|APRIL 20, 2005|
|Knight Trading Group Announces GAAP Earnings of $0.05 Per Diluted Share for First Quarter 2005|
Company earned $0.05 per diluted share from the sale of a portion of its investment in the International Securities Exchange
Excluding the ISE gain, operating results from the company's three segments,
Equity Markets, Asset Management and Corporate, were essentially flat in challenging market conditions
Board of Directors approved a $70 million increase in the company's share repurchase program
JERSEY CITY, N.J., April 20 /PRNewswire-FirstCall/ -- Knight Trading Group, Inc. (Nasdaq: NITE) today reported GAAP earnings of $5.9 million, or $0.05 per diluted share, for the first quarter of 2005.
For the first quarter of 2004, the company reported GAAP earnings of $31.8 million, or $0.26 per diluted share, which included net income from continuing operations of $25.9 million, or $0.21 per diluted share, and income from discontinued operations of $5.9 million, net of tax, or $0.05 per diluted share.
"Continuing operations" includes the company's Equity Markets and Asset Management operating business segments as well as a Corporate segment, encompassing corporate investments and overhead expenses. Amounts reported as "discontinued operations" include the company's former Derivative Markets business segment, the sale of which was completed to Citigroup for $237 million in cash at the close of business December 9, 2004. In accordance with generally accepted accounting principles, the results of the Derivative Markets segment, as well as the gain on the sale of this business, have been included within discontinued operations for all periods presented. The final purchase price was subject to adjustment based on the final determination of the book value of the Derivative Markets business at the time the deal closed. The results of this adjustment and other expenses related to the sale resulted in a loss from discontinued operations, net of tax, of $266,000 in the first quarter of 2005.
Revenues from continuing operations for the first quarter of 2005 were $137.6 million, compared to $198.3 million from continuing operations for the first quarter of 2004.
"Gains by our Asset Management segment and proceeds from a portion of our investment in the International Securities Exchange led to Knight's modestly positive results in the first quarter," said Thomas M. Joyce, Chairman and Chief Executive Officer of Knight Trading Group. "Additionally, industry statistics indicate that our share of the institutional market continued to climb. Our Equity Markets segment essentially broke even during the quarter, despite the poor trading environment and our historically low revenue capture. While market and competitive pressures continue to challenge us, Knight is taking steps to improve the business over the long term, including a reorganization of our equities operations announced in early April."
Q1 2005 Q1 2004 Revenues ($) 137,556,870 198,319,470 Net income from continuing operations ($) 6,124,955 25,946,686 (Loss) income from discontinued operations, net of tax ($) (265,927) 5,867,771 Net income ($) 5,859,028 31,814,457 Diluted EPS from continuing operations ($) 0.05 0.21 Diluted EPS from discontinued operations ($) -- 0.05 Diluted EPS ($) 0.05 0.26 U.S. equity dollar value traded (in $ millions) 470,676 504,615 U.S. equity trades executed (in thousands) 52,849 59,592 Average daily U.S. equity trades (in thousands) 866 961 Nasdaq and Listed equity shares traded (in millions) 29,099 40,927 OTC Bulletin Board and Pink Sheet shares traded (in millions) 295,799 320,555 Average revenue capture per U.S. equity dollar value traded (bps) 1.7 2.8 Average month-end balance of assets under management ($ millions) 3,478.9 1,965.1 Quarterly fund return to investors* 0.8% 2.0% * Quarterly fund return represents the blended quarterly return across all assets under management in the Deephaven funds
During the first quarter of 2005, the Equity Markets business segment, which consists of both domestic and international equity market-making and institutional sales operations, generated total revenues of $108.0 million, compared to $177.9 million during the first quarter of 2004. In the first quarter of 2005, the Equity Markets business segment reported a net loss of approximately $380,000, which represents net income of approximately $510,000 from domestic equity markets and a net loss of $890,000 from our London operations.
On April 4, 2005, Knight issued two news releases regarding its Equity Markets segment. The company announced an agreement to acquire the business of Direct Trading Institutional, Inc., a direct market access firm. That same day, the company also announced the reorganization of its Equity Markets segment into three primary groups: Broker-Dealer, Electronic Services and Institutional.
"We reorganized our equities operations to both improve service for our clients and returns for our shareholders," Mr. Joyce said. "By sharpening our focus on each type of client, we can better understand their needs for capital commitment, sales trading and electronic services. We believe our Broker-Dealer Group will respond well to efforts to increase efficiencies through automation and cost-cutting measures while preserving our high level of client service. At the same time, we look forward to exploring new opportunities through our Electronic Services Group and continuing to grow our Institutional Group.
"Our effort to produce more consistent returns is aided by our considerable trading volume and our technology," Mr. Joyce continued. "We have the size and the balance sheet strength needed to adjust our business quickly in response to competitive pressures and market structure changes, and to pursue new offerings. The acquisition of direct access capabilities is the first of many strategic moves we expect to make to support our new structure and leverage our trading platform."
During the first quarter of 2005, the Asset Management business segment, Deephaven Capital Management, generated $17.9 million in asset management fees, compared to $13.9 million in the same period a year ago. Asset Management had approximately $3.5 billion under management at March 31, 2005, down slightly from the $3.6 billion under management at December 31, 2004, and up from $2.2 billion at March 31, 2004.
The company's investment in the Deephaven funds was slightly less than breakeven during the first quarter of 2005, down from pre-tax earnings of $4.8 million in the first quarter of 2004. At the end of the first quarter of 2005, the company had $315.2 million invested in the Deephaven funds.
On January 1, 2005, the company made an additional short-term investment in the Deephaven funds of $100 million, a portion of its proceeds from the sale of the Derivative Markets segment. This investment was redeemed by the company on April 1, 2005, thereby reducing the company's total corporate investment in the Deephaven funds to $215 million.
In conjunction with the initial public offering of the International Securities Exchange in March 2005, the company sold approximately 30% of its original equity ownership stake of 2.48 million common shares. As a result of the transaction, the company recognized a gain of $5.6 million, net of taxes, or $0.05 per diluted share. The company currently owns 1.73 million common shares of the ISE.
The company had $833.8 million in stockholders' equity as of March 31, 2005, equivalent to a book value of $7.42 per diluted share. As of March 31, 2005, the company had $232.6 million in cash and cash equivalents and a $315.2 million investment in funds managed by Deephaven, its Asset Management business segment.
During the first quarter of 2005, the company repurchased 6.6 million shares for approximately $68 million under the company's $250 million stock repurchase program. To date, the company has repurchased 28.3 million shares for $219 million. At its April 19, 2005 meeting, the Board of Directors authorized a $70 million increase in the size of its repurchase program to $320 million from $250 million. The company cautions that there are no assurances that any further repurchases may actually occur.
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Copies of this earnings release and other information on the company can be obtained at the company's Web site, http://www.knight.com. The company will conduct its first quarter 2005 earnings conference call for analysts, investors and the media at 9:00 a.m. Eastern Daylight Time (EDT) today, April 20, 2005. 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 March 2005 on its Web site before the start of trading today.
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About Knight Trading Group
Knight is a leading provider of comprehensive trade execution and asset management services. Our Equity Markets business offers institutions and broker-dealers high quality trade execution and capital commitment across the depth and breadth of the equity market. Our Asset Management business, Deephaven Capital Management, is a market-neutral investment manager focused on delivering risk-adjusted returns with low volatility for institutions and high net worth individuals. Knight strives to be a valued partner by providing superior service and continually enhancing its offering to meet client needs. More information about Knight can be obtained at http://www.knight.com.
Presentation of Information in this Press Release
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 including, without limitation, the risks and uncertainties detailed under the headings "Certain Factors Affecting Results of Operations" and "Risks Affecting our Business" in the Company's Annual Report on Form 10-K.
KNIGHT TRADING GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS* (Unaudited) For the three months ended March 31, 2005 2004 REVENUES Net trading revenue $37,421,828 $100,727,855 Commissions and fees 70,116,011 76,637,524 Asset management fees 17,880,667 13,932,132 Interest and dividends, net 2,339,800 857,962 Investment income and other 9,798,564 6,163,997 Total revenues 137,556,870 198,319,470 EXPENSES Employee compensation and benefits 56,857,441 65,103,791 Execution and clearance fees 23,546,783 37,762,298 Soft dollar and commission recapture expense 15,484,575 15,775,915 Payments for order flow 7,404,075 13,018,439 Communications and data processing 7,813,959 6,753,777 Depreciation and amortization 4,250,398 3,870,824 Occupancy and equipment rentals 3,996,041 4,435,070 Professional fees 3,776,416 3,353,024 Business development 1,293,336 2,042,971 Other 2,653,746 2,749,333 Total expenses 127,076,770 154,865,442 Income from continuing operations before income taxes 10,480,100 43,454,028 Income tax expense 4,355,145 17,507,342 Net income from continuing operations 6,124,955 25,946,686 (Loss) income from discontinued operations, net of tax (265,927) 5,867,771 Net income $5,859,028 $31,814,457 Basic earnings per share from continuing operations $0.06 $0.23 Diluted earnings per share from continuing operations $0.05 $0.21 Basic earnings per share from discontinued operations $- $0.05 Diluted earnings per share from discontinued operations $- $0.05 Basic earnings per share $0.05 $0.28 Diluted earnings per share $0.05 $0.26 Shares used in computation of basic earnings per share 108,858,845 113,473,360 Shares used in computation of diluted earnings per share 112,409,158 121,988,464 * Certain prior period amounts have been reclassified to conform to the current period presentation. KNIGHT TRADING GROUP, INC. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Unaudited) March 31, 2005 December 31, 2004 ASSETS Cash and cash equivalents $232,633,119 $445,539,282 Securities owned, held at clearing brokers, at market value 279,860,044 254,473,209 Receivable from brokers and dealers 443,635,264 244,881,065 Investment in Deephaven sponsored funds 315,157,464 215,329,959 Fixed assets and leasehold improvements at cost, less accumulated depreciation and amortization 62,953,966 54,024,186 Strategic investments 67,996,445 29,266,796 Goodwill 19,182,248 19,182,248 Intangible assets, less accumulated amortization 11,391,111 11,546,528 Other assets 67,326,039 117,305,578 Total assets $1,500,135,700 $1,391,548,851 LIABILITIES & STOCKHOLDERS' EQUITY Liabilities Securities sold, not yet purchased, at market value $226,027,863 $221,420,569 Payable to brokers and dealers 330,744,844 88,480,788 Accrued compensation expense 49,226,779 123,664,383 Accrued expenses and other liabilities 60,321,008 103,485,220 Total liabilities 666,320,494 537,050,960 Stockholders' equity Class A common stock 1,381,199 1,339,655 Additional paid-in-capital 463,946,314 427,451,712 Retained earnings 596,307,811 590,448,783 Treasury stock, at cost (216,604,389) (147,636,413) Accumulated other comprehensive income, net of tax 23,886,641 - Unamortized stock-based compensation (35,102,370) (17,105,846) Total stockholders' equity 833,815,206 854,497,891 Total liabilities and stockholders' equity $1,500,135,700 $1,391,548,851
SOURCE Knight Trading Group, Inc. -0- 04/20/2005 /CONTACT: Margaret Wyrwas, Senior Managing Director, Corporate Communications & Investor Relations, +1-201-557-6954, email@example.com, or Kara Fitzsimmons, Vice President, Corporate Communications, +1-201-356-1523, firstname.lastname@example.org, or Greta Morley, Vice President, Marketing Communications & Public Relations, +1-201-557-6948, email@example.com, or Molly McDowell, Analyst, Corporate Communications & Investor Relations, +1-201-356-1723, firstname.lastname@example.org, all of Knight Trading Group, Inc./ /Web site: http://www.knight.com / (NITE)