|JULY 19, 2000|
|Knight Trading Group Reports 16% Growth In Quarterly Earnings and 23% Growth In Quarterly Revenues Over Second Quarter 1999|
JERSEY CITY, N.J., July 19 /PRNewswire/ -- Knight Trading Group, Inc. (Nasdaq: NITE) today reported results for the second quarter ended June 30, 2000. 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, fixed income instruments and certain commodities 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 subsidiary.
Second Quarter 2000 vs. Second Quarter 1999 -- 23% growth in revenues -- 55% growth in equity trades executed -- 16% growth in pro forma net income -- 1% growth in equity shares traded YTD 2000 vs. YTD 1999 -- 81% growth in revenues -- 93% growth in equity trades executed -- 103% growth in pro forma net income -- 75% growth in equity shares traded Second Quarter Second Quarter 2000 1999 Revenues ($) 313,517,756 254,172,478 Pro forma net income ($) 67,218,795 58,031,726 Pro forma diluted EPS ($) .53 .46 Equity trades executed 33,285,417 21,448,630 Average daily trades 528,340 340,454 Equity shares traded 21,516,920,838 21,319,768,752 YTD YTD 2000 1999 Revenues ($) 828,282,022 457,612,643 Pro forma net income ($) 202,840,400 99,974,918 Pro forma diluted EPS ($) 1.60 .80 Equity trades executed 77,354,858 40,139,998 Average daily trades 613,927 323,710 Equity shares traded 65,333,712,218 37,262,921,041
Revenues for the second quarter of 2000 rose 23% to $313.5 million, compared to $254.2 million for the second quarter of 1999. Net income for the second quarter of 2000 totaled $67.2 million, or $.53 per share on a diluted basis, a 16% increase from $58.0 million, or $0.46 per share on a diluted basis for the pro forma period a year ago. The Company achieved pre-tax margins of 34.7% in the second quarter of 2000. Return on equity for the second quarter of 2000, stated on an annualized basis, was 39.7%.
Revenues and net income for the second quarter of 2000 decreased 39% and 50%, respectively, from the pro forma first quarter of 2000. Equity trades executed and equity shares traded for the second quarter of 2000 decreased 24% and 51%, respectively, from the first quarter of 2000, primarily due to decreased retail trading volume in the latter half of the second quarter.
The Company's options market-making business generated total net trading revenue of approximately $37.8 million, versus $20.6 million during the second quarter of 1999. Additionally, the Company's asset management business generated $10.9 million in asset management fees during the second quarter of 2000, up 71% from the same period a year ago.
"Knight focused its efforts during the second quarter on achieving its stated business objectives," said Kenneth D. Pasternak, the Chief Executive Officer and President of Knight Trading Group. "We made significant strides toward growing our client base, expanding our systems capacity and processing power, enhancing our execution standards, and building our business model in international markets. Indicative of our success during the past quarter is what we accomplished in the options industry. In less than six months since entering the business, we now are a major player in options trading. We have a presence on all five of the major U.S. options exchanges, and can handle options orders in more than 250 companies."
"On the international front, we made significant progress during the second quarter toward building our business model in Europe and Japan," continued Mr. Pasternak. "We have established our joint venture with Nikko Securities to provide wholesale market-making services in Japanese equity securities. In short, we are delivering -- faster than many thought we would -- on our promises to carve out a dominant role in options trading and to transport our business model to international markets."
"We also were successful in attracting order flow from a more diverse client base during the past quarter," said Mr. Pasternak. "Institutional order flow, for example, accounted for 44% of our equity trading revenues, versus 19% in the second quarter of 1999. We also implemented a new trading service in Nasdaq stocks that enhances our execution capabilities in the OTC market by offering more opportunities for price improvement through executions requiring no dealer intervention. The viability of the Nasdaq InterMarket, in which we are the largest trading firm, was reaffirmed when three electronic communications networks (ECNs) agreed to forge links to that market. All of these developments indicate that Knight is well positioned to become the liquidity center best equipped to provide superior order executions in OTC and listed securities transactions."
Knight plans to file promptly an SEC Registration Statement on Form S-3 covering 2.5 million shares of Knight Trading Group Class A Common Stock. The sellers on the Registration Statement consist of the five former members of Arbitrade Holdings. The Company makes this filing pursuant to the resale registration rights agreed to in the Agreement and Plan of Merger between the parties dated November 17, 1999, as filed with the SEC on a Current Report on Form 8-K on January 12, 2000. Knight intends to keep the Form S-3 effective through January 12, 2001, the first anniversary of the Company's Arbitrade acquisition.
Knight Trading Group, Inc., headquartered in Jersey City, NJ, is a liquidity center that seeks to empower investors by providing them with opportunities for price improvement, immediacy and enhanced liquidity in over-the-counter (OTC) and listed securities transactions. It has the power to commit capital for market orders, and it also maintains the largest limit order book in the OTC market. Knight traded 81 billion shares in 1999, a volume behind only those posted by Nasdaq and the New York Stock Exchange (NYSE). It also is one of the largest execution destinations for securities transactions placed via the Internet. Knight is a charter member of Fortune magazine's "e-50 Stock Index," an elite collection of companies that are shaping the new Internet-based economy. In addition, Knight, which has been in operations for fewer than five years, is 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 or at http://www.knight-sec.com.
Copies of this earnings release and other information on the Company can be obtained via the Internet at http://www.knighttradinggroup.com or at http://www.knight-sec.com, or via 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 & Exchange Commission.
KNIGHT TRADING GROUP, INC. Consolidated Statements of Income (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2000 1999 2000 1999 Revenues Net trading revenue $283,041,696 $237,046,452 $770,086,203 $430,309,416 Asset management fees 10,900,200 6,373,299 20,328,694 9,796,084 Interest and dividends 12,142,855 5,093,387 22,494,593 8,728,374 Commissions and fees 5,481,872 4,438,874 10,176,577 6,966,056 Investment income and other 1,951,133 1,220,466 5,195,955 1,812,713 Total revenues 313,517,756 254,172,478 828,282,022 457,612,643 Expenses Employee compensation and benefits 102,275,294 77,141,196 277,415,954 139,355,694 Payments for order flow 38,319,274 35,354,189 97,636,834 67,782,017 Execution and clearance fees 27,646,413 22,027,402 57,403,931 41,742,573 Interest 7,991,811 1,880,570 14,863,967 4,585,160 Communications and data processing 7,103,218 4,225,659 14,235,689 8,356,358 Professional fees 6,232,897 2,393,126 10,764,570 3,692,392 Depreciation and amortization 5,495,985 2,765,027 9,697,134 4,905,124 Occupancy and equipment rentals 4,305,870 2,575,176 7,380,002 4,498,557 Business development 2,886,158 1,567,608 8,120,385 2,335,149 Other 2,345,618 2,208,884 4,908,813 4,002,997 Total expenses 204,602,538 152,138,837 502,427,279 281,256,021 Income before income taxes 108,915,218 102,033,641 325,854,743 176,356,622 Income tax expense 41,696,423 35,506,010 122,103,947 62,823,564 Net income $ 67,218,795 $ 66,527,631 $203,750,796 $113,533,058 Basic earnings per share $0.55 $0.55 $1.67 $0.95 Diluted earnings per share $0.53 $0.53 $1.60 $0.91 Pro forma adjustments:* Income before income taxes $102,033,641 $325,854,743 $176,356,622 Adjustment for pro forma employee compensation and benefits (2,713,499) (267,109) (4,419,564) Pro forma income before income taxes 99,320,142 325,587,634 $171,937,058 Pro forma income tax expense 41,288,416 122,747,234 71,962,140 Pro forma net income $58,031,726 $202,840,400 $99,974,918 Pro forma basic earnings per share $0.48 $1.66 $0.83 Pro forma diluted earnings per share $0.46 $1.60 $0.80 Shares used in the computation of basic earnings per share * 122,234,246 121,421,678 122,192,533 119,774,228 Shares used in the computation of diluted earnings per share * 126,795,238 126,672,844 127,007,447 124,647,369
KNIGHT TRADING GROUP, INC. Consolidated Statements of Financial Condition June 30, December 31, 2000 1999 (unaudited) ASSETS Cash and cash equivalents $383,703,422 $304,053,554 Securities owned, at market value 1,428,211,228 910,232,916 Receivable from clearing brokers 317,772,210 215,423,208 Fixed assets and leasehold improvements at cost,less accumulated depreciation 50,201,063 26,820,045 Goodwill, less accumulated amortization 39,083,425 24,899,982 Investments 57,866,551 40,408,554 Other assets 34,740,195 18,447,547 Total assets $2,311,578,094 $1,540,285,806 LIABILITIES & STOCKHOLDERS' EQUITY Liabilities Securities sold, not yet purchased, at market value $1,354,476,921 $720,919,013 Securities sold under agreements to repurchase -- 10,409,736 Payable to clearing brokers 128,237,588 159,943,018 Accrued compensation expense 64,749,345 57,234,608 Accrued execution and clearance fees 9,187,248 8,371,056 Accrued payments for order flow 10,021,939 13,978,854 Accounts payable, accrued expenses and other liabilities 19,298,383 54,205,482 Income taxes payable 19,513,907 15,992,937 Total liabilities 1,605,485,331 1,041,054,704 Stockholders' equity Class A Common Shares 1,222,740 1,221,215 Additional paid-in capital 303,464,434 300,355,094 Retained earnings 401,405,589 197,654,793 Total stockholders' equity 706,092,763 499,231,102 Total liabilities and stockholders' equity $2,311,578,094 $1,540,285,806
SOURCE Knight Trading Group, Inc.
CONTACT: Robert Turner, Executive Vice President, Chief Financial Officer and Treasurer, 201-557-6845, or Margaret Wyrwas, Vice President of Corporate Communications & Investor Relations, 201-557-6954, firstname.lastname@example.org; or Chuck Dohrenwend, Manager of Corporate Communications, 201-356-1753, email@example.com, all of Knight Trading Group, Inc./