<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 26, 1998 Commission file number: 0 - 23644
INVESTMENT TECHNOLOGY GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 13 - 3757717
- -------------------------------------- -------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization)
380 Madison Avenue, New York, New York (212) 588 - 4000
- -------------------------------------- -------------------------------------
(Address of Principal Executive (Registrant's Telephone Number,
Offices) Including Area Code)
10017
- --------------------------------------
(Zip Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
As of August 7, 1998, the Registrant had 18,437,861 shares of common stock, $.01
par value, outstanding.
<PAGE>
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Item 1. Financial Statements
Consolidated Statement of Financial Condition:
June 26, 1998 (unaudited) and December 31, 1997 ......... 3
Consolidated Statement of Operations (unaudited):
Six Months Ended June 26, 1998 and June 27, 1997 ........ 4
Three Months Ended June 26, 1998 and June 27, 1997 ...... 5
Consolidated Statement of Changes in Stockholders' Equity
(unaudited):
Six Months Ended June 26, 1998 .......................... 6
Consolidated Statement of Cash Flows (unaudited):
Six Months Ended June 26, 1998 and June 27, 1997 ........ 7
Condensed Notes to Consolidated Financial Statements
(unaudited) ............................................. 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................... 13
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote and Reports on Form 8-K ..... 19
Item 5. Other Information ........................................... 20
Item 6. Exhibits and Reports on Form 8-K ............................ 20
Signature ............................................................. 21
</TABLE>
FORWARD-LOOKING STATEMENTS
In addition to the historical information contained throughout this
Quarterly Report on Form 10-Q, there are forward-looking statements that reflect
management's expectations for the future, including information under "The Year
2000 Issue", below. A variety of important factors could cause results to differ
materially from such statements. These factors are noted throughout this
Quarterly Report on Form 10-Q and include: the actions of both current and
potential new competitors, rapid changes in technology, financial market
volatility, evolving industry regulation, cash flows into or redemptions from
equity funds, effects of inflation, customer trading patterns, customers,
vendors, and securities industry participants responses to Year 2000 issues, and
new products and services.
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Page 2 of 21
<PAGE>
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 26, DECEMBER 31,
1998 1997
------------------------ ------------------------
ASSETS (UNAUDITED)
<S> <C> <C>
Cash and cash equivalents ........................................ $ 79,011 $ 51,263
Securities owned 76 358
Investment in limited partnership (at market; cost $10,000) 11,340 10,935
Trade receivables, net of allowance for doubtful accounts
of $170 and $308 ............................................. 10,173 7,071
Trade receivable from affiliate .................................. 5,414 2,931
Due from affiliates .............................................. 290 1,365
Premises and equipment ........................................... 20,054 19,506
Capitalized software ............................................. 7,528 5,973
Other assets ..................................................... 10,808 9,857
Goodwill ......................................................... 1,648 1,922
Deferred tax asset ............................................... 2,736 2,460
------------------------ ------------------------
$ 149,078 $ 113,641
------------------------ ------------------------
------------------------ ------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses ............................ $ 25,086 $ 12,725
Software royalties payable ....................................... 3,841 2,663
Securities sold, not yet purchased ............................... 142 3
Due to affiliates ................................................ 1,579 2,999
Income taxes payable to affiliate ................................ 3,679 1,488
------------------------ ------------------------
34,327 19,878
------------------------ ------------------------
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01; shares authorized: - -
5,000,000; shares issued: none ...............................
Common stock, par value $.01; shares authorized:
30,000,000; shares issued: 19,002,861 and 18,818,468
at June 26, 1998 and December 31, 1997 ....................... 190 188
Additional paid-in capital ..................................... 42,385 38,554
Retained earnings .............................................. 78,821 61,531
Common stock held in treasury, at cost; shares: 597,500
at June 26, 1998 and at December 31, 1997 .................... (6,510) (6,510)
Accumulated other comprehensive loss:
Currency translation adjustment .............................. (135) -
------------------------ ------------------------
Total stockholders' equity ..................................... 114,751 93,763
------------------------ ------------------------
$ 149,078 $ 113,641
------------------------ ------------------------
------------------------ ------------------------
Book value per share ............................................. $ 6.23 $ 5.15
------------------------ ------------------------
------------------------ ------------------------
</TABLE>
SEE ACCOMPANYING UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Page 3 of 21
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------
JUNE 26, JUNE 27,
1998 1997
------------------------------
<S> <C> <C>
Revenues ....................................... $ 92,292 $ 67,333
------------------------------
Expenses:
Compensation and employee benefits ......... 22,810 13,880
Transaction processing ..................... 12,364 10,585
Software royalties ......................... 6,759 4,963
Occupancy and equipment .................... 5,620 3,868
Consulting ................................. 1,092 946
Telecommunications and data processing
services ................................. 4,106 3,113
Loss on long-term investments .............. 2,087 -
Spin-off costs ............................. 625 -
Other general and administrative ........... 5,112 4,692
------------------------------
Total expenses .......................... 60,575 42,047
------------------------------
Earnings before income tax expense.......... 31,717 25,286
Income tax expense ............................. 14,427 10,747
------------------------------
Net earnings ................................... $ 17,290 $ 14,539
------------------------------
------------------------------
Basic net earnings per share of common stock.... $ 0.95 $ 0.80
------------------------------
------------------------------
Diluted net earnings per share of common stock.. $ 0.90 $ 0.78
------------------------------
------------------------------
Basic weighted average shares outstanding ...... 18,277 18,191
------------------------------
------------------------------
Diluted weighted average shares and common stock
equivalents outstanding..................... 19,159 18,757
------------------------------
------------------------------
</TABLE>
SEE ACCOMPANYING UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Page 4 of 21
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------
JUNE 26, JUNE 27,
1998 1997
------------------------------
<S> <C> <C>
Revenues ....................................... $ 50,905 $ 36,679
------------------------------
Expenses:
Compensation and employee benefits ......... 12,225 7,007
Transaction processing ..................... 6,710 5,682
Software royalties ......................... 3,774 2,581
Occupancy and equipment .................... 2,823 2,010
Consulting ................................. 393 574
Telecommunications and data processing
services ................................. 2,325 2,156
Loss on long-term investments .............. 1,085 -
Spin-off costs ............................. 374 -
Other general and administrative ........... 2,529 2,744
------------------------------
Total expenses ....................... 32,238 22,754
------------------------------
Earnings before income tax expense.......... 18,667 13,925
Income tax expense ............................. 8,739 5,917
------------------------------
Net earnings ................................... $ 9,928 $ 8,008
------------------------------
------------------------------
Basic net earnings per share of common stock.... $ 0.54 $ 0.44
------------------------------
------------------------------
Diluted net earnings per share of common stock.. $ 0.52 $ 0.43
------------------------------
------------------------------
Basic weighted average shares outstanding ...... 18,330 18,128
------------------------------
------------------------------
Diluted weighted average shares and common stock
equivalents outstanding..................... 19,208 18,702
------------------------------
------------------------------
</TABLE>
SEE ACCOMPANYING UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Page 5 of 21
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 26, 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
Common
Additional Stock Accumulated Total
Preferred Common Paid-in Retained Held in Comprehensive Stockholders'
Stock Stock Capital Earnings Treasury Income/(loss) Equity
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 ............. $ - $ 188 $ 38,554 $ 61,531 $ (6,510) $ - $ 93,763
Issuance of common stock in connection
with the employee stock option plan
(184,393 shares)........................ 2 3,831 3,833
Comprehensive income/(loss):
Net earnings ........................... 17,290 17,290
Other comprehensive loss, net of tax:
Currency translation adjustment ...... (135) (135)
-----------
Comprehensive income ..................... 17,155
-----------------------------------------------------------------------------------------
Balance at June 26, 1998 ................. $ - $ 190 $ 42,385 $ 78,821 $ (6,510) $ (135) $ 114,751
-----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Page 6 of 21
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------
JUNE 26, JUNE 27,
1998 1997
----------------------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings .................................... $ 17,290 $ 14,539
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Deferred income tax benefit ................... (276) (419)
Depreciation and amortization ................. 4,053 2,848
Unrealized gain on investment in limited
partnership .................................. (405) (283)
Undistributed loss of affiliates .............. 77 316
Provision for doubtful accounts receivable .... 48 42
Decrease (increase) in operating assets:
Securities owned .............................. 281 212
Trade receivables ............................. (3,150) (2,258)
Trade receivables from affiliate .............. (2,482) (948)
Due from affiliates ........................... 1,074 68
Other assets .................................. (1,079) 186
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses ......... 12,413 5,097
Software royalties payable .................... 1,178 363
Securities sold, not yet purchased ............ 139 (1,147)
Due to affiliates ............................. (1,421) 2,512
Income taxes payable to affiliate ............. 2,191 (1,283)
----------------------------
Net cash provided by operating activities.... 29,931 19,845
----------------------------
Cash flows from financing activities:
Purchase of common stock for treasury ......... - (2,746)
Issuance of common stock ...................... 3,833 65
----------------------------
Net cash provided by (used in) financing
activities ................................ 3,833 (2,681)
Cash flows from investing activities:
Purchase of premises and equipment ............ (3,746) (10,213)
Capitalization of software development costs... (2,135) (1,932)
----------------------------
Net cash used in investing activities ....... (5,881) (12,145)
----------------------------
Effect of foreign currency translation on cash
and cash equivalents .......................... (135) -
Net increase in cash and cash equivalents.... 27,748 5,019
Cash and cash equivalents - beginning of period.. 51,263 43,955
----------------------------
Cash and cash equivalents - end of period ....... $ 79,011 $ 48,974
----------------------------
----------------------------
Supplemental cash flow information:
Interest paid ................................. $ 14 $ 100
----------------------------
----------------------------
Income taxes paid to affiliate ................ $ 11,081 $ 12,434
----------------------------
----------------------------
</TABLE>
SEE ACCOMPANYING UNAUDITED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Page 7 of 21
<PAGE>
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
BASIS OF PRESENTATION
The Consolidated Financial Statements include the accounts of Investment
Technology Group, Inc. and its wholly-owned subsidiaries (collectively, the
"Company"), principally ITG Inc. ("ITG"), a Delaware corporation, registered as
a broker-dealer in securities under the Securities Exchange Act of 1934, ITG
Global Trading, Inc. ("Global Trading") which is a 50% partner in the Global
POSIT joint venture, ITG Australia PTY Limited, which is a 50% partner in ITG
Pacific Holdings, ITG Ventures Inc., and ITG International Limited and its
wholly-owned subsidiary ITG Israel. Jefferies Group, Inc. ("Jefferies Group")
owned over 80% of the Company's common stock at June 26, 1998.
All material intercompany balances and transactions are eliminated in
consolidation. The consolidated financial statements reflect all adjustments,
which are in the opinion of management, necessary for the fair statement of the
results for the interim periods and should be read in conjunction with the
Company's 1997 annual report on Form 10-K.
BUSINESS SEGMENT
Through its wholly-owned, broker/dealer subsidiary, ITG, the Company, is 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.
GOODWILL
In May 1991, Jefferies Group acquired Integrated Analytics Corporation
("IAC") and contributed its business to ITG in 1992. IAC's principal product,
MarketMind, was used to develop the Company's QuantEX product. Goodwill, which
represents the excess of purchase price for IAC over the fair value of the IAC
net assets acquired, is amortized on a straight-line basis over ten years. The
Company assesses the recoverability of this intangible asset by determining
whether the amortization of the goodwill balance over its remaining life can be
recovered through undiscounted future operating cash flows of the acquired
operation. At June 26, 1998 and December 31, 1997, goodwill amounted to $1.6
million and $1.9 million, net of accumulated amortization of $3.6 million and
$3.4 million, respectively.
PREMISES AND EQUIPMENT
Premises and equipment are carried at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets (generally
three to five years). Leasehold improvements are amortized using the
straight-line method over the lesser of the estimated useful lives of the
related assets or the non-cancelable lease term.
REVENUES
REVENUES primarily consist of commission revenues. TRADE RECEIVABLE FROM
AFFILIATE consists of commissions receivable. Transactions in securities,
commission revenues and related expenses are recorded on a trade-date basis.
EXPENSES
COMPENSATION AND EMPLOYEE BENEFITS include base salaries, bonuses,
employment agency fees, part-time employees, commissions paid to Jefferies &
Company, Inc. ("Jefferies & Co.") employees, the employee portion of capitalized
software and fringe benefits, including employer contributions for medical
insurance, life insurance, retirement plans and payroll taxes. TRANSACTION
PROCESSING consists of floor brokerage and clearing fees. SOFTWARE ROYALTIES are
payments to
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Page 8 of 21
<PAGE>
BARRA Inc. ("BARRA"), the Company's joint venture partner in POSIT1. Royalty
payments are calculated at an effective rate of 13.1% of adjusted POSIT
revenues. The royalty payments related to Global Trading are calculated at an
effective rate of 50% of pretax earnings. OCCUPANCY AND EQUIPMENT includes
rent, depreciation, amortization of leasehold improvements, maintenance,
utilities, occupancy taxes and property insurance. CONSULTING is for equity
research, product development and other activities which the Company believes
it is advantageous to out-source. TELECOMMUNICATIONS AND DATA PROCESSING
SERVICES include costs for computer hardware, office automation and
workstations, data center equipment, market data services and voice, data,
telex and network communications. LOSS ON LONG-TERM INVESTMENTS includes
goodwill amortization, equity loss pick-up, and initial start up costs
associated with a European joint venture, the investment in the LongView
Group and the Australian joint venture. OTHER GENERAL AND ADMINISTRATIVE
includes goodwill amortization, legal, audit, tax and promotional expenses.
SPIN-OFF EXPENSES include legal, accounting, consulting and various other
expenses.
INCOME TAXES
The Company is a member of the Jefferies affiliated group ("Group") for
purposes of filing a Federal income tax return (i.e., Jefferies Group owns more
than 80% of the Company). The Company's tax liability is determined on a
"separate return" basis. That is, the Company is required to pay to Jefferies
Group its proportionate share of the consolidated tax liability plus any excess
of its "separate" tax liability (assuming a separate tax return were to be filed
by the Company) over its proportionate amount of the consolidated Group tax
liability. Alternatively, Jefferies Group is required to pay the Company an
"additional amount" for the amount by which the consolidated tax liability of
the Group is decreased by reason of inclusion of the Company in the Group.
Deferred tax assets and liabilities reflect the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
reverse. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Past effects of such changes in the rates were not material to the combined
financial statements.
The Company recently received a "30-day letter" proposing certain
adjustments which, if sustained, would result in a tax deficiency of
approximately $9.6 million plus interest. The adjustments proposed relate to
(i) the disallowance of deductions taken in connection with the termination of
certain compensation plans at the time of the Company's initial public offering
in 1994 and (ii) the disallowance of tax credits taken in connection with
certain research and development expenditures. The company believes that the
tax benefits in question were taken properly and intends to vigorously contest
the proposed adjustments. The Company is unable to predict when this matter
will be resolved or the costs associated with its resolution.
CAPITALIZED SOFTWARE
The Company capitalizes software development costs where technological
feasibility of the product has been established. The establishment of
technological feasibility and the ongoing assessment of recoverability of
capitalized software development costs requires considerable judgment by
management with respect to certain external factors, including, but not limited
to, technological feasibility, anticipated future gross revenues, estimated
economic life and changes in software and hardware technologies. The Company is
amortizing capitalized software costs using the straight-line method over the
estimated economic useful life, the average life of which is under two years.
Amortization begins when the product is available for release to customers.
- -----------------------
(1) POSIT is a registered service mark of the POSIT Joint Venture.
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Page 9 of 21
<PAGE>
CASH AND CASH EQUIVALENTS
The Company generally invests its excess cash in money market funds and
other short-term investments that generally mature within 90 days. At June 26,
1998 and December 31, 1997, such cash equivalents amounted to $78.5 million and
$49.3 million, respectively.
INVESTMENT IN LIMITED PARTNERSHIP
INVESTMENT IN LIMITED PARTNERSHIP consists of an investment in the TQA
Arbitrage Fund L.P. (the "Fund"), a Delaware limited partnership. The Fund
invests primarily in convertible securities, and seeks capital appreciation from
its convertible securities portfolio through a combination of convertible
securities purchases and short sales of related stocks focusing on the current
income and capital appreciation available from such strategies with
convertibles. The Company may withdraw any or all of its investment from the
Fund upon at least thirty days notice. Investment in limited partnership is
valued at market, and unrealized gains or losses are reflected in revenues.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Substantially all of the Company's financial instruments are carried at
fair value or amounts approximating fair value.
SECURITIES OWNED
Securities owned are valued at market, and unrealized gains or losses are
reflected in revenues. Securities owned consisted of equity securities and
municipal securities as of June 26, 1998 and December 31, 1997, respectively.
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at June 26, 1998 and December 31,
1997 consisted of the following;
<TABLE>
<CAPTION>
JUNE 26, DECEMBER 31,
1998 1997
--------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accounts payable and accrued expenses.... $ 9,336 $ 4,475
Accrued bonus expense.................... 7,218 2,849
Soft dollars payable .................... 4,222 3,125
Loan payable ............................ 2,000 -
Accrued rent ............................ 2,310 2,276
--------------------------
Total ................................... $ 25,086 $ 12,725
--------------------------
--------------------------
</TABLE>
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Page 10 of 21
<PAGE>
OTHER COMPREHENSIVE LOSS
The following summarizes other comprehensive loss as of June 26, 1998
(dollars in thousands):
<TABLE>
<CAPTION>
TAX NET
PRE-TAX (EXPENSE) OF TAX
AMOUNT OR BENEFIT AMOUNT
---------------------------------
<S> <C> <C> <C>
Currency translation adjustment........ $ (135) $ - $ (135)
---------------------------------
Other Comprehensive loss............... $ (135) $ - $ (135)
---------------------------------
---------------------------------
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
CURRENCY OTHER
TRANSLATION COMPREHENSIVE
ADJUSTMENT LOSS
--------------------------------
<S> <C> <C>
Balance at December 31, 1997........... $ - $ -
Change during six months ended (135) (135)
June 26, 1998........................
--------------------------------
Balance at June 26, 1998............... $ (135) $ (135)
--------------------------------
--------------------------------
</TABLE>
EARNINGS PER SHARE
Net earnings per share of common stock is based upon an adjusted weighted
average number of shares of common stock outstanding. The average number of
outstanding shares for the six months ended June 26, 1998 and June 27, 1997 were
18.3 million and 18.2 million, respectively. The average number of outstanding
shares for the three months ended June 26, 1998 and June 27, 1997 were 18.3
million and 18.1 million, respectively.
The following is a reconciliation of the basic and diluted earnings per
share computations for the six months ended June 26, 1998 and June 27, 1997.
<TABLE>
<CAPTION>
JUNE 26, JUNE 27,
1998 1997
----------- -----------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Net earnings for basic and diluted earnings per share................ $ 17,290 $ 14,539
----------- -----------
----------- -----------
Shares of common stock and common stock equivalents:
Average number of common shares................................... 18,277 18,191
----------- -----------
Average shares used in basic computation.......................... 18,277 18,191
Effect of dilutive securities - options........................... 882 566
----------- -----------
Average shares used in diluted.................................... 19,159 18,757
----------- -----------
----------- -----------
Earnings per share:
Basic............................................................. $ 0.95 $ 0.80
----------- -----------
----------- -----------
Diluted........................................................... $ 0.90 $ 0.78
----------- -----------
----------- -----------
</TABLE>
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Page 11 of 21
<PAGE>
The following is a reconciliation of the basic and diluted earnings per share
computations for the three months ended June 26, 1998 and June 27, 1997.
<TABLE>
<CAPTION>
JUNE 26, JUNE 27,
1998 1997
-------- --------
(AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Net earnings for basic and diluted earnings per share. . . . . . $ 9,928 $ 8,008
------- -------
------- -------
Shares of common stock and common stock equivalents:
Average number of common shares. . . . . . . . . . . . . . . 18,330 18,128
------- -------
Average shares used in basic computation . . . . . . . . . . 18,330 18,128
Effect of dilutive securities - options. . . . . . . . . . . 878 574
------- -------
Average shares used in diluted . . . . . . . . . . . . . . . 19,208 18,702
------- -------
------- -------
Earnings per share:
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.54 $ 0.44
------- -------
------- -------
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.52 $ 0.43
------- -------
------- -------
</TABLE>
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets, liabilities, revenues and expenses and the
disclosure of contingent assets, liabilities, revenues and expenses to prepare
these financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year's amounts to
conform to the current year's presentation.
JEFFERIES GROUP AND THE COMPANY ANNOUNCE INTENTION TO CONSIDER SEPARATING INTO
TWO INDEPENDENT COMPANIES
On March 17, 1998, Jefferies Group and the Company jointly announced that
they are considering the separation of Jefferies & Co. and other Jefferies Group
subsidiaries ("JEFCO") from the Company through a spin-off.
If the separation is completed, Jefferies Group shareholders will own 100%
of JEFCO and approximately 81.5% of the Company. The public Company shareholders
will continue to own 18.5% of the Company. (The Company percentage ownership
interests could change slightly as a result of the Company's stock repurchases
or issuances before the transaction closing date.) The spin-off will be
accomplished by a tax-free distribution of 100% of the shares of a new company,
JEFCO, to Jefferies Group shareholders. Jefferies Group's 15 million shares of
the Company would then be its only asset. The spin-off would be followed
immediately by a tax-free merger of Jefferies Group and the Company, with the
Company's public shareholders receiving shares of Jefferies Group. Jefferies
Group would then be renamed Investment Technology Group, Inc.
The spin-off and restructuring transactions are contingent on a number of
factors, including receipt of all Board of Directors and shareholder approvals
of Jefferies Group and the Company, receipt of a favorable tax ruling from the
Internal Revenue Service and other required regulatory and contractual
approvals.
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
PAGE 12 OF 21
<PAGE>
DIVIDENDS
Any future payments of dividends will be at the discretion of the Company's
Board of Directors and will depend on the Company's financial condition, results
of operations, capital requirements and other factors deemed relevant. The
Company is contemplating a special dividend in conjunction with the proposed
spin-off.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FIRST HALF 1998 VERSUS FIRST HALF 1997 (Dollars in millions, except as noted)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------- %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . $92.3 $67.3 $25.0 37%
Number of Trading Days . . . . . . . . . . . . . . . 122 124 (2) (2%)
Revenues per Trading Day (Dollars in thousands). . . $756 $543 $213 39%
</TABLE>
Increased revenues were attributed to the continued growth of POSIT, the
Company's Electronic Trading Desk and QuantEX(2). During the six months ended
June 26, 1998 ("First Half 1998"), POSIT revenues were approximately 36% or
$13.8 million above the comparable six months ended June 27, 1997 ("First Half
1997"). The number of shares per day traded via POSIT increased by
approximately 6 million or 40% to 21 million in the First Half 1998 over the
First Half 1997 amount of 15 million. The Electronic Trading Desk posted a 62%
or $8.8 million increase over the First Half 1997 while client QuantEX revenues
were up 14% or $2.0 million.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------- %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Compensation and employee benefits expense . . . . . $22.8 $13.9 $8.9 64%
Number of employees at period end. . . . . . . . . . 235 184 51 28%
Revenues per employee (Dollars in thousands) . . . . $393 $366 $27 7%
Compensation and employee benefits expense per
employee (Dollars in thousands). . . . . . . . . $97 $76 $21 28%
</TABLE>
Salaries, bonuses and related employee benefits increased as a result of the
Company's 28% growth in personnel, increases resulting from the Company's
profitability based compensation and increases in compensation due to market
pressures to attract and retain quality personnel. This increase was slightly
offset by capitalization of the employee portion of software costs from
additional software projects.
- --------------------------
(2) QuantEX is a registered trademark of the Company.
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
PAGE 13 OF 21
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------- %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Transaction processing expense . . . . . . . . . . . $12.4 $10.6 $1.8 17%
Transaction processing expense as a percentage
of revenues. . . . . . . . . . . . . . . . . . . 13.4% 15.7% (2.3pts.) (15%)
</TABLE>
The increase is primarily due to the expense associated with a higher volume
of transactions and shares in First Half 1998. However, as a percentage of
revenues, transaction processing expenses declined by 2.3 points primarily
from the Company's ability to leverage its technology by a mix of business in
the higher margin POSIT product and volume discounts realized with clearing
and execution services.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------- %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Software royalties expense . . . . . . . . . . . . . $6.8 $5.0 $1.8 36%
Software royalties expense as a percentage of
POSIT revenues . . . . . . . . . . . . . . . . . 13.1% 13.1% - N/A
</TABLE>
Software royalties are a contractually fixed percentage of POSIT revenues.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------- %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Occupancy and equipment expense . . . . . . . . . . $5.6 $3.9 $1.7 44%
</TABLE>
Increases in depreciation, amortization of leasehold improvements and rent
expense were primarily the result of the Company's relocation of its
corporate headquarters to 380 Madison Avenue in mid-June 1997.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------- %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Consulting expense . . . . . . . . . . . . . . . . . $1.1 $0.9 $0.2 22%
</TABLE>
When it is advantageous to do so, the Company outsources certain expertise
for implementation of some tactical projects. During the First Half 1998,
costs were incurred in exploring joint venture opportunities and assisting in
a major network conversion.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------- %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Telecommunications and data processing services
expense. . . . . . . . . . . . . . . . . . . . . $4.1 $3.1 $1.0 32%
</TABLE>
The First Half 1998 increase stems from the Company's growth in client base,
which requires market data line connections.
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
PAGE 14 OF 21
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------- %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Loss on long-term investments. . . . . . . . . . . . $2.1 - $2.1 N/A
</TABLE>
In the First Half 1998 the Company recorded losses from long-term investments
made to enhance products and enter new markets via joint ventures worldwide.
Costs include amortization of goodwill, the Company's equity loss pick-up and
initial start-up costs in conjunction with work on potential joint venture
partnerships.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------- %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Spin-off costs . . . . . . . . . . . . . . . . . . . $0.6 - $0.6 N/A
</TABLE>
The increase is attributable to Company's legal, accounting, consulting and
other expenses incurred for the proposed Investment Technology Group,
Inc./JEFCO spin-off, as discussed in the Condensed Notes to Consolidated
Financial Statements.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------- %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Other general and administrative expense . . . . . . $5.1 $4.7 $0.4 9%
</TABLE>
Increases in business development costs, such as advertising and active sales
efforts to promote ITG products and increase the ITG client base, were
largely responsible for the overall increase.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------- %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Income tax expense . . . . . . . . . . . . . . . . . $14.4 $10.7 $3.7 35%
</TABLE>
The increase is primarily due to the increase in pretax earnings. The
effective tax rate increased from 42.5% in the First Half 1997 to 45.5% in
the First Half 1998. Also responsible for the increase were certain
non-deductible expenses, such as goodwill amortization related to equity
investments, certain spin-off costs and exclusion of international losses in
calculating income tax expense that were not present in the First Half 1997.
SECOND QUARTER 1998 VERSUS SECOND QUARTER 1997 (Dollars in millions, except as
noted)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------ %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . $50.9 $36.7 $14.2 39%
Number of Trading Days . . . . . . . . . . . . . . . 63 64 (1) (2)%
Revenues per Trading Day (Dollars in thousands). . . $808 $573 $235 41%
</TABLE>
Increased revenues were attributed to the continued growth of POSIT, QuantEX and
the Company's Electronic Trading Desk. For the three months ended June 26, 1998
("Second Quarter 1998"), POSIT revenues were approximately 47% or $9.2 million
above the comparable three months ended June 27, 1997 ("Second Quarter 1997").
The number of shares per day traded via POSIT increased by approximately 7
million or 47% to 22 million in the Second Quarter 1998 over the Second Quarter
1997 amount of 15 million. The Company's client QuantEX revenues were
approximately 12% or $0.9 million above the Second Quarter 1997. The Electronic
Trading Desk posted a 49% or $4.1 million increase over the Second Quarter 1997.
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
PAGE 15 OF 21
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------ %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Compensation and employee benefits expense . . . . . $12.2 $ 7.0 $5.2 74%
Number of employees at period end. . . . . . . . . . 235 184 51 28%
Revenues per employee (Dollars in thousands) . . . . $217 $199 $18 9%
Compensation and employee benefits expense per
employee (Dollars in thousands). . . . . . . . . $ 52 $ 38 $14 37%
</TABLE>
Salaries, bonuses and related employee benefits increased as a result of the
Company's 28% growth in personnel, increases resulting from the Company's
profitability based compensation and increases in compensation due to market
pressures to attract and retain quality personnel.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------ %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Transaction processing expense . . . . . . . . . . . $6.7 $5.7 $1.0 18%
Transaction processing expense as a percentage of
revenues . . . . . . . . . . . . . . . . . . . . 13.2% 15.5% (2.3pts.) (15%)
</TABLE>
The increase is primarily due to the expense associated with a higher volume
of transactions and shares in Second Quarter 1998. However, as a percentage
of revenues, transaction processing expenses declined by 2.3 points primarily
from the Company's ability to leverage its technology by a mix of business in
the higher margin POSIT product and volume discounts realized with clearing
and execution services.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------ %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Software royalties expense . . . . . . . . . . . . . $ 3.8 $ 2.6 $1.2 46%
Software royalties expense as a percentage of
POSIT revenues . . . . . . . . . . . . . . . . . 13.1% 13.1% - N/A
</TABLE>
Software royalties are a contractually fixed percentage of POSIT revenues.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------ %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Occupancy and equipment expense . . . . . . . . . . $2.8 $2.0 $0.8 40%
</TABLE>
Increases in depreciation, amortization of leasehold improvements and rent
expense were primarily the result of the Company's relocation of its
corporate headquarters to 380 Madison Avenue in mid-June 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------ %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Consulting expense. . . . . . . . . . . . . . . . . $0.4 $0.6 ($0.2) (33%)
</TABLE>
When it is advantageous to do so, the Company outsources certain expertise
for implementation of some tactical projects. During the Second Quarter
1998, costs were incurred in exploring joint venture opportunities and
assisting in a major network conversion.
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
PAGE 16 OF 21
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------ %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Telecommunications and data processing services
expense . . . . . . . . . . . . . . . . . . . . . $2.3 $2.2 $0.1 5%
</TABLE>
The Second Quarter 1998 increase stems from the Company's growth in client base,
which requires market data line connections.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------ %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Loss on long-term investments . . . . . . . . . . . $1.1 - $1.1 N/A
</TABLE>
In the Second Quarter 1998 the Company recorded losses from Long-term
investments made to enhance products and enter new markets via joint ventures
worldwide. Costs include amortization of goodwill, the Company's equity loss
pick-up and initial start-up costs in conjunction with work on potential
joint venture partnerships.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------ %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Spin-off costs. . . . . . . . . . . . . . . . . . . $0.4 - $0.4 N/A
</TABLE>
The increase is attributable to Company's legal, accounting, consulting and
other expenses incurred for the proposed Investment Technology Group,
Inc./JEFCO spin-off, as discussed in the Condensed Notes to Consolidated
Financial Statements.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------ %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Other general and administrative expense. . . . . . $2.5 $2.7 ($0.2) (7%)
</TABLE>
The decrease is largely attributable to decreases in business development costs
during Second Quarter 1998.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------ %
JUNE 26, 1998 JUNE 27, 1997 CHANGE CHANGE
------------- ------------- ------ ------
<S> <C> <C> <C> <C>
Income tax expense. . . . . . . . . . . . . . . . . $8.7 $5.9 $2.8 48%
</TABLE>
The increase is primarily due to the increase in pretax earnings. The
effective tax rate increased from 42.5% in the Second Quarter 1997 to 46.8%
in the Second Quarter 1998. Also responsible for the increase were certain
non-deductible expenses, such as goodwill amortization related to equity
investments, certain spin-off costs and exclusion of international losses in
calculating income tax expense that were not present in the Second Quarter
1997.
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Page 17 of 21
<PAGE>
THE YEAR 2000 ISSUE
OVERVIEW
Some computer systems and software products were originally designed to accept
only two digit entries in the data code field. As a result, certain computer
systems and software packages will not be able to interpret dates beyond
December 31, 1999 and thus will interpret dates beginning January 1, 2000
incorrectly. This could potentially result in computer failure or
miscalculations, causing operating disruptions, including an inability to
process transactions, send invoices or engage in normal business operations.
Therefore, companies may have to upgrade or replace computer and software
systems in order to comply with the "Year 2000" requirements.
ITG'S STRATEGY
The Company is well aware of and is actively addressing the Year 2000 issue
and the potential problems that can arise in any computer and software system.
Planning and evaluation work began in 1997 including the identification of those
systems affected. A "Year 2000 working group" was established to address the
Company's Year 2000 issue. The Company has targeted its efforts into three major
areas:
i) VENDORS;
ii) COMPANY PROPRIETARY PRODUCTS; AND
iii) CLIENTS.
VENDORS - The Company's ability to successfully meet the Year 2000 challenge is
in part dependent on its vendors. The Company has contacted its vendors to
determine the status of their Year 2000 programs and has created a database
recording each vendor's readiness status.
COMPANY PROPRIETARY PRODUCTS - The Company has evaluated its trading systems and
has endeavored to examine all code contained in its internally produced
software. Internal testing is scheduled to be completed by the end of 1998. The
Company plans to release Year 2000 compliant versions of its products by the
beginning of 1999. The Company also intends to participate in the Securities
Industry Association's industry-wide testing program in 1999.
CLIENTS - A letter explaining the Company's Year 2000 strategy was sent to all
clients in July of 1998. In addition, clients have been contacted on a project
by project basis to ascertain compatibility between the Company's systems and
changes made to the clients' systems. In 1999, the Company plans to provide
point-to-point-testing opportunities for its clients.
RISKS
The Company currently expects to implement the necessary changes to ensure
that its internal operations are Year 2000 compliant prior to December 31, 1999.
However, if such changes are not completed in a timely manner, the Year 2000
issue could have a material impact on the Company's operations. The Company
does not believe that the costs incurred to ready its systems for the Year 2000
will have a material effect on its financial condition. Total costs for the
whole project are estimated to be between $2.5 and $3.0 million, which includes
the cost of personnel, consultants and software and hardware costs. To date,
the Company has spent approximately $400,000 on the Year 2000 project.
The Year 2000 issue, however, can affect all businesses that rely heavily on
automated systems. A general failure of computer and communication systems
relied upon by the securities industry (such as the systems provided by long
distance telephone companies, the exchanges, Nasdaq, the Depository Trust
Company and ADP Brokerage Services ) would prevent the Company from operating
in whole or in part until such systems have been restored. In such case or if
the Year 2000 issue adversely affects the Company's customers, this in turn
could have a material adverse effect on the
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Page 18 of 21
<PAGE>
Company's trading revenues and collections. Should the Company, third party
information vendors, other third party electronic vendors, or the Company's
customers fail to adequately address this issue, the Company's business,
financial condition and results of operations could be materially adversely
affected.
PART II. - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) Date of Meeting - May 12, 1998
Type of Meeting - Annual Meeting of Stockholders
(b) At the meeting, the following directors were elected by the
stockholders to hold office until the next annual meeting of
stockholders or until their successors have been duly elected and
qualified:
Frank E. Baxter
Richard G. Dooley
William I Jacobs
Raymond L. Killian, Jr.
Robert L. King
Michael L. Klowden
Scott P. Mason
Dale A. Prouty
Mark A. Wolfson
(c) At the meeting, with respect to the election of the directors and
approval of the Employee Stock Purchase Plan, the following votes were cast in
the following manner:
<TABLE>
<CAPTION>
Election of Directors
NAME FOR WITHHELD
- --------------------------------------------------------------------
<S> <C> <C>
Frank E. Baxter 18,105,132 97,200
Richard G. Dooley 18,094,432 107,900
William I Jacobs 18,105,132 97,200
Raymond L. Killian, Jr. 18,105,132 97,200
Robert L. King 18,105,132 97,200
Michael L. Klowden 18,105,132 97,200
Scott P. Mason 18,105,132 97,200
Dale A. Prouty 18,105,132 97,200
Mark A. Wolfson 18,105,132 97,200
</TABLE>
Approval of the Employee Stock Purchase Plan
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------
<S> <C>
For 18,100,554
Against 99,000
Abstain 2,778
</TABLE>
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Page 19 of 21
<PAGE>
Item 5. Other Information
On July 17, 1998, the Company announced that its wholly owned subsidiary, ITG
Ventures Inc., has entered into an agreement with Barclays California
Corporation ("Barcal") pursuant to which Barcal will purchase all of the
outstanding shares of the LongView Group Inc. The transaction, which is
subject to certain conditions, including Barcal regulatory approval, is
expected to close in the third quarter of 1998 and to generate a gain.
The Company recently received a "30-day letter" proposing certain adjustments
which, if sustained, would result in a tax deficiency of approximately $9.6
million plus interest. The adjustments proposed relate to (i) the disallowance
of deductions taken in connection with the termination of certain compensation
plans at the time of the Company's initial public offering in 1994 and (ii) the
disallowance of tax credits taken in connection with certain research and
development expenditures. The company believes that the tax benefits in
question were taken properly and intends to vigorously contest the proposed
adjustments. The Company is unable to predict when this matter will be resolved
or the costs associated with its resolution.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K.
On May 1, 1998, the Company filed a Form 8-K reporting updated
financial information regarding the previously announced plan by
Jefferies Group, Inc. ("Group") and the Company to separate Group's
100% owned subsidiary, Jefferies & Company, Inc. and Group's 81.5%
owned subsidiary, the Company, through a proposed spin-off and related
transactions.
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Page 20 of 21
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INVESTMENT TECHNOLOGY GROUP, INC.
---------------------------------
(Registrant)
Date: August 7, 1998 By: /s/ John R. MacDonald
------------------- ---------------------
John R. MacDonald
Chief Financial Officer and
Duly Authorized Signatory of
Registrant
INVESTMENT TECHNOLOGY GROUP, INC. AND SUBSIDIARIES
Page 21 of 21
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE IS SUMMARY FINANCIAL INFORMATION FROM THE CONSOLIDATED STATEMENT
OF FINANCIAL CONDITION AND THE CONSOLIDATED STATEMENT OF OPERATIONS AS OF
6/26/98 AND FOR THE 6 MONTHS THEN ENDED AND THE NOTES THERETO AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS FILED IN THE 1998
INVESTMENT TECHNOLOGY GROUP, INC. 2ND QTR 10-Q FILING.
</LEGEND>
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-26-1998
<CASH> 79,011
<RECEIVABLES> 15,877
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 11,416
<PP&E> 20,054
<TOTAL-ASSETS> 149,078
<SHORT-TERM> 0
<PAYABLES> 28,927
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 0
0
0
<COMMON> 190
<OTHER-SE> 114,561
<TOTAL-LIABILITY-AND-EQUITY> 149,078
<TRADING-REVENUE> 0
<INTEREST-DIVIDENDS> 1,679
<COMMISSIONS> 90,613
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 0
<INTEREST-EXPENSE> 14
<COMPENSATION> 22,810
<INCOME-PRETAX> 31,717
<INCOME-PRE-EXTRAORDINARY> 31,717
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,290
<EPS-PRIMARY> 0.95
<EPS-DILUTED> 0.90
</TABLE>
