WASHINGTON, D.C. 20549

 

FORM 10-Q

 

Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

 

 

INVESTMENT TECHNOLOGY GROUP, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

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 ý                       No o

 

Indicate by check mark whether the registrant is an accelerated filer (as defined by Exchange Act Rule 12b-2)

 

Yes ý                       No o

 

As of August 5, 2003, the Registrant had 47,273,756 shares of common stock, $0.01 par value, outstanding.

 

 

QUARTERLY REPORT ON FORM 10-Q

 

TABLE OF CONTENTS

 

		Page
	PART I. - Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Statements of Financial Condition: June 27, 2003 (unaudited) and December 31, 2002	4
	Condensed Consolidated Statements of Income (unaudited): Three and Six Months Ended June 27, 2003 and June 30, 2002	5
	Condensed Consolidated Statement of Changes in Stockholders’ Equity (unaudited): Six Months Ended June 27, 2003	6
	Condensed Consolidated Statements of Cash Flows (unaudited): Six Months Ended June 27, 2003 and June 30, 2002	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 4.	Controls and Procedures	31
	PART II. - Other Information
Item 5.	Other Information	32
Item 6.	Exhibits and Reports on Form 8-K	32
	Signature	32

 

QuantEX, Investment Technology Group, ITG and SmartServer are registered trademarks of the Investment Technology Group, Inc. companies. POSIT is a registered service mark of the POSIT Joint Venture. TriAct is a trademark of the POSIT Joint Venture. SPI SmartServer, VWAP SmartServer, ITG ACE, TCA, ITG WebAccess, ITG/Opt, ITG PRIME, ResRisk, Hoenig and AlterNet are trademarks of the Investment Technology Group, Inc. companies.

 

2

 

FORWARD-LOOKING STATEMENTS

 

In addition to the historical information contained throughout this Quarterly Report on Form 10-Q, there are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements regarding our expected future financial position, results of operations, cash flows, dividends, financing plans, business strategies, competitive positions, plans and objectives of management for future operations, and concerning securities markets and economic trends are forward-looking statements. Although we believe our expectations reflected in such forward-looking statements are based on reasonable assumptions, there can be no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements herein include, among others, the actions of both current and potential new competitors, rapid changes in technology, fluctuations in market trading volumes, financial market volatility, evolving industry regulations, risk of errors or malfunctions in our systems or technology, cash flows into or redemptions from equity funds, effects of inflation, customer trading patterns, the success of our new products and services offerings as well as general economic and business conditions, internationally or nationally, securities, credit and financial market conditions, and adverse changes or volatility in interest rates. Certain of these factors, and other factors, are more fully discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations - Issues and Uncertainties - in our annual report on Form 10-K for the year ended December 31, 2002, which you are encouraged to read.

 

3

 

PART I.   -     FINANCIAL INFORMATION

 

Item 1.                                   Financial Statements

 

INVESTMENT TECHNOLOGY GROUP, INC.

Condensed Consolidated Statements of Financial Condition

(In thousands, except share amounts)

 

		June 27, 2003			December 31, 2002
		(unaudited)
Assets
Cash and cash equivalents		$	195,169		$	180,970
Cash restricted or segregated under regulations and other		13,078			12,302
Securities owned, at fair value		83,559			75,644
Receivables from brokers, dealers and other, net		302,788			159,293
Investments in limited partnerships		26,653			26,104
Premises and equipment		24,664			28,999
Capitalized software		8,035			6,582
Goodwill and other intangibles		82,531			82,567
Deferred taxes		9,929			9,740
Other assets		12,016			12,053
Total assets		$	758,422		$	594,254
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable and accrued expenses		$	89,358		$	83,350
Payables to brokers, dealers and other		273,432			139,138
Software royalties payable		4,753			4,122
Securities sold, not yet purchased, at fair value		176			37
Income taxes payable		16,633			11,098
Total liabilities		384,352			237,745
Commitments and contingencies
Stockholders’ Equity:
Preferred stock, par value $0.01; shares authorized: 1,000,000; shares issued: none		—			—
Common stock, par value $0.01; shares authorized: 100,000,000; shares issued: 51,237,705 and 51,220,201 at June 27, 2003 and December 31, 2002, respectively		512			512
Additional paid-in capital		156,030			155,085
Retained earnings		310,329			292,025
Common stock held in treasury, at cost; shares: 3,996,583 and 3,689,722 at June 27, 2003 and December 31, 2002, respectively		(96,882		)	(92,471		)
Accumulated other comprehensive income:
Currency translation adjustment		4,081			1,358
Total stockholders’ equity		374,070			356,509
Total liabilities and stockholders’ equity		$	758,422		$	594,254

 

See accompanying unaudited notes to condensed consolidated financial statements.

 

4

 

INVESTMENT TECHNOLOGY GROUP, INC.

Condensed Consolidated Statements of Income (unaudited)

(In thousands, except per share amounts)

 

		Three Months Ended						Six Months Ended
		June 27, 2003			June 30, 2002			June 27, 2003			June 30, 2002
Revenues:
Commissions:
POSIT		$	34,343		$	41,600		$	59,063		$	88,186
Electronic Trading Desk		31,791			23,880			59,123			46,916
Client Site Direct Access		20,128			31,410			39,124			57,422
Other		2,380			2,508			4,843			4,612
Total revenues		88,642			99,398			162,153			197,136
Expenses:
Compensation and employee benefits		30,438			29,474			59,206			55,635
Transaction processing		11,965			11,664			22,059			23,572
Software royalties		4,530			5,387			7,646			11,308
Occupancy and equipment		8,093			6,851			15,755			13,132
Telecommunications and data processing services		4,757			4,040			9,247			8,286
Other general and administrative		8,746		<