|OCTOBER 18, 2000|
|Knight Trading Group Reports Third Quarter Earnings Per Share of $0.16|
|Market Conditions and International Expansion Costs Impact Knight's Third Quarter Results
JERSEY CITY, N.J., Oct. 18 /PRNewswire/ -- Knight Trading Group, Inc. (Nasdaq: NITE) today reported results for the third quarter ended September 30, 2000. Knight Trading Group is the leading market maker in equity securities listed on Nasdaq, the OTCBB of the National Association of Securities Dealers (NASD), and the over-the-counter market for New York Stock Exchange (NYSE) and American Stock Exchange (AMEX)-listed securities. Knight also is a leading market maker in options on individual equities, equity indices and fixed income instruments in the U.S. and Europe. The firm also maintains an asset management business for institutional investors and high net worth individuals through its Deephaven Capital Management subsidiary.
Third Quarter 2000 vs. Third Quarter 1999 22% growth in revenues 54% growth in equity trades executed 27% decline in pro forma net income 23% growth in equity shares traded YTD 2000 vs. YTD 1999 66% growth in revenues 80% growth in equity trades executed 75% growth in pro forma net income 58% growth in equity shares traded Third Quarter Third Quarter 2000 1999 Revenues ($) 199,055,585 163,832,771 Pro forma net income ($) 20,583,979 28,210,940 Pro forma diluted EPS ($) .16 .22 Equity trades executed 31,419,403 20,438,294 Average daily trades 498,721 319,348 Equity shares traded 21,921,940,076 17,800,637,280 YTD YTD 2000 1999 Revenues ($) 1,030,244,095 621,445,412 Pro forma net income ($) 223,773,631 128,185,862 Pro forma diluted EPS ($) 1.76 1.02 Equity trades executed 108,774,261 60,578,292 Average daily trades 575,525 322,225 Equity shares traded 87,255,652,294 55,063,558,321
Revenues for the third quarter of 2000 rose 22% to $199.1 million, compared to $163.8 million for the third quarter of 1999. Net income for the third quarter of 2000 totaled $20.6 million, or $.16 per share on a diluted basis, a 27% decrease from $28.2 million, or $0.22 per share on a diluted basis for the pro forma period a year ago. The Company achieved pre-tax margins of 17.3% in the third quarter of 2000. Return on equity for the third quarter of 2000, stated on an annualized basis, was 12%.
Revenues and net income for the third quarter of 2000 decreased 37% and 70%, respectively, from the second quarter of 2000. Equity trades executed and equity shares traded for the third quarter of 2000 decreased 6% and increased 2%, respectively, from the second quarter of 2000.
The Company's options market-making business generated total net trading revenue of approximately $30.6 million in the third quarter, versus $18.7 million during the third quarter of 1999. Additionally, the Company's asset management business generated $9.8 million in asset management fees during the third quarter of 2000, up 91% from the same period a year ago.
"The markets experienced a great deal of uncertainty during the third quarter, as evidenced by the recurring declines in Nasdaq and widespread low volatility," said Kenneth D. Pasternak, Chief Executive Officer and President of Knight Trading Group. "This uncertainty was caused by a confluence of factors -- namely the lingering effects of the second quarter market correction, summer seasonality, and investor concern over energy costs, corporate earnings, the weak Euro and the upcoming presidential election. We believe that this market environment caused self-directed individual investors to take a more conservative approach to investing, leaving the majority of trading activity to professional traders, program traders and institutions. This market dynamic was accompanied by a rotation in our order flow mix away from growth and technology stocks toward a heavier concentration in large cap issues such as those in the Nasdaq 100 and on the NYSE -- stocks for which Knight posts lower revenue capture per share. All of these factors hurt Knight's profit performance during the third quarter."
"Despite these changing market conditions, we spent approximately $9 million (equivalent to seven cents per share) during the third quarter to make the necessary infrastructure and technology expenditures to establish a global footprint," continued Mr. Pasternak. "We already have a significant first mover advantage over our competition in Europe, and we are working to support trading across all of Europe in all U.S. and European equity securities. We believe that our aggressive approach to enhancing our European business will distance us even further from our competition in the region. We plan to ultimately provide superior order executions in a seamless, interconnected trading environment for our clients throughout Europe."
"Our business model has shown the flexibility to optimize profitability in good market conditions and maintain profitability in down times," said Mr. Pasternak. "We continue to increase Knight's competitive advantage despite challenging market conditions by making significant headway in diversifying our product offering, client base and geographic reach. This diversification strategy will help us become the first truly global order execution provider across multiple markets and products for broker-dealer and institutional clients."
Effective October 16, 2000, Kenneth D. Pasternak was elected Chairman by Knight's Board of Directors. Mr. Pasternak's title is now Chairman, Chief Executive Officer and President of Knight Trading Group.
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 87 billion shares in the first nine months of 2000, a volume behind only those posted by Nasdaq and the New York Stock Exchange (NYSE). It is a charter member of Fortune magazine's "e-50 Stock Index," an elite collection of companies shaping the Internet-based economy. Knight also 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.
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 and Exchange Commission.
KNIGHT TRADING GROUP, INC Consolidated Statements of Income (unaudited)
Three Months Ended Nine Months Ended September 30 September 30 2000 1999 2000 1999 Revenues Net trading revenue $165,546,668 $147,143,673 $935,634,409 $577,468,890 Asset management fees 9,785,248 5,112,929 30,113,942 14,909,013 Interest and dividends 17,444,776 5,696,718 40,302,822 14,425,091 Commissions and fees 5,866,883 4,721,878 17,940,494 11,687,932 Investment income and other 412,010 1,157,573 6,252,428 2,954,486 Total revenues 199,055,585 163,832,771 1,030,244,095 621,445,412 Expenses Employee compensation and benefits 57,329,180 42,187,961 334,810,522 181,543,655 Payments for order flow 37,270,268 31,068,701 134,907,102 98,850,717 Execution and clearance fees 24,176,765 22,559,526 82,226,696 64,274,267 Interest 11,607,266 2,808,069 26,834,684 7,393,228 Communications and data processing 8,060,354 5,322,280 22,290,632 13,595,170 Depreciation and amortization 7,385,754 3,045,514 17,100,314 7,950,638 Professional fees 5,844,500 1,411,916 16,483,250 5,104,308 Occupancy and equipment rentals 5,421,985 2,943,891 12,826,528 7,466,916 Business development 2,442,141 3,733,388 10,564,939 6,068,537 Other 4,993,821 657,370 11,215,276 4,747,195 Total expenses 164,532,034 115,738,616 669,259,943 396,994,631 Income before income taxes and minority interest 34,523,551 48,094,155 360,984,152 224,450,781 Income tax expense 14,117,335 12,894,648 136,477,888 75,718,211 Net income before minority interest 20,406,216 35,199,507 224,506,264 148,732,570 Minority interest in consolidated subsidiaries 177,763 -- 177,763 -- Net income $20,583,979 $35,199,507 $224,684,027 $148,732,570 Basic earnings per share $0.17 $0.29 $1.84 $1.24 Diluted earnings per share $0.16 $0.28 $1.77 $1.19 Pro forma adjustments:* Income before income taxes and minority interest -- $48,094,155 $360,984,152 $224,450,781 Adjustment for pro forma employee compensation and benefits -- (2,271,248) (267,109) (6,690,813) Pro forma income before income taxes and minority interest -- 45,822,907 360,717,043 217,759,968 Pro forma income tax expense -- 17,611,967 137,121,175 89,574,106 Pro forma income before minority interest -- 28,210,940 223,595,868 128,185,862 Minority interest in consolidated subsidiaries -- -- 177,763 -- Pro forma net income -- $28,210,940 $223,773,631 $128,185,862 Pro forma basic earnings per share -- $0.23 $1.83 $1.06 Pro forma diluted earnings per share -- $0.22 $1.76 $1.02 Shares used in the computation of basic earnings per share * 122,661,830 121,708,801 122,350,107 120,426,172 Shares used in the computation of diluted earnings per share * 126,565,409 126,855,862 126,930,997 125,348,986
KNIGHT TRADING GROUP, INC. Consolidated Statements of Financial Condition September 30 December 31 2000 1999 (unaudited) ASSETS Cash and cash equivalents $347,989,686 $304,053,554 Securities owned, at market value 1,665,024,982 910,232,916 Receivable from clearing brokers 197,030,172 215,423,208 Fixed assets and leasehold improvements at cost, less accumulated depreciation 57,274,866 26,820,045 Goodwill, less accumulated amortization 45,895,470 24,899,982 Investments 42,950,479 40,408,554 Income taxes receivable 10,421,043 -- Other assets 43,312,696 18,447,547 Total assets $2,409,899,394 $1,540,285,806 LIABILITIES & STOCKHOLDERS' EQUITY Liabilities Securities sold, not yet purchased, at market value $1,389,772,941 $720,919,013 Securities sold under agreements to repurchase -- 10,409,736 Payable to clearing brokers 196,950,609 159,943,018 Accrued compensation expense 44,172,563 57,234,608 Accrued execution and clearance fees 7,193,029 8,371,056 Accrued payments for order flow 10,348,122 13,978,854 Accounts payable, accrued expenses and other liabilities 19,148,285 54,205,482 Income taxes payable -- 15,992,937 Total liabilities 1,667,585,549 1,041,054,704 Minority interest in consolidated subsidiaries 7,229,376 -- Stockholders' equity Class A Common Shares 1,228,385 1,221,215 Additional paid-in capital 312,431,791 300,355,094 Retained earnings 422,321,246 197,637,219 Other comprehensive income -- foreign currency translation adjustments, net of income taxes ** (896,953) 17,574 Total stockholders' equity 735,084,469 499,231,102 Total liabilities and stockholders' equity $2,409,899,394 $1,540,285,806
** Prior to the third quarter 2000, foreign currency translation
adjustments were classified within other expenses on the Consolidated Statements of Income due to their immaterial amount.
SOURCE Knight Trading Group, Inc.
CONTACT: Robert Turner, Executive Vice President, Chief Financial Officer and Treasurer, 201-557-6845, or Margaret Wyrwas, Vice President, Corporate Communications & Investor Relations, 201-557-6954, or e-mail firstname.lastname@example.org, or Chuck Dohrenwend, Manager, Corporate Communications, 201-356-1753, or e-mail email@example.com all for Knight Trading Group, Inc./