-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IX2PLcY+rCvVjuL5Aht3ZolFZv4wz0iTG8xfW7nz5BUv5AZ1evjNqFCjhciRp3Zu eAirpETAuHjJu44fsR1o3w== 0000950123-96-002213.txt : 19960619 0000950123-96-002213.hdr.sgml : 19960619 ACCESSION NUMBER: 0000950123-96-002213 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960329 FILED AS OF DATE: 19960513 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVESTMENT TECHNOLOGY GROUP INC CENTRAL INDEX KEY: 0000920424 STANDARD INDUSTRIAL CLASSIFICATION: 6211 IRS NUMBER: 133757717 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23644 FILM NUMBER: 96561008 BUSINESS ADDRESS: STREET 1: 900 THIRD AVE STREET 2: 2ND FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2127556800 MAIL ADDRESS: STREET 1: 11100 SANTA MONICA BLVD STREET 2: 12TH FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90025 10-Q 1 FORM 10-Q FOR QUARTER ENDED MARCH 29, 1996 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 29, 1996 Commission file number: 0 - 23644
INVESTMENT TECHNOLOGY GROUP, INC. (Exact Name of Registrant as Specified in Its Charter) DELAWARE 13 - 3757717 - - ------------------------------------------------ ------------------------------------------------ (State or Other Jurisdiction of Incorporation or (I.R.S. Employer Identification No.) Organization) 900 Third Avenue, New York, New York (212) 755 - 6800 - - ------------------------------------------------ ------------------------------------------------ (Address of Principal Executive Offices) (Registrant's Telephone Number, Including Area Code) 10022 - - ------------------------------------------------ (Zip Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / As of April 29, 1996, the Registrant had 18,259,800 shares of common stock, $.01 par value, outstanding. 2 QUARTERLY REPORT ON FORM 10-Q TABLE OF CONTENTS PART IFINANCIAL INFORMATION
Page ------ Item 1. Financial Statements Consolidated Statement of Financial Condition: March 29, 1996 (unaudited) and December 31, 1995 . . . . . . . . . . . . . . . 3 Consolidated Statement of Operations (unaudited): Three Months Ended March 29, 1996 and March 31,1995 . . . . . . . . . . . . . 4 Consolidated Statement of Changes in Stockholders' Equity (unaudited): Three Months Ended March 29, 1996 . . . . . . . . . . . . . . . . . . . . . . 5 Consolidated Statement of Cash Flows (unaudited): Three Months Ended March 29, 1996 and March 31,1995 . . . . . . . . . . . . . 6 Condensed Notes to Consolidated Financial Statements (unaudited) . . . . . . . . . 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . 9
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES Page 2 of 10 3 PART I. - FINANCIAL INFORMATION Item 1. Financial Statements CONSOLIDATED STATEMENT OF FINANCIAL CONDITION DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
March 29, December 31, 1996 1995 --------------------- ---------------------- ASSETS (unaudited) Cash and cash equivalents . . . . . . . . . . . . . . $ 24,859 $ 17,960 Securities owned . . . . . . . . . . . . . . . . . . 8,417 8,509 Trade receivable from affiliate . . . . . . . . . . . 9,568 7,766 Due from affiliates . . . . . . . . . . . . . . . . . 904 5,001 Premises and equipment . . . . . . . . . . . . . . . 5,684 4,852 Capitalized software . . . . . . . . . . . . . . . . 2,947 2,757 Other assets . . . . . . . . . . . . . . . . . . . . 6,267 5,122 Goodwill . . . . . . . . . . . . . . . . . . . . . . 2,883 3,021 Deferred tax asset . . . . . . . . . . . . . . . . . 1,376 330 --------------------- ---------------------- $ 62,905 $ 55,318 ===================== ====================== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued expenses . . . . . . . . $ 7,080 $ 5,112 Software royalties payable . . . . . . . . . . . . . 2,305 1,794 Securities sold, not yet purchased . . . . . . . . . 1,452 - Due to affiliates . . . . . . . . . . . . . . . . . . 754 2,243 Income taxes payable to affiliate . . . . . . . . . . 1,787 690 --------------------- ---------------------- 13,378 9,839 Stockholders' equity: Preferred stock, par value $.01; shares authorized: 5,000,000; none issued . . . . . . . . . . . . . - - Common stock, par value $.01; shares authorized: 30,000,000; shares issued: 18,700,000 . . . . . 187 187 Additional paid-in capital . . . . . . . . . . . . 36,055 36,055 Retained earnings................... . . . . . . . 16,675 11,279 Common stock held in treasury, at cost; shares: 420,200 at March 29, 1996 and 310,200 at December 31, 1995 . . . . . . . . . . . . . . . . . . . . (3,390) (2,042) --------------------- ---------------------- Total stockholders' equity . . . . . . . . . . . . 49,527 45,479 --------------------- ---------------------- $ 62,905 $ 55,318 ===================== ====================== Book value per share . . . . . . . . . . . . . . . . $ 2.71 $ 2.47 ===================== ======================
See accompanying unaudited notes to consolidated financial statements. INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES Page 3 of 10 4 CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
Three Months Ended ----------------------------------- March 29, March 31, 1996 1995 ---------------- ---------------- Revenues . . . . . . . . . . . . . . . . . . . . . . . . $ 26,667 $ 16,343 ---------------- ---------------- Expenses: Compensation and employee benefits . . . . . . . . . 5,869 3,542 Transaction processing . . . . . . . . . . . . . . . 3,699 2,206 Software royalties . . . . . . . . . . . . . . . . 2,221 1,381 Occupancy and equipment . . . . . . . . . . . . . . 1,027 818 Consulting . . . . . . . . . . . . . . . . . . . . . 854 563 Telecommunications and data processing services . . 1,251 486 Other general and administrative . . . . . . . . . . 2,112 1,566 ---------------- ---------------- 17,033 10,562 ---------------- ---------------- Earnings before income tax expense . . . . . . . . . 9,634 5,781 Income tax expense . . . . . . . . . . . . . . . . . . . 4,238 2,606 ---------------- ---------------- Net earnings . . . . . . . . . . . . . . . . . . . . . . $ 5,396 $ 3,175 ================ ================ Net earnings per share of common stock . . . . . . . . . $ 0.29 $ 0.17 ================ ================ Weighted average shares of common stock and common stock equivalents outstanding. . . . . . . . . . . . . . 18,425 18,531 ================ ================
See accompanying unaudited notes to consolidated financial statements. INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES Page 4 of 10 5 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) THREE MONTHS ENDED MARCH 29, 1996 DOLLARS IN THOUSANDS
ADDITIONAL PREFERRED COMMON PAID-IN RETAINED STOCK STOCK CAPITAL EARNINGS ---------------------------------------------------------------------------------- Balance at December 31, 1995 . . . . . $ - $ 187 $ 36,055 $ 11,279 Purchase of common stock for treasury (110,000 shares) . . . . Net earnings . . . . . . . . . . . . . 5,396 ---------------------------------------------------------------------------------- Balance at March 29, 1996 . . . . . . . $ - $ 187 $ 36,055 $ 16,675 ================================================================================== COMMON TOTAL STOCK STOCK- HELD IN HOLDERS' TREASURY EQUITY ---------------------------------------------- Balance at December 31, 1995 . . . . . $ (2,042) $ 45,479 Purchase of common stock for treasury (110,000 shares) . . . . (1,348) (1,348) Net earnings . . . . . . . . . . . . . 5,396 ---------------------------------------------- Balance at March 29, 1996 . . . . . . . $ (3,390) $ 49,527 ==============================================
See accompanying unaudited notes to consolidated financial statements. INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES Page 5 of 10 6 CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) DOLLARS IN THOUSANDS
Three Months Ended ----------------------------------------- March 29, March 31, 1996 1995 ----------------------------------------- Cash flows from operating activities: Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,396 $ 3,175 Adjustments to reconcile net earnings to net cash provided by operating activities: Deferred income tax (benefit) expense . . . . . . . . . . . . . . . . (1,046) 1,947 Depreciation and amortization . . . . . . . . . . . . . . . . . . . . 772 489 Decrease (increase) in operating assets: Securities owned . . . . . . . . . . . . . . . . . . . . . . . . . 92 - Trade receivable from affiliate . . . . . . . . . . . . . . . . . (1,802) (1,290) Due from affiliates . . . . . . . . . . . . . . . . . . . . . . . 4,096 - Income taxes receivable from affiliate . . . . . . . . . . . . . - 746 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,267) (124) Increase (decrease) in operating liabilities: Accounts payable and accrued expenses . . . . . . . . . . . . . . 2,083 417 Software royalties payable . . . . . . . . . . . . . . . . . . . . 512 322 Securities sold, not yet purchased . . . . . . . . . . . . . . . . 1,452 - Due to affiliates . . . . . . . . . . . . . . . . . . . . . . . . (1,489) 442 Income taxes payable to affiliate . . . . . . . . . . . . . . . . 1,097 700 ----------------------------------------- Net cash provided by operating activities . . . . . . . . . . . . . . . . 9,896 6,824 ----------------------------------------- Cash flows from financing activities: Purchase of common stock for treasury . . . . . . . . . . . . . . . . . . (1,348) (280) ----------------------------------------- Net cash used by financing activities . . . . . . . . . . . . . . . . . . (1,348) (280) ----------------------------------------- Cash flows from investing activities: Investment in VERSUS Technologies, Inc. . . . . . . . . . . . . . . . . . 8 250 Purchase of premises and equipment . . . . . . . . . . . . . . . . . . . (1,180) (698) Capitalization of software development costs . . . . . . . . . . . . . . (477) (589) ----------------------------------------- Net cash used by investing activities . . . . . . . . . . . . . . . . . . (1,649) (1,037) ----------------------------------------- Net increase in cash and cash equivalents . . . . . . . . . . . . . . . . 6,899 5,507 Cash and cash equivalents - beginning of period . . . . . . . . . . . . . . . . 17,960 21,446 ----------------------------------------- Cash and cash equivalents - end of period . . . . . . . . . . . . . . . . . . . $ 24,859 $ 26,953 ========================================= Supplemental cash flow information: Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12 $ 8 ========================================= Income taxes paid to (received from) affiliate . . . . . . . . . . . . . $ 4,187 $ (787) =========================================
See accompanying unaudited notes to consolidated financial statements. INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES Page 6 of 10 7 CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) BASIS OF PRESENTATION The consolidated financial statements include the accounts of Investment Technology Group, Inc. and its wholly-owned subsidiaries (collectively, the "Company"), principally ITG Inc. ("ITG"), a Delaware corporation, registered as a broker-dealer in securities under the Securities Exchange Act of 1934, and ITG Global Trading, Inc. ("Global Trading") which is a 50% partner in the Global POSIT joint venture. Jefferies Group, Inc. ("Jefferies Group") owned over 80% of the Company's common stock at March 29, 1996. All material intercompany balances and transactions are eliminated in consolidation. The consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for the fair statement of the results for the interim periods and should be read in conjunction with the Company's 1995 annual report on Form 10-K. Certain reclassifications have been made to the financial statements for the prior period to conform to the presentation for 1996. INCOME TAXES The Company is a member of the Jefferies affiliated group ("Group") for purposes of filing a Federal income tax return (i.e., Jefferies Group owns more than 80% of the Company). The Company's tax liability is determined on a "separate return" basis. That is, the Company is required to pay to Jefferies Group its proportionate share of the consolidated tax liability plus any excess of its "separate" tax liability (assuming a separate tax return were to be filed by the Company) over its proportionate amount of the consolidated Group tax liability. Alternatively, Jefferies Group is required to pay the Company an "additional amount" for the amount by which the consolidated tax liability of the Group is decreased by reason of inclusion of the Company in the Group. INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES Page 7 of 10 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations FIRST QUARTER 1996 VERSUS FIRST QUARTER 1995 (Dollars in millions, except as noted)
Three Months Ended Change ------------------ ------ March 29, 1996 March 31, 1995 Amount Percentage -------------- -------------- ------ ---------- Revenues $26.7 $16.3 $10.4 64% Number of Trading Days 63 63 0 0% Revenues per Trading Day (Dollars in thousands) $423 $259 $164 63%
Increased revenues were attributed to a growing use of POSIT, QuantEX and the Company's other electronic trading desk services. For the quarter ended March 29, 1996, POSIT revenues were approximately 55% or $6.0 million above the comparable period for 1995, while QuantEX revenues were approximately 70% or $2.3 million above the comparable period for 1995. For the quarter ended March 29, 1996, other electronic trading desk services were $2.5 million above the comparable period for 1995.
Three Months Ended Change ------------------ ------ March 29, 1996 March 31, 1995 Amount Percentage -------------- -------------- ------ ---------- Compensation and employee benefits expense $ 5.9 $ 3.5 $ 2.3 66% Number of employees at period end 127 95 32 34% Revenues per employee (Dollars in thousands) $210 $172 $38 22% Compensation and employee benefits expense per employee (Dollars in thousands) $ 46 $ 37 $ 9 24%
The increase is due primarily to an increase in the number of employees and an increase in profitability based compensation.
Three Months Ended Change ------------------ ------ March 29, 1996 March 31, 1995 Amount Percentage -------------- -------------- ------ ---------- Transaction processing expense $3.7 $2.2 $1.5 68% Transaction processing expense per revenues 13.9% 13.5% 0.4% 3.0%
The increase is primarily due to the expense associated with a higher volume of transactions in 1996. The increase as a percentage of revenues increased by 3% primarily because the QuantEX revenues were a larger mix of the total revenues. The QuantEX product has slightly lower margins than POSIT because there are no floor brokerage expenses associated with POSIT.
Three Months Ended Change ------------------ ------ March 29, 1996 March 31, 1995 Amount Percentage -------------- -------------- ------ ---------- Software royalties expense $2.2 $1.4 $0.8 61%
The increase is due to higher revenue associated with POSIT.
Three Months Ended Change ------------------ ------ March 29, 1996 March 31, 1995 Amount Percentage -------------- -------------- ------ ---------- Occupancy and equipment expense $1.0 $0.8 $0.2 26%
The increase is due primarily to depreciation of capital expenditures acquired since the beginning of 1995 and increased rent expense, both of which are primarily related to the opening of the Boston office.
Three Months Ended Change ------------------ ------ March 29, 1996 March 31, 1995 Amount Percentage -------------- -------------- ------ ---------- Consulting expense $0.9 $0.6 $0.3 52%
Consulting is primarily for equity research functions which the Company currently believes are advantageous to out-source. The increase is due primarily to the Firm undertaking special projects related to contingency planning and systems' security. INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES Page 8 of 10 9
Three Months Ended Change ------------------ ------ March 29, 1996 March 31, 1995 Amount Percentage -------------- -------------- ------ ---------- Telecomunications and data processing services expense $1.3 $0.5 $0.8 157%
The increase is due primarily to an increase in quotation services charges and communications charges associated with the increased number of QuantEX installations as well as the increased amount of QuantEX business.
Three Months Ended Change ------------------ ------ March 29, 1996 March 31, 1995 Amount Percentage -------------- -------------- ------ ---------- Other general and administrative expense $2.1 $1.6 $0.5 35%
The increase is largely due to an increase in amortization of capitalized software and an allowance for general legal expenses.
Three Months Ended Change ------------------ ------ March 29, 1996 March 31, 1995 Amount Percentage -------------- -------------- ------ ---------- Income tax expense $4.2 $2.6 $1.6 63%
The increase is primarily due to the increase in pretax earnings partially offset by a decrease in the effective tax rate from 45% to 44%. PART II. - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits There are no exhibits for the quarter ended March 29, 1996. (b) Reports on Form 8-K. There were no reports filed on Form 8-K during the quarter ended March 29, 1996. INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES Page 9 of 10 10 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INVESTMENT TECHNOLOGY GROUP, INC. --------------------------------- (Registrant) Date: May 13, 1996 By: /s/ John R. MacDonald ------------------ ---------------------- John R. MacDonald Chief Financial Officer, and Duly Authorized Signatory of Registrant INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES Page 10 of 10 11 EXHIBIT INDEX ------------- EXHIBIT 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-29-1996 24,859 8,417 10,472 0 0 0 5,684 0 62,905 13,378 0 0 0 187 49,340 62,905 26,667 26,667 0 0 17,033 0 0 9,634 4,238 5,396 0 0 0 5,396 0.29 0
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