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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Reuters Grp. | LSE:RTR | London | Ordinary Share | GB0002369139 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 631.00 | 0.00 | 00:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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Reuters Group PLC
22 July 2003
NEWS RELEASE
22 July 2003 08/03
REUTERS UNIT INSTINET ANNOUNCES SECOND QUARTER 2003 RESULTS
London - Instinet, which is 63% owned by Reuters Group, published its half-year
results for the six months ended 30 June 2003 today.
INSTINET ANNOUNCES SECOND QUARTER 2003 RESULTS
NEW YORK, July 21, 2003 - Instinet Group Incorporated (Nasdaq: INET) today
announced a net loss of $5 million or $0.02 per share, compared to a net loss of
$60 million or $0.24 per share, for the second quarter of 2002.(1) The pro forma
operating loss was $1.5 million, or $0.00 per share, for the second quarter of
2003. The pro forma operating loss excludes investment gains and losses, charges
related to cost reductions and the related tax effect of these items.(2)
Ed Nicoll, Chief Executive Officer of Instinet, commented: "During the second
quarter, trading volumes improved compared to the last quarter, although
business conditions remained tough. Instinet continued to make strong progress
in its plan to reduce its costs, rationalize its structure, and invest in key
technologies and services. To position the company for continuing market
challenges, and to capitalize on changing business conditions, we will press on
with our cost reductions, but will also separate the company's management and
operations along three distinct businesses based on what they do -- the
sell-side ECN or ATS, the buy-side value-added brokerage, and our LJR commission
recapture subsidiary."
Business Highlights
* Our clients traded 37.1 billion U.S. equity shares through Instinet in
the second quarter of 2003, up from 19.2 billion shares executed in the second
quarter of 2002, and up 18% from 31.5 billion shares executed in the first
quarter of 2003. The increase versus the first quarter of 2003 was due to higher
overall average daily market volumes and two additional trading days in the
second quarter. The Island ECN accounted for 14.4 billion shares of this volume
in the second quarter of 2003.
* U.S. equity shares executed through Instinet during the second quarter
of 2003 consisted of 32.0 billion NASDAQ-listed shares and 5.1 billion U.S.
exchange-listed shares.
* Our share of total U.S. equity volume was 15.5% in the second quarter.
This compares to 8.6% in the second quarter of 2002 and 15.4% in the first
quarter of 2003.
* Our share of NASDAQ-listed equity volume was 28.4% in the second
quarter, and our share of U.S. exchange-listed equity volume was 4.0%.
* We have maintained our focus on cost reduction. Our annualized
fixed-cost base in the second quarter was approximately 14% below its level in
the second quarter of 2002. (The fixed-cost base excludes variable costs - soft
dollar and commission recapture, broker-dealer rebates and brokerage, clearing
and exchange fees - and non-operating expenses, which include charges related to
our cost-reduction initiatives).2
Financial Performance
Revenues
Total revenues for the second quarter were $285 million, up 19% from the first
quarter of 2003.
Transaction fee revenue for the second quarter was $276 million, up 8% from the
first quarter of 2003. Our net equity transaction fee revenue was $164 million,
up 8% from the first quarter of 2003. 2
During the second quarter, Instinet recorded a net investment gain of $3 million
due to an increase in the carrying value of certain of the company's investments
in non-U.S. exchanges, offset in part by write-downs of other investments.
Expenses
Instinet's total expenses from continuing operations for the second quarter of
2003 were $290 million, up 3% from the first quarter of 2003. Operating expenses
were $282 million, or 3% higher than the comparable expenses in the first
quarter of 2003. Operating expenses exclude an $8 million severance charge
included in compensation and benefits in the second quarter of 2003, and $11
million in severance and occupancy charges included in compensation and benefits
and occupancy in the first quarter of 2003, both related to cost reductions.2
* Compensation and benefits expense was $61 million in the second quarter
of 2003. Excluding an $8 million severance charge, compensation and benefits
expense was down 4% from the previous period, reflecting lower staff levels.
* Brokerage, clearing and exchange fees were $33 million, down 2% from
the previous quarter as lower fees were partly offset by higher volumes.
* Communications and equipment expense was $32 million, up 3% from the
previous quarter due to additional charges associated with our migration of
clients to a third-party network. We expect this transition to be substantially
complete by the end of the third quarter.
* Occupancy expenses were $13 million, down 20% from the previous
quarter, primarily due to the consolidation of office space and a $2 million
charge for occupancy in the first quarter.
* Other expenses were $8 million, up 7% from the first quarter of 2003,
primarily the result of higher bad debt expenses, partly offset by lower
discretionary expenses.
Balance Sheet
At June 30, 2003, Instinet had net cash (cash and cash equivalents and
securities owned less short-term borrowings) of approximately $578 million,
tangible net assets of approximately $879 million, and shareholders' equity of
approximately $994 million. There were approximately 331 million shares of
common stock outstanding.
Instinet's Chief Financial Officer, John F. Fay, commented: "We have been
focused on reducing our costs and on strengthening the structure of our business
to better serve our customers. By delivering on these initiatives, along with
our global exchange network and strong balance sheet, we can offer our customers
low-cost and technologically advanced products and compete aggressively in this
tough environment."
Strategic Developments
During the quarter, Instinet formulated a reorganization plan that includes
separating the company's buy-side and sell-side businesses. The purpose of the
plan is to add strategic clarity to our businesses and better serve our
customers.
The buy-side business will be a global value-added brokerage (VAB) that seeks
best execution on behalf of its customers. The VAB will continue to focus on
products and services that enhance the trading experience and investment
performance of its clients. These may include unbiased access to all major
equity pools of liquidity, unconflicted and trusted sales trading expertise
along with sophisticated execution tools and strategies, and independent and
exclusive research to help improve investment performance. The VAB is expected
to cater to both self-directed electronic traders and those seeking sales
trading and assisted execution, and to provide for all clients access to
domestic and international equity markets, rules-based trading, block trading,
portfolio trading and other services.
Instinet's sell-side business consists of an alternative trading system (ATS)
comprising the Instinet and Island ECNs and their clearing broker, Instinet
Clearing Services. The ATS collects, prioritizes, displays, and matches orders
within its member network. Instinet will focus on fully integrating its two
pools of liquidity into one, and developing the ATS to offer matching and
routing services for its U.S.-registered broker-dealer subscribers. Institutions
or non-U.S. broker-dealers will need to be sponsored by a U.S. broker-dealer to
gain access to the ATS. All member broker-dealers will enjoy equal access to the
ATS, and will be permitted to redistribute access to third parties.
Instinet has put in place a strong business team to manage the reorganization of
its business units. Alex Goor, previously EVP for Strategy and Planning, will
lead the ATS. The VAB will be headed by an interim joint management team
consisting of Ed Nicoll, Instinet's CEO, alongside Mike Plunkett, formerly head
of Instinet's hedge fund group, and Natan Tiefenbrun, formerly responsible for
products & services for quantitative money managers.
Instinet expects to make additional announcements in the future with respect to
our plans for personnel and organizational structure, and the timeframe for
implementing such plans. The company also anticipates that it will provide
separate financial disclosures for the VAB and the ATS, beginning with the first
quarter 2004 reporting period.
Please refer to the table entitled Customer Operating Dataattached to this
release.
Webcast
Instinet will webcast a conference call to discuss its second quarter results at
5:00 p.m. New York time today at http://www.investor.instinet.com. A replay will
be available at the same address following the call.
About Instinet
Instinet, through affiliates, is the largest global electronic agency securities
broker and has been providing investors with electronic trading solutions for
more than 30 years. Our services enable buyers and sellers worldwide to trade
securities directly and anonymously with each other, have the opportunity to
gain price improvement for their trades, manage their orders and lower their
overall trading costs. Instinet is part of the Reuters family of companies.
Through our electronic platforms, our customers can access over 40 securities
markets throughout the world, including NASDAQ, the NYSE and stock exchanges in
Frankfurt, Hong Kong, London, Paris, Sydney, Tokyo, Toronto and Zurich. Our
customers consist of institutional investors, such as mutual funds, pension
funds, insurance companies and hedge funds, as well as market professionals,
including broker-dealers. We act solely as an agent for our customers and do not
trade securities for our own account or maintain inventories of securities for
sale.
END
Reuters contacts
Press - UK Tel: +44 (0) 20 7542 7800
Simon Walker
simon.walker@reuters.com
Investors - UK Tel: +44 (0) 20 7542 7057
Miriam McKay
miriam.mckay@reuters.com
Investors and press - USA Tel: +1 646 223 5220
Nancy Bobrowitz
nancy.bobrowitz@reuters.com
Instinet contact
Investors and press Tel: +1 212 310 7481
John Pitt
john.pitt@instinet.com
This press release is for information purposes only and is not intended as an
offer or solicitation with respect to the purchase or sale of any security.
(c) 2003 Instinet Group Incorporated and its affiliated companies. All rights
reserved. INSTINET is a registered service mark in the United States and in
other countries throughout the world. Instinet is part of the Reuters family of
companies.
Instinet Corporation (member NASD/SIPC), The Island ECN, Inc. (member NASD/CSE/
SIPC), Instinet Clearing Services, Inc. (member NASD/SIPC) and the Island
Holding Company, Inc. are subsidiaries of Instinet Group Incorporated.
This news release may be deemed to include forward-looking statements relating
to Instinet. Certain important factors that could cause actual results to differ
materially from those disclosed in such forward-looking statements are included
in Instinet's Annual Report on Form 10-K for the fiscal year ended December 31,
2002, and other documents filed with the SEC and available on the Company's
website. Certain information regarding trading volumes is also included in
Instinet's Annual Report on Form 10-K for the fiscal year ended December 31,
2002 and on the Company's website at www.instinet.com. These statements speak
only as of the date of this news release, and the Company does not undertake any
obligation to update them.
Instinet Group Incorporated
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
----------------- -------------
June 30, 2003 Mar 31, 2003 June 30, 2002 June 30, 2003 June 30, 2002
------- ------- ------- -------- -------
REVENUES
Transaction $275,909 $255,224 $269,933 $ 531,133 $ 535,814
fees
Interest 6,651 6,347 11,958 12,998 20,892
Investments 2,841 (21,678) (13,181) (18,837) (18,895)
------- ------- ------- -------- -------
Total 285,401 239,893 268,710 525,294 537,811
revenues
EXPENSES
Compensation 60,749 63,984 70,989 124,733 157,207
and benefits
Soft dollar and 49,604 49,058 61,738 98,662 115,329
commission
recapture
Broker-dealer 58,630 50,420 25,503 109,050 28,794
rebates
Brokerage, 33,446 34,025 33,767 67,471 70,448
clearing and
exchange fees
Communications 31,617 30,720 29,187 62,337 62,496
and equipment
Depreciation 23,534 24,074 17,930 47,608 37,053
and amortization
Occupancy 13,175 16,458 13,595 29,633 27,147
Professional 7,228 6,338 6,646 13,566 11,664
fees
Marketing and 3,480 2,781 7,480 6,261 10,887
business development
Other 8,407 7,860 16,852 16,267 32,526
Restructuring - - 42,410 - 57,440
Insurance - (5,000) - (5,000) -
recovery of ------- ------- ------- -------- -------
fixed assets lost
Total 289,870 280,718 326,097 570,588 610,991
expenses ------- ------- ------- -------- -------
Loss from (4,469) (40,825) (57,387) (45,294) (73,180)
continuing operations
before income taxes
Income tax 732 (6,507) (14,117) (5,775) (19,820)
benefit ------- ------- ------- -------- -------
Loss from (5,201) (34,318) (43,270) (39,519) (53,360)
continuing operations
Discontinued
operations:
Loss from - - (23,581) - (33,356)
operations of
fixed income business
Income tax - - 6,946 - 10,770
benefit ------- ------- ------- -------- -------
Loss before (5,201) (34,318) (59,905) (39,519) (75,946)
cumulative effect of
change inaccounting
principle
Cumulative - - - - (18,642)
effect of ------- ------- ------- -------- -------
change in accounting
principle related to
goodwill, net of tax
Net loss (5,201) (34,318) (59,905) $ (39,519) $ (94,588)
======= ======= ======= ======== =======
Earnings/(loss)
per share -basic and diluted
Loss from $ (0.02) $ (0.10) $ (0.17) $ (0.12) $ (0.22)
continuing operations
Discontinued
operations:
Loss from - - (0.10) - (0.13)
operations of fixed income
business
Income tax - - 0.03 - 0.04
benefit ------- ------- ------- -------- -------
Loss before (0.02) (0.10) (0.24) (0.12) (0.31)
cumulative
effect of change in
accountingprinciple
Cumulative - - - - (0.07)
effect of ------- ------- ------- -------- -------
change in accounting
principle, net of tax
Net loss $ (0.02) $ (0.10) $ (0.24) $ (0.12) $ (0.38)
======= ======= ======= ======== =======
Weighted 330,841 330,764 248,739 330,803 248,735
average shares
outstanding - basic
Weighted 330,841 330,764 248,771 330,803 248,813
average shares
outstanding - diluted
Note: Results for Island Holding Company, Inc. are included subsequent to 9/20/02.
Instinet Group Incorporated
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Quarter Ended
June Mar 31, Dec 31, Sept 30, June 30, Mar 31, Dec 31, Sept June
30, 30, 30,
2003 2003 2002 2002 2002 2002 2001 2001 2001
REVENUE
Transaction fees $275,909 $255,224 $278,441 $263,917 $269,933 $265,881 $319,219 $311,737 $378,891
Interest 6,651 6,347 8,546 10,699 11,958 8,934 11,562 14,254 11,199
Investments 2,841 -21,678 -19,878 -20,336 -13,181 -5,714 17,817 -6,330 3,689
Total revenues 285,401 239,893 267,109 254,280 268,710 269,101 348,598 319,661 393,779
EXPENSES
Compensation and 60,749 63,984 60,745 63,809 70,989 86,218 83,996 84,820 112,735
benefits
Soft dollar and 49,604 49,058 50,161 51,824 61,738 53,591 58,174 51,595 54,228
commission recapture
Broker-dealer 58,630 50,420 56,601 39,004 25,503 3,291 - - -
rebates
Brokerage, 33,446 34,025 36,994 42,079 33,767 36,681 40,364 33,284 36,185
clearing and
exchange fees
Communications and 31,617 30,720 36,604 26,620 29,187 33,309 32,872 36,939 42,560
equipment
Depreciation and 23,534 24,074 24,659 16,712 17,930 19,123 21,269 21,206 19,669
amortization
Occupancy 13,175 16,458 16,158 12,223 13,595 13,552 11,587 14,424 13,796
Professional fees 7,228 6,338 7,820 5,110 6,646 5,018 7,880 8,085 9,012
Marketing and 3,480 2,781 3,756 2,451 7,480 3,407 2,739 843 8,477
business development
Other 8,407 7,860 16,559 9,899 16,852 15,674 13,742 14,312 13,545
Restructuring - - 62,405 955 42,410 15,030 1,557 22,821 -
Goodwill - - - 551,991 - - - - -
impairment
Loss of fixed - - - - - - 818 19,528 -
assets at World Trade Center
Insurance recovery - -5,000 - - - - -1,472 -19,528 -
of fixed assets lost
Total expenses 289,870 280,718 372,462 822,677 326,097 284,894 273,526 288,329 310,207
Income/(loss) from -4,469 -40,825 -105,353 -568,397 -57,387 -15,793 75,072 31,332 83,572
continuing operations before
income taxes, cumulative effect
of change in accounting
principle
Income tax 732 -6,507 6,690 -39,958 -14,117 -5,703 26,662 15,685 36,198
provision/(benefit)
Income/(loss) from -5,201 -34,318 -112,043 -528,439 -43,270 -10,090 48,410 15,647 47,374
continuing operations before
cumulative effect
of change in accounting
principle
Discontinued
operations:
Loss from - - -412 - -23,581 -9,775 -4,535 -11,871 -10,841
operations of
fixed income
business
Income tax benefit - - 252 - 6,946 3,824 1,844 4,434 4,197
Income (loss) ($5,201) ($34,318) ($112,203) ($528,439) ($59,905) ($16,041) $45,719 $8,210 $40,730
before cumulative
effect of change
in accounting
principle
Cumulative effect - - - - - (18,642) - - -
of change in
accounting
principle, net of tax
Net income / ($5,201) ($34,318) ($112,203) ($528,439) ($59,905) ($34,683) $45,719 $8,210 $40,730
(loss)
Basic and diluted:
Earnings/(loss) ($0.02) ($0.10) ($0.34) ($2.05) ($0.24) ($0.14) $0.18 $0.03 $0.18
per share
Note: Results for Island Holding Company, Inc. are included subsequent to 9/20/02.
Instinet Group Incorporated
CONSOLIDATED STATISTICAL DATA
The following table presents key transaction volume information, as well as certain other operating
information.
Pct Chg -- inc/(decr)
-----------
-----------
Three Months Ended (5) June 30 2003 versus:
---------------- -----------
June 30, 2003 Mar 31, 2003 June 30, 2002 Mar 31, 2003 June 30, 2002
------- ------ ------- ------ -------
Total U.S. equity share 239,780 204,359 224,527 17.33% 6.79%
volume (millions) 1,2
Instinet's U.S. equity 37,065 31,541 19,221 17.51% 92.84%
share volume (millions)
1,2
Instinet's share of 15.5% 15.4% 8.6%
total U.S. equity share ------- ------ -------
volume 1,2
Total Nasdaq-listed 112,524 89,015 116,114 26.4% -3.1%
equity share volume
(millions) 2
Instinet's Nasdaq-listed 31,996 26,341 16,149 21.5% 98.1%
equity share volume
(millions) 2
Instinet's share of 28.4% 29.6% 13.9%
total Nasdaq-listed ------- ------ -------
equity share volume 2
Total U.S. 127,256 115,343 108,413 10.3% 17.4%
exchange-listed equity
share volume (millions)
Instinet's U.S. 5,069 5,200 3,072 -2.5% 65.0%
exchange-listed equity
share volume (millions)2
Instinet's share of 4.0% 4.5% 2.8%
total U.S. ------- ------ -------
exchange-listed equity
share volume 2
Instinet's U.S. equity 75,934 67,987 27,000 11.7% 181.2%
transaction volume
(thousands)
Instinet's non-U.S. 1,547 2,161 1,955 -28.4% -20.9%
equity transaction ------- ------ -------
volume (thousands)
Instinet's total equity 77,481 70,148 28,955 10.5% 167.6%
transaction volume ------- ------ -------
(thousands)
Instinet's average U.S. 488 464 712 5.2% -31.4%
equity transaction size
(shares per transaction)
Instinet's average 1,205 1,150 422 4.8% 185.6%
equity transactions per ------- ------ -------
day (thousands)
Transaction fees from US $229,973 $211,934 $213,851 8.5% 7.5%
equities (thousands)
Transaction fees from 45,936 43,290 56,082 6.1% -18.1%
non-US equities ------- ------ -------
(thousands)
Total equity transaction $275,909 $255,224 $269,933 8.1% 2.2%
fees (thousands)
Net transaction fees $135,475 $122,370 $140,212 10.7% -3.4%
from US equities
(thousands) (non-GAAP
financial measure)3
Net transaction fees 28,840 30,019 39,942 -3.9% -27.8%
from non-US equities ------- ------ -------
(thousands) (non-GAAP
financial measure)3
Total net equity $164,315 $152,389 $180,154 7.8% -8.8%
transaction fees
(thousands) (non-GAAP
financial measure) 3
Instinet's average 0.0031 0.0034 0.0056 -8.8% -44.6%
equity transaction fee
revenue (U.S. cents per
share per side) 4
Instinet's average net 0.0018 0.0019 0.0036 -1.6% -48.1%
equity transaction fee ------- ------ -------
revenue (U.S. cents per
share per side)
(non-GAAP financial
measure) 3,4
------------------------
Full time employees at 1,311 1,428 1,559 -8.2% -15.9%
period end ------- ------ -------
------------------------
(1) U.S. shares consist of shares of U.S. exchange-listed and Nasdaq-quoted stocks.
(2) For a description of how we calculate our share volumes, see - "Nasdaq Volume Calculations" and
"Calculation of Instinet ATS and Island ATS Volume Combined Volumes" in our Annual Report on Form 10-K
for the year ended December 31, 2002.
(3) Our net equity transaction fee revenues are calculated by subtracting the soft dollar and
commission recapture expenses and broker-dealer rebates from the related equity transaction fees. GAAP
requires us to add our soft dollar and commission recapture expenses and broker-dealer rebates,
dollar-for-dollar, to related equity transaction fee revenues.
(4) Average transaction fee revenue is calculated by dividing transaction fee revenue for the buy and
sell side of each transaction by total share volume.
(5) Represents Instinet Group Incorporated volume from all sources, including the Island ECN
subsequent to 9/20/02, ProTrader Securities L.P. subsequent to 10/1/01, and Instinet Corporation. U.S.
shares consist of shares of exchange-listed and Nasdaq-quoted stocks.
Instinet Group Incorporated
CUSTOMER OPERATING DATA 1
(Unaudited)
Quarter Ended
---------------------------
June 30, Mar 31, Dec 31, Sept 30, June 30, Mar 31,
2003 2003 2002 2002 2002 2002
------ ------ ------ ------ ------ ------
Value Added Broker
A. US Equities
Average daily 87 83 85 88 90 100
volume (million
shares)
Amount charged $0.0144 $0.0141 $0.0150 $0.0154 $0.0168 $0.0176
to client per
share 2
B. Non-US
Equities
Average daily $666 $783 $751 $936 $874 $940
consideration
(millions)
Average basis 5.7 5.1 5.5 5.6 5.8 5.9
points charged
to client per
consideration
traded 3
ATS
Matched average
daily volume 4
NASDAQ-listed 444 380 450 313 208 155
equity share
volume (million
shares)
Share of 24.8% 26.1% 27.4% 18.2% 11.4% 8.5%
total
market
U.S. 45 48 47 17 6 8
exchange-listed
equity share
volume (million
shares)
Share of 2.2% 2.5% 2.4% 0.8% 0.4% 0.5%
total
market
U.S. total 489 428 497 330 214 163
equity share
volume (million
shares) 5
Share of 12.8% 12.8% 13.9% 8.8% 6.1% 4.6%
total
market
(1) For a description of how we calculate our share volumes, see - "Nasdaq Volume
Calculations" and "Calculation of Instinet ATS and Island ATS Volume Combined Volumes" in
our Annual Report on Form 10-K for the year ended December 31, 2002.
(2) Net of soft dollar and commission recapture expenses and broker-dealer rebates.
(3) Commissions on European and Asian transactions are calculated as a percentage (i.e.,
basis points) of the total value (i.e., consideration of the transaction. (price times
number of shares).
(4) Matched volume reflects transactions where the buyer and seller are matched on the
Instinet ATSs
(5) U.S. shares consist of shares of exchange-listed and Nasdaq-quoted stocks.
Instinet Group Incorporated
RECONCILIATION OF PRO FORMA OPERATING RESULTS FOR 2Q03
(In thousands, except per share amounts)
In evaluating our financial performance and results of operations, management
reviews certain financial measures that are not in accordance with generally
accepted accounting standards in the United States ("non-GAAP"). Non-GAAP
measurements do not have any standardized meaning and are therefore unlikely to
be comparable to similar measures presented by other companies. Management uses
non-GAAP financials measures in evaluating our operating performance. In light of
the use by management of these non-GAAP measurements to assess our operational
performance, we believe it is useful to provide information with respect to these
non-GAAP measurements so as to share this perspective of management. These
non-GAAP financials measures should be considered in the context with our GAAP
results. A reconciliation of our non-GAAP measurements are provided below:
(1) Management reviews adjusted operating income, in addition to GAAP financial
results. This non-GAAP financial measurement excludes non-operating items, which
by their nature, management does not consider to be a true reflection of the
operating results and financial performance of our global agency brokerage
business. These non-operating charges are investment gains and losses, charges
related to our cost reduction initiatives, goodwill impairment, fixed assets lost
at the World Trade Center and related insurance recovery, and the related tax
effects of those items. The following schedule reconciles our operating income to
our GAAP financial results:
Three Months Ended
------------------------
June 30, 2003 Mar 31, 2003 June 30, 2002
---------- --------- ---------
Total revenues, $ 285,401 $ 239,893 $ 268,710
as reported
Less 2,841 (21,678) (13,181)
Investments ---------- --------- ---------
Pro forma 282,560 261,571 281,891
revenues ---------- --------- ---------
Total expenses, 289,870 280,718 326,097
as reported
Less severance 7,938 9,146 -
included in
compensation
and benefits
Less real - 2,333 -
estate abandonment
costs included
in occupancy
Less - - 42,410
restructuring
Add insurance - (5,000) -
recovery of ---------- --------- ---------
fixed assets at
the World Trade Center
Pro forma 281,932 274,239 283,687
operating ---------- --------- ---------
expenses
---------- --------- ---------
Pro forma 628 (12,668) (1,796)
income/(loss) ---------- --------- ---------
before income
taxes
Income tax 732 (6,507) (14,117)
provision/(benefit), as
reported
Tax effect of 1,413 337 6,888
pro forma ---------- --------- ---------
adjustments
Pro forma 2,145 (6,170) (7,229)
provision/(bene ---------- --------- ---------
fit) for income taxes
Net loss, as (5,201) (34,318) (59,905)
reported
Net effect of 3,684 27,820 6,293
pro forma ---------- --------- ---------
adjustments
Pro forma net $ $ $ (53,612)
loss (1,517) (6,498)
---------- --------- ---------
Earnings/(loss) $ $ $
per share - (0.02) (0.10) (0.24)
basic and diluted, as
reported
Net effect of 0.02 0.08 0.02
pro forma ---------- --------- ---------
adjustments
Pro forma $ $ $
earnings/(loss) 0.00 (0.02) (0.22)
per share - ---------- --------- ---------
basic and diluted
Instinet Group Incorporated
RECONCILIATION OF PRO FORMA OPERATING RESULTS FOR 2Q03
(In thousands, except per share amounts)
In evaluating our financial performance and results of operations, management
reviews certain financial measures that are not in accordance with generally
accepted accounting standards in the United States ("non-GAAP"). Non-GAAP
measurements do not have any standardized meaning and are therefore unlikely to be
comparable to similar measures presented by other companies. Management uses
non-GAAP financials measures in evaluating our operating performance. In light of
the use by management of these non-GAAP measurements to assess our operational
performance, we believe it is useful to provide information with respect to these
non-GAAP measurements so as to share this perspective of management. These non-GAAP
financials measures should be considered in the context with our GAAP results. A
reconciliation of our non-GAAP measurements are provided below:
(2) Our expense structure includes a certain level of fixed costs, as well as a
variable cost base that fluctuates with customer transaction volumes. If demand for
our brokerage services declines and we are unable to respond by adjusting our fixed
cost base, our operating results could be materially adversely affected. Therefore,
we have undertaken cost reduction initiatives to reduce our fixed cost base. We
estimate our fixed cost base by subtracting line items that we have determined to
be predominantly variable in nature. Some of these variable line items may contain
a fixed component. Similarly, some of our fixed expense line items may contain a
variable component. Management does not adjust for the variable or fixed component
within each line item when analyzing our fixed cost base. Our fixed cost base is
calculated as follows:
Three Months Ended
--------- --------- ---------
June 30, 2003 Mar 31, 2003 June 30, 2002
--------- --------- ---------
Reconciliation of fixed cost base:
------------------------------------
Total expenses, as reported $ 289,870 $ 280,718 $ 326,097
Less brokerage, clearing and 33,446 34,025 33,767
exchange fees
Less soft dollar and commission 49,604 49,058 61,738
recapture
Less broker-dealer rebates 58,630 50,420 25,503
Add insurance recovery of fixed - (5,000) -
assets at the World Trade Center
Less restructuring - - 42,410
Less severance included in 7,938 9,146 -
compensation and benefits
Less real estate abandonment costs - 2,333 -
included in occupancy --------- --------- ---------
Total fixed costs 140,252 140,736 162,679
--------- --------- ---------
Annualized $ 561,008 $ 562,944 $ 650,716
========= ========= =========
Instinet Group Incorporated
RECONCILIATION OF PRO FORMA OPERATING RESULTS FOR 2Q03
(In thousands, except per share amounts)
In evaluating our financial performance and results of operations, management
reviews certain financial measures that are not in accordance with generally
accepted accounting standards in the United States ("non-GAAP"). Non-GAAP
measurements do not have any standardized meaning and are therefore unlikely
to be comparable to similar measures presented by other companies. Management
uses non-GAAP financials measures in evaluating our operating performance. In
light of the use by management of these non-GAAP measurements to assess our
operational performance, we believe it is useful to provide information with
respect to these non-GAAP measurements so as to share this perspective of
management. These non-GAAP financials measures should be considered in the
context with our GAAP results. A reconciliation of our non-GAAP measurements
are provided below:
(3) Our transaction fees earned from our customers trading equity securities have
represented, and continue to represent, a substantial part of our revenues. GAAP
requires us to add our soft dollar and commission recapture expenses and
broker-dealer rebates, dollar-for-dollar, to related equity transaction fee
revenues, which has a dilutive effect on our operating margins. Therefore, when
evaluating our revenues from equity transactions, management reviews our net
equity transaction fee revenue, based on U.S. securities and non-U.S. securities.
Our net equity transaction fee revenues are calculated by subtracting the soft
dollar and commission recapture expenses as well as broker-dealer rebates from the
related equity transaction fees, as well as non-equity related revenues, and is
calculated as follows:
Three Months Ended
----------------------
June 30, 2003 Mar 31, 2003 June 30, 2002
--------- -------- ---------
Total
-------
Transaction fee revenue, as $275,909 $ 255,224 $ 269,933
reported
Less non equity related transaction 3,360 3,357 2,538
fee revenue
Less soft dollar revenues and 49,604 49,058 61,738
commission recapture expenses
Less broker-dealer rebates 58,630 50,420 25,503
--------- -------- ---------
Net equity transaction fee 164,315 152,389 180,154
revenue ========= ======== =========
U.S.
------
Transaction fee revenue from U.S. $ 229,973 $ 211,934 $ 213,851
equities
Less non equity related transaction 3,360 3,357 2,538
fee revenue
Less soft dollar revenues and 32,508 35,787 45,598
commission recapture expenses from
U.S. equities
Less broker-dealer rebates 58,630 50,420 25,503
--------- -------- ---------
Net equity transaction fee revenue 135,475 122,370 140,212
from U.S. equities ========= ======== =========
U.S. revenue per share
------------------------
Average U.S. equity transaction fee $ 0.0031 $ 0.0034 $ 0.0056
revenue (per share, per side)
Less non equity related transaction 0.0001 0.0001 0.0001
fee revenue
Less soft dollar revenues and 0.0004 0.0006 0.0012
commission recapture expenses from
U.S. equities
Less broker-dealer rebates 0.0008 0.0008 0.0007
--------- -------- ---------
Average U.S. equity net transaction 0.0018 0.0019 0.0036
fee revenue (per share, per side) ========= ======== =========
Non-U.S.
----------
Transaction fee revenue from $ 45,936 $ 43,290 $ 56,082
non-U.S. equities
Less soft dollar revenues and 17,096 13,271 16,140
commission recapture expenses from --------- -------- ---------
non-U.S. equities
Net equity transaction fee revenue 28,840 30,019 39,942
from non-U.S. equities ========= ======== =========
-------------------------
1 Unless otherwise specified, financial results and statistical information
referred to in this release include data for Island Holding Company, Inc.
following the closing of our acquisition of Island on September 20, 2002.
2 See table titled "Reconciliation of Pro Forma Operating Results for 2Q03".
This information is provided by RNS
The company news service from the London Stock Exchange
END
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