ITG Reports Fourth Quarter 2012 Results

                   ITG Reports Fourth Quarter 2012 Results

Continued Expense Discipline Helps Maintain Operating Profitability

PR Newswire

NEW YORK, Jan. 31, 2013

NEW YORK, Jan. 31, 2013 /PRNewswire/ --ITG (NYSE: ITG), an independent
execution and research broker, today reported results for the quarter ended
December 31, 2012.

(Logo: http://photos.prnewswire.com/prnh/20120123/NY39237LOGO )

Fourth quarter 2012 highlights included:

  oA GAAP net loss of $6.5 million, or $0.17 per diluted share compared to a
    GAAP net loss of $3.7 million, or $0.09 per diluted share for the fourth
    quarter of 2011. The GAAP net loss for the fourth quarter of 2012
    included (i) charges associated with a cost reduction plan focused on
    headcount, market data and general and administrative expenses of $9.5
    million, or $0.17 per diluted share after taxes and (ii) duplicate rent
    charges associated with the build-out of ITG's new headquarters of $1.4
    million, or $0.02 per diluted share after taxes. 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.
  oAdjusted net income of $0.6 million, or $0.02 per diluted share, compared
    to adjusted net income in the fourth quarter of 2011 of $2.7 million, or
    $0.07 per diluted share.
  oRevenues of $121.5 million, compared to revenues of $129.9 million in the
    fourth quarter of 2011.
  oExpenses of $130.1 million compared to expenses of $136.3 million in the
    fourth quarter of 2011.
  oAdjusted expenses of $119.2 million compared to adjusted expenses of
    $125.2 million in the fourth quarter of 2011.
  oAverage daily trading volume in the U.S. of 181 million shares, nearly
    unchanged from the fourth quarter of 2011. POSIT^® average daily U.S.
    volume was 85 million shares compared to 86 million shares in the fourth
    quarter of 2011. Total combined NYSE and NASDAQ average daily trading
    volume was down 14% in the fourth quarter of 2012 compared with the
    prior-year period.
  oIn Europe, the total number of clients trading European equities through
    ITG rose to an all-time high. Average daily value traded in POSIT was
    $364 million, up 16% from the fourth quarter of 2011. POSIT now
    represents more than 11% of total European dark trading.
  oThe repurchase of 700,000 shares of common stock under ITG's authorized
    share repurchase program for a total of $5.9 million. Repurchases since
    the first quarter of 2010 have totaled $112.7 million for 8.6 million
    shares, resulting in a decrease in shares outstanding, net of new
    issuances, of nearly 15%.

Revenues from U.S. operations were $77.1 million in the fourth quarter of 2012
compared to $83.1 million in the fourth quarter of 2011. ITG's U.S.
operations posted a GAAP net loss of $5.8 million and an adjusted net loss of
$1.1 million in the fourth quarter of 2012, compared to a GAAP net loss of
$6.4 million and adjusted net income of $0.3 million in the fourth quarter of
2011. Sell-side client volume represented 52% of total U.S. volumes, up from
51% in the third quarter of 2012. The overall revenue capture rate per share
in the U.S. was $0.0043, down from $0.0044 in the third quarter of 2012. 

ITG's International revenues were $44.4 million in the fourth quarter of 2012
compared to $46.8 million in the fourth quarter of 2011. ITG's International
operations posted a GAAP net loss of $0.7 million and adjusted net income of
$1.7 million in the fourth quarter of 2012, compared to GAAP net income of
$2.7 million and adjusted net income of $2.4 million in the fourth quarter of
2011.

"The challenging environment for institutional equity volumes continued into
the fourth quarter with market volumes at or near multi-year lows," said Bob
Gasser, ITG's Chief Executive Officer and President. "Despite these
headwinds, we improved our competitive position and also maintained operating
profitability due in large part to our focus on controlling costs. The recent
cost reduction measures we took should allow us to improve profitability and
we expect to maintain our expense discipline even if institutional volumes
improve in 2013."

Year-to-Date Results

For the full year 2012, revenues were $504.4 million, GAAP net loss was $247.9
million, or $6.45 per diluted share, and adjusted net income was $8.2 million,
or $0.21 per diluted share. 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.

The discussion of results above includes adjusted net income and related per
share amounts, in addition to adjusted expense 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
1-866-314-4865 (1-617-213-8050 outside the U.S.) and enter the passcode
13105195 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 website at investor.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 U.S.) and entering the
passcode 64828941. The replay will be available starting approximately two
hours after the completion of the conference call.

About ITG

ITG is an independent execution and research 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 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 2011 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, the volatility of our stock price, 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. AND SUBSIDIARIES
Consolidated Statements of Operations (unaudited)
(In thousands, except per share amounts)
                      ThreeMonthsEnded        Year EndedEnded
                      December 31,              December 31,
                      2012         2011         2012           2011
Revenues:
Commissions and   $ 91,034    $ 97,627    $ 380,976     $ 445,801
fees
Recurring             27,594       28,636       109,767        110,919
Other                 2,906        3,660        13,693         15,317
Total revenues        121,534      129,923      504,436        572,037
Expenses:
Compensation and      47,100       52,041       196,362        219,307
employee benefits
Transaction           19,965       20,632       81,173         91,602
processing
Occupancy and         16,892       15,282       62,637         60,191
equipment
Telecommunications
and data              15,037       13,960       59,850         58,460
 processing
services
Other general and     21,049       22,705       88,543         90,808
administrative
Restructuring         9,499        6,754        9,499          24,432
charges
Goodwill and other    —            4,282        274,285        229,317
asset impairment
Acquisition related   —            —            —              2,523
costs
Interest expense      562          625          2,542          2,025
Total expenses        130,104      136,281      774,891        778,665
Loss before income    (8,570)      (6,358)      (270,455)      (206,628)
tax benefit
Income tax benefit    (2,117)      (2,686)      (22,596)       (26,839)
Net loss              $ (6,453)   $ (3,672)   $ (247,859)   $ (179,789)
Loss per share:
Basic                 $ (0.17)    $ (0.09)    $ (6.45)      $ (4.42)
Diluted               $ (0.17)    $ (0.09)    $ (6.45)      $ (4.42)
Basic weighted
average number of     37,709       39,624       38,418         40,691
 common shares
outstanding
Diluted weighted
average number of    37,709       39,624       38,418         40,691
 common shares
outstanding



INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(In thousands, except share amounts)
                                                        December31,
                                                        2012        2011
Assets
Cash and cash equivalents                               $245,875    $284,188
Cash restricted or segregated under regulations and     61,117      71,496
other
Deposits with clearing organizations                    29,149      25,538
Securities owned, at fair value                         10,086      5,277
Receivables from brokers, dealers and clearing          1,107,119   871,315
organizations
Receivables from customers                              546,825     472,509
Premises and equipment, net                             54,989      43,023
Capitalized software, net                               43,994      51,258
Goodwill                                                —           274,292
Other intangibles, net                                  35,227      39,594
Income taxes receivable                                 7,460       6,838
Deferred taxes                                          39,155      16,493
Other assets                                            15,763      16,248
Total assets                                            $2,196,759  $2,178,069
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued expenses                   $165,062    $181,224
Short-term bank loans                                   22,154      1,606
Payables to brokers, dealers and clearing organizations 1,337,459   1,079,773
Payables to customers                                   226,892     207,738
Securities sold, not yet purchased, at fair value       5,249       438
Income taxes payable                                    10,608      11,460
Deferred taxes                                          293         719
Term debt                                               19,272      23,997
Total liabilities                                       1,786,989   1,506,955
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; 52,037,011 and                              520         519
 51,899,229 shares issued at December31, 2012 and
2011, respectively
Additional paid-in capital                              245,002     249,469
Retained earnings                                       405,485     653,344
Common stock held in treasury, at cost; 14,677,872 and
12,679,948 shares at                                    (253,111)   (240,559)
 December31, 2012 and 2011, respectively
Accumulated other comprehensive income (net of tax)     11,874      8,341
Total stockholders' equity                              409,770     671,114
Total liabilities and stockholders' equity              $2,196,759  $2,178,069



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 are reconciliations of GAAP results to adjusted results for the
periods presented (in thousands except per share amounts):
                        Three Months Ended December    Year EndedEnded
                        31,                            December 31,
                        2012              2011         2012        2011
                        (unaudited)       (unaudited)  (unaudited) (unaudited)
  Total revenues        $       121,534   $   129,923  $   504,436 $   572,037
  Total expenses        130,104           136,281      774,891     778,665
   Less:
   Restructuring      (9,499)           (6,754)      (9,499)     (24,432)
  charges (1) (2)
   Duplicate rent     (1,378)           —            (1,378)     —
  charges (3)
   Goodwill and other
  asset impairment      —                 (4,282)      (274,285)   (229,317)
  (4)(5)
  
  Acquisition-related   —                 —            —           (2,523)
  costs (6)
  Adjusted operating    119,227           125,245      489,729     522,393
  expenses
  Loss before income    (8,570)           (6,358)      (270,455)   (206,628)
  tax benefit
   Effect of pro forma 10,877            11,036       285,162     256,272
  adjustment
  Adjusted pre-tax      2,307             4,678        14,707      49,644
  operating income
  Income tax benefit    (2,117)           (2,686)      (22,596)    (26,839)
   Tax effect of pro  3,806             4,636        29,128      47,897
  forma adjustment
  Adjusted operating    1,689             1,950        6,532       21,058
  income tax expense
  Net loss              (6,453)           (3,672)      (247,859)   (179,789)
   Net effect of    7,071             6,400        256,034     208,375
  pro forma adjustment
  Adjusted operating    $       618       $   2,728    $   8,175   $   28,586
  net income
  Diluted loss per      $       (0.17)    $   (0.09)   $   (6.45)  $   (4.42)
  share
   Net effect of pro  0.19              0.16         6.66        5.11
  forma adjustment
  Adjusted diluted
  operating earnings    $       0.02      $   0.07     $   0.21    $   0.69
  per share

                  US Operations                    International Operations

                  Three Months Ended December 31,  Three Months Ended December
                                                   31,
                  2012            2011             2012            2011
                  (unaudited)     (unaudited)      (unaudited)     (unaudited)
Total revenues    $     77,073    $     83,119     $     44,461    $   46,804
Total expenses    85,458          94,227           44,646          42,054
 Less:
 Restructuring  (6,798)         (7,027)          (2,701)         273
charges (1) (2)
 Duplicate rent (1,378)         —                —               —
charges (3)
 Goodwill and
other asset       —               (4,282)          —               —
impairment (5)
Adjusted
operating         77,282          82,918           41,945          42,327
expenses
(Loss) income
before income tax (8,385)         (11,108)         (185)           4,750
benefit
 Effect of pro   8,176           11,309           2,701           (273)
forma adjustment
Adjusted pre-tax
operating (loss)  (209)           201              2,516           4,477
income
Income tax        (2,623)         (4,749)          506             2,063
(benefit) expense
 Tax effect of
pro forma         3,505           4,636            301             —
adjustment
Adjusted
operating income  882             (113)            807             2,063
tax expense
Net (loss) income (5,762)         (6,359)          (691)           2,687
 Net effect
of pro forma      4,671           6,673            2,400           (273)
adjustment
Adjusted
operating net     $     (1,091)   $     314        $     1,709     $   2,414
(loss) income
Diluted loss per  $     (0.15)    $     (0.16)     $     (0.02)    $   0.07
share
 Net effect of
pro forma         0.12            0.17             0.07            (0.01)
adjustment
Adjusted diluted
operating (loss)  $     (0.03)    $     0.01       $     0.05      $   0.06
earnings per
share

Notes:

1.During the fourth quarter of 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 charge
    consisted entirely of employee separation costs.
2.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.
3.During the fourth quarter of 2012, ITG began to build out and ready its
    new lower Manhattan headquarters while continuing to occupy its existing
    headquarters in Mid-town Manhattan and as a result, incurred duplicate
    rent charges.
4.In the second quarter of 2012, goodwill with a carrying value of $274.3
    million was deemed impaired and its fair value was determined to be zero,
    resulting in a full impairment charge.
5.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. 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.
6.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
    acquisition-related costs, including legal fees, contract settlement costs
    and other professional fees.

SOURCE ITG

Website: http://www.itginc.com