ITG Reports Second Quarter 2006 EPS of $0.63; Record Trading Volumes, Revenues and Earnings.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Investment Technology Group, Inc. (NYSE NYSE See: New York Stock Exchange : ITG ITG In the Groove ITG Investment Technology Group ITG Information Technology Group ITG International Trumpet Guild ITG Instituut Voor Tropische Geneeskunde (Dutch: Institute of Tropical Medicine; Antwerp, Belgium) ), a leading provider of technology-based trading services and transaction research, today announced that for the second quarter ended June June: see month. 30, 2006, net income was $27.9 million, 60 percent higher than net income of $17.4 million in the second quarter of 2005. Earnings were $0.63 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, an increase of 54 percent versus earnings of $0.41 per diluted share in the second quarter of last year. ITG's total revenues for the second quarter of 2006 were $153.6 million, 50 percent higher than total revenue of $102.2 million for the second quarter of 2005. Excluding the impact of non-recurring items, operating revenues operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. of $148.1 million increased by 49 percent from second quarter 2005 operating revenues of $99.5 million and includes $16.8 million pertaining per·tain intr.v. per·tained, per·tain·ing, per·tains 1. To have reference; relate: evidence that pertains to the accident. 2. to our recent acquisitions of Macgregor Noun 1. MacGregor - Scottish clan leader and outlaw who was the subject of a 1817 novel by Sir Walter Scott (1671-1734) Rob Roy, Robert MacGregor and Plexus Plexus - A modular World-Wide Web server written in Perl by Tony Sanders <sanders@earth.com>. Comes with interfaces to allow many other information services to be served via the Web. Version 3.0m 1994-07-22. . In the second quarter of 2006, operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before per share of $0.56 increased 47 percent versus $0.38 per diluted share in the second quarter of last year. Pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: in the second quarter of 2006 were 28.2 percent, up from 24.9 percent in the second quarter of 2005. Second quarter 2006 operating results exclude a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. pre-tax gain of $5.4 million ($3.2 million after tax), or $0.07 per diluted share from the sale of our 50 percent stake in a Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. joint venture, KTG KTG Kerntechnische Gesellschaft e.V. KTG Korea Tobacco & Ginseng Corporation Technologies Corp., to IRESS Market Technology Limited for CAD CAD: see computer-aided design. (Computer-Aided Design) Using computers to design products. CAD systems are high-speed workstations or desktop computers with CAD software. $9.5 million, or approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. US $8.3 million, in April 2006. Excluding this one-time gain, ITG's operating net income grew 55 percent over second quarter 2005 and 14 percent versus first quarter 2006, while operating earnings per share increased 47 percent above second quarter 2005 and 14 percent over first quarter 2006. "ITG's US volumes grew significantly in the second quarter as we increased our market share to record levels," said Ray Killian Killian can refer to several people and things People:
ITG's International operating revenues were $28.2 million in the second quarter of 2006, 23 percent higher than revenues of $22.9 million in the second quarter of 2005. International pre-tax operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. increased from $2.0 million in the second quarter of 2005 to $2.3 million in the second quarter of 2006. "ITG sees a growth opportunity in the international markets as we expand our existing market footprint The amount of geographic space covered by an object. A computer footprint is the desk or floor surface it occupies. A satellite's footprint is the earth area covered by its downlink. See form factor. 1. into Asia," said Mr. Killian. "In addition, the focus on best execution in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). is
accelerating electronic trading  This article or section is in need of attention from an expert on the subject.Please help recruit one or [ improve this article] yourself. See the talk page for details. , a trend that has positive implications for ITG." Year to date - US GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). Results For the six months ended June 30, 2006, revenues increased 55 percent from the prior year period to $299.8 million, net income increased 77 percent to $54.3 million and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of increased 68 percent to $1.23. Conference Call ITG has scheduled a conference call today at 11:00 a.m. ET to discuss first quarter results. Those wishing to listen to the call should dial 1-866-362-4820 and enter the pass code 62679103 at least 10 minutes prior to the start of the call to ensure connection. A listen-only webcast will also be available on ITG's website at http://www.itg.com/. For those unable to listen to the live broadcast of the call, a replay will be available for one week by dialing 1-888-286-8010 and entering the pass code 24830881. A replay will be available for two weeks on ITG's website. Both methods of listening to the replay will be available starting approximately two hours after the completion of the conference call. About ITG Investment Technology Group, Inc. (NYSE:ITG), is a specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. agency brokerage BROKERAGE, contracts. The trade or occupation of a broker; the commissions paid to a broker for his services. and technology firm that partners with clients globally to provide innovative solutions spanning the entire investment process. A pioneer in electronic trading, ITG has a unique approach that combines pre-trade analysis, order management, trade execution, and post-trade evaluation to provide clients with continuous improvements in trading and cost efficiency. The firm is headquartered in New York with offices in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , Europe and the Asia Pacific regions. For more information on ITG, please visit www.itg.com. In addition to historical information, this press release may contain "forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. " statements, as defined in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, that reflect management's expectations for the future. A variety of important factors could cause results to differ materially from such statements. These factors include the company's ability to achieve expected future levels of sales; the actions of both current and potential new competitors; rapid changes in technology; financial market volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the ; general economic conditions in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and elsewhere; evolving industry regulation; cash flows into or redemption The liberation of an estate in real property from a mortgage. Redemption is the process by which land that has been mortgaged or pledged is bought back or reclaimed. It is accomplished through a payment of the debt owed or a fulfillment of the other conditions. from equity funds; effects of inflation; customer trading patterns Trading pattern Long-range direction of a security or commodity futures price, charted by drawing one line connecting the highest prices the security has reached and another line connecting the lowest prices at which the security has traded over the same period. ; and new products and services. These and other risks are described in greater detail in the company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended December December: see month. 31, 2005, and other documents filed with the Securities and Exchange Commission and available on the company's web site.
INVESTMENT TECHNOLOGY GROUP, INC.
Consolidated Statements of Income (unaudited)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
2006 2005 2006 2005
--------- ------------------ ---------
Revenues:
Commissions $125,904 $95,688 $243,482 $183,221
Recurring 18,206 2,260 35,870 4,773
Other 9,449 4,234 20,449 5,850
--------- -------- --------- ---------
Total revenues 153,559 102,182 299,801 193,844
--------- -------- --------- ---------
Expenses:
Compensation and employee
benefits 50,749 37,731 102,726 71,312
Transaction processing 19,738 14,013 37,581 28,297
Occupancy and equipment 9,586 7,220 18,069 14,473
Telecommunications and data
processing services 7,702 4,935 14,597 9,800
Other general and
administrative 15,347 10,773 29,255 20,241
Interest expense 3,157 -- 6,180 --
--------- -------- --------- ---------
Total expenses 106,279 74,672 208,408 144,123
--------- -------- --------- ---------
Income before income tax
expense 47,280 27,510 91,393 49,721
Income tax expense 19,428 10,070 37,134 19,045
--------- -------- --------- ---------
Net income $ 27,852 $17,440 $ 54,259 $ 30,676
========= ======== ========= =========
Earnings per share:
Basic $ 0. 64 $ 0.41 $ 1.26 $ 0.73
========= ======== ========= =========
Diluted $ 0. 63 $ 0.41 $ 1.23 $ 0.73
========= ======== ========= =========
Basic weighted average number
of common shares outstanding 43,304 42,040 43,153 42,025
Diluted weighted average number
of common shares outstanding 44,265 42,204 44,034 42,183
INVESTMENT TECHNOLOGY GROUP, INC.
Consolidated Statements of Financial Condition
(In thousands, except share amounts)
June 30, December 31,
2006 2005
----------- -----------
(unaudited)
Assets
Cash and cash equivalents $270,506 $261,044
Cash restricted or segregated under
regulations and other 14,289 7,007
Securities owned, at fair value 6,628 6,017
Receivables from brokers, dealers and other,
net 1,019,165 485,012
Investments 9,207 10,628
Premises and equipment, net 27,865 22,292
Capitalized software, net 21,801 12,780
Goodwill 401,108 176,773
Other intangibles 30,538 12,173
Deferred taxes 12,717 7,972
Other assets 11,951 14,636
----------- -----------
Total assets $1,825,775 $1,016,334
=========== ===========
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued expenses $159,970 $109,442
Payables to brokers, dealers and other 937,158 435,141
Securities sold, not yet purchased, at fair
value 680 91
Income taxes payable 9,747 9,354
Long term debt 175,100 --
----------- -----------
Total liabilities 1,282,655 554,028
----------- -----------
Commitments and contingencies
Stockholders' Equity
Preferred stock, par value $0.01; 1,000,000
shares authorized; no shares issued or
outstanding -- --
Common stock, par value $0.01; 100,000,000
shares authorized; 51,419,727 and 51,390,027
shares issued at June 30, 2006 and December
31, 2005, respectively and 43,349,110 and
42,773,651 shares outstanding at June 30,
2006 and December 31, 2005, respectively 514 514
Additional paid-in capital 186,980 175,600
Retained earnings 496,906 442,647
Common stock held in treasury, at cost;
8,070,617 and 8,616,376 shares at June 30,
2006 and December 31, 2005, respectively (152,427) (162,735)
Accumulated other comprehensive income (net of
tax) 11,147 6,280
----------- -----------
Total stockholders' equity 543,120 462,306
----------- -----------
Total liabilities and stockholders' equity $1,825,775 $1,016,334
=========== ===========
INVESTMENT TECHNOLOGY GROUP, INC.
Reconciliation of US GAAP Results to Pro Forma Operating Results
(unaudited)
In evaluating the Company's financial performance, management reviews
results from operations which excludes non-operating or one-time
charges. Pro forma earnings per share is a non-GAAP (generally
accepted accounting principles) performance measure, but the Company
believes that it is useful to assist investors in gaining an
understanding of the trends and operating results for the Company's
core businesses. Pro forma earnings per share should be viewed in
addition to, and not in lieu of, the Company's reported results under
US GAAP.
The following is a reconciliation of US GAAP results to pro forma
results for the periods presented (in thousands except per share
amounts):
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ------------------
2006 2005 2006 2005
-------------------- -------------------
Total revenues $153,559 $ 102,182 $299,801 $193,844
Less:
Non-recurring revenue
(1)(2) (5,453) (2,699) (13,230) (2,824)
-------------------- -------------------
Pro forma operating revenues 148,106 99,483 286,571 191,020
-------------------- -------------------
Total expenses 106,279 74,672 208,408 144,123
Income before income tax
expense 47,280 27,510 91,393 49,721
Effect of pro forma
adjustments (5,453) (2,699) (13,230) (2,824)
-------------------- -------------------
Pro forma operating income
before income tax expense 41,827 24,811 78,163 46,897
-------------------- -------------------
Income tax expense 19,428 10,070 37,134 19,045
Tax effect of pro forma
adjustments (2,219) (1,106) (5,111) (1,158)
-------------------- -------------------
Pro forma operating income tax
expense 17,209 8,964 32,023 17,887
-------------------- -------------------
Net income 27,852 17,440 54,259 30,676
Net effect of pro forma
adjustments (3,234) (1,593) (8,119) (1,666)
-------------------- -------------------
Pro forma operating net
income $ 24,618 $ 15,847 $ 46,140 $ 29,010
-------------------- -------------------
Diluted earnings per share $ 0.63 $ 0.41 $ 1.23 $ 0.73
Net effect of pro forma
adjustments (0.07) (0.03) (0.18) (0.04)
-------------------- -------------------
Pro forma diluted operating
earnings per share $ 0.56 $ 0.38 $ 1.05 $ 0.69
==================== ===================
Notes:
------
(1) In 2006, non-recurring revenues relate to:
a) our ownership of two memberships on the New York Stock Exchange
("NYSE") that as part of their merger with Archipelago
Holdings, Inc. ("Archipelago") were combined under a new
holding company named NYSE Group, Inc. in which each NYSE
member received compensation consisting of cash and restricted
shares of NYSE Group, Inc. common stock. Accordingly,
consideration received for our memberships in First Quarter
2006 consisted of 157,202 restricted shares of NYSE Group,
Inc. common stock resulting in gains of approximately $6.9
million and approximately $1.0 million in cash and dividends,
which was recorded as dividend income. In Second Quarter 2006,
we were able to sell a portion of the shares received and
recorded an additional gain of approximately $80,000, and
b) our sale in Second Quarter 2006 of our remaining interests in a
Canadian joint venture that we entered into in 2004 with IRESS
Market Technology Limited ("IRESS"), to IRESS resulting in a
gain of $5.4 million.
(2) In 2005, non-recurring revenue was comprised of gains from a) our
shares of Archipelago Holdings common stock that we received as
part of an equity entitlement program, of which $2.7 million was
recognized in Second Quarter of 2005, and b) a recovery against
previous investment write-downs of $0.4 million in First Quarter
2005.
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