Instinet Group Announces Third Quarter 2005 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 -- Instinet Instinet An electronic securities order-matching (trading) and information system that allows members (primarily professional traders and investors) to display bid and offer quotes for stocks, and to transact between themselves using brokers. Group Incorporated (Nasdaq: INGP) today announced net income of $84 million or $0.25 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 for the third quarter of 2005 compared to net income of $11 million or $0.03 per diluted share for the third quarter of 2004 and net income of $8 million or $0.02 per diluted share for the second quarter of 2005. Excluding the discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. of Lynch Lynch may be:
LJR Legislative, Judicial and Rules (committee) LJR Layer Jump Recording "), Instinet Group incurred a net loss of $5 million or $(0.02) per diluted share for the third quarter of 2005 compared to net income of $8 million or $0.02 per diluted share for the third quarter of 2004 and net income of $7 million or $0.02 per diluted share for the second quarter of 2005. Discontinued operations for the third quarter of 2005 included an after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. gain on the sale of LJR of $90 million. The third quarter 2005 results included $20 million in charges related to facility and asset write-offs, $9 million in severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when charges and $6 million in merger related advisory fees, partially offset by $9 million in net investment gains. Excluding these items and the related tax effects, pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the third quarter of 2005 was $11 million, or $0.03 per diluted share compared to pro forma net income from continuing operations of $5 million or $0.02 per diluted share for the third quarter of 2004 and pro forma net income from continuing operations of $6 million, or $0.02 per diluted share for the second quarter of 2005.(1) Financial Performance(2) Instinet Group Revenues Total consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: revenues for Instinet Group, net of interest, were $254 million for the third quarter of 2005, up 2% from the third quarter of 2004 and down 2% from the second quarter of 2005. Expenses Total expenses for the third quarter of 2005 were $269 million, up 12% from $240 million in the third quarter of 2004 and up 9% from $246 million in the second quarter of 2005. The third quarters of 2005 and 2004 and second quarter of 2005 included net investment gains of $9 million, $4 million and $25 million, respectively. Excluding these gains, total expenses were $278 million in the third quarter of 2005, up 14% from $244 million in the third quarter of 2004 and up 3% from $271 million in the second quarter of 2005. Cost of revenues was $154 million for the third quarter of 2005, down 4% from the second quarter of 2005 primarily due to lower transaction volumes. Direct expenses were $124 million for the third quarter of 2005, up 12% from the second quarter of 2005. --Compensation and benefits expense was $57 million for the third quarter of 2005, down 6% from the previous quarter primarily due to lower severance charges partially offset by higher variable compensation. The third quarter of 2005 included a $9 million severance charge while the second quarter of 2005 included $16 million in severance expense. These severance charges are part of our ongoing efforts to streamline streamline, path of a fluid flowing steadily and without appreciable turbulence. A body is said to be streamlined if its shape offers the least possible resistance to a current of air, water, or other fluid. the institutional broker business. These cost reductions are not related to the pending transaction with The Nasdaq Stock Market Nasdaq stock market The first electronic stock market listing over 5000 companies. The Nasdaq stock market comprises two separate markets, namely the Nasdaq National Market, which trades large, active securities and the Nasdaq Smallcap Market that trades emerging growth companies. , Inc. ("NASDAQ"). --Depreciation and amortization expense was $14 million, up 34% from the previous quarter primarily due to $5 million of asset write-offs associated with facility consolidation in the U.S. --Occupancy expense was $23 million for the third quarter of 2005, up $13 million from the previous quarter due to $15 million in facility write-offs associated with the consolidation of space in the U.S. and the move to new space in London London, city, Canada London, city (1991 pop. 303,165), SE Ont., Canada, on the Thames River. The site was chosen in 1792 by Governor Simcoe to be the capital of Upper Canada, but York was made capital instead. London was settled in 1826. . At September September: see month. 30, 2005, Instinet Group had net cash (cash and cash equivalents and securities owned less short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. borrowings) of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $938 million, up $2 million from $936 million at December December: see month. 31, 2004. The increase in cash was primarily due to proceeds received from the sale of LJR partially offset by a special dividend paid to shareholders, firm cash used in customer settlement activities and seasonal payments related to incentive compensation. At September 30, 2005, total assets were approximately $1.8 billion and shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. was approximately $1.1 billion. There were approximately 341 million shares of common stock outstanding as of September 30, 2005. On September 30, 2005, Instinet Group's total headcount head count or head·count n. 1. The act of counting people in a particular group. 2. The number of people counted in this way. Noun 1. was 785 employees compared to 938 on June June: see month. 30, 2005. Headcount at September 30, 2005 included 614 employees from Instinet, 82 employees from INET INET Internet INET Intranet INET International Networking (conference) INET Institutional Network (Hawaii Department of Education) INET Instinet LLC iNET Integrated Network Enhanced Telemetry and 89 employees from Instinet Group. Business Segments(3) Instinet, The Institutional Broker --Instinet reported a net loss from continuing operations before income taxes of $28 million for the third quarter of 2005, 32% lower than the second quarter of 2005. --Total revenues, net of interest, were $142 million for the third quarter of 2005, 2% lower than the second quarter of 2005, primarily due to lower U.S. revenues partially offset by higher revenues from our international business. --Instinet's customers traded an average of 99 million U.S. shares a day in the third quarter of 2005, up 6% from 93 million shares a day during the second quarter of 2005. Average daily consideration in non-U non-U adj. Chiefly British Not characteristic of the upper class, especially in language usage. [non- + U2. .S. equities for the third quarter of 2005 was $1,011 million, a 11% increase from the second quarter of 2005. --Gross margin of $71 million for the third quarter of 2005 was level with the second quarter of 2005. --Direct expenses of $99 million for the third quarter of 2005 were up 8% from the second quarter of 2005. INET, The electronic marketplace --INET reported net income before income taxes of $4 million for the third quarter of 2005, down 54% from $10 million in the second quarter of 2005. --Total revenues, net of interest, were $116 million for the third quarter of 2005, 2% lower than the previous quarter primarily due to lower U.S. equity market volumes in the third quarter of 2005. --INET reported NASDAQ-listed average matched equity share volume of 416 million shares per day in the third quarter of 2005, down 8% from the previous quarter. INET's share of the total market in NASDAQ-listed equity trading In finance, equity trading is the buying and selling of company stock shares. Shares in large publicly-traded companies are bought and sold through one of the major stock exchanges, such as the New York Stock Exchange, London Stock Exchange or Tokyo Stock Exchange, which serve as was 25.8% in the third quarter of 2005, down from 26.0% in the previous quarter. --INET reported U.S. exchange-listed average matched equity share volume of 100 million shares per day in the third quarter of 2005, up from 85 million in the previous quarter. INET's share of the total market in U.S. exchange-listed equity trading was 4.5% in the third quarter of 2005, up from 3.9% in the previous quarter. --Cost of revenues as a percentage of total transaction fees was 80% in the third quarter of 2005 compared to 79% in the second quarter of 2005. --Gross margin was $24 million for the third quarter of 2005, 3% lower than the previous quarter. --Direct expenses of $20 million for the third quarter of 2005 were up 29% from the second quarter of 2005. Company Announcements and Updates Instinet Group announced on April 22, 2005 that it has entered into a definitive agreement pursuant to which NASDAQ will acquire Instinet Group. --NASDAQ will acquire all outstanding shares of Instinet Group for an aggregate purchase price of approximately $1.88 billion in cash, or $5.10 per share (on a fully diluted basis) (reflecting a reduction of the purchase price for the special cash dividend) subject to certain adjustments. The $1.88 billion included proceeds from a separate sale of Lynch Jones and Ryan to The Bank of New York The Bank of New York, abbrieviated to BNY, was a global financial services company that existed until its merger with the Mellon Financial Corporation on July 2, 2007.[1] The bank now continues under the new name of The Bank of New York Mellon Corporation. for $174 million. Instinet Group paid a special cash dividend of $0.32 per common share to Instinet Group stockholders on August 15, 2005, based upon the net after-tax proceeds of the sale of Lynch Jones and Ryan. --The merger agreement was adopted on September 21, 2005 by a majority of Instinet Group shareholders. Instinet Group expects that the merger will be completed during the fourth quarter of 2005, at which time each shareholder will have the right to receive approximately $5.10 per share (on a fully diluted basis) (reflecting a reduction of the purchase price for the special cash dividend) subject to certain adjustments. Completion of the transaction is still subject to customary conditions, including regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. approvals. --On June 17, 2005 the Department of Justice ("DOJ (Department Of Justice) The legal arm of the U.S. government that represents the public interest of the United States. It is headed by the Attorney General. ") issued a Request for Additional Information and Documentary documentary: see motion pictures. documentary Fact-based film that depicts actual events and persons. Documentaries can deal with scientific or educational topics, can be a form of journalism or social commentary, or can be a conduit for propaganda Materials (a "second request") to Instinet Group and NASDAQ in connection with the DOJ's investigation under the Hart-Scott Rodino Rodino may refer to:
The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade. Improvements Act of the pending acquisition of Instinet Group by NASDAQ. Based on discussions with the DOJ staff responsible for reviewing the NASDAQ/Instinet transaction, we understand that the staff has forwarded its recommendation to senior DOJ officials and that we anticipate a formal decision from the DOJ soon. --In April and May 2005, four purported pur·port·ed adj. Assumed to be such; supposed: the purported author of the story. pur·port  ed·ly adv. class action lawsuits class action lawsuitA lawsuit in which one party or a limited number of parties sue on behalf of a larger group to which the parties belong. For example, investors may bring a class action lawsuit against a brokerage firm that has actively promoted a tax were filed in the Court of Chancery court of chancery n. pl. courts of chancery A court with jurisdiction in equity. Noun 1. court of chancery - a court with jurisdiction in equity chancery in the State of Delaware Delaware, state, United States Delaware (dĕl`əwâr, –wər), one of the Middle Atlantic states of the United States, the country's second smallest state (after Rhode Island). against Instinet Group, each of our directors and Reuters Reuters British cooperative news agency. Founded in 1851 by Paul Julius Reuter, it was initially concerned with commercial news but began to serve a growing newspaper clientele after the London Morning Advertiser subscribed in 1858. alleging, among other things, that defendants breached their fiduciary duties Noun 1. fiduciary duty - the legal duty of a fiduciary to act in the best interests of the beneficiary legal duty - acts which the law requires be done or forborne as to our public stockholders in connection with the proposed merger by approving the transaction at an allegedly unfair and inadequate price. On June 22, 2005, plaintiffs filed a consolidated amended complaint amended complaint n. what results when the party suing (plaintiff or petitioner) changes the complaint he/she has filed. It must be in writing, and can be done before the complaint is served on any defendant, by agreement between the parties (usually their lawyers), consolidating three of the lawsuits while voluntarily dismissing the fourth lawsuit lawsuit: see procedure; tort. . The amended complaint seeks, among other things, class action status, an injunction injunction, in law, order of a court directing a party to perform a certain act or to refrain from an act or acts. The injunction, which developed as the main remedy in equity, is used especially where money damages would not satisfy a plaintiff's claim, or to against consummation CONSUMMATION. The completion of a thing; as the consummation of marriage; (q.v.) the consummation of a contract, and the like. 2. A contract is said to be consummated, when everything to be done in relation to it, has been accomplished. of the transaction, invalidation in·val·i·date tr.v. in·val·i·dat·ed, in·val·i·dat·ing, in·val·i·dates To make invalid; nullify. in·val of certain provisions of the Merger Agreement, damages in an unspecified Adj. 1. unspecified - not stated explicitly or in detail; "threatened unspecified reprisals" specified - clearly and explicitly stated; "meals are at specified times" amount, rescission The abrogation of a contract, effective from its inception, thereby restoring the parties to the positions they would have occupied if no contract had ever been formed. By Agreement in the event the transaction is consummated con·sum·mate tr.v. con·sum·mat·ed, con·sum·mat·ing, con·sum·mates 1. a. To bring to completion or fruition; conclude: consummate a business transaction. b. and attorney's fees attorney's fee n. the payment for legal services. It can take several forms: 1) hourly charge, 2) flat fee for the performance of a particular service (like $250 to write a will), 3) contingent fee (such as one-third of the gross recovery, and nothing if there is no . On September 9, 2005, the parties entered into a proposed settlement of the action pursuant to a Stipulation An agreement between attorneys that concerns business before a court and is designed to simplify or shorten litigation and save costs. During the course of a civil lawsuit, criminal proceeding, or any other type of litigation, the opposing attorneys may come to an agreement and Agreement of Compromise, Settlement and Release. Pursuant to the proposed settlement: (i) Instinet revised the definitive proxy statement Proxy Statement A document containing the information that a company is required by the SEC to provide to shareholders so they can make informed decisions about matters that will be brought up at an annual stockholder meeting. to include certain disclosures that have been agreed upon Adj. 1. agreed upon - constituted or contracted by stipulation or agreement; "stipulatory obligations" stipulatory noncontroversial, uncontroversial - not likely to arouse controversy and reviewed by plaintiffs; (ii) Nasdaq and Instinet agreed to reduce by 15%, from $66,500,000 to $56,525,000, the break-up break-up noun 1. separation, split, divorce, breakdown, ending, parting, breaking, splitting, wind-up, rift, disintegration, dissolution, termination noun 2. fee that Instinet would pay to Nasdaq under certain conditions pursuant to Section 8.6(a) of the merger agreement; and (iii) Nasdaq agreed to waive To intentionally or voluntarily relinquish a known right or engage in conduct warranting an inference that a right has been surrendered. For example, an individual is said to waive the right to bring a tort action when he or she renounces the remedy provided by law for such , with respect to members of the purported plaintiff class only, the provisions of the merger agreement pursuant to which the aggregate merger consideration was to have been reduced by up to $2.5 million based on the total amount of certain of our transaction liabilities, the net effect of which is an increase of approximately $0.007 per share (or approximately $1.0 million in the aggregate) in the merger consideration that will be received by Instinet stockholders other than the defendants. On September 16, 2005, Instinet mailed a notice of settlement to its stockholders. On October October: see month. 25, 2005, the Delaware Court of Chancery certified See certification. the class of Instinet Group shareholders and approved the proposed settlement as fair and reasonable. Separately, on November November: see month. 30, 2005, the Court will hold a hearing to consider plaintiffs' counsel's application for an award of attorneys' fees and reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. of expenses. The settlement is still subject to the entry of a final and non-appealable judgment dismissing the consolidated action with prejudice prejudice, unsubstantiated prejudgment of an individual or group, favorable or unfavorable in character, tending to action in a consonant direction. The hostility that prejudice can engender and the discrimination to which it may lead on the part of a dominant and the delivery of appropriate releases. Webcast Instinet Group will webcast a conference call to discuss its third quarter results at 10:00 a.m. New York time on November 2, 2005 at http://www.investor.instinetgroup.com. A replay will be available at the same address following the call. About Instinet Group Instinet Group, through affiliates, is the largest global electronic agency securities broker and has been providing investors with 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. solutions and execution services for more than 30 years. We operate our two major businesses through Instinet, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control , The Institutional Broker, and Inet ATS, Inc., The electronic marketplace. --Instinet, The Institutional Broker, gives its customers the opportunity to use its sales-trading expertise and advanced technology tools to interact Interact can refer to:
Fall of Interact While the Game Boy device was first released, Interact acquired the rights to sell Datel's Action Replay with global securities markets, improve trading performance and lower overall transaction costs Transaction Costs Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price they can sell it). . Through Instinet's electronic platforms, customers can access other U.S. trading venues, including NASDAQ and the NYSE NYSE See: New York Stock Exchange , and almost 30 securities markets throughout the world. Instinet acts solely as an agent for its customers, including institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. , such as mutual funds, pension funds, insurance companies and hedge funds hedge fund, in finance, a highly speculative, largely unregulated investment device. Originating in the 1950s, the funds "hedge" by offsetting "short" positions (borrowing a security and then selling it at a higher price before repaying the lender) against "long" . --INET, The electronic marketplace, represents the consolidation of the order flow of the former Instinet ECN (Electronic Communications Network) A computerized, private financial trading system. Terra Nova Trading (www.terranovatrading.com) and Instinet (www.instinet.com) are examples. and former Island ECN, providing its U.S. broker-dealer Broker-Dealer A person or firm in the business of buying and selling securities operating as both a broker and dealer depending on the transaction. Notes: Technically, a broker is only an agent who executes orders on behalf of clients, whereas a dealer acts as a principal customers one of the largest liquidity pools in NASDAQ-listed securities. This news release may be deemed to include forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc Instinet Group. Certain important factors that could cause actual results to differ materially from those disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). in such forward-looking statements are included in Instinet Group'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 31, 2004, and other documents filed with the SEC and available on the Company's website at www.investor.instinetgroup.com. (C)2005 Instinet Group Incorporated and its affiliated companies Affiliated Companies A situation that occurs when one company owns a minority interest (less than 50%) in another company. Also refers to companies that are related to each other in some way. Notes: An affiliated company is sometimes referred to as a subsidiary. . All rights reserved. INSTINET and INET are service marks 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. . Instinet, LLC, member NASD/SIPC, branded as Instinet, The Institutional Broker, Inet ATS, Inc., member NASD/NSX/SIPC, branded as INET, The electronic marketplace and Bridge Trading Company, member NASD/SIPC are subsidiaries of Instinet Group Incorporated which is a member of the Reuters family of companies.
(1) The comparative quarters exclude asset write-offs, advisory fees,
severance expense and investment gains. See table titled
"Reconciliation of Pro Forma Operating Results for 3Q05" on our
website at www.investor.instinetgroup.com under the heading
"Earnings Releases - Financial Tables."
(2) All financial information disclosed in this section of the release
excludes the discontinued operations of LJR unless otherwise
noted.
(3) See also "Earnings Releases - Financial Tables" on our website at
www.investor.instinetgroup.com.
Instinet Group Incorporated
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
----------------------------- -------------------
Sep 30, Jun 30, Sep 30, Sep 30, Sep 30,
2005 2005 2004 2005 2004
--------- --------- -------- --------- --------
Revenue
Transaction fees $246,449 $252,960 $245,696 $771,000 $828,385
Interest income 9,414 7,073 4,061 22,522 12,923
Interest expense (1,449) (739) (743) (3,005) (2,565)
-------- -------- -------- -------- --------
Interest income,
net 7,965 6,334 3,318 19,517 10,358
-------- -------- -------- -------- --------
Total revenues,
net 254,414 259,294 249,014 790,517 838,743
-------- -------- -------- -------- --------
Cost of Revenues
Soft dollar 33,416 36,260 36,943 110,129 128,664
Broker-dealer
rebates 63,811 67,992 59,859 204,823 190,394
Brokerage, clearing
and exchange fees 56,467 56,141 47,078 165,295 159,294
-------- -------- -------- -------- --------
Total cost of
revenues 153,694 160,393 143,880 480,247 478,352
-------- -------- -------- -------- --------
Gross margin 100,720 98,901 105,134 310,270 360,391
-------- -------- -------- -------- --------
Direct Expenses
Compensation and
benefits 57,390 61,047 43,467 167,313 153,320
Communications and
equipment 13,655 14,092 18,775 41,015 57,564
Depreciation and
amortization 13,886 10,382 13,363 34,396 45,139
Occupancy 22,804 9,769 9,351 42,728 28,197
Professional fees 11,160 10,815 7,410 29,087 20,568
Marketing and
business
development 1,111 1,559 2,725 3,781 10,655
Other 4,110 2,768 4,802 12,476 9,993
-------- -------- -------- -------- --------
Total direct
expenses 124,116 110,432 99,893 330,796 325,436
-------- -------- -------- -------- --------
Contractual
settlement - - - - (7,250)
Investments (8,768) (24,690) (4,031) (36,373) (8,705)
Insurance recovery - - - - (5,116)
-------- -------- -------- -------- --------
Total expenses 269,042 246,135 239,742 774,670 782,717
-------- -------- -------- -------- --------
Income (loss) from
continuing
operations before
income taxes (14,628) 13,159 9,272 15,847 56,026
Income tax expense
(benefit) (9,325) 6,410 1,440 2,975 20,961
-------- -------- -------- -------- --------
Net income (loss)
from continuing
operations (5,303) 6,749 7,832 12,872 35,065
Discontinued
operations, net
of tax 89,591 1,635 2,784 93,702 9,465
-------- -------- -------- -------- --------
Net income $ 84,288 $ 8,384 $ 10,616 $106,574 $ 44,530
======== ======== ======== ======== ========
BASIC AND DILUTED EARNINGS PER SHARE
Income (loss) from
continuing
operations $ (0.02) $ 0.02 $ 0.02 $ 0.04 $ 0.10
Discontinued
operations, net of
tax 0.27 - 0.01 0.27 0.03
-------- -------- -------- -------- --------
Net income $ 0.25 $ 0.02 $ 0.03 $ 0.31 $ 0.13
======== ======== ======== ======== ========
Weighted average
shares outstanding
- basic 340,474 339,765 337,327 339,513 336,127
Weighted average
shares outstanding
- diluted 341,876 341,505 339,226 341,044 338,111
Instinet Group Incorporated
Operating Data
(Unaudited)
Three Months Ended
-----------------------------
Sep 30, Jun 30, Mar 31,
2005 2005 2005
-------- --------- ---------
U.S. Market
-----------
Trade Days 64 64 61
Average daily NASDAQ-listed equity share
volume (millions) 1,615 1,746 1,981
Average daily U.S. exchange-listed
equity share volume (millions) 2,217 2,193 2,252
-------- --------- ---------
Average daily U.S. equity share volume
(millions) 3,832 3,939 4,233
Total U.S. equity share volume
(millions) 245,255 252,113 258,190
Instinet, The Institutional Broker
----------------------------------
A. U.S. Equities (1)
Our total average daily volume (million
shares) 99 93 111
Our share of total market 2.6% 2.4% 2.6%
Our average daily volume (million
shares) - Institutional and Crossing 58 61 77
Average amount charged to client per
share (cents per share) (2) -
Institutional and Crossing 1.34 1.38 1.34
Our average daily volume (million
shares) - Institutional Correspondents 41 32 34
Average amount charged to client per
share (cents per share) (2) -
Institutional Correspondents 0.04 0.05 0.05
B. Non-US Equities (3)
Our average daily consideration
(millions) $ 1,011 $ 907 $ 844
Average basis points charged to client
per consideration traded 4.5 4.5 5.0
INET, The electronic marketplace
--------------------------------
A. Our Matched Average Daily Volume (4)
Our NASDAQ-listed equity share volume
(million shares) 416 453 521
Our share of total market 25.8% 26.0% 26.3%
Our U.S. exchange-listed equity share
volume (million shares) 100 85 70
Our share of total market 4.5% 3.9% 3.1%
Our total U.S. equity share volume
(million shares) 516 538 591
Our share of total market 13.5% 13.6% 14.0%
B. Our Routed Average Daily Volume
(million shares) (5) 202 180 143
Headcount (6) 785 938 1,029
-------------
Three Months Ended
---------------------------------------
Dec 31, Sep 30, Jun 30, Mar 31,
2004 2004 2004 2004
-------- -------- -------- --------
U.S. Market
-----------
Trade Days 64 64 62 62
Average daily NASDAQ-listed
equity share volume (millions) 1,865 1,542 1,735 2,030
Average daily U.S. exchange-
listed equity share volume
(millions) 2,119 1,853 2,072 2,255
-------- -------- -------- --------
Average daily U.S. equity
share volume (millions) 3,984 3,395 3,807 4,285
Total U.S. equity share volume
(millions) 254,969 217,305 236,023 265,685
Instinet, The Institutional Broker
----------------------------------
A. U.S. Equities (1)
Our total average daily
volume (million shares) 106 92 101 111
Our share of total market 2.7% 2.7% 2.7% 2.6%
Our average daily volume
(million shares) -
Institutional and Crossing 77 67 77 89
Average amount charged to
client per share (cents per
share) (2) - Institutional
and Crossing 1.40 1.52 1.49 1.46
Our average daily volume
(million shares) -
Institutional Correspondents 29 25 24 22
Average amount charged to
client per share (cents per
share) (2) - Institutional
Correspondents 0.06 0.06 0.08 0.11
B. Non-US Equities (3)
Our average daily
consideration (millions) $ 742 $ 678 $ 901 $ 932
Average basis points charged
to client per consideration
traded 5.3 5.4 5.2 5.3
INET, The electronic marketplace
--------------------------------
A. Our Matched Average Daily
Volume (4)
Our NASDAQ-listed equity share
volume (million shares) 459 401 433 505
Our share of total market 24.6% 26.0% 25.0% 24.9%
Our U.S. exchange-listed
equity share volume (million
shares) 73 72 71 64
Our share of total market 3.4% 3.9% 3.4% 2.8%
Our total U.S. equity share
volume (million shares) 532 473 504 569
Our share of total market 13.4% 13.9% 13.2% 13.3%
B. Our Routed Average Daily
Volume (million shares) (5) 119 115 115 91
Headcount (6) 1,049 1,128 1,138 1,176
-------------
(1) Instinet average daily U.S. equity share volume is counted as the
sum of our customers' share volume per side related to a trade.
For example a matched trade where one customer buys 100 shares and
the other sells 100 shares is counted as 200 shares; if the buy or
sell order were routed out, we would count 100 shares on the
customer side.
Institutional and Crossing comprise certain U.S. buy-side clients,
hedge funds and other clients. Crossing includes order flow from
both buy-side and sell-side clients who execute through our after
hours cross. Institutional Correspondents represent our direct
market access U.S. buy-side clients.
All periods presented have been restated to exclude Lynch, Jones &
Ryan which is a discontinued operation.
(2) The amount charged per share is the average cents per share
charged net of soft dollar and commission recapture expenses.
(3) Commissions on international transactions are presented as basis
points (one hundred of one percent) of the total value
(consideration) of the transaction.
(4) In computing our U.S. share volume for INET in either
NASDAQ-listed or U.S. exchange-listed equities, we count the
customer share volume on one side of the matched trade. Matched
volume reflects transactions where the buyer and seller are
matched on INET.
For example, where a customer sells 100 shares to another customer
as a matched trade, we count 100 shares. INET share volume
includes transactions sent to it by Instinet, the Institutional
Broker and prior quarters have been recalculated to include this
volume.
In computing our total market share, our numerator share volume is
counted as described above for each market where we disclose a
market share statistic. The denominator for NASDAQ market share is
total NASDAQ share volume as published by NASDAQ. For U.S.
exchange-listed market share, the denominator is the total share
volume of U.S. listed markets obtained from a widely recognized
market data vendor. Listed markets include the New York Stock
Exchange, American Stock Exchange, Boston Stock Exchange,
Philadelphia Stock Exchange, National Stock Exchange, Chicago
Stock Exchange and Pacific Stock Exchange. Historical amounts may
be restated due to updates of volume information from these
sources.
(5) Routed volume reflects transactions where the trade was not
matched on INET.
(6) Instinet Group headcount is as of the end of the reporting period
and includes LJR for all periods presented.
Instinet Group Incorporated
Consolidated Statement of Operations - Three Months Ended
September 30, 2005
(In thousands)
(Unaudited)
Three Months Ended September 30, 2005
---------------------------------------------------
Instinet INET Eliminations Corporate Total
---------------------------------------------------
Revenue
Transaction fees $139,638 $114,865 $ (8,054) $ - $246,449
Interest income,
net 2,009 953 - 5,003 7,965
--------- --------- ---------- --------- --------
Total revenue,
net 141,647 115,818 (8,054) 5,003 254,414
--------- --------- ---------- --------- --------
Cost of revenues
Soft dollar 33,416 - - - 33,416
Broker-dealer
rebates - 63,811 - - 63,811
Brokerage,
clearing and
exchange fees 36,755 27,766 (8,054) - 56,467
--------- --------- ---------- --------- --------
Total cost of
revenues 70,171 91,577 (8,054) - 153,694
--------- --------- ---------- --------- --------
--------------------------------------------------
Gross margin 71,476 24,241 - 5,003 100,720
--------- --------- ---------- --------- --------
Direct Expenses
Compensation and
benefits 41,296 3,834 - 12,260 57,390
Communications and
equipment 12,251 1,109 - 295 13,655
Depreciation and
amortization 6,736 2,089 - 5,061 13,886
Occupancy 10,456 380 - 11,968 22,804
Professional fees 3,283 720 - 7,157 11,160
Marketing and
business
development 913 43 - 155 1,111
Other 4,654 177 - (721) 4,110
Technology service
company charges (1,242) 1,242 - - -
Corporate overhead
charges 20,917 10,255 - (31,172) -
--------- --------- ---------- --------- --------
Total direct
expenses 99,264 19,849 - 5,003 124,116
--------- --------- ---------- --------- --------
Investments - - - (8,768) (8,768)
--------------------------------------------------
Total expenses 169,435 111,426 (8,054) (3,765) 269,042
--------- --------- ---------- --------- --------
Income (loss)
from continuing
operations
before income
taxes $(27,788) $ 4,392 $ - $ 8,768 $(14,628)
========= ========= ========== ========= ========
See also table titled "Statements of Operations - Segments" on our
website at www.investor.instinetgroup.com under the heading
"Investor Relations" for historical data.
NOTE: All periods presented have been restated to include LJR as a
discontinued operation.
Instinet Group Incorporated
Consolidated Statement of Operations - Nine Months
Ended September 30, 2005
(In thousands)
(Unaudited)
Nine Months Ended September 30, 2005
---------------------------------------------------
Instinet INET Eliminations Corporate Total
---------------------------------------------------
Revenue
Transaction fees $436,487 $356,853 $ (22,340) $ - $771,000
Interest income,
net 6,929 1,873 - 10,715 19,517
--------- --------- ---------- --------- --------
Total revenue,
net 443,416 358,726 (22,340) 10,715 790,517
--------- --------- ---------- --------- --------
Cost of revenues
Soft dollar 110,129 - - - 110,129
Broker-dealer
rebates - 204,823 - - 204,823
Brokerage, clearing
and exchange fees 110,882 76,753 (22,340) - 165,295
--------- --------- ---------- --------- --------
Total cost of
revenues 221,011 281,576 (22,340) - 480,247
--------- --------- ---------- --------- --------
--------------------------------------------------
Gross margin 222,405 77,150 - 10,715 310,270
--------- --------- ---------- --------- --------
Direct Expenses
Compensation and
benefits 122,237 12,323 - 32,753 167,313
Communications and
equipment 35,976 3,938 - 1,101 41,015
Depreciation and
amortization 22,799 6,060 - 5,537 34,396
Occupancy 25,195 1,334 - 16,199 42,728
Professional fees 10,718 1,289 - 17,080 29,087
Marketing and
business
development 3,076 406 - 299 3,781
Other 10,359 1,302 - 815 12,476
Technology service
company charges (6,015) 6,015 - - -
Corporate overhead
charges 42,306 20,763 - (63,069) -
--------- --------- ---------- --------- --------
Total direct
expenses 266,651 53,430 - 10,715 330,796
--------- --------- ---------- --------- --------
Investments - - - (36,373) (36,373)
-------------------------------------------------
Total expenses 487,662 335,006 (22,340) (25,658) 774,670
--------- --------- ---------- --------- --------
Income (loss)
from continuing
operations
before income
taxes $(44,246) $ 23,720 $ - $ 36,373 $ 15,847
========= ========= ========== ========= ========
See also table titled "Statements of Operations - Segments" on our
website at www.investor.instinetgroup.com under the heading
"Investor Relations" for historical data.
NOTE: All periods presented have been restated to include LJR as a
discontinued operation.
Instinet Group Incorporated
Statements of Operations - Instinet, The Institutional Broker
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
-------------------------------------------------
Sep 30, Jun 30, Sep 30, Sep 30, Sep 30,
2005 2005 2004 2005 2004
-------- -------- -------- -------- --------
Revenue
Transaction fee $134,001 $135,310 $140,624 $416,564 $485,114
Clearing revenue 5,637 6,987 5,981 19,923 23,102
-------- -------- -------- -------- --------
Total transaction
fees 139,638 142,297 146,605 436,487 508,216
-------- -------- -------- -------- --------
Interest income, net 2,009 2,383 2,916 6,929 9,298
-------- -------- -------- -------- --------
Total revenues, net 141,647 144,680 149,521 443,416 517,514
-------- -------- -------- -------- --------
Cost of Revenues
Soft dollar 33,416 36,260 36,943 110,129 128,664
Brokerage, clearing
and exchange fees 36,755 37,898 30,140 110,882 111,101
-------- -------- -------- -------- --------
Total cost of
revenues 70,171 74,158 67,083 221,011 239,765
-------- -------- -------- -------- --------
Gross margin 71,476 70,522 82,438 222,405 277,749
-------- -------- -------- -------- --------
Direct Expenses
Compensation and
benefits 41,296 47,385 35,943 122,237 123,207
Communications and
equipment 12,251 12,217 16,839 35,976 48,524
Depreciation and
amortization 6,736 8,187 10,502 22,799 36,632
Occupancy 10,456 7,296 5,922 25,195 22,269
Professional fees 3,283 3,550 5,219 10,718 13,129
Marketing and
business development 913 1,194 2,507 3,076 7,670
Other 4,654 2,454 3,822 10,359 8,511
Technology service
company charges (1,242) (1,344) (5,573) (6,015) (20,383)
Corporate overhead
charges 20,917 10,709 7,122 42,306 25,654
-------- -------- -------- -------- --------
Total direct
expenses 99,264 91,648 82,303 266,651 265,213
-------- -------- -------- -------- --------
Total expenses 169,435 165,806 149,386 487,662 504,978
-------- -------- -------- -------- --------
Income (loss) from
continuing
operations before
income taxes $(27,788) $(21,126) $ 135 $(44,246) $ 12,536
======== ======== ======== ======== ========
NOTE: All periods presented have been restated to include LJR as a
discontinued operation.
Instinet Group Incorporated
Statements of Operations - INET, The electronic marketplace
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
----------------------------- -------------------
Sep 30, Jun 30, Sep 30, Sep 30, Sep 30,
2005 2005 2004 2005 2004
-------- -------- -------- -------- --------
Revenue
Transaction fees $114,865 $117,650 $104,057 $356,853 $334,915
Interest income, net 953 517 402 1,873 1,060
-------- -------- -------- -------- --------
Total revenues, net 115,818 118,167 104,459 358,726 335,975
-------- -------- -------- -------- --------
Cost of Revenues
Broker-dealer
rebates 63,811 67,992 59,859 204,823 190,394
Brokerage, clearing
and exchange fees 27,766 25,230 21,904 76,753 62,939
-------- -------- -------- -------- --------
Total cost of
revenues 91,577 93,222 81,763 281,576 253,333
-------- -------- -------- -------- --------
Gross margin 24,241 24,945 22,696 77,150 82,642
-------- -------- -------- -------- --------
Direct Expenses
Compensation and
benefits 3,834 4,116 3,590 12,323 10,470
Communications and
equipment 1,109 1,556 1,418 3,938 7,262
Depreciation and
amortization 2,089 1,977 2,518 6,060 7,512
Occupancy 380 518 503 1,334 1,456
Professional fees 720 443 383 1,289 1,263
Marketing and
business development 43 234 206 406 2,274
Other 177 (200) (715) 1,302 (1,340)
Technology service
company charges 1,242 1,344 5,573 6,015 20,383
Corporate overhead
charges 10,255 5,362 4,114 20,763 10,943
-------- -------- -------- -------- --------
Total direct
expenses 19,849 15,350 17,590 53,430 60,223
-------- -------- -------- -------- --------
Total expenses 111,426 108,572 99,353 335,006 313,556
-------- -------- -------- -------- --------
Income (loss) from
continuing
operations before
income taxes $ 4,392 $ 9,595 $ 5,106 $ 23,720 $ 22,419
======== ======== ======== ======== ========
Instinet Group Incorporated
Statements of Operations - Corporate
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
---------------------------- -------------------
Sep 30, Jun 30, Sep 30, Sep 30, Sep 30,
2005 2005 2004 2005 2004
-------- -------- -------- -------- --------
Interest income, net $ 5,003 $ 3,434 $ - $ 10,715 $ -
-------- -------- -------- -------- --------
Direct Expenses
Compensation and
benefits 12,260 9,546 3,934 32,753 19,643
Communications and
equipment 295 319 518 1,101 1,778
Depreciation and
amortization 5,061 218 343 5,537 995
Occupancy 11,968 1,955 2,926 16,199 4,472
Professional fees 7,157 6,822 1,808 17,080 6,176
Marketing and
business development 155 131 12 299 711
Other (721) 514 1,695 815 2,822
Corporate overhead
charges (31,172) (16,071) (11,236) (63,069) (36,597)
-------- -------- -------- -------- --------
Total direct
expenses 5,003 3,434 - 10,715 -
-------- -------- -------- -------- --------
Income (loss) from
operations before
investments and
income taxes $ - $ - $ - $ - $ -
======== ======== ======== ======== ========
Instinet Group Incorporated
Reconciliation of Pro Forma Operating Results for 3Q05
(In thousands, except per share amounts)
(Unaudited)
In evaluating our financial performance and results of operations,
management reviews certain financial measures that are not in
accordance with generally accepted accounting principles in the United
States ("non-GAAP"). Non-GAAP measurements do not have any
standardized meaning and are therefore unlikely to be comparable to
similar measures presented by other companies. Management uses
non-GAAP financial measures in evaluating our operating performance.
In light of the use by management of these non-GAAP measurements to
assess our operational performance, we believe it is useful to provide
information with respect to these non-GAAP measurements so as to share
this perspective of management. These non-GAAP financial measures
should be considered in context with our GAAP results. A
reconciliation of our non-GAAP measurements is provided below.
Management reviews adjusted operating income, in addition to GAAP
financial results. This non- GAAP financial measurement excludes
non-operating items, which by their nature, management does not
consider to be a true reflection of the operating results and
financial performance of our business. These non-operating charges are
investment gains and losses, charges related to our cost reduction
initiatives, fixed asset write-offs, contractual settlements, goodwill
and intangible asset impairment, insurance recoveries, advisory fees
and the related tax effects of those items. The following schedule
reconciles our pro forma net income to our GAAP financial results:
Three Months Ended Nine Months Ended
----------------------------- -------------------
Sep 30, Jun 30, Sep 30, Sep 30, Sep 30,
2005 2005 2004 2005 2004
--------- --------- -------- --------- --------
Total revenues, net,
as reported $254,414 $259,294 $249,014 $790,517 $838,743
Total expenses, as
reported 269,042 246,135 239,742 774,670 782,717
Severance in
compensation and
benefits (9,466) (15,886) - (24,615) (3,668)
Advisory fees in
professional fees (5,770) (5,093) - (12,049) -
Asset write-offs in
depreciation and
amortization (4,824) (804) - (5,628) (2,018)
Facilities write-
offs in occupancy (15,413) - - (15,413) -
Contractual
settlements - - - - 7,250
Investments 8,768 24,690 4,031 36,373 8,705
Insurance recovery - - - - 5,116
-------- -------- -------- -------- --------
Pro forma operating
expenses 242,337 249,042 243,773 753,338 798,102
-------- -------- -------- -------- --------
Pro forma income from
continuing operations
before income taxes 12,077 10,252 5,241 37,179 40,641
-------- -------- -------- -------- --------
Income tax provision,
as reported (9,325) 6,410 1,440 2,975 20,961
Tax effect of pro
forma adjustments 10,135 (1,758) (1,495) 6,061 (5,803)
-------- -------- -------- -------- --------
Pro forma provision
for income taxes 810 4,652 (55) 9,036 15,158
-------- -------- -------- -------- --------
Income (loss) from
continuing operations,
as reported (5,303) 6,749 7,832 12,872 35,065
Net effect of pro
forma adjustments 16,570 (1,149) (2,536) 15,271 (9,582)
-------- -------- -------- -------- --------
Pro forma income
from continuing
operations $ 11,267 $ 5,600 $ 5,296 $ 28,143 $ 25,483
======== ======== ======== ======== ========
Earnings per share
from continuing
operations - basic
and diluted, as
reported $ (0.02) $ 0.02 $ 0.02 $ 0.04 $ 0.10
Net effect of pro
forma adjustments 0.05 - - 0.04 (0.03)
-------- -------- -------- -------- --------
Pro forma earnings
per share from
continuing
operations - basic
and diluted $ 0.03 $ 0.02 $ 0.02 $ 0.08 $ 0.08
======== ======== ======== ======== ========
Weighted average
shares outstanding -
basic 340,474 339,765 337,327 339,513 336,127
Weighted average
shares outstanding -
diluted 341,876 341,505 339,226 341,044 338,111
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