ITG Reports 2002 Results
ITG Reports 2002 Results
Compared to last year's fourth quarter, revenues declined 6%, reflecting a $19.5 million decline in ITG's core U.S. operations being partially offset by $8.8 million in revenue from the recently acquired Hoenig U.S. operations and a $4.3 million increase in revenue (of which $2.1 million pertains to Hoenig International) from ITG's international operations.
For the year ended December 31, 2002, ITG's total revenues increased 3% to $387.6 million. Net income was $73.8 million and diluted earnings per share were $1.51, after the restructuring charge cited above. Last year's net earnings of $78.9 million and $1.62 diluted earnings per share included a one-time gain of $2.0 million after taxes or $0.04 per share from ITG Europe's 2001 sale of shares it had held in the London Stock Exchange.
The restructuring charge taken in the fourth quarter of 2002 reflects a 10% workforce reduction to align ITG's infrastructure with expected levels of trading volume and to position the company for profitable growth as financial markets recover. The company expects the reductions to generate annual savings of approximately $12 million. Excluding the restructuring charge in the fourth quarter of 2002 and the gain from the sale of ITG Europe's shares in the London Stock Exchange in the first quarter 2001, pro forma diluted earnings per share in the fourth quarter 2002 compared to last year's fourth quarter declined 26% from $0.46 to $0.34. For the year ended December 31, 2002, pro forma diluted earnings per share increased 1% to $1.59 from $1.58 in 2001. (1)
For the year, revenues per trading day for Electronic Trading Desk increased 23%, Client-Site Trading Products increased 17%, and POSIT decreased 18%. For the fourth quarter of 2002 compared to the fourth quarter of 2001, revenues per trading day for Electronic Trading Desk increased 37% (due entirely to the inclusion of Hoenig operations in 2002), Client-Site Trading Products decreased 3%, and POSIT decreased 36%.
In the U.S. (excluding Hoenig), ITG's trading volume for the fourth quarter of 2002 was 5.4 billion shares (averaging 82.6 million shares per trading day) compared to 6.3 billion shares in the third quarter of 2002 (averaging 100.0 million shares per trading day) and 6.2 billion shares in the fourth quarter of 2001 (averaging 97.4 million shares per trading day). On a consolidated basis including international operations, total 2002 trading volume was approximately 9.7 billion shares for the fourth quarter and 34.9 billion shares for the year.
Despite difficult trading conditions in most overseas capital markets, ITG's international expansion continued to progress. International revenues for the fourth quarter were a record $13.4 million, a 48% increase over last year's fourth quarter. For the year, International revenues were $41.5 million, a 58% increase over last year.
Revenues in Europe were up 39% to $6.7 million for the fourth quarter and up 48% ($6.3 million) to $19.5 million for the year (of which $5.1 million of the growth pertained to our May 2001 acquisition of the remaining 50% ownership in ITG Europe that we did not already own). Revenues in Canada were up 28% to $4.0 million for the fourth quarter and up 80% to $15.2 million for the year. Revenues in Australia were up 14% to $1.3 million for the fourth quarter and up 5% to $5.0 million for the year. During the year, ITG started up operations in Hong Kong, which generated revenues of $1.9 million (including $1.6 million from Hoenig Hong Kong), of which $1.4 million was earned in the fourth quarter (including $1.3 million from Hoenig).
We are expecting a continuation of weak institutional trading volumes in the first half of 2003 and have seen January volumes to date tracking approximately 15% lower than those achieved in the fourth quarter of 2002. For the full year 2003, it will be difficult to match 2002 revenues and earnings unless there is an improvement in the U.S. domestic equity market environment.
ITG has scheduled a conference call today at 10:30 a.m. ET to discuss 2002 results and the outlook for 2003. Those wishing to listen to the call should dial (800) 819-9193 at least 10 minutes prior to the start of the call to ensure connection. For those unable to listen to the live broadcast of the call, a week-long replay will be available by dialing 888-203-1112 and entering the pass code 450129, and a two week-long replay will be available on ITG's website at http://www.itginc.com starting approximately 2 hours after the completion of the call.
ITG is headquartered in New York with offices in Boston, Los Angeles, Dublin, Hong Kong, London, Melbourne, Sydney, Tel Aviv and Toronto. As a leading provider of technology-based equity-trading services and transaction research to institutional investors and brokers, ITG services help clients to access liquidity, execute trades more efficiently, and make better trading decisions. ITG generates superior trading results for its clients through three product lines. POSIT®, the world's largest equity matching system, allows clients to trade confidentially. The Electronic Trading Desk is recognized as one of the leading program trading operations in the U.S. ITG's leading-edge Client-Site Trading products allow users to implement their own trading strategies by providing direct electronic access to most sources of market liquidity. For additional information, visit http://www.itginc.com.
(1) See table titled “Reconciliation of U.S. GAAP Results to Pro Forma Operating Results (unaudited)”.
In addition to historical information, this press release may contain "forward-looking" statements, as defined in the Private Securities Litigation Reform Act of 1995, that reflect management's expectations for the future. A variety of important factors could cause results to differ materially from such statements. These factors include the Company's ability to achieve expected future levels of sales; the actions of both current and potential new competitors; rapid changes in technology; financial market volatility; general economic conditions, internationally or nationally; evolving industry regulation; cash flows into or redemption from equity funds; effects of inflation; customer trading patterns; and new products and services. These and other risks are described in greater detail in the Company's filings with the Securities and Exchange Commission including those on forms 10-K and 10-Q.
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