KCG Kcg Holdings Class A

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 30, 2015

 

 

KCG HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

DELAWARE		000-54991		38-3898306
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.

545 Washington Boulevard, Jersey City, NJ 07310

(Address of principal executive offices) (Zip Code)

(201) 222-9400

(Registrant’s telephone number, including area code)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

---

KCG Holdings, Inc.

Current Report on Form 8-K

Item 2.02 Results of Operations and Financial Condition.

See Item 9.01

Item 7.01 Regulation FD Disclosure.

The following information is furnished under Item 2.02, “Results of Operations and Financial Condition”, Item 7.01, “Regulation FD Disclosure”, and Item 9.01 “Financial Statements and Exhibits.” This information, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

On January 30, 2015, KCG Holdings, Inc. (the “Company” or “KCG”) issued a press release announcing its earnings for the fourth quarter of 2014. The press release did not include certain financial statements, related footnotes and certain other financial information relating to the Company that will be filed with the Securities and Exchange Commission as part of the Company’s Quarterly Report on Form 10-Q. A copy of the press release is attached hereto as Exhibit 99.1. Executives from KCG will review the earnings via teleconference and live audio webcast at 9:00 a.m. Eastern time on January 30, 2015. A copy of a visual presentation that will be a part of that review is attached as Exhibit 99.2. All of the attached exhibits are incorporated by reference into this Current Report on Form 8-K.

Item 9.01 Financial Statements and Exhibits.

 

(a)	Financial Statements of Businesses Acquired

Not Applicable

 

(b)	Pro Forma Financial Information

Not Applicable

 

(c)	Shell Company Transactions

Not Applicable

 

(d)

Exhibits

Exhibit 99.1 – Press Release of KCG Holdings, Inc. issued on January 30, 2015.

Exhibit 99.2 – KCG Holdings, Inc. Earnings Presentation, dated January 30, 2015.

---

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’s duly authorized signatory.

Dated: January 30, 2015

 

KCG HOLDINGS, INC.
By:		/s/ John McCarthy
Name:		John McCarthy
Title:		General Counsel and Corporate Secretary

---

EXHIBIT INDEX

 

Exhibit No.		Description
99.1		Press Release of KCG Holdings, Inc. issued on January 30, 2015.
99.2		KCG Holdings, Inc. Earnings Presentation, dated January 30, 2015.

Exhibit 99.1

KCG ANNOUNCES CONSOLIDATED EARNINGS OF $0.23

PER DILUTED SHARE FOR THE FOURTH QUARTER OF 2014

Pre-tax income from continuing operations of $26.5 million includes a net charge

of $4.0 million from items that are unrelated to core operations

JERSEY CITY, New Jersey – January 30, 2015 – KCG Holdings, Inc. (NYSE: KCG) today reported consolidated earnings of $26.1 million, or $0.23 per diluted share, for the fourth quarter of 2014.

The fourth quarter 2014 GAAP net income from continuing operations was $26.0 million, or $0.23 per diluted share. Included in these results is a net tax benefit of approximately $7 million related to the recognition of state deferred tax assets which primarily relate to state tax net operating losses, and a $1.2 million tax benefit related to federal tax credits. Fourth quarter pre-tax income from continuing operations was $26.5 million and included a $6.1 million lease loss and a $2.1 million gain related to the completion of the sale of KCG’s futures commission merchant (FCM). Excluding these items, on a non-GAAP basis, the fourth quarter 2014 income from continuing operations before taxes was $30.5 million. A reconciliation of GAAP to non-GAAP results is included in Exhibit 4.

KCG was formed July 1, 2013 as a result of the merger between Knight Capital Group, Inc. and GETCO Holding Company, LLC. Financial results for the periods prior to the third quarter of 2013 contained herein solely represent the results of GETCO Holding Company, LLC as the accounting acquirer.

 

Select Financial Results		($ in thousands, except EPS)
From Continuing Operations		4Q14				3Q14				4Q13
Revenues			346,139				272,302				323,374
Trading revenues, net			221,415				150,865				212,809
Commissions and fees			117,326				102,663				111,083
GAAP pre-tax income (loss)			26,531				(15,235	)			(16,699	)
GAAP EPS			0.23				(0.09	)			(0.15	)
Non-GAAP pre-tax income (loss)*			30,532				(19,518	)			19,845

 

*	See Exhibit 4 for a reconciliation of GAAP to non-GAAP results.

---

Fourth Quarter Highlights

 

•

U.S. equity market making grew market share of SEC Rule 605 U.S. equity share volume

 

•

Algorithmic trading and order routing established a new quarterly record for average daily U.S. equity share volume

 

•

Released $45 million in excess capital from the consolidation of U.K. broker dealers

 

•

Completed the sale of KCG’s FCM

 

•

Subsequent to the fourth quarter, announced the sale of KCG Hotspot to BATS

Daniel Coleman, Chief Executive Officer of KCG, said, “During the fourth quarter, KCG generated solid financial results due in part to an improved operating environment. The U.S. equity market posted higher average daily share volume, dollar volume and realized volatility on both a sequential and annual basis. Amid the heightened activity, KCG recorded market share gains in U.S. equity market making as well as algorithmic trading and order routing from the third quarter. Also contributing to KCG’s results were increased market volumes and volatility in select segments of the global equities, fixed income, currencies and commodities markets. Finally, during the quarter, management completed a strategic review of KCG Hotspot and initiated a sale process which ultimately proved successful.”

In the first quarter of 2014, the Company began to charge the Market Making and Global Execution Services segments for the cost of aggregate debt interest. The interest amount charged to each of the segments is based on capital limits and requirements. Historically, debt interest was fully included within the Corporate and Other segment. This change in the measurement of segment profitability, which has no impact to the consolidated results, is reported prospectively and, therefore, is not reflected in the financial results for any period prior to January 1, 2014.

Market Making

The Market Making segment encompasses direct-to-client and non-client, exchange-based market making across multiple asset classes and is an active participant in all major cash, options and futures markets in the U.S., Europe and Asia. During the fourth quarter of 2014, the segment generated total revenues of $238.7 million and pre-tax income of $42.7 million, which included a debt interest charge of $5.6 million.

During the fourth quarter of 2014, the favorable market conditions drove heightened activity in direct-to-client and non-client, exchange-based market making across several asset classes. KCG’s average daily SEC Rule 605 U.S. equity share volume rose 27.3 percent sequentially due to a rebound in retail trading activity plus steady market share gains amid persistent strong competition. In aggregate, KCG direct-to-client and non-client market making in U.S. equities increased average daily exchange-listed share volume 28.3 percent quarter over quarter. Results from non-U.S. equity market making grew quarter over quarter on improved market conditions in certain classes of global equities, fixed income, currencies and commodities.

In the third quarter of 2014, the segment generated total revenues of $166.6 million and a pre-tax loss of $8.0 million. Excluding compensation related to a reduction in workforce and other employee separations, the pre-tax loss for the quarter was $5.2 million. In the fourth quarter of 2013, the segment reported total revenues of $232.5 million and pre-tax income of $48.0 million. Excluding compensation costs related to a reduction in workforce, the pre-tax earnings for the quarter was $53.2 million.

Mr. Coleman commented, “During the fourth quarter, U.S. equity market volumes picked up with the return of realized volatility to more normative levels over the past five years. KCG’s market share gains in direct-to-client U.S. equity market making were largely attributable to additive order flow from longstanding clients. Also, individual investors continued to express confidence in the market by allocating an estimated $27.7 billion in net inflows to U.S. equities during the quarter, which represented the highest quarterly total during 2014. In non-U.S. equity market making, KCG continued to develop strategic asset classes that demonstrate promise.”

---

Select Trade Statistics: U.S. Equity Market Making

 

		4Q14		3Q14		4Q13
Average daily dollar volume traded ($ millions)		31,621		24,726		26,566
Average daily trades (thousands)		4,036		3,326		3,909
Average daily shares traded (millions)		5,241		5,787		5,113
NYSE and NASDAQ shares traded		933		727		833
OTC Bulletin Board and OTC Market shares traded		4,308		5,060		4,280
Average revenue capture per U.S. equity dollar value traded (bps)		0.93		0.75		0.98

Global Execution Services

The Global Execution Services segment comprises agency execution services and trading venues. During the fourth quarter of 2014, the segment generated total revenues of $93.4 million and pre-tax income of $10.0 million, which included a debt interest charge of $1.2 million. The results also included a gain of $2.1 million related to the completion of the sale of the FCM. Excluding this gain, the Global Execution Services segment’s pre-tax income for the fourth quarter was $7.9 million.

The results for the fourth quarter of 2014 reflect increased trading activity across numerous addressable markets as well as signs of growth from strategic initiatives. In agency execution, algorithmic trading and order routing established a new quarterly high for average daily U.S. equity share volume. Institutional equity sales trading in the U.S. and Europe made a solid contribution while the ETF trading team continued to successfully cultivate existing clients and onboard new ones. Among KCG’s trading venues, KCG Hotspot increased average daily notional FX dollar volume 4.4 percent quarter over quarter while KCG BondPoint grew average daily par value traded by 3.9 percent.

In the third quarter of 2014, the segment generated total revenues of $79.2 million and a pre-tax loss of $1.7 million. Excluding compensation related to a reduction in workforce and other employee separations, the pre-tax results for the segment was earnings of $1.9 million. In the fourth quarter of 2013, the segment reported total revenues of $84.1 million and a pre-tax loss of $4.5 million. Excluding compensation costs related to the reduction in workforce and asset writedowns, the segment’s pre-tax results were earnings of $2.6 million.

Mr. Coleman commented, “Institutional trading activity was especially strong during the fourth quarter, which is reflected in the results from KCG’s agency execution services. Algorithmic trading continued to make steady inroads with a number of leading institutions and the ETF trading team is quickly approaching critical mass after a year of rebuilding.”

Select Trade Statistics: Agency Execution and Trading Venues

 

		4Q14		3Q14		4Q13
Average daily KCG algorithmic trading and order routing U.S. equities shares traded (millions)		334.3		248.2		256.1
Average daily KCG Hotspot notional foreign exchange dollar value traded ($ billions)		31.6		30.3		29.0
Average daily KCG BondPoint fixed income par value traded ($ millions)		130.8		126.0		133.0

---

Corporate and Other

The Corporate and Other segment includes strategic investments and corporate overhead expenses. During the fourth quarter of 2014, the segment recorded total revenues of $14.0 million and a pre-tax loss of $26.1 million, which included lease loss expenses of $6.1 million. The Corporate and Other segment’s pre-tax loss for the fourth quarter was $20.0 million excluding the lease losses.

In the third quarter of 2014, the segment recorded total revenues of $26.5 million and a pre-tax loss of $5.5 million which included a net gain of $15.1 million related to KCG’s investment in tradeMONSTER, in conjunction with tradeMONSTER’s combination with OptionsHouse in the third quarter, compensation related to a reduction in workforce and other employee separations of $4.2 million and a lease loss accrual of $0.3 million. In the fourth quarter of 2013, the segment recorded total revenues of $6.8 million and a pre-tax loss of $60.2 million, which included approximately $24.2 million in writeoff of capitalized debt costs related to pay down of debt, asset writedown and lease losses, professional fees associated with the Merger and Knight’s August 1, 2012 technology issue and compensation costs related to a reduction in force.

Financial Condition

As of December 31, 2014, KCG had $578.8 million in cash and cash equivalents. Total outstanding debt was $422.3 million, of which $117.3 million is due in March 2015. The Company had $1.5 billion in stockholders’ equity, equivalent to a book value of $13.03 per share and tangible book value of $11.72 per share based on total shares outstanding of 116.9 million, including restricted stock units.

KCG’s headcount at December 31, 2014 was 1,093 full-time employees as compared to 1,153 full-time employees at September 30, 2014.

During the fourth quarter of 2014, KCG did not repurchase any shares under the Company’s $150.0 million stock repurchase program. As of December 31, 2014, KCG had approximately $55.0 million of remaining capacity available to repurchase additional shares under the program. The Company cautions that there are no assurances that any further repurchases may actually occur.

Announced Sale of KCG Hotspot

On January 28, 2015, KCG announced the sale of spot foreign exchange ECN KCG Hotspot to BATS Global Markets. Under the terms of the agreement, KCG will receive $365 million in cash upon the close of the transaction. In addition, the parties have agreed to share certain tax benefits, which could result in further payments to KCG of up to approximately $70 million in the three-year period following the close. Upon the close, the transaction is expected to increase KCG’s tangible book value by approximately $2.00 per share. The transaction is expected to be completed in the second quarter of 2015.

Conference Call

KCG will hold a conference call to discuss fourth quarter 2014 financial results starting at 9:00 a.m. Eastern Time today, January 30, 2015. To access the call, dial 888-218-8142 (domestic) or 913-312-0957 (international) and enter passcode 7898269. In addition, the call will be webcast at http://www.media-server.com/m/acs/41fae90442d481b1589c479d3013dbef. Following the conclusion of the call, a replay will be available by selecting a number based on country of origin from a list posted at: https://replaynumbers.conferencinghub.com/index.aspx?confid=7898269&passcode=7898269 and entering passcode 7898269.

Additional information for investors, including a presentation of the fourth quarter financial results, can be found at http://investors.kcg.com.

---

Non-GAAP Financial Presentations

KCG believes that certain non-GAAP financial presentations, when taken into consideration with the corresponding GAAP financial presentations, are important in understanding operating results. Selected financial information is included in the non-GAAP financial presentations for the three months ended December 31, 2014, September 30, 2014 and December 31, 2013 and for the twelve months ended December 31, 2014 and 2013. KCG believes the presentations provide a meaningful summary of results of operations for each of the three and twelve month periods. Reconciliations of GAAP to non-GAAP results are included in the schedules in Exhibit 4.

About KCG

KCG is a leading independent securities firm offering investors and clients a range of services designed to address trading needs across asset classes, product types and time zones. The firm combines advanced technology with exceptional client service across market making, agency execution and venues. KCG has multiple access points to trade global equities, fixed income, currencies and commodities via voice or automated execution. www.kcg.com

Certain statements contained herein may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “target,” “estimate,” “continue,” “positions,” “prospects” or “potential,” by future conditional verbs such as “will,” “would,” “should,” “could” or “may,” or by variations of such words or by similar expressions. These “forward-looking statements” are not historical facts and are based on current expectations, estimates and projections about KCG’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Any forward-looking statement contained herein speaks only as of the date on which it is made. Accordingly, readers are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict including, without limitation, risks associated with: (i) the strategic business combination (the “Mergers”) of Knight Capital Group, Inc. (“Knight”) and GETCO Holding Company, LLC (“GETCO”), including, among other things, (a) difficulties and delays in integrating the Knight and GETCO businesses or fully realizing cost savings and other benefits, (b) the inability to sustain revenue and earnings growth, and (c) customer and client reactions to the Mergers; (ii) the August 1, 2012 technology issue that resulted in Knight’s broker-dealer subsidiary sending numerous erroneous orders in NYSE-listed and NYSE Arca securities into the market and the impact to Knight’s business as well as actions taken in response thereto and consequences thereof; (iii) the sale of KCG’s reverse mortgage origination and securitization business, sale of KCG’s futures commission merchant and the agreement to sell KCG Hotspot; (iv) changes in market structure, legislative, regulatory or financial reporting rules, including the increased focus by regulators, the New York Attorney General, Congress and the media on market structure issues, and in particular, the scrutiny of high frequency trading, alternative trading systems, market fragmentation, colocation, access to market data feeds, and remuneration arrangements such as payment for order flow and exchange fee structures; (v) past or future changes to organizational structure and management; (vi) KCG’s ability to develop competitive new products and services in a timely manner and the acceptance of such products and services by KCG’s customers and potential customers; (vii) KCG’s ability to keep up with technological changes; (viii) KCG’s ability to effectively identify and manage market risk, operational and technology risk, legal risk, liquidity risk, reputational risk, counterparty and credit risk, international risk, regulatory risk, and compliance risk; (ix) the cost and other effects of material contingencies, including litigation contingencies, and any adverse judicial, administrative or arbitral rulings or proceedings; and (x) the effects of increased competition and KCG’s ability to maintain and expand market share. The list above is not exhaustive. Readers should carefully review the risks and uncertainties disclosed in KCG’s reports with the SEC, including, without limitation, those detailed under “Risk Factors” in KCG’s Annual Report on Form 10-K for the year-ended December 31, 2013, under “Certain Factors Affecting Results of Operations” in KCG’s Quarterly Report on Form 10-Q for the period ended September 30, 2014 and other reports or documents KCG files with, or furnishes to, the SEC from time to time.

CONTACTS

 

Sophie Sohn		Jonathan Mairs
Communications & Marketing		Investor Relations
312-931-2299		201-356-1529
media@kcg.com		jmairs@kcg.com

---

Exhibit 1

KCG HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		For the three months ended
		December 31, 2014				September 30, 2014				December 31, 2013
		(In thousands, except per share amounts)
Revenues
Trading revenues, net		$	221,415			$	150,865			$	212,809
Commissions and fees			117,326				102,663				111,083
Interest, net			(177	)			139				433
Investment income (loss) and other, net			7,575				18,635				(951	)
Total revenues			346,139				272,302				323,374
Expenses
Employee compensation and benefits			116,214				95,307				112,209
Execution and clearance fees			82,377				74,058				78,483
Communications and data processing			36,945				38,576				37,512
Depreciation and amortization			21,224				20,298				19,566
Payments for order flow			14,698				15,377				18,243
Occupancy and equipment rentals			8,514				7,672				9,358
Collateralized financing interest			7,973				7,330				5,327
Debt interest expense			7,721				7,714				12,943
Professional fees			5,695				7,161				7,734
Business development			2,308				3,163				1,923
Writedown of assets and lease loss accrual, net			6,117				301				10,500
Writedown of capitalized debt costs			—				—				13,209
Other			9,822				10,580				13,066
Total expenses			319,608				287,537				340,073
Income (loss) from continuing operations before income taxes			26,531				(15,235	)			(16,699	)
Income tax expense (benefit)			562				(5,796	)			787
Income (loss) from continuing operations, net of tax			25,969				(9,439	)			(17,486	)
Income (loss) from discontinued operations, net of tax			165				(177	)			864
Net Income (loss)		$	26,134			$	(9,616	)		$	(16,622	)
Basic earnings (loss) per share from continuing operations		$	0.24			$	(0.09	)		$	(0.15	)
Diluted earnings (loss) per share from continuing operations		$	0.23			$	(0.09	)		$	(0.15	)
Basic income (loss) per share from discontinued operations		$	—			$	—			$	0.01
Diluted income (loss) per share from discontinued operations		$	—			$	—			$	0.01
Basic earnings (loss) per share		$	0.24			$	(0.09	)		$	(0.15	)
Diluted earnings (loss) per share		$	0.23			$	(0.09	)		$	(0.15	)
Shares used in computation of basic earnings (loss) per share			109,654				110,376				114,272
Shares used in computation of diluted earnings (loss) per share			112,224				110,376				114,272

---

Exhibit 1

(Continued)

KCG HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS⁽¹⁾

(Unaudited)

 

		For the years ended
		December 31, 2014				December 31, 2013
		(In thousands, except per share amounts)
Revenues
Trading revenues, net		$	837,357			$	628,304
Commissions and fees			437,022				275,474
Interest, net			621				(537	)
Investment income and other, net			41,232				124,095
Total revenues			1,316,232				1,027,336
Expenses
Employee compensation and benefits			437,269				349,192
Execution and clearance fees			305,177				246,414
Communications and data processing			150,595				123,552
Depreciation and amortization			81,448				55,570
Payments for order flow			70,183				35,711
Occupancy and equipment rentals			32,707				24,812
Collateralized financing interest			27,860				9,847
Debt interest expense			32,456				34,938
Professional fees			25,596				46,662
Business development			9,763				4,609
Writedown of assets and lease loss accrual, net			8,625				14,748
Writedown of capitalized debt costs			9,552				13,209
Other			39,814				43,094
Total expenses			1,231,045				1,002,358
Income from continuing operations before income taxes			85,187				24,978
Income tax expense (benefit)			22,753				(101,114	)
Income from continuing operations, net of tax			62,434				126,092
(Loss) income from discontinued operations, net of tax			(1,332	)			80
Net income		$	61,102			$	126,172
Net loss allocated to preferred and participating units		$	—			$	(21,565	)
Net income attributable to common shareholders		$	61,102			$	147,737
Basic earnings per share from continuing operations		$	0.55			$	1.84
Diluted earnings per share from continuing operations		$	0.54			$	1.82
Basic loss per share from discontinued operations		$	(0.01	)		$	—
Diluted loss per share from discontinued operations		$	(0.01	)		$	—
Basic earnings per share		$	0.54			$	1.84
Diluted earnings per share		$	0.52			$	1.82
Shares used in computation of basic earnings (loss) per share			112,854				80,143
Shares used in computation of diluted earnings (loss) per share			116,534				81,015

 

(1)	Year ended December 31, 2013 includes six months of results of KCG Holdings, Inc. plus six months of GETCO Holding Company, LLC.

---

Exhibit 2

KCG HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

 

		December 31, 2014				December 31, 2013
		(In thousands)
ASSETS
Cash and cash equivalents		$	578,768			$	674,281
Cash and cash equivalents segregated under federal and other regulations			3,361				183,082
Financial instruments owned, at fair value:
Equities			2,479,910				2,298,785
Listed options			144,586				339,798
Debt securities			82,815				83,256
Other financial instruments			60				—
Total financial instruments owned, at fair value			2,707,371				2,721,839
Collateralized agreements:
Securities borrowed			1,632,062				1,357,387
Receivable from brokers, dealers and clearing organizations			1,188,833				1,257,251
Fixed assets and leasehold improvements, less accumulated depreciation and amortization			134,051				146,668
Investments			100,726				125,413
Goodwill and Intangible assets, less accumulated amortization			152,594				208,806
Deferred tax asset, net			154,759				175,639
Assets of business held for sale			40,484				—
Other assets			137,645				146,638
Total assets		$	6,830,654			$	6,997,004
LIABILITIES & EQUITY
Liabilities
Financial instruments sold, not yet purchased, at fair value:
Equities		$	2,069,342			$	1,851,006
Listed options			115,362				252,282
Debt securities			101,003				57,198
Other financial instruments			—				5,014
Total financial instruments sold, not yet purchased, at fair value			2,285,707				2,165,500
Collateralized financings:
Securities loaned			707,744				733,230
Financial instruments sold under agreements to repurchase			933,576				640,950
Total collateralized financings			1,641,320				1,374,180
Payable to brokers, dealers and clearing organizations			674,345				474,108
Payable to customers			22,110				481,041
Accrued compensation expense			114,559				149,430
Accrued expenses and other liabilities			138,721				175,910
Capital lease obligations			6,700				10,039
Liabilities of business held for sale			2,356				—
Debt			422,259				657,259
Total liabilities			5,308,077				5,487,467
Equity
Class A Common Stock			1,275				1,233
Additional paid-in capital			1,369,298				1,306,549
Retained earnings			272,780				211,678
Treasury stock, at cost			(122,909	)			(11,324	)
Accumulated other comprehensive income			2,133				1,401
Total equity			1,522,577				1,509,537
		$	6,830,654			$	6,997,004

---

Exhibit 3

KCG HOLDINGS, INC.

PRE-TAX EARNINGS (LOSS) FROM CONTINUING OPERATIONS BY BUSINESS SEGMENT*

(In thousands)

(Unaudited)

 

		For the three months ended
		December 31, 2014				September 30, 2014				December 31, 2013
Market Making
Revenues		$	238,740			$	166,620			$	232,519
Expenses			196,030				174,653				184,569
Pre-tax earnings (loss)			42,710				(8,033	)			47,951
Global Execution Services
Revenues			93,369				79,218				84,065
Expenses			83,401				80,882				88,557
Pre-tax earnings (loss)			9,968				(1,664	)			(4,491	)
Corporate and Other
Revenues			14,030				26,464				6,790
Expenses			40,177				32,002				66,949
Pre-tax loss			(26,147	)			(5,538	)			(60,159	)
Consolidated
Revenues			346,139				272,302				323,374
Expenses			319,608				287,537				340,073
Pre-tax earnings (loss)		$	26,531			$	(15,235	)		$	(16,699	)

 

*	Totals may not add due to rounding.

---

Exhibit 3

(Continued)

KCG HOLDINGS, INC.

PRE-TAX EARNINGS (LOSS) FROM CONTINUING OPERATIONS BY BUSINESS SEGMENT*

(In thousands)

(Unaudited)

 

		For the year ended
		December 31, 2014				December 31, 2013
Market Making
Revenues		$	901,152			$	688,197
Expenses			754,439				584,585
Pre-tax earnings			146,713				103,612
Global Execution Services
Revenues			345,710				197,765
Expenses			334,654				223,559
Pre-tax earnings (loss)			11,056				(25,794	)
Corporate and Other
Revenues			69,369				141,374
Expenses			141,951				194,216
Pre-tax loss			(72,582	)			(52,842	)
Consolidated
Revenues			1,316,232				1,027,336
Expenses			1,231,045				1,002,358
Pre-tax earnings		$	85,187			$	24,978

 

*	Totals may not add due to rounding.

Year ended December 31, 2013 includes six months of results of KCG Holdings, Inc. plus six months of GETCO Holding

Company, LLC.

---

Exhibit 4

 

KCG HOLDINGS, INC.
Regulation G Reconciliation of Non-GAAP financial measures (Continuing operations)
(in thousands)

Three months ended December 31, 2014		Market Making				Global Execution Services				Corporate and Other				Consolidated
Reconciliation of GAAP Pre-Tax to Non-GAAP Pre-Tax:
GAAP Income (loss) from continuing operations before income taxes		$	42,710			$	9,968			$	(26,147	)		$	26,531
Gain on sale of FCM			—				(2,116	)			—				(2,116	)
Writedown of assets and lease loss accrual, net			—				—				6,117				6,117
Non GAAP Income (loss) from continuing operations before income taxes		$	42,710			$	7,852			$	(20,030	)		$	30,532
Three months ended September 30, 2014		Market Making				Global Execution Services				Corporate and Other				Consolidated
Reconciliation of GAAP Pre-Tax to Non-GAAP Pre-Tax:
GAAP Loss from continuing operations before income taxes		$	(8,033	)		$	(1,664	)		$	(5,538	)		$	(15,235	)
Net gain related to tradeMONSTER combination with OptionsHouse			—				—				(15,105	)			(15,105	)
Compensation related to reduction in workforce and other employee separations			2,786				3,577				4,158				10,521
Writedown of assets and lease loss accrual, net			—				—				301				301
Non GAAP (loss) Income from continuing operations before income taxes		$	(5,247	)		$	1,913			$	(16,184	)		$	(19,518	)
Three months ended December 31, 2013		Market Making				Global Execution Services				Corporate and Other				Consolidated
Reconciliation of GAAP Pre-Tax to Non-GAAP Pre-Tax:
GAAP Income (loss) from continuing operations before income taxes		$	47,951			$	(4,491	)		$	(60,159	)		$	(16,699	)
Compensation and other expenses related to reduction in workforce			5,254				5,447				708				11,409
Professional and other fees related to Mergers and August 1st technology issue			—				—				2,785				2,785
Writedown of capitalized debt costs			—				—				13,209				13,209
Gain on strategic asset			—				—				(1,359	)			(1,359	)
Writedown of assets and lease loss accrual			—				1,681				8,819				10,500
Non GAAP Income (loss) from continuing operations before income taxes		$	53,205			$	2,637			$	(35,997	)		$	19,845

 

*	Totals may not add due to rounding

---

Exhibit 4

(Continued)

 

KCG HOLDINGS, INC.
Regulation G Reconciliation of Non-GAAP financial measures (Continuing operations)(1)
(in thousands)

Year ended December 31, 2014		Market Making				Global Execution Services				Corporate and Other				Consolidated
Reconciliation of GAAP Pre-Tax to Non-GAAP Pre-Tax:
GAAP Income (loss) from continuing operations before income taxes		$	146,713			$	11,056			$	(72,582	)		$	85,187
Net gain related to tradeMONSTER combination with OptionsHouse			—				—				(15,105	)			(15,105	)
Income resulting from the merger of BATS and Direct Edge, net			—				—				(9,644	)			(9,644	)
Gain on sale of FCM			—				(2,116	)			—				(2,116	)
Compensation related to reduction in workforce and other employee separations			3,169				5,463				4,958				13,590
Writedown of capitalized debt costs			—				—				9,552				9,552
Writedown of assets and lease loss accrual, net			811				—				7,814				8,625
Non GAAP Income (loss) from continuing operations before income taxes		$	150,693			$	14,403			$	(75,007	)		$	90,089
Year ended December 31, 2013		Market Making				Global Execution Services				Corporate and Other				Consolidated
Reconciliation of GAAP Pre-Tax to Non-GAAP Pre-Tax:
GAAP Income (loss) from continuing operations before income taxes		$	103,612			$	(25,794	)		$	(52,842	)		$	24,978
Gain on investment in Knight Capital Group, Inc.			—				—				(127,972	)			(127,972	)
Professional and other fees related to Mergers and August 1st technology issue			—				—				47,183				47,183
Writedown of capitalized debt costs			—				—				13,209				13,209
Compensation and other expenses related to reduction in workforce			11,518				21,444				708				33,670
Unit based compensation acceleration due to Mergers			—				—				22,031				22,031
Strategic asset impairment			—				—				7,825				7,825
Writedown of assets and lease loss accrual			108				1,681				13,344				15,133
Non GAAP Income (loss) from continuing operations before income taxes		$	115,238			$	(2,669	)		$	(76,514	)		$	36,057

 

*	Totals may not add due to rounding

(1)	Year ended December 31, 2013 includes six months of results of KCG Holdings, Inc. plus six months of GETCO Holding Company, LLC.

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---