| OCTOBER 20, 2004 |
| Knight Trading Group Announces GAAP Loss of $0.01 per Diluted Share for Third Quarter 2004 |
| - GAAP loss of $0.01 per diluted share in third quarter 2004, including earnings from discontinued operations of $0.05 per diluted share from Derivative Markets - For third quarter 2003, Knight reported GAAP earnings of $0.20 per diluted share, including earnings from discontinued operations of $0.03 per diluted share from Derivative Markets - Lackluster market conditions impacted both Equity Markets and Asset Management, Knight's continuing operations, during the third quarter 2004 JERSEY CITY, N.J., Oct 20, 2004 /PRNewswire-FirstCall via COMTEX/ -- Knight Trading Group, Inc. (Nasdaq: NITE) today reported a GAAP loss of $1.1 million for the third quarter of 2004, or a loss of $0.01 per diluted share. For the third quarter of 2003, the company reported GAAP earnings of $23.6 million, or $0.20 per diluted share. As previously announced on August 9, 2004, the company entered into a definitive agreement to sell its Derivative Markets business to Citigroup for approximately $225 million in cash. In accordance with generally accepted accounting principles, the results of this business segment have been included within discontinued operations for all periods presented within both the income statements and balance sheets. For the third quarter of 2004, the company had a net operating loss from continuing operations of $6.0 million, or a loss of $0.05 per diluted share. In addition, the company had net income from discontinued operations of $5.3 million, or $0.05 per diluted share, representing the results of the Derivative Markets business segment. For the third quarter of 2003, the company had net operating income from continuing operations of $19.8 million, or $0.17 per diluted share. In addition, the company had net income from discontinued operations of $3.8 million, or $0.03 per diluted share, representing the results of the Derivative Markets business segment. Revenues from continuing operations for the third quarter of 2004 were $99.4 million, compared to $143.0 million for the third quarter of 2003. "Like other firms engaged in capital markets activities, we endured the lackluster market environment that lasted from the middle of May through September. For the third quarter, Knight had nominal operating losses of approximately 1 penny in each of our domestic equity markets and asset management businesses. Our derivatives business returned a solid operating profit, reflecting healthy volumes in the options market," said Thomas M. Joyce, Chief Executive Officer and President of Knight Trading Group. "Throughout this dreary market, we continued to make long-term investments in our infrastructure that we believe will better position us to reach our goal of being profitable in every market environment. We continued to invest in our London operation, resulting in a loss of 3 cents in the quarter. We expect our European efforts to be profitable in 2005. Listed market-making, which has the lowest revenue capture of all equity types, had a negative impact on domestic equities revenue capture. We also spent approximately $30 million in cash to repurchase 3.3 million shares of our company's stock."
Q3 2004 Q3 2003
Revenues ($) 99,359,304 143,026,883
Net (loss) income from continuing
operations ($) (6,470,139) 19,800,841
Income from discontinued operations,
net of tax ($) 5,343,961 3,801,711
Net (loss) income ($) (1,126,178) 23,602,552
Net operating (loss) income from
continuing operations per diluted
share ($) (0.05) 0.17
Diluted EPS from continuing
operations ($) (0.06) 0.17
Diluted EPS from discontinued
operations ($) 0.05 0.03
Diluted EPS ($) (0.01) 0.20
U.S. equity dollar value traded (in $
millions) 333,103 421,146
U.S. equity trades executed (in
thousands) 41,572 47,780
Average daily U.S. equity trades (in
thousands) 650 747
Nasdaq and Listed equity shares
traded (in millions) 22,546 36,481
OTC Bulletin Board and Pink Sheet
shares traded (in millions) 294,237 82,721
U.S. options contracts traded (in
thousands) 21,953 17,117
YTD 2004 YTD 2003
Revenues ($) 425,432,705 359,468,876
Net (loss) income from continuing
operations ($) (32,106,133) 25,224,863
Income from discontinued operations,
net of tax ($) 14,948,350 3,333,333
Net (loss) income ($) (17,157,783) 28,558,196
Net operating income from
continuing operations per diluted
share ($) 0.23 0.30
Diluted EPS from continuing
operations ($) (0.28) 0.22
Diluted EPS from discontinued
operations ($) 0.13 0.03
Diluted EPS ($) (0.15) 0.25
U.S. equity dollar value traded (in $
millions) 1,254,516 1,081,286
U.S. equity trades executed (in
thousands) 150,222 129,115
Average daily U.S. equity trades (in
thousands) 799 687
Nasdaq and Listed equity shares
traded (in millions) 92,708 101,157
OTC Bulletin Board and Pink Sheet
shares traded (in millions) 990,647 169,038
U.S. options contracts traded (in
thousands) 64,245 46,009
"We continue to play an important role in the market by providing an unbundled, competitive execution offering across the breadth of the equity market. We are encouraged by the 30-percent increase in our year-over-year equity markets operating income to $21 million for the first nine months of 2004," Mr. Joyce said. "Our future success is directly tied to the quality of our offerings and our ability to meet and satisfy our clients' needs. With this in mind, we continue to manage our company for the long term to support the ongoing focus on our Equity Markets and Asset Management businesses."
Continuing Operations
Equity Markets During the third quarter of 2004, the Equity Markets business segment, which consists of both domestic and international equity market-making and institutional sales operations, generated total revenues of $94.1 million compared to $124.6 million during the third quarter of 2003. In the third quarter, the Equity Markets business segment reported an operating loss of approximately $4.3 million net of taxes, which represents operating losses of approximately $1.3 million from domestic equity markets and $3.0 million from our London operations. The equity markets results include a benefit of approximately $1.8 million net of taxes, related to an adjustment to legal reserves. Asset Management During the third quarter of 2004, the Asset Management business segment, Deephaven, generated $6.8 million in asset management fees, compared to $13.0 million in the same period a year ago. The decrease in asset management fees reflects the reduction in incentive fees due to lower returns, partially offset by higher management fees on greater assets under management. Asset Management had approximately $3.5 billion under management at September 30, 2004 compared to $1.4 billion at September 30, 2003. During the third quarter of 2004, there was a net inflow of approximately $350 million in assets under management. The company lost $1.6 million during the third quarter of 2004 on its investment in the Deephaven funds, down from earnings of $5.2 million in the third quarter of 2003. The company had invested $206.3 million in the Deephaven funds at the end of the third quarter of 2004.
Discontinued Operations
Derivative Markets For the third quarter of 2004, the results of the Derivative Markets business segment were presented net of taxes within discontinued operations. The business segment principally consists of options market-making and option specialist operations. This segment generated total revenues of $47.2 million in the third quarter 2004 compared to $39.5 million during the third quarter of 2003. In the third quarter, the company had net income from discontinued operations of $5.3 million, or $0.05 per diluted share from its Derivative Markets business segment. As of September 30, 2004, the Derivative Markets business segment had 236 employees. Excluding employees in Derivative Markets, Knight Trading Group had 675 employees at the end of the third quarter of 2004. "During the third quarter, we entered into a definitive agreement to sell our derivative markets business to Citigroup," Mr. Joyce said. "We concluded that Knight's strongest future growth opportunities remain in our Equity Markets and Asset Management businesses, and that Derivative Markets has a better opportunity to reach its full potential as part of a larger company. We expect the deal to close in the fourth quarter." Liquidity and Stock Repurchase Plan The company had $753.5 million in stockholders' equity as of September 30, 2004, equivalent to a book value of $6.61 per share. As of September 30, 2004, the company had $210.0 million in cash and cash equivalents within its continuing operations and a $206.3 million investment in funds managed by Deephaven, its Asset Management business segment. At its August 8, 2004 meeting, the Board of Directors authorized a $140 million increase in the size of the company's stock repurchase program to $250 million from $110 million. During the third quarter of 2004, the company repurchased 3.3 million shares for approximately $30 million. To date, the company has repurchased 18.9 million shares for $120.7 million under the program. The company cautions that there are no assurances that any further repurchases may actually occur. As of September 30, 2004, the company had a $78 million receivable from its Derivative Markets business segment, which will be repaid on or before the closing of its sale to Citigroup. Copies of this earnings release and other information on the company can be obtained via the Internet at the company's web site. The company will conduct its third quarter earnings conference call for analysts, investors and the media at 9:00 a.m. Eastern Daylight Time (EDT) today, October 20, 2004. 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 monthly volume statistics for September 2004 before the start of trading today on Knight's web site. On Monday, November 8, 2004, Knight will provide a live web cast of its semi-annual meeting for Analysts and Institutional Investors. All interested parties can access this event through Knight's web site.
* * *
Knight is focused on meeting the needs of institutional and broker-dealer clients by providing comprehensive trade execution services in equities. A leading execution specialist, Knight offers capital commitment and access to a deep pool of liquidity across the depth and breadth of the equity market. Knight also operates an asset management business for institutions and high net worth individuals. To be a valued partner, Knight strives to provide superior client service and will continue to tailor its offering to meet the needs of its clients. More information about Knight can be obtained at http://www.knighttradinggroup.com. Presentation of Information in this Press Release In an effort to provide investors with additional information regarding the Company's results as determined by generally accepted accounting principles (GAAP), the Company also discloses certain non-GAAP information which management believes provides useful information to investors. Within this press release, the Company has disclosed its net income (loss) amounts for certain reporting periods before charges, writedowns and discontinued operations to assist the reader in understanding the impact of these charges, writedowns and discontinued operations on the Company's financial results, thereby facilitating more useful period-to-period comparisons of the Company's businesses. 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(*)
(Unaudited)
For the three months For the nine months
ended ended
September 30, September 30,
2004 2003 2004 2003
REVENUES
Net trading revenue $33,448,976 $79,741,797 $183,129,453 $192,332,716
Commissions and fees 58,598,744 41,788,492 203,804,800 108,320,141
Asset management
fees 6,804,928 12,994,069 28,843,815 36,985,896
Interest and
dividends, net 1,198,974 926,031 2,828,891 2,544,278
Investment income
and other (692,318) 7,576,494 6,825,746 19,285,845
Total revenues 99,359,304 143,026,883 425,432,705 359,468,876
EXPENSES
Employee
compensation and
benefits 50,108,698 58,283,201 168,463,224 150,497,162
Execution and
clearance fees 19,584,906 19,354,119 73,747,290 54,897,372
Payments for order
flow 4,555,323 9,453,223 27,416,779 22,003,659
Soft dollar and
commission
recapture expense 14,309,230 1,463,474 44,321,999 3,738,795
Communications and
data processing 7,867,254 6,408,166 21,583,633 21,336,416
Depreciation and
amortization 3,338,134 4,378,026 10,720,438 15,020,507
Occupancy and
equipment rentals 3,981,784 4,100,286 12,817,436 12,723,267
Professional fees 4,257,549 1,656,940 11,561,434 9,012,827
Business development 2,053,578 1,341,802 5,921,960 4,969,847
Writedown of assets
and lease loss
accrual 874,275 - 3,498,261 16,712,880
Regulatory charges
and related matters - - 79,200,000 -
Other (820,487) 3,165,241 4,118,364 7,032,687
Total expenses 110,110,244 109,604,478 463,370,818 317,945,419
(Loss) income from
continuing
operations before
income taxes (10,750,940) 33,422,405 (37,938,113) 41,523,457
Income tax
(benefit) expense (4,280,801) 13,621,564 (5,831,980) 16,298,594
Net (loss) income
from continuing
operations (6,470,139) 19,800,841 (32,106,133) 25,224,863
Income from
discontinued
operations, net of
tax 5,343,961 3,801,711 14,948,350 3,333,333
Net (loss) income $(1,126,178) $23,602,552 $(17,157,783) $28,558,196
Basic earnings per
share from
continuing
operations $(0.06) $0.18 $(0.28) $0.23
Diluted earnings per
share from
continuing
operations $(0.06) $0.17 $(0.28) $0.22
Basic and diluted
earnings per share
from discontinued
operations $0.05 $0.03 $0.13 $0.03
Basic earnings per
share $(0.01) $0.21 $(0.15) $0.26
Diluted earnings per
share $(0.01) $0.20 $(0.15) $0.25
Shares used in
computation of
basic earnings per
share 112,012,941 111,086,526 112,816,260 111,903,396
Shares used in
computation of
diluted earnings
per share 112,012,941 117,698,712 112,816,260 115,984,945
(*) Certain prior period amounts have been reclassified to conform to
the current period presentation.
KNIGHT TRADING GROUP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
September 30, 2004 December 31, 2003
ASSETS
Cash and cash equivalents $209,990,127 $249,997,693
Securities owned, held at clearing
brokers, at market value 248,581,687 201,238,570
Receivable from brokers and dealers 463,519,109 205,019,632
Receivable from discontinued
operations 78,070,984 43,529,819
Investment in Deephaven sponsored
funds 206,331,983 197,605,068
Fixed assets and leasehold
improvements at cost, less
accumulated depreciation and
amortization 45,985,914 28,741,113
Strategic investments 26,017,902 20,496,876
Goodwill 19,182,248 16,665,074
Intangible assets, less accumulated
amortization 11,701,944 11,952,000
Assets within discontinued operations 3,084,952,066 2,938,222,972
Other assets 93,757,419 87,879,509
Total assets $4,488,091,383 $4,001,348,326
LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities
Securities sold, not yet purchased,
at market value $228,722,102 $173,118,793
Payable to brokers and dealers 293,666,960 26,813,012
Accrued compensation expense 82,240,779 94,224,406
Liabilities within discontinued
operations 2,986,699,996 2,851,696,563
Accounts payable, accrued expenses
and other liabilities 143,305,605 65,363,774
Total liabilities 3,734,635,442 3,211,216,548
Stockholders' equity
Class A common shares 1,317,242 1,281,871
Additional paid-in-capital 407,067,359 370,897,405
Retained earnings 481,898,971 499,056,756
Treasury stock, at cost (115,729,941) (68,795,258)
Unamortized stock-based compensation (21,097,690) (12,308,996)
Total stockholders' equity 753,455,941 790,131,778
Total liabilities and
stockholders' equity $4,488,091,383 $4,001,348,326
KNIGHT TRADING GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP DISCLOSURES(*)
Amounts in millions, except per share data
For the three months ended
September 30, 2004
Equity Asset Discontinued Total
Markets Management Operations
GAAP NET(LOSS) INCOME $(4.8) $(1.7) $5.3 $(1.1)
Adjustments, net of tax:
Writedown of assets and lease
loss accrual 0.5 - - 0.5
(Income) from
discontinued operations - - (5.3) (5.3)
Net impact of adjustments 0.5 - (5.3) (4.8)
NET OPERATING LOSS FROM
CONTINUING OPERATIONS $(4.3) $(1.7) $- $(6.0)
GAAP NET (LOSS) INCOME PER
DILUTED SHARE $(0.04) $(0.01) $0.05 $(0.01)
Adjustments, net of tax:
Writedown of assets
and lease loss accrual 0.00 - - 0.00
(Income) from
discontinued operations - - (0.05) (0.05)
Net impact of adjustments 0.00 - (0.05) (0.04)
NET OPERATING LOSS FROM
CONTINUING OPERATIONS
PER DILUTED SHARE $(0.04) $(0.01) $- $(0.05)
For the three months ended September 30, 2003
Equity Asset Discontinued Total
Markets Management Operations
GAAP NET INCOME $14.0 $5.8 $3.8 $23.6
Adjustments, net of tax:
(Income) from
discontinued operations - - (3.8) (3.8)
Net impact of adjustments - - (3.8) (3.8)
NET OPERATING INCOME FROM
CONTINUING OPERATIONS $14.0 $5.8 $- $19.8
GAAP NET INCOME PER
DILUTED SHARE $0.12 $0.05 $0.03 $0.20
Adjustments, net of tax:
(Income) from
discontinued operations - - (0.03) (0.03)
Net impact of adjustments - - (0.03) (0.03)
NET OPERATING INCOME
FROM CONTINUING OPERATIONS
PER DILUTED SHARE $0.12 $0.05 $- $0.17
(*) Totals may not add due to rounding.
KNIGHT TRADING GROUP, INC.
RECONCILIATION OF GAAP TO NON-GAAP DISCLOSURES (*)
Amounts in millions, except per share data
For the nine months ended September 30, 2004
Equity Asset Discontinued Total
Markets Management Operations
GAAP NET(LOSS) INCOME $(37.5) $5.4 $14.9 $(17.2)
Adjustments, net of tax:
Writedown of assets and
lease loss accrual 2.0 - - 2.0
Regulatory charges and
related matters 56.4 - - 56.4
(Income) from
discontinued operations - - (14.9) (14.9)
Net impact of adjustments 58.5 - (14.9) 43.5
NET OPERATING INCOME
FROM CONTINUING OPERATIONS $21.0 $5.4 $- $26.4
GAAP NET (LOSS) INCOME PER
DILUTED SHARE $(0.33) $0.05 $0.13 $(0.15)
Adjustments, net of tax:
Writedown of assets
and lease loss accrual 0.02 - - 0.02
Regulatory charges
and related matters 0.50 - - 0.50
(Income) from
discontinued operations - - (0.13) (0.13)
Net impact of adjustments 0.52 - (0.13) 0.39
NET OPERATING INCOME FROM
CONTINUING OPERATIONS PER
DILUTED SHARE $0.19 $0.05 $- $0.23
For the nine months ended September 30, 2003
Equity Asset Discontinued Total
Markets Management Operations
GAAP NET INCOME $6.3 $19.0 $3.3 $28.6 Adjustments, net of tax: Writedown of assets and lease loss accrual 9.9 - - 9.9 (Income) from discontinued operations - - (3.3) (3.3) Net impact of adjustments 9.9 - (3.3) 6.5 NET OPERATING INCOME FROM 8N ]N*NG OPERATIONS $16.1 $19.0 $- $35.1
GAAP NET INCOME PER DILUTED
SHARE $0.05 $0.16 $0.03 $0.25
Adjustments, net of tax:
Writedown of assets and
lease loss accrual 0.08 - - 0.08
(Income) from
discontinued operations - - (0.03) (0.03)
Net impact of adjustments 0.08 - (0.03) 0.06
NET OPERATING INCOME
FROM CONTINUING OPERATIONS
PER DILUTED SHARE $0.14 $0.16 $- $0.30
(*) Totals may not add due to rounding.
SOURCE Knight Trading Group Margaret Wyrwas, Senior Managing Director, Corporate Communications & Investor Relations, +1-201-557-6954, or mwyrwas@knighttrading.com; or Greta Morley Assistant Vice President, Marketing Communications & Public Relations +1-201-557-6948, or gmorley@knighttrading.com, or Kara Fitzsimmons, Vice President, Corporate Communications, +1-201-356-1523 or kfitzsimmons@knighttrading.com, or Molly McDowell, Analyst, Corporate Communications & Investor Relations, +1-201-356-1723 or mmcdowell@knighttrading.com, all for Knight Trading Group http://www.knighttradinggroup.com |
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The matters described within the Investor Relations section of the Knight Capital Group (the "Company") Web site 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.
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