|JANUARY 17, 2001|
|Knight Trading Group Reports Fourth Quarter Earnings Per Share of $0.28|
|- Market Conditions and International Expansion Costs Impact Knight's Fourth Quarter Results -
JERSEY CITY, N.J., Jan. 17 /PRNewswire/ -- Knight Trading Group, Inc. (Nasdaq: NITE) today reported results for the fourth quarter ended December 31, 2000. Knight Trading Group is the leading market maker in equity securities listed on Nasdaq, the OTCBB of the National Association of Securities Dealers (NASD), and the over-the-counter market for New York Stock Exchange (NYSE) and American Stock Exchange (AMEX)-listed securities. Knight also is a leading market maker in options on individual equities, equity indices and fixed income instruments in the U.S. and Europe. The firm also maintains an asset management business for institutional investors and high net worth individuals through its Deephaven Capital Management subsidiary.
Fourth Quarter 2000 vs. Fourth Quarter 1999
-- 11% decline in revenues -- 13% growth in equity trades executed -- 42% decline in pro forma -- 4% decline in equity shares net income traded 2000 vs. 1999 -- 40% growth in revenues -- 57% growth in equity trades executed -- 37% growth in pro forma -- 38% growth in equity shares net income traded Fourth Fourth Year Year Quarter Quarter 2000 1999 2000 1999 Revenues ($) 251,327,596 281,698,232 1,256,919,577 896,575,443 Pro forma net income ($) 35,254,120 60,278,554 259,011,602 188,459,815 Pro forma diluted EPS ($) .28 .47 2.04 1.50 Equity trades executed 33,957,354 30,111,762 142,731,615 90,690,054 Average daily equity trades 539,006 470,496 566,395 359,881 Equity shares traded 24,797,134,511 25,946,697,929 112,052,786,805 81,010,256,250
Revenues for the fourth quarter of 2000 decreased 11% to $251.3 million, compared to $281.7 million for the fourth quarter of 1999. Net income for the fourth quarter of 2000 totaled $35.3 million, or $.28 per share on a diluted basis, a 41.5% decrease from $60.3 million, or $0.47 per share on a diluted basis for the pro forma period a year ago. The Company achieved pre-tax margins of 22.9% in the fourth quarter of 2000. Return on equity for the fourth quarter of 2000, stated on an annualized basis, was 18.5%.
Revenues and net income for the fourth quarter of 2000 increased 33.9% and 71.3%, respectively, from the third quarter of 2000. Equity trades executed and equity shares traded for the fourth quarter of 2000 increased 8% and 13%, respectively, from the third quarter of 2000.
The Company's options market-making business generated total net trading revenue of approximately $48.5 million in the fourth quarter, up 135% from the fourth quarter of 1999. Additionally, the Company's asset management business generated $10.9 million in asset management fees during the fourth quarter of 2000, up 159% from the same period a year ago.
"The markets reflected the uncertainty of investors during the fourth quarter, as evidenced by the significant declines across the major financial indices," said Kenneth D. Pasternak, Chairman, Chief Executive Officer and President of Knight Trading Group. "The Nasdaq closed its worst year ever, plunging 33% in the fourth quarter alone, and the New York Stock Exchange ended its worst year since 1981. The year closed out with a modest 6% decline in the Dow Jones Industrial Average versus the massive 39% decline in the Nasdaq Composite Index. Tax loss selling, portfolio repositioning and bargain hunting caused volumes on both exchanges to rebound to record levels in December. Investors, however, continued to seek refuge in larger cap, defensive stock issues as a safe haven from the volatility of technology and Internet stocks."
"We believe that the market correction kept many self-directed individual investors on the sidelines or in larger cap, defensive stock issues throughout the fourth quarter," continued Mr. Pasternak. "This mix of stocks -- for which Knight posts lower revenue capture per share -- negatively impacted our revenue for the quarter. These pressures were partially overcome by our unique trading methodology and our diverse client base and product offerings, resulting in a solid fourth quarter despite these challenging market conditions."
"During the fourth quarter, we continued to build the infrastructure for our global footprint," said Mr. Pasternak. "Expenses in Europe and Japan during the fourth quarter amounted to about $11 million (equivalent to about $.09 per share). We are also taking this opportunity to announce that the formation of our European Roundtable is nearing completion. Knight has received non-binding commitment letters from 24 potential Roundtable broker- dealer investors from 10 countries, and is confident of reaching its goal of raising over $70 million from investors. Based on the anticipated terms of the transaction, Knight will make a matching investment, and maintain an equity interest of approximately 70%. We anticipate finalizing the legal formalities with our European partners and hope to make a final announcement on closing this consortium soon."
"In spite of the extreme market conditions, this past year was marked by some remarkable accomplishments for Knight. The acquisition of our options market maker and asset management businesses, which was completed on January 12, 2000, has been highly accretive to earnings. Knight Financial Products has grown its options market share from less than 1% at the time of acquisition to over 3.5% by the end of the fiscal year. We now hold the number four market-making position in options, trading on all five leading options exchanges in the US, up from two at the time of acquisition."
"We are proud of our accomplishments over the last fiscal year and we begin 2001 poised to build our global operations and solidify our technology advantage," said Mr. Pasternak. "We are on the cusp of completing the formation of our European Roundtable. Once completed, Knight will be positioned as a first mover and leader in pan-European market-making solutions in the second largest market in the world. And we will continue to spend aggressively to enhance our technology, which is the clear differentiator in today's market and the key to our leadership position. Our strong balance sheet, superior technology and scalable, portable business model position us for leadership as the execution solution provider of choice for the global trading village."
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). 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 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 Year Ended December 31, December 31, 2000 1999 2000 1999 Revenues Net trading revenue $229,145,837 $267,636,474 $1,157,515,897 $845,105,365 Asset management fees 10,856,531 4,187,056 41,883,882 19,921,092 Interest and dividends, net * 2,864,764 4,917,957 16,137,298 11,949,821 Commissions and fees 7,225,816 4,751,156 32,157,736 16,439,090 Investment income and other 1,234,648 205,589 9,224,764 3,160,075 Total revenues 251,327,596 281,698,232 1,256,919,577 896,575,443 Expenses Employee compensation and benefits 86,376,860 87,680,182 421,169,673 269,223,837 Payments for order flow 39,738,337 39,845,973 174,645,439 138,696,691 Execution and clearance fees 28,618,894 25,301,127 112,238,423 89,575,394 Communications and data processing 10,737,004 5,349,191 33,025,036 18,944,361 Depreciation and amortization 8,244,142 3,445,096 25,335,639 11,395,735 Professional fees 5,043,352 2,784,890 21,526,495 7,889,198 Occupancy and equipment rentals 5,929,931 3,239,480 18,741,887 10,706,397 Business development 4,245,397 4,226,009 14,806,302 10,294,545 Merger related costs -- 9,969,295 -- 9,969,295 Other 4,822,769 1,473,252 16,899,239 7,050,073 Total expenses 193,756,686 183,314,495 838,388,133 573,745,526 Income before income taxes and minority interest 57,570,910 98,383,737 418,531,444 322,829,917 Income tax expense 22,975,979 35,827,729 159,446,394 111,545,941 Net income before minority interest 34,594,931 62,556,008 259,085,050 211,283,976 Minority interest in consolidated subsidiaries (659,189) -- (836,952) -- Net income $35,254,120 $62,556,008 $259,922,002 $211,283,976 Basic earnings per share $0.29 $0.51 $2.12 $1.75 Diluted earnings per share $0.28 $0.49 $2.05 $1.68 Pro forma adjustments:** Income before income taxes and minority interest $98,383,737 $418,531,444 $322,829,917 Adjustment for pro forma employee compensation and benefits (889,015) (267,109) (7,579,827) Pro forma income before income taxes and minority interest 97,494,722 418,264,335 315,250,090 Pro forma income tax expense 37,216,168 160,089,685 126,790,275 Pro forma income before minority interest 60,278,554 258,174,650 188,459,815 Minority interest in consolidated subsidiaries -- (836,952) -- Pro forma net income $60,278,554 $259,011,602 $188,459,815 Pro forma basic earnings per share $0.49 $2.11 $1.56 Pro forma diluted earnings per share $0.47 $2.04 $1.50 Shares used in the computation of basic earnings per share ** 123,029,403 121,995,424 122,520,733 120,821,710 Shares used in the computation of diluted earnings per share ** 126,403,983 126,952,388 126,863,316 125,755,430
KNIGHT TRADING GROUP, INC. Consolidated Statements of Financial Condition December 31, December 31, 2000 1999 ASSETS Cash and cash equivalents $364,057,534 $304,053,554 Securities owned, at market value 1,799,966,679 910,232,916 Receivable from clearing brokers 114,047,275 215,423,208 Fixed assets and leasehold improvements at cost, less accumulated depreciation 79,014,393 26,820,045 Goodwill, less accumulated amortization 45,239,177 24,899,982 Investments 64,917,975 40,408,554 Other assets 54,166,139 18,447,547 Total assets $2,521,409,172 $1,540,285,806 LIABILITIES & STOCKHOLDERS' EQUITY Liabilities Securities sold, not yet purchased, at market value $1,427,214,323 $720,919,013 Securities sold under agreements to repurchase -- 10,409,736 Payable to clearing brokers 184,269,478 159,943,018 Accrued compensation expense 62,444,645 57,234,608 Accrued execution and clearance fees 6,092,754 8,371,056 Accrued payments for order flow 11,635,069 13,978,854 Accounts payable, accrued expenses and other liabilities 30,576,814 54,205,482 Income taxes payable 4,813,771 15,992,937 Total liabilities 1,727,046,854 1,041,054,704 Minority interest in consolidated subsidiaries 20,175,872 -- Stockholders' equity Class A Common Shares 1,232,908 1,221,215 Additional paid-in capital 317,999,321 300,355,094 Retained earnings 457,559,221 197,637,219 Accumulated other comprehensive income(loss) - foreign currency translation adjustments, net of income taxes (2,605,004) 17,574 Total stockholders' equity 774,186,446 499,231,102 Total liabilities and stockholders' equity $2,521,409,172 $1,540,285,806
SOURCE Knight Trading Group, Inc.
CONTACT: Robert Turner, Executive Vice President, Chief Financial Officer and Treasurer, 201-557-6845, Margaret Wyrwas, Vice President, Corporate Communications & Investor Relations, 201-557-6954, email@example.com, Judy Pirro, Manager, Investor Relations, 201-356-1548 or firstname.lastname@example.org, all of Knight Trading Group, Inc./