Knight Trading Group Reports Earnings Per Share of $0.21, Ahead of Reduced Expectations

Difficult Market Environment During First Quarter 2001

Impacts Quarterly Results



International Expansion Investment Costs Total $0.08 Per Share



Apr 18, 2001, 01:00 ET from Knight Trading Group, Inc.

    JERSEY CITY, N.J., April 18 /PRNewswire/ --
 Knight Trading Group, Inc. (Nasdaq: NITE) today reported results for the first
 quarter ended March 31, 2001.  Knight Trading Group is the leading market
 maker in equity securities listed on Nasdaq, the OTCBB of the National
 Association of Securities Dealers (NASD), and the over-the-counter market for
 New York Stock Exchange (NYSE) and American Stock Exchange (AMEX)-listed
 securities.  Knight also is a leading market maker in options on individual
 equities, equity indices and fixed income instruments in the U.S. and Europe.
 The firm also maintains an asset management business for institutional
 investors and high net worth individuals through its Deephaven Capital
 Management subsidiary.
 
     First Quarter 2001 vs. First Quarter 2000
     * 56% decline in revenues    * 32% decline in equity trades executed
     * 80% decline in             * 40% decline in equity shares traded
       pro forma net income
 
     First Quarter 2001 vs. Fourth Quarter 2000
     * 10% decline in revenues    * 11% decline in equity trades executed
     * 24% decline in net income  * 7% growth in equity shares traded
 
 
                                             First Quarter      First Quarter
                                                 2001                2000
 
     Revenues ($)                             225,647,124        510,599,038
     Pro forma net income ($)                  26,917,463        135,731,822
     Pro forma diluted EPS ($)                       0.21               1.07
     Equity trades executed                    30,177,299         44,069,441
     Average daily equity trades                  486,731            699,515
     Equity shares traded                  26,450,899,186     43,816,791,380
 
 
     Revenues for the first quarter of 2001 declined 56% to $225.6 million,
 compared to $510.6 million for the first quarter of 2000.  Net income for the
 first quarter of 2001 totaled $26.9 million, or $0.21 per share on a diluted
 basis, an 80% decrease from $135.7 million, or $1.07 per share on a pro forma
 diluted basis for the same period a year ago.  The Company achieved pre-tax
 margins of 19.1% in the first quarter of 2001, down from 42.5% in the first
 quarter of 2000.  Return on equity for the first quarter of 2001, stated on an
 annualized basis, was 13.8%.  Costs related to international expansion efforts
 accounted for approximately $10 million, equivalent to $0.08 per share.
     Revenues and net income for the first quarter of 2001 decreased 10% and
 24%, respectively, from the fourth quarter of 2000.  For the first quarter,
 equity trades executed declined 11% versus the fourth quarter of 2000.  Equity
 shares traded for the first quarter of 2001 increased 7% from the fourth
 quarter of 2000.
     The Company's options market maker generated total net trading revenue of
 approximately $41.6 million during the first quarter of 2001, versus
 $33.0 million during the first quarter of 2000.  Additionally, the Company's
 asset management business generated $12.7 million in asset management fees
 during the first quarter of 2001, up 30% from $9.8 million in the same period
 a year ago.
     "First quarter 2001 was the most challenging trading environment Knight
 has experienced, characterized by severe declines across most of the leading
 indexes," stated Kenneth D. Pasternak, Chairman, Chief Executive Officer and
 President of Knight Trading Group.  "The Nasdaq, DJIA, S&P 500 and Russell
 2000 indices closed down 26%, 8%, 12% and 7%, respectively, during the
 quarter, despite increased trading volume."
     "The precipitous decline in the Nasdaq Composite Index, which went from a
 high of 5,049 on March 10, 2000 to its first quarter 2001 low of 1,820 on
 March 29th, negatively impacted trading activity by the self-directed
 investor -- Knight's core constituency.  Record levels of money flows into
 money market funds during the first two months of this year reflected the bias
 in self-directed investor sentiment towards cash rather than equities.  Absent
 any economic catalyst, we believe the self-directed investor will continue to
 remain cautious as the market cycle bottoms out."
     "Knight's efforts to diversify our revenue stream through enhanced product
 offerings and by broadening our client base have been important factors in
 partially offsetting the negative effects of the current market," continued
 Mr. Pasternak.  "Despite the recent cyclical downturn in the equity markets,
 we believe there is a powerful, ongoing secular trend towards self-directed
 investing as a means of wealth creation and management.  Evidence of this
 trend is clearly outlined when one reviews Knight's average daily equity
 trades for the first quarters of the past five years:  63,000 in 1997,
 124,000 in 1998, 306,000 in 1999, 700,000 in 2000, and 487,000 in 2001.  We
 believe that positioning Knight as a single point of entry for order flow
 across multiple product, client and geographic lines will enhance our ability
 to capture the benefits of this trend when the market cycle swings back into
 positive territory."
 
     Knight is the liquidity center that offers superior execution services to
 its broker-dealer and institutional clients in over-the-counter (OTC) and
 listed equity securities, and in equity options.  In so doing, Knight helps
 its clients meet their fiduciary obligation of obtaining best execution for
 the securities orders that they place on behalf of their customers.  Knight
 also maintains an asset management business for institutional investors and
 high net worth individuals through Deephaven Capital Management.
     Knight has the power to commit capital for market orders, and also
 maintains one of the largest limit order books in the OTC market.  It is one
 of the largest destinations for stock orders placed via the Internet.  Knight
 traded 112 billion shares in the year 2000, a volume behind only those posted
 by Nasdaq and the New York Stock Exchange (NYSE). For the second consecutive
 year, based on 1999 and 2000 fiscal year results, Knight was ranked by Forbes
 magazine as one of the 500 most profitable public companies in the U.S.
 Ultimately, Knight plans to enable the global trading village to trade all
 types of equity securities and options at anytime, from anywhere in the world.
 More information about Knight can be obtained at
 http://www.knighttradinggroup.com.
     Copies of this earnings release and other information on the Company can
 be obtained via the Internet at http://www.knighttradinggroup.com, or by
 calling the Company's toll-free investor information line at 1-877-INFO-NITE.
 
     The matters described herein contain forward-looking statements that are
 made pursuant to the Safe Harbor provisions of the Private Securities
 Litigation Reform Act of 1995.  Forward-looking statements involve a number of
 risks, uncertainties or other factors beyond the Company's control, which
 could cause actual results to differ materially from historical results,
 performance or other expectations and from any opinions or statements
 expressed with respect to future periods.  These factors include, but are not
 limited to, the Company's ability to implement its growth strategies,
 economic, political and market conditions and fluctuations, government and
 industry regulation, interest rate risk, intellectual property rights, and
 other factors detailed in the Company's registration statement and periodic
 reports filed with the Securities and Exchange Commission.
 
 
                           KNIGHT TRADING GROUP, INC.
                 Consolidated Statements of Income (unaudited)
 
                                                 Three Months Ended March 31,
                                                     2001             2000
 
     Revenues
     Net trading revenue                         $187,454,445   $486,778,104
     Asset management fees                         12,720,036      9,773,589
     Interest and dividends, net                    5,309,313      3,507,417
     Commissions and fees                          14,512,201      7,027,629
     Investment income and other                    5,651,129      3,512,299
      Total revenues                              225,647,124    510,599,038
 
     Expenses
     Employee compensation and benefits            79,695,673    175,198,790
     Payments for order flow                       29,718,426     59,317,560
     Execution and clearance fees                  30,049,055     30,222,288
     Communications and data processing            12,831,389      7,125,993
     Depreciation and amortization                 10,222,579      4,214,963
     Professional fees                              5,654,011      4,532,062
     Occupancy and equipment rentals                5,010,858      3,093,186
     Business development                           3,369,758      5,238,693
     Other                                          5,942,719      4,605,761
      Total expenses                              182,494,468    293,549,296
 
     Income before income taxes and
      minority interest                            43,152,656    217,049,742
     Income tax expense                            17,982,130     80,454,361
 
     Net income before minority interest          $25,170,526   $136,595,381
 
     Minority interest in consolidated
      subsidiaries                                 (1,746,937)            --
 
     Net income                                  $ 26,917,463   $136,595,381
     Basic earnings per share                           $0.22          $1.12
     Diluted earnings per share                         $0.21          $1.08
 
     Pro forma adjustments:*
     Income before income taxes                                 $217,049,742
     Adjustment for pro forma
      employee compensation and benefits                            (267,109)
 
     Pro forma income before income taxes                        216,782,633
     Pro forma income tax expense                                 81,050,811
      Pro forma net income                                      $135,731,822
 
     Pro forma basic earnings per share                                $1.11
     Pro forma diluted earnings per share                              $1.07
 
     Shares used in the computation
      of basic earnings per share*                123,517,121    122,146,982
     Shares used in the computation
      of diluted earnings per share*              126,179,906    126,981,962
 
     *  On January 12, 2000, Knight Trading Group, Inc. (the "Company")
        completed its merger with Arbitrade Holdings LLC ("Arbitrade").  The
        transaction was accounted for as a pooling of interests, and, as such,
        the historical financial statements have been restated to account for
        the merger on a retroactive basis.  Pro forma adjustments for
        compensation and income taxes have been made to the historical
        financial statements of Arbitrade to adjust for partners' compensation
        paid as distributions of capital and income taxes, which were
        previously borne by the individual partners.  The foregoing description
        of the Arbitrade transaction is a brief summary and is  qualified in
        its entirety by reference to the Merger Agreement, a copy of which was
        filed as an exhibit to the Company's 8-K filed with the SEC on
        January 12, 2000.  See also the Company's Reports on Form 10-K for the
        years ended December 31, 1999 and December 31, 2000.
 
 
                           KNIGHT TRADING GROUP, INC.
                 Consolidated Statements of Financial Condition
 
                                                    March 31,    December 31,
                                                     2001           2000
                                                   (unaudited)
     ASSETS
     Cash and cash equivalents                   $374,848,966   $364,057,534
     Securities owned, held at clearing
      broker, at market value                   1,517,954,276  1,799,966,679
     Receivable from clearing brokers             658,361,210    114,047,275
     Fixed assets and leasehold
      improvements at cost, less
      accumulated depreciation                     86,819,156     79,014,393
     Goodwill, less accumulated amortization       43,194,198     45,239,177
     Investments                                   83,253,424     64,917,975
     Other assets                                  54,824,311     54,166,139
 
     Total assets                              $2,819,255,541 $2,521,409,172
 
     LIABILITIES & STOCKHOLDERS' EQUITY
     Liabilities
     Securities sold, not yet purchased,
      at market value                          $1,745,436,253 $1,427,214,323
     Payable to clearing brokers                  134,333,130    184,269,478
     Accrued compensation expense                  41,693,199     62,444,645
     Accrued execution and clearance fees           5,040,626      6,092,754
     Accrued payments for order flow                5,981,101     11,635,069
     Accounts payable, accrued expenses
      and other liabilities                        22,827,010     30,576,814
     Income taxes payable                          17,563,405      4,813,771
     Total liabilities                          1,972,874,724  1,727,046,854
 
     Minority interest in consolidated
      subsidiaries                                 27,094,662     20,175,872
 
     Stockholders' equity
     Class A Common Shares                          1,236,505      1,232,908
     Additional paid-in capital                   331,163,026    309,611,248
     Retained earnings                            492,864,757    465,947,294
     Accumulated other comprehensive
      income (loss) - foreign currency
      translation adjustments, net of tax          (5,978,133)    (2,605,004)
 
     Total stockholders' equity                   819,286,155    774,186,446
 
     Total liabilities and
      stockholders' equity                     $2,819,255,541 $2,521,409,172
 
 

SOURCE Knight Trading Group, Inc.
    JERSEY CITY, N.J., April 18 /PRNewswire/ --
 Knight Trading Group, Inc. (Nasdaq: NITE) today reported results for the first
 quarter ended March 31, 2001.  Knight Trading Group is the leading market
 maker in equity securities listed on Nasdaq, the OTCBB of the National
 Association of Securities Dealers (NASD), and the over-the-counter market for
 New York Stock Exchange (NYSE) and American Stock Exchange (AMEX)-listed
 securities.  Knight also is a leading market maker in options on individual
 equities, equity indices and fixed income instruments in the U.S. and Europe.
 The firm also maintains an asset management business for institutional
 investors and high net worth individuals through its Deephaven Capital
 Management subsidiary.
 
     First Quarter 2001 vs. First Quarter 2000
     * 56% decline in revenues    * 32% decline in equity trades executed
     * 80% decline in             * 40% decline in equity shares traded
       pro forma net income
 
     First Quarter 2001 vs. Fourth Quarter 2000
     * 10% decline in revenues    * 11% decline in equity trades executed
     * 24% decline in net income  * 7% growth in equity shares traded
 
 
                                             First Quarter      First Quarter
                                                 2001                2000
 
     Revenues ($)                             225,647,124        510,599,038
     Pro forma net income ($)                  26,917,463        135,731,822
     Pro forma diluted EPS ($)                       0.21               1.07
     Equity trades executed                    30,177,299         44,069,441
     Average daily equity trades                  486,731            699,515
     Equity shares traded                  26,450,899,186     43,816,791,380
 
 
     Revenues for the first quarter of 2001 declined 56% to $225.6 million,
 compared to $510.6 million for the first quarter of 2000.  Net income for the
 first quarter of 2001 totaled $26.9 million, or $0.21 per share on a diluted
 basis, an 80% decrease from $135.7 million, or $1.07 per share on a pro forma
 diluted basis for the same period a year ago.  The Company achieved pre-tax
 margins of 19.1% in the first quarter of 2001, down from 42.5% in the first
 quarter of 2000.  Return on equity for the first quarter of 2001, stated on an
 annualized basis, was 13.8%.  Costs related to international expansion efforts
 accounted for approximately $10 million, equivalent to $0.08 per share.
     Revenues and net income for the first quarter of 2001 decreased 10% and
 24%, respectively, from the fourth quarter of 2000.  For the first quarter,
 equity trades executed declined 11% versus the fourth quarter of 2000.  Equity
 shares traded for the first quarter of 2001 increased 7% from the fourth
 quarter of 2000.
     The Company's options market maker generated total net trading revenue of
 approximately $41.6 million during the first quarter of 2001, versus
 $33.0 million during the first quarter of 2000.  Additionally, the Company's
 asset management business generated $12.7 million in asset management fees
 during the first quarter of 2001, up 30% from $9.8 million in the same period
 a year ago.
     "First quarter 2001 was the most challenging trading environment Knight
 has experienced, characterized by severe declines across most of the leading
 indexes," stated Kenneth D. Pasternak, Chairman, Chief Executive Officer and
 President of Knight Trading Group.  "The Nasdaq, DJIA, S&P 500 and Russell
 2000 indices closed down 26%, 8%, 12% and 7%, respectively, during the
 quarter, despite increased trading volume."
     "The precipitous decline in the Nasdaq Composite Index, which went from a
 high of 5,049 on March 10, 2000 to its first quarter 2001 low of 1,820 on
 March 29th, negatively impacted trading activity by the self-directed
 investor -- Knight's core constituency.  Record levels of money flows into
 money market funds during the first two months of this year reflected the bias
 in self-directed investor sentiment towards cash rather than equities.  Absent
 any economic catalyst, we believe the self-directed investor will continue to
 remain cautious as the market cycle bottoms out."
     "Knight's efforts to diversify our revenue stream through enhanced product
 offerings and by broadening our client base have been important factors in
 partially offsetting the negative effects of the current market," continued
 Mr. Pasternak.  "Despite the recent cyclical downturn in the equity markets,
 we believe there is a powerful, ongoing secular trend towards self-directed
 investing as a means of wealth creation and management.  Evidence of this
 trend is clearly outlined when one reviews Knight's average daily equity
 trades for the first quarters of the past five years:  63,000 in 1997,
 124,000 in 1998, 306,000 in 1999, 700,000 in 2000, and 487,000 in 2001.  We
 believe that positioning Knight as a single point of entry for order flow
 across multiple product, client and geographic lines will enhance our ability
 to capture the benefits of this trend when the market cycle swings back into
 positive territory."
 
     Knight is the liquidity center that offers superior execution services to
 its broker-dealer and institutional clients in over-the-counter (OTC) and
 listed equity securities, and in equity options.  In so doing, Knight helps
 its clients meet their fiduciary obligation of obtaining best execution for
 the securities orders that they place on behalf of their customers.  Knight
 also maintains an asset management business for institutional investors and
 high net worth individuals through Deephaven Capital Management.
     Knight has the power to commit capital for market orders, and also
 maintains one of the largest limit order books in the OTC market.  It is one
 of the largest destinations for stock orders placed via the Internet.  Knight
 traded 112 billion shares in the year 2000, a volume behind only those posted
 by Nasdaq and the New York Stock Exchange (NYSE). For the second consecutive
 year, based on 1999 and 2000 fiscal year results, Knight was ranked by Forbes
 magazine as one of the 500 most profitable public companies in the U.S.
 Ultimately, Knight plans to enable the global trading village to trade all
 types of equity securities and options at anytime, from anywhere in the world.
 More information about Knight can be obtained at
 http://www.knighttradinggroup.com.
     Copies of this earnings release and other information on the Company can
 be obtained via the Internet at http://www.knighttradinggroup.com, or by
 calling the Company's toll-free investor information line at 1-877-INFO-NITE.
 
     The matters described herein contain forward-looking statements that are
 made pursuant to the Safe Harbor provisions of the Private Securities
 Litigation Reform Act of 1995.  Forward-looking statements involve a number of
 risks, uncertainties or other factors beyond the Company's control, which
 could cause actual results to differ materially from historical results,
 performance or other expectations and from any opinions or statements
 expressed with respect to future periods.  These factors include, but are not
 limited to, the Company's ability to implement its growth strategies,
 economic, political and market conditions and fluctuations, government and
 industry regulation, interest rate risk, intellectual property rights, and
 other factors detailed in the Company's registration statement and periodic
 reports filed with the Securities and Exchange Commission.
 
 
                           KNIGHT TRADING GROUP, INC.
                 Consolidated Statements of Income (unaudited)
 
                                                 Three Months Ended March 31,
                                                     2001             2000
 
     Revenues
     Net trading revenue                         $187,454,445   $486,778,104
     Asset management fees                         12,720,036      9,773,589
     Interest and dividends, net                    5,309,313      3,507,417
     Commissions and fees                          14,512,201      7,027,629
     Investment income and other                    5,651,129      3,512,299
      Total revenues                              225,647,124    510,599,038
 
     Expenses
     Employee compensation and benefits            79,695,673    175,198,790
     Payments for order flow                       29,718,426     59,317,560
     Execution and clearance fees                  30,049,055     30,222,288
     Communications and data processing            12,831,389      7,125,993
     Depreciation and amortization                 10,222,579      4,214,963
     Professional fees                              5,654,011      4,532,062
     Occupancy and equipment rentals                5,010,858      3,093,186
     Business development                           3,369,758      5,238,693
     Other                                          5,942,719      4,605,761
      Total expenses                              182,494,468    293,549,296
 
     Income before income taxes and
      minority interest                            43,152,656    217,049,742
     Income tax expense                            17,982,130     80,454,361
 
     Net income before minority interest          $25,170,526   $136,595,381
 
     Minority interest in consolidated
      subsidiaries                                 (1,746,937)            --
 
     Net income                                  $ 26,917,463   $136,595,381
     Basic earnings per share                           $0.22          $1.12
     Diluted earnings per share                         $0.21          $1.08
 
     Pro forma adjustments:*
     Income before income taxes                                 $217,049,742
     Adjustment for pro forma
      employee compensation and benefits                            (267,109)
 
     Pro forma income before income taxes                        216,782,633
     Pro forma income tax expense                                 81,050,811
      Pro forma net income                                      $135,731,822
 
     Pro forma basic earnings per share                                $1.11
     Pro forma diluted earnings per share                              $1.07
 
     Shares used in the computation
      of basic earnings per share*                123,517,121    122,146,982
     Shares used in the computation
      of diluted earnings per share*              126,179,906    126,981,962
 
     *  On January 12, 2000, Knight Trading Group, Inc. (the "Company")
        completed its merger with Arbitrade Holdings LLC ("Arbitrade").  The
        transaction was accounted for as a pooling of interests, and, as such,
        the historical financial statements have been restated to account for
        the merger on a retroactive basis.  Pro forma adjustments for
        compensation and income taxes have been made to the historical
        financial statements of Arbitrade to adjust for partners' compensation
        paid as distributions of capital and income taxes, which were
        previously borne by the individual partners.  The foregoing description
        of the Arbitrade transaction is a brief summary and is  qualified in
        its entirety by reference to the Merger Agreement, a copy of which was
        filed as an exhibit to the Company's 8-K filed with the SEC on
        January 12, 2000.  See also the Company's Reports on Form 10-K for the
        years ended December 31, 1999 and December 31, 2000.
 
 
                           KNIGHT TRADING GROUP, INC.
                 Consolidated Statements of Financial Condition
 
                                                    March 31,    December 31,
                                                     2001           2000
                                                   (unaudited)
     ASSETS
     Cash and cash equivalents                   $374,848,966   $364,057,534
     Securities owned, held at clearing
      broker, at market value                   1,517,954,276  1,799,966,679
     Receivable from clearing brokers             658,361,210    114,047,275
     Fixed assets and leasehold
      improvements at cost, less
      accumulated depreciation                     86,819,156     79,014,393
     Goodwill, less accumulated amortization       43,194,198     45,239,177
     Investments                                   83,253,424     64,917,975
     Other assets                                  54,824,311     54,166,139
 
     Total assets                              $2,819,255,541 $2,521,409,172
 
     LIABILITIES & STOCKHOLDERS' EQUITY
     Liabilities
     Securities sold, not yet purchased,
      at market value                          $1,745,436,253 $1,427,214,323
     Payable to clearing brokers                  134,333,130    184,269,478
     Accrued compensation expense                  41,693,199     62,444,645
     Accrued execution and clearance fees           5,040,626      6,092,754
     Accrued payments for order flow                5,981,101     11,635,069
     Accounts payable, accrued expenses
      and other liabilities                        22,827,010     30,576,814
     Income taxes payable                          17,563,405      4,813,771
     Total liabilities                          1,972,874,724  1,727,046,854
 
     Minority interest in consolidated
      subsidiaries                                 27,094,662     20,175,872
 
     Stockholders' equity
     Class A Common Shares                          1,236,505      1,232,908
     Additional paid-in capital                   331,163,026    309,611,248
     Retained earnings                            492,864,757    465,947,294
     Accumulated other comprehensive
      income (loss) - foreign currency
      translation adjustments, net of tax          (5,978,133)    (2,605,004)
 
     Total stockholders' equity                   819,286,155    774,186,446
 
     Total liabilities and
      stockholders' equity                     $2,819,255,541 $2,521,409,172
 
 SOURCE  Knight Trading Group, Inc.