1) The unrealized loss recorded in the fourth quarter of 2008 pertains
to the 55,440 shares of common stock in NYSE Euronext, Inc. that ITG
received in March 2006 as consideration in connection with the merger
between the NYSE and Archipelago Holdings, Inc. ITG recorded the
write-down to reflect the December 31, 2008 fair market value of these
shares at $1.5 million as it determined the impairment was other-than-
temporary. Upon receipt of these shares in 2006, ITG had recorded
non-operating revenues totaling $7.9 million, reflecting a gain of
$6.9 million and dividend income of approximately $1.0 million.
(2) In the fourth quarter of 2009 management committed to a restructuring
plan focused primarily on US operations to position ITG for long-term
profitable growth. Restructuring charges include employee severance
arrangements, costs related to the consolidation of leased facilities
and write-offs of capitalized software and certain intangible assets
due primarily to changes in product priorities.
SOURCE Investment Technology Group, Inc.
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