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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 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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Reuters Group PLC
22 October 2003
REUTERS GROUP PLC - THIRD QUARTER RESULTS
for the three months to 30 September 2003
22 October 2003 10/03
REUTERS: INSTINET STATEMENT
London - Instinet Group Incorporated, the electronic brokerage in which Reuters
has a 63% stake, published its financial results for the third quarter of 2003
today. These results are published under US GAAP. The equivalent set of revenue
figures in sterling and under UK GAAP will be added to the Reuters core third
quarter figure, being published on 27 October, to give third quarter revenue for
Reuters Group.
Instinet's full statement follows at the end of this release.
Reconciliation of Instinet revenue for the three months to 30 September 2003 and
the nine months to 30 September 2003
The following is a reconciliation of the unaudited revenue for three months to
30 September 2003 and nine months to 30 September 2003 under US GAAP as released
by Instinet on 22 October 2003, to the numbers that will be reported for
Instinet under UK GAAP.
Three months to Nine months to
30 September 30 September
2003 2003
---------------------- ------------ ------------
Per Instinet results - US GAAP (US$m) 272 798
Adjustments to UK GAAP
- Soft dollar commission (55) (154)
- Interest (3) (8)
- Investments 1 20
---------------------- ------------ ------------
Instinet results - UK GAAP (US$m) 215 656
---------------------- ------------ ------------
Instinet results - UK GAAP (#m) 132 407
---------------------- ------------ ------------
An exchange rate of US$1.61 has been used, being the average for both the three
months to
30 September 2003 and the nine months to 30 September 2003.
Explanation of adjustments
A significant part of the adjustment from US GAAP to UK GAAP relates to soft
dollar activities, primarily relating to the purchase of third party research
products, as well as payments made as part of Instinet's commission recapture
services. Under US GAAP, Instinet reports its transaction fee revenue from these
businesses on a gross basis. Under UK GAAP these revenues and costs are not
grossed up but are netted against each other.
Other revenue adjustments include interest income and movements in the value of
investments held at the balance sheet date including mark-to-market gains and
losses and impairments as well as realised gains and losses on disposals, all of
which are not included as revenue under UK GAAP.
END
Reuters contacts
Press Tel: +44 (0) 20 7542 7800
Simon Walker
simon.walker@reuters.com
Investors Tel: +44 (0) 20 7542 7057
Miriam McKay
miriam.mckay@reuters.com
INSTINET ANNOUNCES THIRD QUARTER 2003 RESULTS
NEW YORK, October 22, 2003 - Instinet Group Incorporated (Nasdaq: INET) today
announced net income of $4 million or $0.01 per share for the third quarter of
2003. This compares to a net loss of $528 million, or $2.05 per share, for the
third quarter of 2002, which included a goodwill impairment write-down of $552
million, a net investment gain of $20 million and a $1 million restructuring
charge. (1),2
Edward J. Nicoll, Chief Executive Officer of Instinet, commented: "Market
volumes declined slightly during the third quarter, which is reflected in our
revenues. However, we stayed on course to reduce costs, and have reported
Instinet's first positive net income since 2001. In addition, we continue to
strengthen our core businesses. Our institutional broker is developing new
products designed to reduce its customers' opportunity costs and increase their
prospects for interacting with natural liquidity. Our two electronic
marketplaces recently cut prices significantly on routing services, further
highlighting the advantages to subscribers of partnering with us to obtain the
opportunity of high-quality executions at low prices."
Business Trends
* Our clients traded 34.2 billion U.S. equity shares through Instinet in
the third quarter of 2003, up 29% from 26.5 billion shares executed in the third
quarter of 2002, and down 8% from 37.1 billion shares executed in the second
quarter of 2003. The decrease versus the second quarter of 2003 was due to the
combination of lower overall average daily market volumes in the third quarter
and reduced market share. The Island ECN accounted for 12.3 billion shares of
this volume in the third quarter of 2003, compared to 1.4 billion in the third
quarter of 2002, which included Island for one week subsequent to the closing of
the Island acquisition.
* U.S. equity shares executed through Instinet during the third quarter
of 2003 consisted of 29.3 billion NASDAQ-listed shares and 4.8 billion U.S.
exchange-listed shares.
* Our share of total U.S. equity volume was 14.7% in the third quarter,
compared to 11.1% in the third quarter of 2002 and 15.5% in the second quarter
of 2003.
* Our share of NASDAQ-listed equity volume was 26.5% in the third
quarter, and our share of U.S. exchange-listed equity volume was 4.0%.
Financial Performance
Revenues
Total revenues for the third quarter were $272 million, down 5% from the second
quarter of 2003.
Transaction fee revenue for the third quarter was $268 million, down 3% from the
second quarter of 2003. Our net equity transaction fee revenue was $156 million,
down 5% from the second quarter of 2003. (2)
Expenses
Instinet's total expenses from continuing operations for the third quarter of
2003 were $267 million, down 8% from the second quarter of 2003.
* Compensation and benefits expense was $51 million in the third quarter
of 2003, down 15% from the previous quarter, primarily reflecting lower staff
levels and a lower severance charge. 2
* Brokerage, clearing and exchange fees were $36 million, up 6% from the
previous quarter.
* Communications and equipment expense was $25 million, down 21% from
the previous quarter, primarily due to the migration of clients from our
proprietary network to a third-party network.
* Other expenses were $6 million, down 32% from the second quarter of
2003, mainly due to lower bad debt and interest expenses.
Balance Sheet
At September 30, 2003, Instinet had net cash (cash and cash equivalents and
securities owned less short-term borrowings) of approximately $637 million,
tangible net assets of approximately $883 million, and shareholders' equity of
approximately $992 million. There were approximately 331 million shares of
common stock outstanding.
Instinet's Chief Financial Officer, John F. Fay, commented: "Our performance in
the third quarter reflects both the market environment as well as our continued
focus on cost reduction. Our balance sheet remains very strong with our cash
balance increasing by 12% to $637 million during the third quarter."
Strategic Developments
During the quarter, Instinet continued to make progress on its plan to separate
its buy-side and sell-side businesses. The aim of this reorganization is to
empower each business to pursue its own distinct interests, add strategic
clarity to our company and lay a foundation for future profitability.
Instinet, the Institutional Broker is a value-added broker that serves
institutions around the world. Its products and services are designed to improve
both the trading efficacy and investment performance of our clients. They
include:
* Direct, efficient and unbiased access to the global equity markets, as
well as the opportunity to trade directly with other Instinet clients.
* Sophisticated trading expertise and advanced technological tools
designed to make it easier to manage increasingly complex global equity trading
strategies.
* Unconflicted trading based on a pure agency business model.
Instinet plans to release to clients before year-end two key brokerage products
for U.S. equity trading.
Continuous Block Crossing, or CBX is a block-matching system with minimum order
and trade-size parameters and penny price increments to better facilitate block
trading. Institutional clients will be able to trade directly with each other,
or use advanced order functionality and routing technologies to intelligently
trade orders in other market venues.
Proactive SmartRouter will enable clients, in addition to routing marketable
orders to the best available execution option, to post orders in more than one
venue at the same time. In a fragmented marketplace like the exchange-listed
market in the U.S., posting an order in one liquidity pool may carry the
opportunity cost of missing the potential for price and size improvement in
another liquidity pool. Proactive SmartRouter is designed to reduce that
opportunity cost.
Our sell-side business is now made up of two alternative trading systems -- the
Instinet ECN and The Island ECN, and their clearing broker, Instinet Clearing
Services, Inc. We are in the process of integrating these two pools of liquidity
into one single ATS, to be called "INET". INET will offer matching and routing
services to its U.S. registered broker-dealer subscribers. INET will provide
access to one of the largest liquidity pools in NASDAQ-listed equities. It will
be based on the existing Island platform, which employs a stable and scalable
infrastructure that enables speed and reliability while allowing the system to
operate at low cost. INET will provide its clients with access to other U.S.
trading venues utilizing Instinet's SmartRouter technology.
Instinet ECN and Island ECN recently announced a 25% price reduction for routing
orders in over-the-counter securities to other trading venues through Instinet's
SmartRouter. Further, retroactive to October 1, 2003 and effective through the
end of this year, the price was reduced by an additional 12 percentage points
for a 37% reduction overall. As a result of this price reduction, subscribers
can now access marketplaces offering automated executions at a cost potentially
lower than accessing those markets directly.
With these and other initiatives, Instinet Group is positioning its business to
thrive in what continues to be a highly competitive environment. Equity markets
in the U.S. may be on the verge of a phase of accelerated modernization that
potentially could see a reduction in, or even the elimination of, some of the
remaining regulatory and other barriers to competition in trading exchange-
listed securities. As we move toward a potentially more open and competitive
environment, Instinet will be ready to serve those investors looking for
technologically advanced products and services focused solely on customers'
needs.
Webcast
Instinet will webcast a conference call to discuss its third quarter results at
11:00 a.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 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. We also
provide our customers with access to research generated by us and by third
parties, as well as various informational and decision-making tools. 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.
# # #
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.instinetgroup.com. These statements
speak only as of the date of this news release, and the Company does not
undertake any obligation to update them.
END
Investor Contact
John Pitt
Instinet Group Incorporated
212 310 7481
john.pitt@instinet.com
Media Contact
Stephen Austin
Instinet Group Incorporated
212 310 4037
stephen.austin@instinet.com
Instinet Group Incorporated
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
Sept 30, June 30, Sept 30, September 30,
------- ------- ------- ------------
2003 2003 2002 2003 2002
------- ------- ------- ------- -------
REVENUE
Transaction $ 268,210 $275,909 $ 63,917 $ 799,343 $ 799,731
fees
Interest 4,931 6,651 10,699 17,929 31,591
Investments (667) 2,841 (20,336) (19,504) (39,231)
------- ------- ------- ------- -------
Total 272,474 285,401 254,280 797,768 792,091
revenues
EXPENSES
Compensation and 51,450 60,749 63,809 176,183 221,016
benefits
Soft dollar and 54,894 49,604 51,824 153,556 167,153
commission
recapture
Broker-dealer 53,552 58,630 39,004 162,602 67,798
rebates
Brokerage, 35,553 33,446 42,079 103,024 112,527
clearing and
exchange fees
Communications 24,917 31,617 26,620 87,254 89,116
and equipment
Depreciation and 22,408 23,534 16,712 70,016 53,765
amortization
Occupancy 12,567 13,175 12,223 42,200 39,370
Professional 5,739 7,228 5,110 19,305 16,774
fees
Marketing and 2,958 3,480 2,451 9,219 13,338
business
development
Other 5,728 8,407 9,899 21,995 42,425
Restructuring - - 955 - 58,395
Goodwill - - 551,991 - 551,991
impairment
Insurance (2,989) - - (7,989) -
recovery of
fixed assets
lost
------- ------- ------- ------- -------
Total 266,777 289,870 822,677 837,365 1,433,668
expenses ------- ------- ------- ------- -------
Income (loss) 5,697 (4,469) (568,397) (39,597) (641,577)
from
continuing
operations
before income
taxes and
cumulative
effect of
change in
accounting
principle
Income tax 1,652 732 (39,958) (4,123) (59,778)
provision ------- ------- ------- ------- -------
(benefit)
Income (loss) 4,045 (5,201) (528,439) (35,474) (581,799)
from
continuing
operations
before
cumulative
effect of
change in
accounting
principle
Discontinued
operations:
Loss from - - - - (33,356)
operations of
fixed income
business
Income tax - - - - 10,770
benefit ------- ------- ------- ------- -------
Income (loss) 4,045 (5,201) (528,439) (35,474) (604,385)
before
cumulative
effect of
change in
accounting
principle
Cumulative - - - - (18,642)
effect of ------- ------- ------- -------
change in
accounting
principle,
net of tax
-------
Net income $ 4,045 $(5,201) $(528,439) $(35,474) $(623,027)
(loss) ======= ======= ======= ======= =======
NET INCOME (LOSS) PER SHARE - BASIC & DILUTED
Income (loss) $ 0.01 $(0.02) $(2.05) $(0.11) $(0.22)
from
continuing
operations
Discontinued
operations:
Loss from - - - - (0.13)
operations of
fixed income
business
Income tax - - - - 0.04
benefit ------- ------- ------- ------- -------
Income (loss) 0.01 (0.02) (2.05) (0.11) (0.31)
before
cumulative
effect of
change in
accounting
principle
Cumulative - - - - (0.07)
effect of chg
in accounting
principle,
net of tax
------- ------- ------- ------- -------
Net income $0.01 $(0.02) $(2.05) $ (0.11) $ (0.38)
(loss) per ======= ======= ======= ======= =======
share
Weighted average 330,893 330,841 258,206 330,833 251,865
shares
outstanding -
basic
Weighted average 332,289 330,841 258,487 330,833 251,965
shares
outstanding -
diluted
Note: Results for Island Holding Company, Inc. are included subsequent to
09/20/02.
Instinet Group Incorporated
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3
2003 2003 2003 2002 2002 2002 2002 2001 2001
REVENUE
Transaction$ 268,210 $ 275,909 $ 255,224 $ 278,441 $ 263,917 $ 269,933 $ 265,881 $ 319,219 $ 311,737
fees
Interest 4,931 6,651 6,347 8,546 10,699 11,958 8,934 11,562 14,254
Investments (667) 2,841 (21,678) (19,878) (20,336) (13,181) (5,714) 17,817 (6,330)
Total 272,474 285,401 239,893 267,109 254,280 268,710 269,101 348,598 319,661
revenues
EXPENSES
Compensation 51,450 60,749 63,984 60,745 63,809 70,989 86,218 83,996 84,820
and benefits
Soft dollar 54,894 49,604 49,058 50,161 51,824 61,738 53,591 58,174 51,595
and commission
recapture
Broker- 53,552 58,630 50,420 56,601 39,004 25,503 3,291 - -
dealer rebates
Brokerage, 35,553 33,446 34,025 36,994 42,079 33,767 36,681 40,364 33,284
clearing and
exchange fees
Communications24,917 31,617 30,720 36,604 26,620 29,187 33,309 32,872 36,939
and equipment
Depreciation 22,408 23,534 24,074 24,659 16,712 17,930 19,123 21,269 21,206
and amortization
Occupancy 12,567 13,175 16,458 16,158 12,223 13,595 13,552 11,587 14,424
Professional 5,739 7,228 6,338 7,820 5,110 6,646 5,018 7,880 8,085
fees
Marketing 2,958 3,480 2,781 3,756 2,451 7,480 3,407 2,739 843
and business
development
Other 5,728 8,407 7,860 16,559 9,899 16,852 15,674 13,742 14,312
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 (2,989) - (5,000) - - - - (1,472) (19,528)
recovery of
fixed assets
lost
Total 266,777 289,870 280,718 372,462 822,677 326,097 284,894 273,526 288,329
expenses
Income (loss) 5,697 (4,469) (40,825) (105,353) (568,397) (57,387) (15,793) 75,072 31,332
from
continuing
operations
before income
taxes and
cumulative
effect of
change in
accounting
principle
Income tax 1,652 732 (6,507) 6,690 (39,958) (14,117) (5,703) 26,662 15,685
provision
(benefit)
Income (loss) 4,045 (5,201) (34,318) (112,043) (528,439) (43,270) (10,090) 48,410 15,647
from
continuing
operations
before
cumulative
effect of
change in
accounting
principle
Discontinued
operations:
Loss from - - - (412) - (23,581) (9,775) (4,535) (11,871)
operations of
fixed income
business
Income tax - - - 252 - 6,946 3,824 1,844 4,434
benefit
Income (loss) 4,045 (5,201) (34,318) (112,203) (528,439) (59,905) (16,041) 45,719 8,210
before
cumulative
effect of
change in
accounting
principle
Cumulative - - - - - - (18,642) - -
effect of
change in
accounting
principle,
net of tax
Net income $ 4,045 $(5,201) $(34,318) $(112,203) $(528,439) $(59,905) $(34,683) $ 45,719 $ 8,210
(loss)
Basic and
diluted
Earnings $ 0.01 $(0.02) $(0.10) $(0.34) $(2.05) $(0.24) $(0.14) $ 0.18 $ 0.03
(loss) per
share
Note: Results for Island Holding Company, Inc. are included subsequent to 09/20/02.
Instinet Group Incorporated
Consolidated Statistical Data
(Unaudited)
The following table presents key transaction volume
information, as well as certain other operating
information.
Three Months Ended Percentage Change
Sept 30, June 30, Sept 30, Sept 30 2003 vs
-------- ------- ------- ----------
2003 2003 2002 June 30, 2003 Sept 30, 2002
-------- ------- ------- ------ ------
Total U.S. 231,762 239,780 239,100 -3.34% -3.07%
equity share
volume (millions) 1,2
Instinet's U.S. 34,168 37,065 26,471 -7.82% 29.08%
equity share
volume (millions) 1,2
Instinet's 14.7% 15.5% 11.1%
share of total -------- ------- -------
U.S. equity
share volume 1,2
Total 110,672 112,524 110,195 -1.65% 0.43%
Nasdaq-listed
equity share
volume (millions) 2
Instinet's 29,345 31,996 22,569 -8.28% 30.02%
Nasdaq-listed
equity share
volume (millions) 2
Instinet's 26.5% 28.4% 20.5%
share of total -------- ------- -------
Nasdaq-listed
equity share volume 2
Total U.S. 121,091 127,256 128,905 -4.84% -6.06%
exchange-listed
equity share
volume (millions) 2
Instinet's U.S. 4,823 5,069 3,902 -4.85% 23.61%
exchange-listed
equity share
volume (millions) 2
Instinet's 4.0% 4.0% 3.0%
share of total -------- ------- -------
U.S. exchange-listed
equity share volume 2
Instinet's U.S. 74,634 75,934 37,789 -1.71% 97.50%
equity
transaction
volume (thousands)
Instinet's 1,320 1,547 2,376 -14.67% -44.44%
non-U.S. equity -------- ------- -------
transaction
volume (thousands)
Instinet's 75,954 77,481 40,165 -1.97% 89.10%
total equity -------- ------- -------
transaction
volume (thousands)
Instinet's 458 488 700 -6.21% -34.64%
average U.S.
equity
transaction
size (shares
per transaction)
Instinet's 1,166 1,205 628 -3.25% 85.69%
average equity -------- ------- -------
transactions
per day (thousands)
Transaction $ 225,962 $ 229,973 $208,388 -1.74% 8.43%
fees from US
equities (thousands)
Transaction 42,248 45,936 55,529 -8.03% -23.92%
fees from -------- ------- -------
non-US equities
(thousands)
Total equity $ 268,210 $ 275,909 $263,917 -2.79% 1.63%
transaction
fees (thousands)
Net transaction $ 126,497 $ 135,475 $130,121 -6.63% -2.79%
fees from US
equities (thousands)
(non-GAAP
financial
measure) 3
Net transaction 29,173 28,840 40,495 1.15% -27.96%
fees from -------- ------- -------
non-US equities
(thousands)
(non-GAAP financial
measure) 3
Total net $ 155,670 $ 164,315 $170,616 -5.26% -8.76%
equity
transaction
fees (thousands)
(non-GAAP
financial measure) 3
Instinet's $ 0.0033 $ 0.0031 $0.0039 6.45% -15.38%
average equity
transaction fee
revenue per
share 4
Instinet's $ 0.0018 $ 0.0018 $0.0024 0.24% -24.82%
average net -------- ------- -------
equity
transaction fee
revenue per
share (non-GAAP
financial
measure) 3,4
Full time 1,259 1,311 1,723 -3.97% -26.93%
employees at
period end
(1) U.S. shares consist of shares of U.S exchange-listed and Nasdaq-listed 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 09/20/02 and Instinet Corporation.
Instinet Group Incorporated
Customer Operating Data 1
(Unaudited)
Q3 Q2 Q1 Q4 Q3 Q2 Q1
------ ------ ------ ------ ------ ------ ------
2003 2003 2003 2002 2002 2002 2002
------ ------ ------ ------ ------ ------ ------
Instinet, the Institutional Broker
A. US Equities
Average daily volume 91 87 83 85 88 90 100
(million shares)
Amount charged to client $0.0148 $0.0144 $0.0141 $0.0150 $0.0154 $0.0168 $0.0176
per share 2
B. Non-US Equities
Average daily $649 $666 $783 $751 $936 $874 $940
consideration (millions)
3
Average basis points 6.2 5.7 5.1 5.5 5.6 5.8 5.9
charged to client per
consideration traded 3
INET ATS
Matched average daily volume 4
NASDAQ-listed equity share 389 444 380 450 313 208 155
volume (million shares)
Share of total 22.5% 24.8% 26.1% 27.4% 18.2% 11.4% 8.5%
market
U.S. exchange-listed 40 45 48 47 17 6 8
equity share volume
(million shares)
Share of total 2.1% 2.2% 2.5% 2.4% 0.8% 0.4% 0.5%
market
U.S. total equity share 5 429 489 428 497 330 214 163
volume (million shares)
5
Share of total 11.9% 12.8% 12.8% 13.9% 8.8% 6.1% 4.6%
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 our ATSs.
Instinet Group Incorporated
Reconciliation of Pro Forma Operating Results for 3Q03
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 financial 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 financial 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 business. These non-operating
charges are investment gains and losses, charges related to our cost reduction
initiatives, goodwill impairment, fixed assets losts at the World Trade Center
and related insurance recoveries, and the related tax effects of those items.
The following schedule reconciles our operating income to our GAAP financial
results:
Three Months Ended
September 30, June 30, September 30,
--------- --------- ---------
2003 2003 2002
--------- --------- ---------
Total revenues, as reported $ 272,474 $ 285,401 $ 254,280
Investments 667 (2,841) 20,336
--------- --------- ---------
Pro forma revenues 273,141 282,560 274,616
--------- --------- ---------
Total expenses, as reported 266,777 289,870 822,677
Less: Severance included in (602) (7,938) -
compensation and benefits
Less: Restructuring - - (955)
Less: Goodwill impairment - - (551,991)
Add: Insurance recovery of fixed 2,989 - -
assets at the World Trade Center --------- --------- ---------
Pro forma operating expenses 269,164 281,932 269,731
--------- --------- ---------
--------- --------- ---------
Pro forma income before income 3,977 628 4,885
taxes --------- --------- ---------
Income tax provision (benefit), as 1,652 732 (39,958)
reported
Tax effect of pro forma (429) 1,413 41,833
adjustments --------- --------- ---------
Pro forma provision for income 1,223 2,145 1,875
taxes --------- --------- ---------
Net income (loss), as reported 4,045 (5,201) (528,439)
Net effect of pro forma (1,291) 3,684 531,449
adjustments --------- --------- ---------
Pro forma net income (loss) $ 2,754 $ (1,517) $ 3,010
--------- --------- ---------
Earnings (loss) per share - basic $ 0.01 $ (0.02) $ (2.05)
and diluted, as reported
Net effect of pro forma - 0.02 2.06
adjustments --------- --------- ---------
Pro forma earnings (loss) per share $ 0.01 $ 0.00 $ 0.01
- basic and diluted --------- --------- ---------
Weighted average shares outstanding 330,893 330,841 258,206
- basic
Weighted average shares outstanding 332,289 330,841 258,487
- diluted
Instinet Group Incorporated
Reconciliation of Pro Forma Operating Results for 3Q03
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 financial 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 financial measures should be considered in the context with our GAAP
results. A reconciliation of our non-GAAP measurements are provided below:
(2) 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
September 30, June 30, September 30,
2003 2003 2002
Total
Transaction fee revenue, as $ 268,210 $ 275,909 $ 263,917
reported
Less: non equity related (4,094) (3,360) (2,473)
transaction fee revenue
Less: soft dollar revenues and (54,894) (49,604) (51,824)
commission recapture expenses
Less: broker-dealer rebates (53,552) (58,630) (39,004)
--------- --------- ---------
Net equity transaction fee $ 155,670 $ 164,315 $ 170,616
revenue ========= ========= =========
U.S.
------
Transaction fee revenue from U.S. $ 225,962 $ 229,973 $ 208,388
equities
Less: non equity related (4,094) (3,360) (2,473)
transaction fee revenue
Less: soft dollar revenues and (41,819) (32,508) (36,790)
commission recapture expenses from
U.S. equities
Less: broker-dealer rebates (53,552) (58,630) (39,004)
--------- --------- ---------
Net equity transaction fee revenue $ 126,497 $ 135,475 $ 130,121
from U.S. equities ========= ========= =========
U.S. revenue per share
------------------------
Average U.S. equity transaction fee $ 0.0033 $ 0.0031 $ 0.0039
revenue (per share, per side)
Less: non equity related (0.0001) (0.0001) (0.0001)
transaction fee revenue
Less: soft dollar revenues and (0.0006) (0.0004) (0.0007)
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 $ 0.0018 $ 0.0024
fee revenue (per share, per side) ========= ========= =========
Non-U.S.
----------
Transaction fee revenue from $ 42,248 $ 45,936 $ 55,529
non-U.S. equities
Less: soft dollar revenues and (13,075) (17,096) (15,034)
commission recapture expenses from --------- --------- ---------
non-U.S. equities
Net equity transaction fee revenue $ 29,173 $ 28,840 $ 40,495
from non-U.S. equities ========= ========= =========
This news release may be deemed to include forward-looking statements relating
to Reuters within the meaning of the US securities laws. Certain important
factors that could cause actual results to differ materially from those
disclosed in such forward -looking statements are described in Reuters Annual
Report and Form 20-F for the year to 31 December 2002 under the heading 'Risk
Factors'. Copies of the Annual Report and Form 20-F are available on request
from Reuters Group PLC, 85 Fleet Street, London EC4P 4AJ.
--------------------------
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 3Q03".
This information is provided by RNS
The company news service from the London Stock Exchange
END
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