|OCTOBER 22, 2003|
|Knight Trading Group Reports $0.20 GAAP Earnings Per Share For Third Quarter 2003|
|Third Quarter 2003 Total Revenues of $182.3 Million Highest Since First Quarter 2001
JERSEY CITY, N.J., Oct 22, 2003 /PRNewswire-FirstCall via COMTEX/ -- Knight Trading Group, Inc. (Nasdaq: NITE) today reported GAAP net income of $23.6 million for the third quarter of 2003, or $0.20 per diluted share. For the third quarter of 2002, the company reported a GAAP net loss of $3.4 million, or $0.03 loss per diluted share.
Revenues for the third quarter of 2003 were $182.3 million, compared to $119.5 million for the third quarter of 2002. During the third quarter of 2003, the company's cash equity and options market-making activities generated net trading revenue and interest of $112.6 million and $34.4 million, respectively, versus $69.3 million and $30.0 million during the third quarter of 2002.
Q3 2003 Q3 2002 Revenues ($) 182,304,850 119,474,654 Income/(loss) from continuing operations ($) 23,602,552 (1,959,053) Loss from discontinued operations ($) 0 (1,471,613) Net income/(loss) ($) 23,602,552 (3,430,666) Diluted EPS ($) 0.20 (0.03) U.S. equity trades executed 47,649,565 31,108,203 Average daily U.S. equity trades 744,524 486,066 U.S. equity shares traded * 118,946,863,128 51,528,587,423 U.S. options contracts traded 17,117,045 13,464,822 * Includes 83.0 billion and 27.6 billion of OTC Bulletin Board and Pink Sheet shares for the third quarter of 2003 and third quarter of 2002, respectively. YTD 2003 YTD 2002 Revenues ($) 467,980,730 381,422,989 Income/(loss) from continuing operations ($) 30,682,493 (34,849,526) Loss from discontinued operations ($) (2,124,297) (4,803,612) Net income/(loss) ($) 28,558,196 (39,653,138) Diluted EPS ($) 0.25 (0.33) U.S. equity trades executed 128,739,173 89,045,740 Average daily U.S. equity trades 684,783 473,648 U.S. equity shares traded * 269,444,767,958 138,815,221,168 U.S. options contracts traded 46,008,772 36,948,149 * Includes 170.1 billion and 73.6 billion of OTC Bulletin Board and Pink Sheet shares for the year-to-date 2003 and year-to-date 2002, respectively.
"Knight just reported its best quarterly earnings in more than two years, coming in well above expectations during what are typically the slowest three months of the year for our industry," said Thomas M. Joyce, Chief Executive Officer and President of Knight Trading Group. "Each of Knight's businesses operated on a profitable basis for the second consecutive quarter. Higher volume, intra-day volatility and increases in dollar value traded during the quarter made for a positive trading environment for Knight as well as attracted more investors to the market. Finally, Knight made further progress adding new clients while garnering more business from its current roster."
The company's domestic businesses earned net income of $23.4 million, led by a strong performance in the cash equity market-making business. For the third quarter of 2002, the net loss from all domestic businesses was $1.0 million.
"Knight continues to introduce fundamental change to our business - for instance, our recent agreement to purchase Donaldson & Co., a leading soft dollar and commission recapture firm," Mr. Joyce said. "These programs are an integral part of the investment process, and we believe the addition to Knight's institutional offering is an extension of the company's strategy to focus all efforts around client needs. Knight always seeks growth opportunities through appropriate investments in new products and services, like soft dollar programs, and in the select hiring of key personnel. To offset the short-term rise in expenses resulting from these initiatives, Knight will continue its internal efforts to drive efficiencies across all businesses."
The company's Asset Management business segment generated $13.0 million in asset management fees during the third quarter of 2003, up from $6.1 million in the same period a year ago, reflecting better returns. The asset management business had approximately $1.4 billion and $1.2 billion of assets under management at September 30, 2003 and 2002, respectively. In addition, the company earned $5.3 million during the third quarter of 2003 on its investment in the Deephaven funds.
The company had 870 employees in the U.S. at the end of the third quarter, down from 967 at the end of 2002 and down from 945 at the end of September 2002.
For the third quarter of 2003 (and for the second consecutive quarter), continuing international operations were slightly profitable. For the third quarter of 2002, the net loss from continuing international operations was $2.4 million.
As of September 30, 2003, Knight had 40 employees in Europe. The company had 63 employees in all international operations at the end of 2002, compared to 89 international employees at the end of September 2002.
"While we have two consecutive solid quarters under our belt, Knight has yet to pass the test under unfavorable market conditions," Mr. Joyce said. "Recent questions around the broad market infrastructure and oversight could make for a potentially choppy trading environment in the fourth quarter. And, while recent economic indicators have been positive, there remains a possibility for investors to become unsettled again in this atmosphere of change. With directionality for the coming months unclear, Knight continues its search to uncover maximum trade efficiency across the breadth and depth of the marketplace -- a necessity for both Knight and for our clients, who themselves face challenge and opportunity in the wake of the revived market structure debate."
Liquidity and Stock Repurchase Plan
The company had $765.4 million in stockholders' equity as of September 30, 2003, equivalent to a book value of $6.74 per share. As of September 30, 2003, the company had $276.5 million in cash and cash equivalents and a $192.1 million investment in funds managed by its Deephaven subsidiary.
At its May 12, 2003 meeting, the Board of Directors authorized an additional increase in the size of the repurchase program from $70 million to $95 million. During the third quarter of 2003, the company repurchased 522,900 shares for $5.1 million. To date, the company has repurchased 14,290,200 shares for $74.3 million under the $95 million stock repurchase program. The company cautions that there are no assurances that any further repurchases may actually occur.
Knight Trading Group had approximately 113.6 million shares of common stock outstanding as of September 30, 2003.
Knight is focused on meeting the needs of institutional and broker-dealer clients by providing comprehensive trade execution services in cash equities and options. A leading execution specialist, Knight offers capital commitment and access to a deep pool of liquidity across the depth and breadth of the market as it strives to provide superior client service. Knight also maintains a $1.4 billion asset management business for institutions and high net worth individuals. More information about Knight can be obtained at www.knighttradinggroup.com.
Copies of this earnings release and other information on the company can be obtained via the Internet at the company's Web site, or by calling the company's toll-free investor information line at 1-877-INFO-NITE. The company will conduct its third quarter earnings conference call for analysts, investors and the media at 9:00 a.m. (EDT) today, October 22, 2003. The conference call will be Webcast live at 9:00 a.m. (EDT) for all investors and interested parties on Knight's Web site. In addition, the company will release its volume statistics for September 2003 before the start of trading today on Knight's Web site.
On Monday, November 10, 2003, Knight will provide a live Webcast of its semi-annual Meeting for Analysts and Institutional Investors. Interested parties can access this event through the company's Web site at www.knighttradinggroup.com.
Certain statements contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates and projections about the Company's industry, management's beliefs and certain assumptions made by management. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Since such statements involve risks and uncertainties, the actual results and performance of the Company may turn out to be materially different from the results expressed or implied by such forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Unless otherwise required by law, the Company also disclaims any obligation to update its view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made herein; however, readers should carefully review reports or documents the Company files from time to time with the Securities and Exchange Commission.
KNIGHT TRADING GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS* For the three months ended For the nine months ended September 30, September 30, 2003 2002 2003 2002 REVENUES Net trading revenue $146,915,058 $97,997,221 $367,293,163 $318,785,648 Commissions and fees 14,016,884 9,943,424 40,333,357 31,326,429 Asset management fees 12,994,069 6,053,433 36,985,896 20,121,346 Interest and dividends, net 341,099 1,654,131 3,348,331 4,258,566 Investment income and other 8,037,740 3,826,445 20,019,983 6,931,000 Total revenues 182,304,850 119,474,654 467,980,730 381,422,989 EXPENSES Employee compensation and benefits 71,799,982 47,450,339 187,258,566 161,988,907 Execution and clearance fees 30,982,099 30,017,218 90,844,269 87,485,368 Payments for order flow 14,528,628 14,514,242 38,942,727 50,557,586 Communications and data processing 7,280,108 8,062,490 24,017,404 27,637,469 Depreciation and amortization 6,656,126 8,772,363 22,166,923 27,429,628 Occupancy and equipment rentals 4,448,483 5,249,974 13,786,410 18,711,117 Professional fees 1,849,530 3,574,148 9,424,937 13,393,664 Business development 1,456,253 1,305,262 5,286,906 5,642,972 International charges - - - 28,395,515 Writedown of assets and lease loss accrual - 1,395,834 17,412,066 10,456,782 Other 3,548,136 2,897,956 8,259,027 9,493,893 Total expenses 142,549,345 123,239,826 417,399,235 441,192,901 Income/(loss) before income taxes, minority interest and discontinued operations 39,755,505 (3,765,172) 50,581,495 (59,769,912) Income tax expense/(benefit) 16,152,953 (1,806,119) 19,899,002 (19,819,889) Income/(loss) before minority interest and discontinued operations 23,602,552 (1,959,053) 30,682,493 (39,950,023) Minority interest in losses of consolidated subsidiaries - - - (5,100,497) Net income/(loss) from continuing operations 23,602,552 (1,959,053) 30,682,493 (34,849,526) Loss from discontinued operations, net of tax - (1,471,613) (2,124,297) (4,803,612) Net income/(loss) $23,602,552 $(3,430,666) $28,558,196 $(39,653,138) Diluted earnings per share from continuing operations $0.20 $(0.02) $0.26 $(0.29) Diluted earnings per share from discontinued operations $- $(0.01) $(0.02) $(0.04) Diluted earnings per share $0.20 $(0.03) $0.25 $(0.33) Shares used in computation of diluted earnings per share 117,698,712 118,316,798 115,984,945 121,658,913 * Certain prior period amounts have been reclassified to conform to the current year presentation. KNIGHT TRADING GROUP, INC. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION September 30, 2003 December 31, 2002 ASSETS Cash and cash equivalents $276,458,391 $316,722,259 Securities owned, held at clearing brokers, at market value 2,796,635,375 1,984,500,084 Receivable from brokers and dealers 159,380,870 480,203,140 Investment in Deephaven sponsored funds 192,141,442 153,790,799 Fixed assets and leasehold improvements at cost, less accumulated depreciation and amortization 40,556,322 58,066,695 Strategic investments 20,090,332 24,715,110 Intangible assets, less accumulated amortization 32,840,505 34,852,535 Goodwill 17,536,945 17,536,945 Other assets 72,512,465 101,488,739 Total assets 3,608,152,647 3,171,876,306 LIABILITIES & STOCKHOLDERS' EQUITY Liabilities Securities sold, not yet purchased, at market value 2,633,328,385 2,254,900,355 Payable to brokers and dealers 70,512,300 35,271,654 Accrued compensation expense 83,069,010 60,525,247 Accounts payable, accrued expenses and other liabilities 55,881,108 52,753,720 Total liabilities 2,842,790,803 2,403,450,976 Minority interest in consolidated subsidiaries - 12,009,561 Stockholders' equity Class A common shares 1,266,026 1,247,053 Additional paid-in-capital 354,039,925 340,211,426 Retained earnings 489,089,850 460,541,000 Treasury stock, at cost (67,670,368) (35,423,292) Unamortized stock-based compensation (11,363,589) (6,791,533) Accumulated other comprehensive income (loss) - foreign currency translation adjustment, net of tax - (3,368,885) Total stockholders' equity 765,361,844 756,415,769 Total liabilities and stockholders' equity 3,608,152,647 3,171,876,306
SOURCE Knight Trading Group, Inc.
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