-----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, SxULvXMTcU4RLm2CLx/nkmokQaTLRRqPvw0Yjd+h1anYaAcPY8yHK6kcbIOQ1G8X yJp18KQqrfw3qG8bTgdpnA== 0000950123-97-006693.txt : 19970813 0000950123-97-006693.hdr.sgml : 19970813 ACCESSION NUMBER: 0000950123-97-006693 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970627 FILED AS OF DATE: 19970812 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVESTMENT TECHNOLOGY GROUP INC CENTRAL INDEX KEY: 0000920424 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [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: 97656430 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 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 27, 1997 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) 380 Madison Avenue, New York, New York (212) 588-4000 - ----------------------------------------------------- ---------------------------------------------------- (Address of Principal Executive Offices) (Registrant's Telephone Number, Including Area Code) 10017 - ----------------------------------------------------- (Zip Code) 900 Third Avenue New York, New York 10022 - ----------------------------------------------------- (Former Address of Principal Executive Offices)
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 July 29, 1997, the Registrant had 18,135,868 shares of common stock, $.01 par value, outstanding. 2 QUARTERLY REPORT ON FORM 10-Q TABLE OF CONTENTS PART I FINANCIAL INFORMATION
Page ---------- Item 1. Financial Statements Consolidated Statement of Financial Condition: June 27, 1997 (unaudited) and December 31, 1996.................................... 3 Consolidated Statement of Operations (unaudited): Six Months Ended June 27, 1997 and June 28, 1996.................................. 4 Three Months Ended June 27, 1997 and June 28, 1996................................ 5 Consolidated Statement of Changes in Stockholders' Equity (unaudited): Six Months Ended June 27, 1997.................................................... 6 Consolidated Statement of Cash Flows (unaudited): Six Months Ended June 27, 1997 and June 28 ,1996.................................. 7 Condensed Notes to Consolidated Financial Statements (unaudited)...................... 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................. 9 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders................................... 13 Item 6. Exhibits and Reports on Form 8-K...................................................... 14 Signature ........................... .............................................................. 15
Investment Technology Group, Inc. and Subsidiaries Page 2 of 15 3 PART I. - FINANCIAL INFORMATION Item 1. Financial Statements CONSOLIDATED STATEMENT OF FINANCIAL CONDITION DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA
June 27, December 31, 1997 1996 ------------------------ ------------------------ ASSETS (unaudited) Cash and cash equivalents................................. $ 48,974 $ 43,955 Securities owned.......................................... 4,596 4,808 Investment in limited partnership (at market; cost $5,000) 5,475 5,193 Trade receivables......................................... 7,022 4,806 Trade receivable from affiliate........................... 3,761 2,812 Due from affiliates....................................... 1,391 1,459 Premises and equipment.................................... 16,904 8,442 Capitalized software...................................... 4,139 3,028 Other assets.............................................. 2,914 3,467 Goodwill.................................................. 2,197 2,471 Deferred tax asset........................................ 2,776 2,357 ------------------------ ------------------------ $ 100,149 $ 82,798 ======================== ======================== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued expenses..................... $ 13,697 $ 8,648 Software royalties payable................................ 2,636 2,274 Securities sold, not yet purchased........................ 79 1,226 Due to affiliates......................................... 4,434 1,922 Income taxes payable to affiliate......................... 352 1,635 ------------------------ ------------------------ 21,198 15,705 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: 18,703,971................ 187 187 Additional paid-in capital............................. 36,120 36,055 Retained earnings...................................... 49,153 34,614 Common stock held in treasury, at cost; shares:597,500 at June 27, 1997 and 445,200 at December 31, 1996.... (6,509) (3,763) ------------------------ ------------------------ Total stockholders' equity............................. 78,951 67,093 ------------------------ ------------------------ $ 100,149 $ 82,798 ======================== ======================== Book value per share...................................... $ 4.36 $ 3.68 ======================== ========================
See accompanying unaudited notes to consolidated financial statements. Investment Technology Group, Inc. and Subsidiaries Page 3 of 15 4 CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
Six Months Ended ------------------------------------------ June 27, June 28, 1997 1996 --------------------- --------------------- Revenues.................................................. $ 67,333 $ 52,980 Expenses: Compensation and employee benefits................... 13,880 12,021 Transaction processing............................... 10,585 7,475 Software royalties................................... 4,963 4,243 Occupancy and equipment.............................. 3,868 2,284 Consulting........................................... 946 1,546 Telecommunications and data processing services...... 3,113 2,176 Other general and administrative..................... 4,692 3,749 --------------------- --------------------- 42,047 33,494 --------------------- --------------------- Earnings before income tax expense................... 25,286 19,486 Income tax expense........................................ 10,747 8,523 --------------------- --------------------- Net earnings.............................................. $ 14,539 $ 10,963 ===================== ===================== Primary earnings per share................................ $ 0.78 $ 0.59 ===================== ===================== Fully diluted earnings per share.......................... $ 0.77 $ 0.59 ===================== ===================== Primary weighted average shares of common stock and common stock equivalents outstanding...................... 18,755 18,606 ===================== ===================== Fully diluted weighted average shares of common stock and common stock equivalents outstanding.................. 18,975 18,606 ===================== =====================
See accompanying unaudited notes to consolidated financial statements. Investment Technology Group, Inc. and Subsidiaries Page 4 of 15 5 CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
Three Months Ended -------------------------------------------- June 27, June 28, 1997 1996 ---------------------- ---------------------- Revenues..................................................$ 36,679 $ 26,313 Expenses: Compensation and employee benefits................... 7,007 6,006 Transaction processing............................... 5,682 3,776 Software royalties................................... 2,581 2,022 Occupancy and equipment.............................. 2,010 1,257 Consulting........................................... 574 692 Telecommunications and data processing services...... 2,156 925 Other general and administrative..................... 2,744 1,783 ---------------------- ---------------------- 22,754 16,461 ---------------------- ---------------------- Earnings before income tax expense................... 13,925 9,852 Income tax expense........................................ 5,917 4,285 ---------------------- ---------------------- Net earnings..............................................$ 8,008 $ 5,567 ====================== ====================== Primary earnings per share................................$ 0.43 $ 0.30 ==================== ===================== Fully diluted earnings per share..........................$ 0.42 $ 0.30 ==================== ====================== Primary weighted average shares of common stock and common stock equivalents outstanding...................... 18,688 18,574 ====================== ====================== Fully diluted weighted average shares of common stock and common stock equivalents outstanding.................. 18,901 18,574 ====================== ======================
See accompanying unaudited notes to consolidated financial statements. Investment Technology Group, Inc. and Subsidiaries Page 5 of 15 6 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) SIX MONTHS ENDED JUNE 27, 1997 DOLLARS IN THOUSANDS
Additional Preferred Common Paid-in Retained Stock Stock Capital Earnings ------------------------------------------------------------------------------ Balance at December 31, 1996............... $ - $ 187 $ 36,055 $ 34,614 Issuance of common stock - Note (1) 65 Purchase of common stock for treasury (152,300 shares)............. Net earnings............................... 14,539 ============================================================================== Balance at June 27, 1997................... $ - $ 187 $ 36,120 $ 49,153 ==============================================================================
Common Total Stock Stock- Held in holders' Treasury Equity -------------------------------------------------- Balance at December 31, 1996............... $ (3,763) $ 67,093 Issuance of common stock - Note (1) 65 Purchase of common stock for treasury (152,300 shares)............. (2,746) (2,746) Net earnings............................... 14,539 ================================================== Balance at June 27, 1997................... $ (6,509) $ 78,951 ==================================================
Note (1): 3,971 shares of common stock were issued during the second quarter of 1997, from options exercised under the 1994 Stock Option and Long-Term Incentive Plan. See accompanying unaudited notes to consolidated financial statements. Investment Technology Group, Inc. and Subsidiaries Page 6 of 15 7 CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) DOLLARS IN THOUSANDS
Six Months Ended ----------------------------------------- June 27, June 28, 1997 1996 ----------------------------------------- Cash flows from operating activities: Net earnings................................................................... $ 14,539 $ 10,963 Adjustments to reconcile net earnings to net cash provided by operating activities: Deferred income tax benefit ............................................... (419) (1,282) Depreciation and amortization.............................................. 2,848 1,618 Unrealized gain on investment in limited partnership....................... (283) (83) Undistributed loss of affiliates........................................... 316 - Provision for doubtful accounts receivable................................. 42 190 Decrease (increase) in operating assets: Securities owned...................................................... 212 2,478 Trade receivables..................................................... (2,258) (2,324) Trade receivable from affiliate....................................... (948) 5,224 Due from affiliates................................................... 68 4,073 Other assets.......................................................... 186 (303) Increase (decrease) in operating liabilities: Accounts payable and accrued expenses................................. 5,097 2,948 Software royalties payable............................................ 363 236 Securities sold, not yet purchased.................................... (1,147) 63 Due to affiliates..................................................... 2,512 (105) Income taxes payable to affiliate..................................... (1,283) 113 ------------------------------------------- Net cash provided by operating activities...................................... 19,845 23,809 ------------------------------------------- Cash flows from financing activities: Purchase of common stock for treasury.......................................... (2,746) (1,649) Issuance of common stock..................................................... 65 - ------------------------------------------- Net cash used by financing activities.......................................... (2,681) (1,649) Cash flows from investing activities: Purchase of premises and equipment............................................. (10,213) (2,611) Capitalization of software development costs................................... (1,932) (954) ------------------------------------------- Net cash used by investing activities.......................................... (12,145) (3,565) ------------------------------------------- Net increase in cash and cash equivalents...................................... 5,019 18,595 Cash and cash equivalents - beginning of period..................................... 43,955 17,960 ------------------------------------------- Cash and cash equivalents - end of period........................................... $ 48,974 $ 36,555 =========================================== Supplemental cash flow information: Interest paid.................................................................. $ 100 $ 54 =========================================== Income taxes paid to affiliate................................................. $ 12,434 $ 9,692 ===========================================
See accompanying unaudited notes to consolidated financial statements. Investment Technology Group, Inc. and Subsidiaries Page 7 of 15 8 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, ITG Global Trading, Inc. ("Global Trading") which is a 50% partner in the Global POSIT joint venture, ITG Australia PTY Limited which is a 50% partner in ITG Pacific Holdings. and ITG Ventures Inc. Jefferies Group, Inc. ("Jefferies Group") owned over 80% of the Company's common stock at June 27, 1997. 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 1996 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 1997. FORWARD-LOOKING STATEMENTS In addition to the historical information contained throughout this Quarterly Report on Form 10-Q, there are forward-looking statements that reflect management's expectations for the future. A variety of important factors could cause results to differ materially from such statements. These factors are noted throughout this Quarterly Report on Form 10-Q and include: the actions of both current and potential new competitors, rapid changes in technology, financial market volatility, evolving industry regulation, cash flows into or redemptions from equity funds, effects of inflation, customer trading patterns, and new products and services. ACCOUNTING DEVELOPMENTS In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact is expected to result in an increase in primary earnings per share for the six months ended June 27, 1997 and the six months ended June 28, 1996 of $0.02 and $0.01, respectfully. The impact is expected to result in an increase in primary earnings per share for the three months ended June 27, 1997 and June 28,1996 of $0.01. Fully diluted earnings per share for both the six and the three months ended June 27, 1997 would increase by $0.01 while there would be no impact on both the six and three month periods ended June 28, 1996. INCOME TAXES The Company is a member of the Jefferies 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 8 of 15 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FIRST HALF 1997 VERSUS FIRST HALF 1996 (Dollars in millions, except as noted)
Six Months Ended Change ---------------- ------ June 27, 1997 June 28, 1996 Amount Percentage ------------- ------------- ------ ---------- Revenues $ 67.3 $ 53.0 $ 14.3 27% Number of Trading Days 124 126 (2) (2%) Revenues per Trading Day (Dollars in thousands) $543 $421 $122 29%
Increased revenues were attributed to a growing use of POSIT, QuantEX and the Company's other electronic trading desk services. For the six months ended June 27, 1997 ("First Half 1997"), POSIT revenues were approximately 17% or $5.4 million above the six months ended June 28, 1996 ("First Half 1996"), while QuantEX revenues were approximately 26% or $3.2 million above the First Half 1996. For the First Half 1997, other electronic trading desk services were 73% or $5.5 million above First Half 1996.
Six Months Ended Change ---------------- ------ June 27, 1997 June 28, 1996 Amount Percentage ------------- ------------- ------ ---------- Compensation and employee benefits expense $ 13.9 $ 12.0 $ 1.9 16% Number of employees at period end 184 141 43 31% Revenues per employee (Dollars in thousands) $366 $376 ($10) (3%) Compensation and employee benefits expense per employee (Dollars in thousands) $ 76 $ 85 ($9) (11%)
The increase is due to an increase in the number of employees offset by a decrease in profitability based compensation. Capitalized software development costs increased approximately $978,000 over the First Half 1996 primarily due to additional projects and an increase in staff engaged in software development.
Six Months Ended Change ---------------- ------ June 27, 1997 June 28, 1996 Amount Percentage ------------- ------------- ------ ---------- Transaction processing expense $10.6 $7.5 $3.1 41% Transaction processing expense as a percentage of revenues 15.8% 14.2% 1.6 pts. 11%
The increase is primarily due to the expense associated with a higher volume of transactions and shares in First Half 1997. The increase as a percentage of revenues increased by 11% primarily because the QuantEX and electronic trading desk service revenues were a larger mix of the total revenues. The QuantEX product and electronic trading desk services have slightly lower margins than POSIT because there are no floor brokerage expenses associated with POSIT.
Six Months Ended Change ---------------- ------ June 27, 1997 June 28, 1996 Amount Percentage ------------- ------------- ------ ---------- Software royalties expense $5.0 $4.2 $0.8 19% Software royalties expense as a percentage of POSIT revenues 13.1% 13.0% 0.1 pt. 1%
The increase is due to higher revenue associated with POSIT.
Six Months Ended Change ---------------- ------ June 27, 1997 June 28, 1996 Amount Percentage ------------- ------------- ------ ---------- Occupancy and equipment expense $3.9 $2.3 $1.6 70%
The increase is due primarily to increased depreciation from the purchase of additional equipment associated with increased headcount. In addition, the Company relocated its corporate headquarters from 900 Third Avenue to 380 Madison Avenue in mid-June, which accelerated the write-off of unamortized leasehold improvements from the 900 Third Avenue location. Investment Technology Group, Inc. and Subsidiaries Page 9 of 15 10
Six Months Ended Change ---------------- ------ June 27, 1997 June 28, 1996 Amount Percentage ------------- ------------- ------ ---------- Consulting expense $0.9 $1.5 ($0.6) (40%)
Consulting is primarily for functions which the Company currently believes are advantageous to out-source. The decrease is due primarily to the Firm undertaking nonrecurring special projects in First Half 1996 related to contingency planning and systems' security.
Six Months Ended Change ---------------- ------ June 27, 1997 June 28, 1996 Amount Percentage ------------- ------------- ------ ---------- Telecommunications and data processing services expense $3.1 $2.2 $0.9 41%
The increase is primarily due to communications costs incurred in 1995 and 1996 relating to the POSIT Joint Venture, which were presented for payment in the second quarter of 1997. In addition, duplicate services were required for 900 Third Avenue and 380 Madison Avenue in connection with the move of the Company's headquarters.
Six Months Ended Change ---------------- ------ June 27, 1997 June 28, 1996 Amount Percentage ------------- ------------- ------ ---------- Other general and administrative expense $4.7 $3.7 $1.0 27%
Software amortization for the First Half 1997 increased over the First Half 1996. In addition, outside legal fees increased due to the fact that the Company did not have in-house counsel, and required outside legal services to evaluate and draft joint venture agreements the Company has been involved in. There was also an increase in charges for services provided by Jefferies & Company Inc. as a result of contract renegotiation.
Six Months Ended Change ---------------- ------ June 27, 1997 June 28, 1996 Amount Percentage ------------- ------------- ------ ---------- Income tax expense $10.7 $8.5 $2.2 26%
The increase is primarily due to the increase in pretax earnings partially offset by a decrease in the effective tax rate from 43.7% to 42.5% from research and development credits taken in 1997. There were no similar benefits in the First Half 1996 due to a temporary expiration of the credits in the First Half 1996. SECOND QUARTER 1997 VERSUS SECOND QUARTER 1996 (Dollars in millions, except as noted)
Three Months Ended Change ------------------ ------ June 27, 1997 June 28, 1996 Amount Percentage ------------- ------------- ------ ---------- Revenues $ 36.7 $ 26.3 $ 10.4 40% Number of Trading Days 64 63 1 2% Revenues per Trading Day (Dollars in thousands) $573 $417 $156 37%
Increased revenues were attributed to a growing use of POSIT, QuantEX and the Company's other electronic trading desk services. For the three months ended June 27, 1997 ("Second Quarter 1997"), POSIT revenues were approximately 28% or $4.3 million above the comparable three months ended June 28, 1996 ("Second Quarter 1996"), while QuantEX revenues were approximately 34% or $2.2 million above the Second Quarter 1996. For the Second Quarter 1997, other electronic trading desk services were 101% or $3.9 million above the Second Quarter 1996. Investment Technology Group, Inc. and Subsidiaries Page 10 of 15 11
Three Months Ended Change ------------------ ------ June 27, 1997 June 28, 1996 Amount Percentage ------------- ------------- ------ ---------- Compensation and employee benefits expense $ 7.0 $ 6.0 $ 1.0 17% Number of employees at period end 184 141 43 31% Revenues per employee (Dollars in thousands) $199 $187 $12 6% Compensation and employee benefits expense per employee (Dollars in thousands) $ 38 $ 43 ($5) (12%)
The increase is due to an increase in the number of employees offset by a decrease in profitability based compensation. Capitalized software development costs increased approximately $1 million over the comparable Second Quarter 1996 primarily due to additional projects and an increase in staff engaged in software development.
Three Months Ended Change ------------------ ------ June 27, 1997 June 28, 1996 Amount Percentage ------------- ------------- ------ ---------- Transaction processing expense $5.7 $3.8 $1.9 50% Transaction processing expense as a percentage of revenues 15.5% 14.4% 1.1 pts. 8%
The increase is primarily due to the expense associated with a higher volume of transactions and shares in Second Quarter 1997. The increase as a percentage of revenues increased by 8% primarily because the QuantEX and electronic trading desk service revenues were a larger mix of the total revenues. The QuantEX product and electronic trading desk services have slightly lower margins than POSIT because there are no floor brokerage expenses associated with POSIT. In addition, the international business has increased 400% over Second Quarter 1996, causing an increase in international clearing fees.
Three Months Ended Change ------------------ ------ June 27, 1997 June 28, 1996 Amount Percentage ------------- ------------- ------ ---------- Software royalties expense $2.6 $2.0 $0.6 30% Software royalties expense as a percentage of POSIT revenues 13.1% 13.1% - 0%
The increase is due to higher revenue associated with POSIT.
Three Months Ended Change ------------------ ------ June 27, 1997 June 28, 1996 Amount Percentage ------------- ------------- ------ ---------- Occupancy and equipment expense $2.0 $1.3 $0.7 54%
The increase is due primarily to increased depreciation from the purchase of additional equipment associated with increased headcount. In addition, in Second Quarter 1997, the Company recorded a $100,000 loss on lease termination related to the Company's previous corporate headquarters.
Three Months Ended Change ------------------ ------ June 27, 1997 June 28, 1996 Amount Percentage ------------- ------------- ------ ---------- Consulting expense $0.6 $0.7 ($0.1) (14%)
Consulting is primarily for functions which the Company currently believes are advantageous to out-source. The decrease is due primarily to the Firm undertaking nonrecurring special projects in Second Quarter 1996 related to contingency planning and systems' security. Investment Technology Group, Inc. and Subsidiaries Page 11 of 15 12
Three Months Ended Change ------------------ ------ June 27, 1997 June 28, 1996 Amount Percentage ------------- ------------- ------ ---------- Telecommunications and data processing services expense $2.2 $0.9 $1.3 144%
The increase is primarily due to communications costs incurred in 1995 and 1996 relating to the POSIT Joint Venture, which were presented for payment in Second Quarter 1997. In addition, duplicate services were required for 900 Third Avenue and 380 Madison Avenue in connection with the move of the Company's headquarters.
Three Months Ended Change ------------------ ------ June 27, 1997 June 28, 1996 Amount Percentage ------------- ------------- ------ ---------- Other general and administrative expense $2.7 $1.8 $0.9 50%
Software amortization for the Second Quarter 1997 increased over the Second Quarter 1996. In addition, outside legal fees increased due to the fact that the Company did not have in-house counsel, and required outside legal services to evaluate and draft joint venture agreements the Company has been involved in. There was also an increase in charges for services provided by Jefferies & Company Inc. as a result of contract renegotiation and an increase in firm travel and entertainment.
Three Months Ended Change ------------------ ------ June 27, 1997 June 28, 1996 Amount Percentage ------------- ------------- ------ ---------- Income tax expense $5.9 $4.3 $1.6 37%
The increase is primarily due to the increase in pretax earnings partially offset by a decrease in the effective tax rate from 43.5% to 42.5% from research and development credits taken in 1997. There were no similar benefits in the Second Quarter 1996 due to a temporary expiration of the credits in the First Half 1996. Investment Technology Group, Inc. and Subsidiaries Page 12 of 15 13 PART II. - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) Date of Meeting - May 6, 1997 Type of Meeting - Annual Meeting of Stockholders (b) At the meeting, the following directors were elected by the stockholders to hold office until the next annual meeting of stockholders or until their successors have been duly elected and qualified: Frank E. Baxter Richard G. Dooley William I. Jacobs Raymond L. Killian, Jr. Robert L. King Michael L. Klowden Scott P. Mason Dale A. Prouty Mark A. Wolfson (c) At the meeting, with respect to the election of the directors, the following votes were cast in the following manner:
Election of Directors NAME FOR WITHHELD - -------------------------------------------------------------------- Frank E. Baxter 16,682,249 16,481 Richard G. Dooley 16,682,249 16,481 William I. Jacobs 16,682,249 16,481 Raymond L. Killian, Jr. 16,682,249 16,481 Robert L. King 16,682,249 16,481 Michael L. Klowden 16,682,249 16,481 Scott P. Mason 16,682,249 16,481 Dale A. Prouty 16,682,249 16,481 Mark A. Wolfson 16,682,249 16,481
Approval of the 1994 Stock Option and Long-Term Incentive Plan, as amended and restated.
Number of Shares ---------------- For 16,744,774 Against 233,000 Abstain 20,956 Brokers non-votes 0
Investment Technology Group, Inc. and Subsidiaries Page 13 of 15 14 Approval of the Pay-for-Performance Incentive Plan.
Number of Shares ---------------- For 16,941,484 Against 2,500 Abstain 17,856 Broker non-votes 36,890
(d) Not applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 11 - Earning per share Exhibit 27 - Financial Data Schedule. (b) Reports on Form 8-K. There were no reports filed on Form 8-K during the quarter ended June 27, 1997. Investment Technology Group, Inc. and Subsidiaries Page 14 of 15 15 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: August 11, 1997 By: /s/ John R. MacDonald --------------------- ---------------------- John R. MacDonald Chief Financial Officer and Duly Authorized Signatory of Registrant Investment Technology Group, Inc. and Subsidiaries Page 15 of 15 16 EXHIBIT INDEX Exhibit 11 - Earning per share Exhibit 27 - Financial Data Schedule. EX-11 2 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11. COMPUTATION OF EARNINGS PER SHARE. (Amounts in thousands, except for per share amounts)
Three Months Ended Six Months Ended -------------------- ---------------------- June 27, June 28, June 27, June 28, 1997 1996 1997 1996 ------ ------- ------- ------- Net earnings ..................................... 8,008 $ 5,567 $14,539 $10,963 ====== ======= ======= ======= Shares of common stock and common stock equivalents: Average number of common shares .................. 18,105 18,260 18,179 18,306 Average common stock equivalents shares related to employee stock based plans ........... 583 314 576 299 ------ ------- ------- ------- Average shares used in primary computation ....... 18,688 18,574 18,755 18,606 Adjust average common stock equivalents to period-end market price, if higher than average price ................................... 213 -- 220 -- ------ ------- ------- ------- Average shares used in fully diluted computation . 18,901 18,574 18,975 18,606 ====== ======= ======= ======= Earnings per share: Primary .......................................... $ 0.43 $ 0.30 $ 0.78 $ 0.59 ====== ======= ======= ======= Fully diluted .................................... $ 0.42 $ 0.30 $ 0.77 $ 0.59 ====== ======= ======= =======
EX-27 3 FINANCIAL DATA SCHEDULE
BD THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENT OF FINANCIAL CONDITION AND THE CONSOLIDATED STATEMENT OF OPERATIONS AS OF JUNE 27, 1997 AND FOR THE SIX MONTHS THEN ENDED AND THE NOTES THERETO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS FILED IN THE 1997 INVESTMENT TECHNOLOGY GROUP, INC. SECOND QUARTER 10-Q FILING. 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-27-1997 48,974 12,174 0 0 10,071 16,904 100,149 0 16,333 0 0 79 0 0 0 187 78,763 100,149 0 1,307 66,026 0 0 100 13,380 25,286 25,286 0 0 14,539 .78 .77
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