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Investment Technology Group Reports Fourth Quarter 2009 Results

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NEW YORK, Feb 03, 2010 /PRNewswire via COMTEX/ -- Investment Technology Group, Inc. (NYSE: ITG), a leading agency broker and financial technology firm, today announced that for the quarter ended December 31, 2009, it incurred a net loss of $7.8 million, or $0.18 per diluted share, compared to net income of $28.7 million, or $0.66 per diluted share for the quarter ended December 31, 2008. Excluding restructuring charges, fourth quarter pro forma operating net income was $8.6 million, or $0.19 per diluted share, compared to pro forma operating net income of $29.6 million, or $0.68 per diluted share, in the fourth quarter of 2008. ITG's revenues for the fourth quarter of 2009 were $151.0 million compared to $190.1 million for the fourth quarter of 2008.

Included in the fourth quarter of 2009 operating results were after-tax expenses of $3.5 million, or $0.08 per diluted share, in employee separation costs unrelated to the restructuring plan. This compares to after-tax expenses of $3.1 million, or $0.07 per diluted share, in the fourth quarter of 2008 related to employee separation costs and write downs of capitalized costs pertaining to discontinued non-core products.

"The fall in volatility, combined with continued weakness in the equity asset management business, resulted in lower institutional trading volumes. However, our fourth quarter restructuring has improved our cost structure and sharpened our business focus, positioning us to benefit as trading conditions and market volumes improve," said Bob Gasser, ITG's Chief Executive Officer and President.

ITG's non-US revenues increased to $47.6 million in the fourth quarter of 2009, compared to $46.0 million in the fourth quarter of 2008. The net loss from non-US operations was $6.2 million during the fourth quarter of 2009, which included $3.3 million of after-tax restructuring charges, compared to non-US net income of $0.7 million in the fourth quarter of 2008.

"Our European business continues to gain market share and drive down transaction processing costs, and in Canada the core business remains strong," said Mr. Gasser. "In the Asia Pacific region, the continued downturn in overall market activity impacted our margins, but we believe our investments in the region will benefit us when market conditions improve."

For the full year, ITG's revenues were $633.1 million compared to $763.0 million in the prior year. Net income was $42.8 million, or $0.97 per diluted share in 2009 compared to net income of $114.6 million, or $2.61 per diluted share in 2008. Pro forma operating net income for the year was $59.2 million, or $1.34 per diluted share, compared to pro forma operating net income of $115.5 million, or $2.63 per diluted share in 2008. ITG's non-US revenues were $175.7 million for the full year compared to $191.7 million for 2008. The full year non-US net loss was $5.9 million, which included $3.3 million of restructuring charges, compared to non-US net income of $4.6 million for 2008.

The discussion above includes pro forma operating net income and related per share amounts which are non-GAAP financial measures that are described in the attached tables along with a reconciliation of these non-GAAP financial measures.

Conference Call

ITG has scheduled a conference call today at 11:00 a.m. ET to discuss fourth quarter results. Those wishing to listen to the call should dial 800-299-7928 and enter the pass code 89562833 at least 10 minutes prior to the start of the call to ensure connection. The conference call and webcast will also be accessible through ITG's website at www.itg.com. For those unable to listen to the live broadcast of the call, a replay will be available for one week by dialing 888-286-8010 and entering the pass code 75045575. The replay will be available starting approximately two hours after the completion of the conference call.

About ITG

Investment Technology Group, Inc., is an independent agency broker and financial technology firm that partners with asset managers globally to improve performance throughout the investment process. A leader in electronic trading since launching the POSIT(R) crossing network in 1987, ITG takes a consultative approach in delivering the highest quality institutional liquidity and market-leading execution services, measurement tools, and proprietary data. Asset managers rely on ITG's independence, experience, and intellectual capital to help mitigate risk, improve performance, and navigate increasingly complex markets. The firm is headquartered in New York with offices in North America, Europe, and the Asia Pacific region. For more information on ITG, please visit http://www.itg.com/.

In addition to historical information, this press release may contain "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 ITG's 2008 Annual Report, on its Form 10-K, and on its Form 10-Qs and include, but are not limited to, the actions of both current and potential new competitors, fluctuations in market trading volumes, financial market volatility, changes in commission pricing, evolving industry regulations, errors or malfunctions in our systems or technology, rapid changes in technology, cash flows into or redemptions from equity funds, effects of inflation, customer trading patterns, the success of our products and service offerings, our ability to continue to innovate and meet the demands of our customers for new or enhanced products, our ability to successfully integrate companies we have acquired, changes in tax policy or accounting rules, fluctuations in foreign exchange rates, adverse changes or volatility in interest rates, as well as general economic, business, credit and financial market conditions, internationally or nationally. The forward-looking statements included herein represent ITG's views as of the date of this release. ITG undertakes no obligation to revise or update publicly any forward-looking statement for any reason unless required by law.

    ITG Contact:

    J.T. Farley
    (212) 444-6259



                       INVESTMENT TECHNOLOGY GROUP, INC.
                       Consolidated Statements of Income
                    (In thousands, except per share amounts)

                                    Three Months Ended         Year Ended
                                       December 31,           December 31,
                                       ------------           ------------
                                     2009        2008       2009       2008
                                 (unaudited) (unaudited) (unaudited) (audited)
                                 ----------- ----------- ----------- ---------
    Revenues:
      Commissions and fees (1)      $124,885   $163,362   $531,998   $654,889
      Recurring                       22,193     22,103     87,483     87,991
      Other                            3,921      4,605     13,588     20,103
                                       -----     -----      ------     ------
        Total revenues               150,999    190,070    633,069    762,983
                                     -------    -------    -------    -------

    Expenses:
      Compensation and employee
       benefits                       59,685     62,473    235,518     256,511
      Transaction processing          23,568     21,975     95,618      95,078
      Occupancy and equipment         15,254     15,075     59,950      57,816
      Telecommunications and data
       processing services            13,497     14,029     54,549      53,243
      Other general and
       administrative                 22,323     28,019     83,028      97,556
      Restructuring charges           25,444          -     25,444           -
      Interest expense                   291      1,660      2,511       7,253
                                         ---      -----      -----       -----
        Total expenses               160,062    143,231    556,618     567,457
                                     -------    -------    -------     -------
    (Loss) income before income
     tax (benefit) expense            (9,063)    46,839     76,451     195,526

    Income tax (benefit) expense      (1,270)    18,096     33,617      80,884
                                      ------     ------     ------      ------
    Net (loss) income                $(7,793)   $28,743    $42,834    $114,642
                                     =======    =======    =======    ========

    (Loss) earnings per share:
    Basic                             $(0.18)     $0.67      $0.98       $2.64
    Diluted                           $(0.18)     $0.66      $0.97       $2.61

    Basic weighted average
     number of common shares
     outstanding                      43,716     43,221     43,538      43,503
    Diluted weighted average
     number of common shares
     outstanding                      43,716     43,498     44,018      43,987

    (1) ITG has changed the revenues caption commissions revenues to
        commissions and fee revenues to better reflect the commission
        equivalent fees earned on spread-based trades.



                       INVESTMENT TECHNOLOGY GROUP, INC.
                 Consolidated Statements of Financial Condition
                     (In thousands, except share amounts)

                                           December 31,      December 31,
                                              2009               2008
                                              ----               ----
                                           (unaudited)        (audited)
                                           -----------        ---------

    Assets
    Cash and cash equivalents               $330,879           $352,960
    Cash restricted or segregated
     under regulations and other              95,787             73,218
    Deposits with clearing organizations      14,891             43,241
    Securities owned, at fair value            6,768              6,399
    Receivables from brokers,
     dealers and clearing organizations      364,436            328,528
    Receivables from customers               298,342            300,158
    Premises and equipment, net               41,437             48,321
    Capitalized software, net                 68,913             62,821
    Goodwill                                 425,301            423,896
    Other intangibles, net                    27,263             31,094
    Income taxes receivable                   13,897                  -
    Deferred taxes                             2,910              2,591
    Other assets                              12,279             12,226
                                              ------             ------
    Total assets                          $1,703,103         $1,685,453
                                          ----------         ----------

    Liabilities and Stockholders' Equity
    Liabilities:
    Accounts payable and accrued expenses   $209,496           $221,582
    Short-term bank loans                          -             24,900
    Payables to brokers, dealers and
     clearing organizations                  248,664            232,527
    Payables to customers                    299,200            287,515
    Securities sold, not yet purchased,
     at fair value                                31              2,479
    Income taxes payable                      14,113             25,646
    Deferred taxes                            16,999              8,924
    Long term debt                            46,900             94,500
                                              ------             ------
      Total liabilities                      835,403            898,073
                                             -------            -------

    Commitments and contingencies

    Stockholders' Equity:
    Preferred stock, $0.01 par
     value; 1,000,000 shares
     authorized; no shares issued
     or outstanding                                -                  -
    Common stock, $0.01 par
     value; 100,000,000 shares
     authorized; 51,682,153 and
     51,582,306 shares issued at
     Dec. 31, 2009 and Dec. 31,
     2008, respectively, and
     43,790,436 and 43,244,184
     shares outstanding at Dec.
     31, 2009 and Dec. 31, 2008,
     respectively                                517                516
    Additional paid-in capital               233,374            219,830
    Retained earnings                        809,153            766,319
    Common stock held in
     treasury, at cost; 7,891,717
     and 8,338,122 shares at Dec.
     31, 2009 and Dec. 31, 2008,
     respectively                           (182,743)          (193,206)
    Accumulated other
     comprehensive income (loss)
     (net of tax)                              7,399             (6,079)
                                               -----             ------
      Total stockholders' equity             867,700            787,380
                                             -------            -------
    Total liabilities and
     stockholders' equity                 $1,703,103         $1,685,453
                                          ----------         ----------




INVESTMENT TECHNOLOGY GROUP, INC.

Reconciliation of US GAAP Results to Pro Forma Operating Results

In evaluating ITG's financial performance, management reviews pro forma operating results, which exclude non-operating or one-time charges. Pro forma operating net income and related per share amounts are non-GAAP (generally accepted accounting principles) performance measures that ITG believes are useful to assist investors in gaining an understanding of the trends and operating results for ITG's core businesses. Pro forma operating net income and related earnings per share should be viewed in addition to, and not in lieu of, reported results under US GAAP.

The following is a reconciliation of the most directly comparable US GAAP results to the pro forma operating results for the periods presented (in thousands except per share amounts):




                                  Three Months Ended        Year Ended
                                     December 31,          December 31,
                                  ------------------       ------------
                                    2009       2008       2009      2008
                                    ----       ----       ----      ----
                               (unaudited) (unaudited) (unaudited) (audited)
                               ----------- ----------- ----------- ---------

    Total revenues                $150,999   $190,070   $633,069  $762,983

    Total expenses                 160,062    143,231    556,618   567,457
       Less:
       Unrealized loss on
        NYSE Euronext common
        stock (1)                        -     (1,519)         -    (1,519)
       Restructuring charges (2)   (25,444)         -    (25,444)        -
    Pro forma operating expenses   134,618    141,712    531,174   565,938

    (Loss) income before income
     tax (benefit) expense          (9,063)    46,839     76,451   195,526
      Effect of pro forma
       adjustment                   25,444      1,519     25,444     1,519
    Pro forma pre-tax operating
     income                         16,381     48,358    101,895   197,045

    Income tax (benefit) expense    (1,270)    18,096     33,617    80,884
       Tax effect of pro forma
        adjustment                   9,101        621      9,101       621
    Pro forma operating income
     tax expense                     7,831     18,717     42,718    81,505

    Net (loss) income               (7,793)    28,743     42,834   114,642
         Net effect of pro forma
          adjustment                16,343        898     16,343       898
    Pro forma operating net income  $8,550    $29,641    $59,177  $115,540

    Diluted (loss) earnings
     per share                      $(0.18)     $0.66      $0.97     $2.61
      Net effect of pro forma
       adjustment                     0.37       0.02       0.37      0.02
    Pro forma diluted operating
     earnings per share              $0.19      $0.68      $1.34     $2.63

    Notes:
    (1) The unrealized loss recorded in the fourth quarter of 2008 pertains
        to the 55,440 shares of common stock in NYSE Euronext, Inc. that ITG
        received in March 2006 as consideration in connection with the merger
        between the NYSE and Archipelago Holdings, Inc.  ITG recorded the
        write-down to reflect the December 31, 2008 fair market value of these
        shares at $1.5 million as it determined the impairment was other-than-
        temporary.  Upon receipt of these shares in 2006, ITG had recorded
        non-operating revenues totaling $7.9 million, reflecting a gain of
        $6.9 million and dividend income of approximately $1.0 million.
    (2) In the fourth quarter of 2009 management committed to a restructuring
        plan focused primarily on US operations to position ITG for long-term
        profitable growth.  Restructuring charges include employee severance
        arrangements, costs related to the consolidation of leased facilities
        and write-offs of capitalized software and certain intangible assets
        due primarily to changes in product priorities.




SOURCE Investment Technology Group, Inc.

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