UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended September 26, 2003

Commission file number: 0 – 23644

 

 

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 November 03, 2003 the Registrant had 46,730,088 shares of common stock, $0.01 par value, outstanding.

 

 

QUARTERLY REPORT ON FORM 10-Q

 

TABLE OF CONTENTS

 

	PART I. - Financial Information	Page
Item 1.	Financial Statements
	Condensed Consolidated Statements of Financial Condition: September 26, 2003 (unaudited) and December 31, 2002	4
	Condensed Consolidated Statements of Income (unaudited): Three and Nine Months Ended September 26, 2003 and September 27, 2002	5
	Condensed Consolidated Statement of Changes in Stockholders’ Equity (unaudited): Nine Months Ended September 26, 2003	6
	Condensed Consolidated Statements of Cash Flows (unaudited): Nine Months Ended September 26, 2003 and September 27, 2002	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 4.	Controls and Procedures	29
	PART II. - Other Information
Item 5.	Other Information	30
Item 6.	Exhibits and Reports on Form 8-K	30
	Signature	30

 

QuantEX, Investment Technology Group, ITG, TCA 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, 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)

 

		September 26, 2003			December 31, 2002
		(unaudited)
Assets
Cash and cash equivalents		$	195,290		$	180,970
Cash restricted or segregated under regulations and other		15,428			12,302
Securities owned, at fair value		84,266			75,644
Receivables from brokers, dealers and other, net		600,736			159,293
Investments in limited partnerships		26,472			26,104
Premises and equipment		22,074			28,999
Capitalized software		8,446			6,582
Goodwill		77,132			77,533
Other intangibles		5,234			5,034
Deferred taxes		9,096			9,740
Other assets		13,623			12,053
Total assets		$	1,057,797		$	594,254
Liabilities and Stockholders’ Equity
Liabilities:
Accounts payable and accrued expenses		$	94,005		$	83,350
Payables to brokers, dealers and other		564,311			139,138
Software royalties payable		4,948			4,122
Securities sold, not yet purchased, at fair value		1,173			37
Income taxes payable		17,277			11,098
Total liabilities		681,714			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: 51,262,743 and 51,220,201 at September 26, 2003 and December 31, 2002, respectively		513			512
Additional paid-in capital		156,892			155,085
Retained earnings		321,521			292,025
Common stock held in treasury, at cost; shares: 4,576,219 and 3,689,722 at September 26, 2003 and December 31, 2002, respectively		(107,151		)	(92,471		)
Accumulated other comprehensive income:
Currency translation adjustment		4,308			1,358
Total stockholders’ equity		376,083			356,509
Total liabilities and stockholders’ equity		$	1,057,797		$	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						Nine Months Ended
		September 26, 2003			September 27, 2002			September 26, 2003			September 27, 2002
Revenues:
Commissions:
POSIT		$	36,557		$	35,334		$	95,620		$	123,520
Electronic Trading Desk		27,683			29,499			86,806			76,415
Client Site Direct Access		18,830			29,630			57,954			87,052
Other		2,252			2,411			7,095			7,023
Total revenues		85,322			96,874			247,475			294,010
Expenses:
Compensation and employee benefits		29,028			28,770			88,234			84,405
Transaction processing		11,501			13,160			33,560			36,732
Software royalties		4,881			4,563			12,527			15,871
Occupancy and equipment		7,963			7,311			23,718			20,443
Telecommunications and data processing services		4,457			4,279