|JANUARY 16, 2002|
|Knight Trading Group Reports Fourth Quarter 2001 Income Per Share of $0.11|
| For a print friendly version, please click hereJERSEY CITY, N.J., Jan 16, 2002 /PRNewswire via COMTEX/ --
Revenue Increase of 24% from Third Quarter to Fourth Quarter 2001 Impacted by Improved U.S. Equity Markets, Business Adjustments to One-Penny MPV EnvironmentKnight Trading Group, Inc. (Nasdaq: NITE) today reported results for the fourth quarter ended December 31, 2001. Knight Trading Group is the leading market maker in equity securities listed on Nasdaq, the OTCBB of the National Association of Securities Dealers (NASD), and the over-the-counter market for New York Stock Exchange (NYSE) and American Stock Exchange (Amex)-listed securities. Knight also is a leading market maker in options on individual equities, equity indices and fixed income instruments in the U.S. and Europe. The firm also maintains an asset management business for institutional investors and high net worth individuals through its Deephaven Capital Management subsidiary.
Fourth Quarter 2001 vs. Fourth Quarter 2000 * 35% decline in revenues * 62% decline in net income * 9% decline in U.S. equity trades executed * 74% increase in U.S. equity shares traded Year ended 2001 vs. Year ended 2000 * 46% decline in revenues * 85% decline in pro forma net income * 18% decline in U.S. equity trades executed * 21% increase in U.S. equity shares traded Fourth Quarter Fourth Quarter 2001 2000 Revenues ($) 162,319,927 251,327,596 Net income ($) 13,477,037 35,250,165 Diluted EPS ($) 0.11 0.28 U.S. equity trades executed 30,899,567 33,957,354 Average daily U.S. equity trades 482,806 539,006 U.S. equity shares traded 43,099,613,471 24,797,134,511 YTD YTD 2001 2000 Revenues ($) 684,712,375 1,257,309,748 Pro forma net income ($) 38,525,567 259,011,602 Pro forma diluted EPS ($) 0.31 2.04 U.S. equity trades executed 117,294,785 142,731,615 Average daily U.S. equity trades 472,963 566,395 U.S. equity shares traded 135,038,125,423 112,052,786,805Revenues for the fourth quarter of 2001 were $162.3 million, 35% lower than the $251.3 million in revenues for the fourth quarter of 2000, and approximately 24% greater than the $130.9 million in third quarter 2001 revenues. Net income for the fourth quarter of 2001 totaled $13.5 million, or $0.11 per share on a diluted basis, a 62% decrease from $35.3 million, or $0.28 per share on a diluted basis for the same period a year ago, and an increase compared to the net loss for the third quarter of 2001 totaling $5.7 million, or ($0.05) per share on a diluted basis. The Company achieved pre-tax margins of 10.0% in the fourth quarter of 2001, down from 22.9% in the fourth quarter of 2000 and up from (7.7%) in the third quarter of 2001. Return on equity for the fourth quarter of 2001, stated on an annualized basis, was 6.4%.
"2001 was the most challenging year in the history of Knight Trading Group, but it allowed us to prove that the Knight business model can prevail through extraordinary obstacles presented by a difficult market environment and an evolving market structure," said Kenneth D. Pasternak, Chairman and Chief Executive Officer of Knight Trading Group. "The bear market continued to affect our returns, but our U.S. equities business is responding well to rightsizing and cost-control efforts, as well as to modifications in our trading algorithms and inventory management practices following the introduction of the one-penny Minimum Price Variant. In Europe, an equivalent market slowdown affected the extensive operations we built during a robust market, and we made painful but necessary headcount reductions to keep the business poised for the market's recovery."
Non-operating charges in the fourth quarter were $2.3 million on a pre-tax basis, or $1.5 million on an after tax basis, equivalent to $0.01 per share. These charges relate primarily to a write-down of excess real-estate capacity.
U.S. equity trades executed and U.S. equity shares traded for the fourth quarter of 2001 increased 27% and 37%, respectively, from the third quarter of 2001.
The Company's market-making activity relating to options generated total net trading revenue of approximately $22.9 million during the fourth quarter of 2001, versus $42.5 million during the fourth quarter of 2000.
Deephaven's asset management business generated $5.0 million in asset management fees during the fourth quarter of 2001, down 54% from $10.9 million in the same period a year ago.
"The management team in place today was instrumental in taking Knight through 2001's challenges while remaining focused on new opportunities for growth," Mr. Pasternak said. "With great comfort, I can retire from the Company to which I have devoted eight years of my life, knowing that the Board of Directors is conducting the most exhaustive search for the best CEO, and that the current generation of Knight managers is capable of continuing the Company's success."
Mr. Pasternak continued, "The next Knight CEO can leverage the Company's proven business model and core strengths -- scale, capacity and technology - and build upon them. Our equities business survived the challenges of 2001 and emerged healthy, while in options, we continue to integrate recent acquisitions and refine our efforts in the dynamic derivatives industry. Going forward, Knight will continue to develop opportunities in institutional trading as well as overseas, where the Company is honing its strategy for careful and smart international development."
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 route on behalf of their customers. Knight also maintains an asset management business for institutional investors and high net worth individuals through Deephaven Capital Management LLC.
Knight has the power to commit capital for market orders and also maintains one of the largest limit order books in the OTC market. The Company has approximately 1,300 employees worldwide and is one of the largest destinations for stock orders placed via the Internet. Knight traded 135 billion shares in the year 2001, a volume behind only those posted by Nasdaq and the New York Stock Exchange (NYSE). Ultimately, Knight plans to enable its clients to trade all types of equity securities and options at any time, from anywhere in the world. More information about Knight can be obtained at http://www.knighttradinggroup.com.
Interested parties who wish to access Knight's Webcast should go to http://ir.ccbn.com/ir.zhtml?t=NITE&s=2400&item_id=577342 by 8:45 a.m. Eastern Time, and follow the instructions listed there. Access to the Webcast, 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 December 31, Year Ended December 31, 2001 2000 2001 2000 Revenues Net trading revenue $139,106,271 $223,116,151 $564,630,212 $1,157,515,897 Commissions and fees 11,316,530 13,255,502 47,942,570 32,547,907 Asset management fees 4,977,959 10,856,531 36,756,865 41,883,882 Interest and dividends, net 4,332,371 2,864,764 24,949,310 16,137,298 Investment income and other 2,586,796 1,234,648 10,433,418 9,224,764 Total revenues 162,319,927 251,327,596 684,712,375 1,257,309,748 Expenses Employee compensation and benefits 58,001,550 86,376,859 249,971,154 421,169,673 Execution and clearance fees 30,728,441 28,622,858 117,518,622 112,238,423 Payments for order flow 17,609,757 39,738,336 81,941,538 174,645,438 Communications and data processing 11,391,829 10,737,003 50,856,148 33,025,035 Depreciation and amortization 11,548,418 8,244,141 42,759,165 25,335,640 Occupancy and equipment rentals 6,799,217 5,929,930 20,540,053 18,741,887 Professional fees 2,207,146 5,043,349 15,052,273 21,526,495 Business development 1,750,889 4,245,398 11,617,364 14,806,302 Other 3,699,139 4,822,768 19,572,254 17,289,411 Loss on writedown of assets 2,343,084 -- 20,538,652 -- Total expenses 146,079,470 193,760,642 630,367,223 838,778,304 Income before income taxes and minority interest 16,240,457 57,566,954 54,345,152 418,531,444 Income tax expense 5,051,948 22,975,979 25,461,246 159,446,394 Net income before minority interest 11,188,509 34,590,975 28,883,906 259,085,050 Minority interest in consolidated subsidiaries (2,288,528) (659,190) (9,641,661) (836,952) Net income $13,477,037 $35,250,165 $38,525,567 $259,922,002 Basic earnings per share $0.11 $0.29 $0.31 $2.12 Diluted earnings per share $0.11 $0.28 $0.31 $2.05 Pro forma adjustments:* Income before income taxes $418,531,444 Adjustment for pro forma employee compensation and benefits (267,109) Pro forma income before income taxes 418,264,335 Pro forma income tax expense 160,089,685 Pro forma income before minority interest $258,174,650 Minority interest in consolidated subsidiaries (836,952) Pro forma net income $259,011,602 Pro forma basic earnings per share $2.11 Pro forma diluted earnings per share $2.04 Shares used in the computation of basic earnings per share* 124,121,053 123,029,403 123,796,181 122,520,733 Shares used in the computation of diluted earnings per share* 125,421,454 126,403,983 125,758,863 126,863,316 * 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 Report on Form 10-K for the year ended December 31, 1999. KNIGHT TRADING GROUP, INC. Consolidated Statements of Financial Condition December 31, December 31, 2001 2000 (unaudited) ASSETS Cash and cash equivalents $361,294,311 $364,057,534 Securities owned, held at clearing broker, at market value 1,754,482,505 1,799,966,679 Receivable from clearing brokers 820,103,479 114,047,275 Fixed assets and leasehold improvements at cost, less accumulated depreciation 90,125,704 79,014,393 Goodwill 51,899,985 45,239,177 Investments 92,665,597 64,917,975 Other assets 55,114,585 54,166,139 Total assets $3,225,686,166 $2,521,409,172 LIABILITIES & STOCKHOLDERS' EQUITY Liabilities Securities sold, not yet purchased, at market value $2,039,355,967 $1,427,214,323 Payable to clearing brokers 227,526,691 184,269,478 Accrued compensation expense 65,121,718 62,444,645 Accrued execution and clearance fees 7,818,552 6,092,754 Accrued payments for order flow 5,594,935 12,117,998 Accounts payable, accrued expenses and other liabilities 24,739,540 30,093,885 Income taxes payable 623,530 4,813,771 Total liabilities 2,370,780,933 1,727,046,854 Minority interest in consolidated subsidiaries 20,648,809 20,175,872 Stockholders' equity Class A Common Shares 1,241,586 1,232,908 Additional paid-in capital 335,796,119 309,611,248 Retained earnings 504,472,861 465,947,294 Unamortized stock-based compensation (672,763) -- Accumulated other comprehensive income (loss) - foreign currency translation adjustments, net of tax (6,581,379) (2,605,004) Total stockholders' equity 834,256,424 774,186,446 Total liabilities and stockholders' equity $3,225,686,166 $2,521,409,172SOURCE Knight Trading Group, Inc.
CONTACT: Robert I. Turner, Executive Vice President, Chief Financial Officer and Treasurer, +1-201-557-6845, or Margaret Wyrwas, Senior Vice President, Corporate Communications & Investor Relations, +1-201-557-6954 or firstname.lastname@example.org, or Judy Pirro, Manager, Investor and Shareholder Relations, +1-201-356-1548 or email@example.com, or Kara Fitzsimmons, Manager, Corporate Communications, +1-201-356-1523 or firstname.lastname@example.org, all of Knight Trading Group