Segment Reporting

12 Months Ended

Dec. 31, 2013

Segment Reporting

Segment Reporting

(22) Segment Reporting

        The Company is organized into four geographic operating segments through which the Company's chief operating decision maker manages the Company's business. The U.S., Canadian, European and Asia Pacific Operations segments provide the following types of products and services:

• •

  Electronic Brokerage—includes self-directed trading using algorithms, smart routing and matching through POSIT in cash equities (including single stocks and portfolio lists), futures and options

  •

  Research, Sales and Trading—includes (a) differentiated, unbiased, data-driven equity research through the use of innovative data mining and analysis, as well as detailed analysis of energy asset plays, and (b) portfolio trading and high-touch trading desks providing execution expertise and trading ideas based on investment research

  •

  Platforms—includes trade order and execution management software applications in addition to network connectivity

  •

  Analytics—includes tools enabling portfolio managers and traders to improve pre-trade and real-time execution performance, portfolio construction and optimization decisions and securities valuation.

        The accounting policies of the reportable segments are the same as those described in Note 2, Summary of Significant Accounting Policies. The Company allocates resources to, and evaluates the performance of, its reportable segments based on income or loss before income tax expense. Consistent with the Company's resource allocation and operating performance evaluation approach, the effects of inter-segment activities are eliminated except in limited circumstances where certain technology related costs are allocated to a segment to support that segment's revenue producing activities. Commissions and fees revenue for trade executions and commission share revenues are principally attributed to each segment based upon the location of execution of the related transaction. Recurring revenues are principally attributed based upon the location of the client using the respective service.

        A summary of the segment financial information is as follows (dollars in thousands):

	U.S. Operations			Canadian Operations		European Operations			Asia Pacific Operations			Consolidated
2013
Total revenues	$	318,036		$	74,994	$	91,792		$	45,979		$	530,801
Income (loss) before income tax expense (1) (2) (3)		15,687			11,441		18,106			(2,179	)		43,055
Identifiable assets		1,183,986			88,503		508,625			428,773			2,209,887
Capital purchases		28,367			1,188		3,323			671			33,549
Depreciation and amortization		43,017			3,437		6,012			1,140			53,606
Share-based compensation		10,932			6,852		2,223			854			20,861
2012
Total revenues	$	321,379		$	76,913	$	67,266		$	38,878		$	504,436
(Loss) income before income tax expense (1) (2) (4)		(248,101	)		10,397		(24,350	)		(8,401	)		(270,455	)
Identifiable assets		1,238,822			99,625		518,335			339,977			2,196,759
Capital purchases		29,159			2,575		923			767			33,424
Depreciation and amortization		44,585			3,711		6,918			1,279			56,493
Share-based compensation		10,449			2,543		2,091			545			15,628
2011
Total revenues	$	375,521		$	85,550	$	70,670		$	40,296		$	572,037
(Loss) income before income tax expense (1) (5) (6)		(222,337	)		20,035		2,263			(6,589	)		(206,628	)
Identifiable assets		1,351,062			83,453		336,454			407,100			2,178,069
Capital purchases		18,684			1,525		1,448			1,200			22,857
Depreciation and amortization		47,004			2,882		7,636			1,535			59,057
Share-based compensation		16,436			1,076		1,509			1,135			20,156

(1)

In 2013, the Company incurred $1.6 million to implement a restructuring plan to close its technology research and development facility in Israel and migrate that function to an outsourced service provider model effective January 1, 2014. This plan primarily focused on reducing costs by limiting ITG's geographic footprint while maintaining the necessary technological expertise via a consulting arrangement. The Company also reduced previously-recorded 2012 and 2011 restructuring accruals of $1.6 million to reflect the sub-lease of previously-vacated office space and certain legal and other employee-related charges deemed unnecessary. During 2012, ITG implemented a restructuring plan to reduce operating costs by reducing workforce, market data and other general and administrative costs across ITG's businesses. The $9.5 million charge consisted entirely of employee separation costs. In 2011, the Company implemented a restructuring plan to improve margins and enhance shareholder returns primarily focused on reducing costs in workforce, consulting and infrastructure in the U.S. and Europe. The cost reduction plan resulted in a restructuring charge totaling $24.4 million for employee separation and lease consolidation costs.

(2)

During 2012, ITG began to build out and ready its new lower Manhattan headquarters while continuing to occupy its then-existing headquarters in midtown Manhattan and as a result incurred duplicate rent charges of $2.6 million in 2013 and $1.4 million in 2012.

(3)

In the second quarter of 2013, ITG moved into its new headquarters and incurred a non-operating charge of $3.9 million, which included a reserve for the remaining lease obligation for the previous midtown Manhattan headquarters.

(4)

Loss before tax expense in 2012 includes the impact of a $274.3 million goodwill impairment charge. The segment breakdown of this charge is as follows: U.S. Operations—$245.1 million, European Operations—$28.5 million and Asia Pacific Operations—$0.7 million.

(5)

In 2011, goodwill with a carrying value of $470.1 million in the U.S. operating segment was deemed impaired and its fair value was determined to be $245.1 million, resulting in an impairment charge of $225.0 million. Also during 2011, the Company determined that the carrying value of its investment in Disclosure Insight, Inc. was fully impaired, resulting in a write-off of $4.3 million.

(6)

During 2011, the Company acquired Ross Smith Energy Group Ltd., a Calgary-based independent provider of research on the oil and gas industry. In connection with the acquisition, the Company incurred acquisition-related costs of $2.5 million, including legal fees, contract settlement costs and other professional fees.

        The table below details the total revenues for the products and services provided by our geographic segments (dollars in thousands):

	Year Ended December 31,
	2013		2012
Revenues:
Electronic Brokerage	$	279,830	$	250,882
Research, Sales and Trading		107,383		106,427
Platforms		96,127		99,334
Analytics		46,004		46,508
Corporate (non-product)		1,457		1,285
Total Revenues	$	530,801	$	504,436

        Prior to 2012, the Company considered all of its products and services as part of one integrated offering from each of its geographic segments. As a result, revenues by types of products and services for 2011 are not available.

        Long-lived assets, classified by the geographic region in which the Company operates, are as follows (dollars in thousands):

	2013		2012		2011
Long-lived Assets at December 31,
United States	$	116,812	$	115,726	$	360,309
Canada		5,676		7,174		6,873
Europe		11,413		10,260		40,052
Asia Pacific		2,046		2,305		3,162
Total	$	135,947	$	135,465	$	410,396

        The Company's long-lived assets primarily consist of premises and equipment, capitalized software, goodwill, other intangibles and debt issuance costs.