PRESS RELEASE

<<Back

ITG Reports Fourth Quarter 2011 Results

Operating Profitability Impacted by Weaker Institutional Trading Volumes

NEW YORK, Feb. 1, 2012 /PRNewswire/ -- ITG (NYSE: ITG), a leading agency research broker and financial technology firm, today reported results for the fourth quarter ended December 31, 2011.

Fourth quarter 2011 highlights included:

  • GAAP net loss of $3.7 million, or $0.09 per diluted share, compared to GAAP net income of $1.8 million, or $0.04 per diluted share in the fourth quarter of 2010. The GAAP net loss for the fourth quarter of 2011 included (i) a restructuring charge related to lease consolidations and employee separation costs of $6.8 million, or $0.10 per diluted share after taxes; and (ii) a non-cash impairment charge attributable to a minority investment of $4.3 million, or $0.06 per diluted share after taxes. GAAP net income for the fourth quarter of 2010 included charges related to the Majestic acquisition and office closings of $4.2 million, or $0.07 per diluted share after taxes.
  • Adjusted net income for the fourth quarter of 2011 of $2.7 million, or $0.07 per diluted share, compared to adjusted net income in the fourth quarter of 2010 of $4.7 million, or $0.11 per diluted share.
  • Revenues of $129.9 million, compared to $138.3 million in the fourth quarter of 2010.
  • Expenses of $136.3 million, compared to $135.2 million in the fourth quarter of 2010.
  • Adjusted expenses of $125.2 million, compared to $131.0 million in the fourth quarter of 2010.
  • Average daily trading volume in the U.S. of 182 million shares, up 6% from the fourth quarter of 2010. POSIT® average daily U.S. volume was 86.4 million shares, up 14% from the fourth quarter of 2010.
  • The repurchase of 1,009,700 shares of common stock under ITG's authorized share repurchase program for a total of $10.7 million. Repurchases since the first quarter of 2010 have totaled $89.2 million or 6.1 million shares, resulting in a decrease in shares outstanding, net of new issuances, of more than 10%.

The results of ITG's U.S. operations during the fourth quarter of 2011 were negatively impacted by reduced levels of trading activity by institutional investors. Sell-side client volume represented 44% of total U.S. volumes, up from 41% in the third quarter of 2011. Revenues from U.S. operations were $83.1 million in the fourth quarter of 2011, down 7% from $89.6 million in the fourth quarter of 2010. ITG's U.S. operations incurred a GAAP net loss of $6.4 million and adjusted net income of $0.3 million in the fourth quarter of 2011, compared to a GAAP net loss of $1.1 million and adjusted net income of $2.3 million in the fourth quarter of 2010.

ITG's International revenues were $46.8 million in the fourth quarter of 2011, a 4% decrease over $48.8 million in the fourth quarter of 2010. ITG's International operations posted GAAP net income of $2.7 million and adjusted net income of $2.4 million in the fourth quarter of 2011, compared to GAAP net income of $2.9 million and adjusted net income of $2.5 million in the fourth quarter of 2010.

"Low levels of trading activity by institutional investors in the U.S. and weaker turnover in both Europe and Asia Pacific pressured our revenues in the fourth quarter," said Bob Gasser, ITG's Chief Executive Officer and President. "Despite these headwinds, we continued to selectively build out the ITG Investment Research platform, maintained a disciplined approach to cost management and returned cash to shareholders via share buybacks in excess of our level of operating earnings."

Full Year 2011 Results

For the full year 2011, revenues were $572.0 million, GAAP net loss was $179.8 million, or $4.42 per diluted share and adjusted net income was $28.6 million, or $0.69 per diluted share. For the full year 2010, revenues were $570.8 million, GAAP net income was $24.0 million, or $0.55 per diluted share, in 2010 and adjusted net income was $38.1 million, or $0.88 per diluted share.

The discussion above includes adjusted expenses and adjusted 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 to GAAP results.

Conference Call

ITG has scheduled a conference call today at 11:00 am ET to discuss fourth quarter results. Those wishing to listen to the call should dial 1-866-831-6234 (1-617-213-8854 outside the US) and enter the passcode 38122132 at least 10 minutes prior to the start of the call to ensure connection. The webcast and accompanying slideshow presentation can be downloaded from ITG's web site at http://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 1-888-286-8010 (1-617-801-6888 outside the US) and entering the passcode 69282617. The replay will be available starting approximately two hours after the completion of the conference call.

About ITG

ITG is an independent research and execution broker that partners with global portfolio managers and traders to provide unique data-driven insights throughout the investment process. From investment decision through settlement, ITG helps clients understand market trends, improve performance, mitigate risk and navigate increasingly complex markets. ITG is headquartered in New York with offices in North America, Europe, and Asia Pacific. For more information, 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. Certain of these factors are noted throughout ITG's 2010 Annual Report on Form 10-K, and its Form 10-Qs and include, but are not limited to, general economic, business, credit and financial market conditions, internationally and nationally, financial market volatility, fluctuations in market trading volumes, effects of inflation, adverse changes or volatility in interest rates, fluctuations in foreign exchange rates, evolving industry regulations, changes in tax policy or accounting rules, the actions of both current and potential new competitors, changes in commission pricing, potential impairment charges related to goodwill and other long-lived assets, rapid changes in technology, errors or malfunctions in our systems or technology, cash flows into or redemptions from equity mutual funds, ability to meet liquidity requirements related to the clearing of our customers' trades, 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 acquired companies, our ability to attract and retain talented employees and our ability to achieve cost savings from our cost reduction plans. 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 Media/Investor Contact:
J.T. Farley
1-212-444-6259
corpcomm@itg.com

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


Three Months EndedDecember 31,
Year EndedDecember 31,


2011
2010
2011
2010


(unaudited)
(unaudited)
(unaudited)


Revenues:








Commissions and fees
$ 97,627
$ 110,639
$ 445,801
$ 469,005
Recurring
28,636
26,542
110,919
93,186
Other
3,660
1,165
15,317
8,563
Total revenues
129,923
138,346
572,037
570,754










Expenses:








Compensation and employee benefits
52,041
57,208
219,307
215,886
Transaction processing
20,632
21,746
91,602
85,387
Occupancy and equipment
15,282
15,316
60,191
59,905
Telecommunications and data processingservices
13,960
14,108
58,460
53,473
Other general and administrative
22,705
22,516
90,808
88,162
Goodwill and other asset impairment
4,282

229,317
11,466
Restructuring charges
6,754
1,812
24,432
4,062
Acquisition related costs

2,409
2,523
2,409
Interest expense
625
83
2,025
671
Total expenses
136,281
135,198
778,666
521,421
(Loss) income before income tax expense
(6,358)
3,148
(206,628)
49,333
Income tax (benefit) expense
(2,686)
1,318
(26,839)
25,353
Net (loss) income
$ (3,672)
$ 1,830
$ (179,789)
$ 23,980










(Loss) earnings per share:








Basic
$ (0.09)
$ 0.04
$ (4.42)
$ 0.56
Diluted
$ (0.09)
$ 0.04
$ (4.42)
$ 0.55










Basic weighted average number of commonshares outstanding
39,624
41,636
40,691
42,767
Diluted weighted average number of commonshares outstanding
39,624
42,538
40,691
43,496



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

December 31,

2011 2010
Assets (unaudited)
Cash and cash equivalents 284,188 $317,010
Cash restricted or segregated under regulations and other 71,496 68,965
Deposits with clearing organizations 25,538 14,235
Securities owned, at fair value 5,277 25,789
Receivables from brokers, dealers and clearing organizations 871,315 865,251
Receivables from customers 472,509 606,256
Premises and equipment, net 43,023 39,373
Capitalized software, net 51,258 57,924
Goodwill 274,292 468,479
Other intangibles, net 39,594 36,784
Income taxes receivable 6,838 5,561
Deferred taxes 16,493 4,902
Other assets 16,248 20,324
Total assets 2,178,069 $2,530,853
Liabilities and Stockholders' Equity

Liabilities:

Accounts payable and accrued expenses 181,224 $195,109
Short-term bank loans 1,606
Payables to brokers, dealers and clearing organizations 1,079,773 1,139,958
Payables to customers 207,738 272,027
Securities sold, not yet purchased, at fair value 438 19,362
Income taxes payable 11,460 16,215
Deferred taxes 719 18,114
Term debt 23,997
Total liabilities 1,506,955 1,660,785
Commitments and contingencies

Stockholders' Equity:

Preferred stock, $0.01 par value; 1,000,000 shares authorized; noshares issued or outstanding
Common stock, $0.01 par value; 100,000,000 shares authorized;51,899,229 and 51,790,608 shares issued at December 31, 2011 and2010, respectively 519 518
Additional paid-in capital 249,469 246,085
Retained earnings 653,344 833,133
Common stock held in treasury, at cost; 12,679,948 and 10,524,757shares at December 31, 2011 and 2010, respectively (240,559) (220,161)
Accumulated other comprehensive income (net of tax) 8,341 10,493
Total stockholders' equity 671,114 870,068
Total liabilities and stockholders' equity 2,178,069 $2,530,853



INVESTMENT TECHNOLOGY GROUP, INC.Reconciliation of US GAAP Results to Adjusted Results

In evaluating ITG's financial performance, management reviews results from operations which excludes non-operating or one-time charges. Adjusted expenses and adjusted net income and related per share amounts are non-GAAP performance measures, but the Company believes that they are useful to assist investors in gaining an understanding of the trends and operating results for ITG's core businesses. These measures should be viewed in addition to, and not in lieu of, ITG's reported results under GAAP.
The following is a reconciliation of GAAP results to adjusted results for the periods presented (in thousands except per share amounts):

Three Months Ended December 31,
Year Ended December 31,

2011 2010
2011 2010

(unaudited) (unaudited)
(unaudited) (unaudited)
Total revenues $ 129,923 $ 138,346
$ 572,037 $ 570,754






Total expenses 136,281 135,198
778,665 521,421
Less:




Acquisition related costs (1) (2) (2,409)
(2,523) (2,409)
Goodwill and other asset impairment (3)(4)(5)(6) (4,282)
(229,317) (11,466)
Restructuring charges (7)(8)(9) (6,755) (1,812)
(24,432) (4,062)
Adjusted operating expenses 125,245 130,977
522,393 503,484






(Loss) income before income tax (benefit) expense (6,358) 3,148
(206,628) 49,333
Effect of adjustments 11,036 4,221
256,272 17,937
Adjusted pre-tax operating income 4,678 7,369
49,644 67,270






Income tax (benefit) expense (2,686) 1,318
(26,839) 25,353
Tax effect of adjustments 4,636 1,318
47,897 3,797
Adjusted operating income tax expense 1,950 2,636
21,058 29,150






Net (loss) income (3,672) 1,830
(179,789) 23,980
Net effect of adjustments 6,400 2,903
208,375 14,140
Adjusted operating net income $ 2,728 $ 4,733
$ 28,586 $ 38,120










Diluted (loss) earnings per share $ (0.09) $ 0.04
$ (4.42) $ 0.55
Net effect of adjustments
0.16
0.07

5.11
0.33
Adjusted diluted operating earnings per share $ 0.07 $ 0.11
$ 0.69 $ 0.88




U.S.
International

Three Months Ended December 31,
Three Months Ended December 31,

2011 2010
2011 2010

(unaudited) (unaudited)
(unaudited) (unaudited)
Total revenues $ 83,119 $ 89,555
$ 46,804 $ 48,791






Total expenses 94,227 92,072
42,054 43,126
Less:




Acquisition related costs (2) (2,409)
Goodwill and other asset impairment (3) (4,282)
Restructuring charges (7)(8)(9) (7,027) (2,254)
273 442
Adjusted operating expenses 82,918 87,409
42,327 43,568






(Loss) income before income tax (benefit) expense (11,108) (2,517)
4,750 5,665
Effect of adjustments 11,309 4,663
(273) (442)
Adjusted pre-tax operating income 201 2,146
4,477 5,223






Income tax(benefit) expense (4,749) (1,449)
2,063 2.767
Tax effect of adjustments 4,636 1,318
Adjusted operating income tax expense (113) (131)
2,063 2,767






Net (loss) income (6,359) (1,068)
2,687 2,898
Net effect of adjustments 6,673 3,345
(273) (442)
Adjusted operating net income $ 314 $ 2,277
$ 2,414 $ 2,456










Diluted (loss) earnings per share $ (0.16) $ (0.03)
$ 0.07 $ 0.07
Net effect of adjustments
0.17
0.08

(0.01)
(0.01)
Adjusted diluted operating earnings per share $ 0.01 $ 0.05
$ 0.06 $ 0.06


Notes:


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

(2) During the fourth quarter of 2010, ITG acquired Majestic Research Corp., a privately held, independent provider of data-driven equity research for the institutional investment community. In connection with the acquisition, ITG incurred approximately $2.4 million of acquisition-related costs, including legal fees and other professional fees, accelerated employee equity awards and severance costs.

(3) During the fourth quarter of 2011, ITG determined that the carrying value of its investment in Disclosure Insight, Inc. was fully impaired, resulting in a write-off of $4.3 million.

(4) In the second quarter of 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.

(5) In 2010, goodwill with a carrying value of $5.4 million in the Asia Pacific operating segment relating to our Australian operations was deemed impaired and its fair value was determined to be zero, resulting in an impairment charge of $5.4 million.

(6) As part of the fourth quarter 2009 restructuring, ITG made certain changes to its product priorities and wrote off $2.4 million of capitalized development initiatives that were not yet deployed. As ITG's product development plan continued to evolve in the first quarter of 2010, it was determined that additional amounts capitalized in 2009 were not likely to be used and a further $6.1 million write-off was recorded.

(7) In 2011, ITG decided to implement 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, including $6.8 million recorded in the fourth quarter and $17.7 million recorded in the second quarter. These costs included employee separation and related costs of $19.2 million and lease consolidation costs of $5.2 million.

(8) During the fourth quarter of 2010, in connection with the integration of Majestic Research Corp., ITG decided to close its Westchester, NY office and relocate the staff, primarily sales traders and support, to its midtown Manhattan office and incurred a restructuring charge of $2.3 million.

(9) In the second quarter of 2010, ITG committed to a restructuring plan in the Asia Pacific region to close its on-shore operations in Japan, resulting in lower operating costs and reduced capital requirements. Restructuring charges primarily included employee severance, contract termination costs and non-cash write-offs of fixed assets and capitalized software.


SOURCE ITG

Social stream