KCG Kcg Holdings Class A

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Schedule TO

Tender Offer Statement under Section 14(d)(1) or 13(e)(1)

Of the Securities Exchange Act of 1934

 

 

KCG Holdings, Inc.

(Name of Subject Company (Issuer) and Filing Person (Offeror))

 

 

Class A Common Stock, par value $0.01 per share

(Title of Class of Securities)

48244B 100

(CUSIP Number of Class of Securities)

 

 

John McCarthy, Esq.

KCG Holdings, Inc.

545 Washington Boulevard

Jersey City, New Jersey 07310

(201) 222-9400

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

with a copy to:

Robert W. Reeder, Esq.

Jared M. Fishman, Esq.

Sullivan & Cromwell LLP

125 Broad Street

New York, New York 10004

(212) 558-4000

(Name, address and telephone number of person authorized to receive notices and communications on behalf of the filing persons)

 

 

CALCULATION OF FILING FEE

 

Transaction Valuation*		Amount of Filing Fee*
$N/A		$N/A

*	Pursuant to General Instruction D to Schedule TO, no filing fee is required for pre-commencement communications.

 

¨	Check the box if any part of the fee is offset as provided by Rule 0–11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

Amount Previously Paid: Not Applicable		Filing Party: Not Applicable
Form or Registration No.: Not Applicable		Date Filed: Not Applicable

 

x	Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

Check the appropriate boxes below to designate any transactions to which the statement relates:

 

¨

third-party tender offer subject to Rule 14d–1.

x

issuer tender offer subject to Rule 13e–4.

¨

going-private transaction subject to Rule 13e–3.

¨

amendment to Schedule 13D under Rule 13d–2.

Check the following box if the filing is a final amendment reporting the results of the tender offer:   ¨

If applicable, check the appropriate box(es) below to designate the appropriate rule provision(s) relied upon:

 

¨

Rule 13e–4(i) (Cross-Border Issuer Tender Offer)

¨

Rule 14d–1(d) (Cross-Border Third-Party Tender Offer)

 

 

 

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On May 1, 2015, KCG Holdings, Inc., a Delaware corporation (“KCG” or the “Company”), issued a press release announcing that it plans to launch a modified Dutch auction tender offer to repurchase for cash up to $330 million of outstanding shares of its Class A Common Stock, par value $0.01 per share (the “Shares”). A copy of the press release is included as Exhibit 99.1 to this Schedule TO. Executives from KCG will review the announcements contained in the press release via teleconference and live audio webcast at 9:00 a.m. Eastern time on May 1, 2015. A copy of a visual presentation that will be a part of that review is included as Exhibit 99.2 to this Schedule TO.

The tender offer described in Exhibits 99.1 and 99.2 has not yet commenced. The press release and earnings presentation included as Exhibits 99.1 and 99.2 are for informational purposes only, are not a recommendation to buy or sell Shares, and do not constitute an offer to buy or the solicitation to sell Shares. The tender offer will be made only pursuant to the Offer to Purchase, Letter of Transmittal and related materials that KCG expects to file Monday, May 4th with the Securities and Exchange Commission. Stockholders should read carefully the Offer to Purchase, Letter of Transmittal and related materials because they contain important information, including the various terms of, and conditions to, the tender offer. Once the tender offer is commenced, stockholders will be able to obtain a free copy of the tender offer statement on Schedule TO, the Offer to Purchase, Letter of Transmittal and other documents that KCG will be filing with the Securities and Exchange Commission at the Commission’s website at www.sec.gov or the investor information section of KCG’s website at www.kcg.com.

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ITEM 12.

Exhibits.

 

Exhibit Number		Description
99.1		Press Release, dated May 1, 2015.
99.2		KCG Holdings, Inc. Earnings Presentation, dated May 1, 2015.

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SIGNATURES

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

Date: May 1, 2015

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EXHIBIT INDEX

 

Exhibit Number		Description
99.1		Press Release, dated May 1, 2015.
99.2		KCG Holdings, Inc. Earnings Presentation, dated May 1, 2015.

Exhibit 99.1

KCG ANNOUNCES CONSOLIDATED EARNINGS OF $2.19

PER DILUTED SHARE FOR THE FIRST QUARTER OF 2015

From first quarter 2015 results and the sale of KCG Hotspot,

KCG’s tangible book value rises to $13.86 per share, book value increases

to $15.10 per share, and stockholders’ equity rises to $1.78 billion

KCG announces plans to launch a modified Dutch auction tender offer

for up to $330 million of its common stock

JERSEY CITY, New Jersey – May 1, 2015 – KCG Holdings, Inc. (NYSE: KCG) today reported consolidated earnings of $249.3 million, or $2.19 per diluted share, for the first quarter of 2015.

Included in these results is a pre-tax gain of $373.8 million from the sale of KCG Hotspot net of professional fees and compensation costs related to the sale. Excluding these items, on a non-GAAP basis, first quarter 2015 pre-tax income from continuing operations was $32.4 million. A reconciliation of GAAP to non-GAAP results is included in Exhibit 4.

 

Select Financial Results		($ in thousands, except EPS)
From Continuing Operations		1Q15				4Q14				1Q14
Revenues			696,156				346,139				383,657
Non-GAAP revenues*			311,130				344,023				374,013
Trading revenues, net			208,795				221,415				258,297
Commissions and fees			99,961				117,326				112,257
GAAP pre-tax income			406,128				26,531				59,384
GAAP EPS			2.19				0.23				0.31
Non-GAAP pre-tax income*			32,427				30,532				57,563

 

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

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First Quarter Highlights

 

•

Market making grew the percentage of consolidated U.S. equity share and dollar volume on both a quarter over quarter and year over year basis

 

•

KCG BondPoint grew trade volumes across Corporates, Municipals and CDs on both a quarter over quarter and year over year basis

 

•

Completed the sale of KCG Hotspot to BATS Global Markets, Inc.

 

•

Raised $500 million in 6.875% Senior Secured Notes due in 2020, repaid $117 million in Convertible Notes upon maturity in March 2015, and, subsequent to the quarter, redeemed $305 million in 8.250% Senior Secured Notes due in 2018

 

•

Subsequent to the quarter, announced plans to launch a modified Dutch auction tender offer for up to $330 million of its common stock as part of an expanded share repurchase program

“During the first quarter, we accomplished a great deal. On the cost front, we’ve relentlessly focused on operating expenses. On the client front, we continue to develop strategic relationships. In addition, we closed the sale of KCG Hotspot to BATS and initiated a process to rationalize our long-term debt. We’ve done all this while continuing to build out and optimize our trading businesses to position them for future revenue growth,” said CEO Daniel Coleman. “Notwithstanding all of this, we believe we can do more. We can support our firm’s ability to grow with regard to improving returns on equity and optimizing our capital structure. To that end, we announced a planned $330 million tender offer at a range of $13.50 to $14.00 per share. The offer is a premium to current and historical prices our shares have traded at since the merger. We believe this is an appropriate recognition of our stockholders’ patience as we have worked through the integration and we believe this is the right use of capital as we invest in our future as a new breed of independent securities firm.”

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 first quarter of 2015, the segment generated total revenues of $224.5 million and pre-tax income of $39.3 million.

During the first quarter of 2015, consolidated U.S equity share and dollar volume posted modest declines quarter over quarter despite the continued rise of leading market indexes. Retail investors remained engaged as evidenced by the sustained average daily SEC Rule 605 share volume and net flows into stocks during the quarter. Market volumes for fixed income, currencies and commodities during the quarter were mixed, punctuated by heightened trading activity from macro events.

Mr. Coleman commented, “KCG’s market making results reflect lower consolidated U.S. equity market volumes compared to the previous quarter and similar levels of realized volatility. Anecdotally, we saw improvement in market making in European equities to European clients, offset by a more difficult quarter in U.S. options. During the quarter, KCG continued to make progress building out direct-to-client market making in FX across regions.”

In the fourth quarter of 2014, the segment generated total revenues of $238.7 million and pre-tax income of $42.7 million. In the first quarter of 2014, the segment generated total revenues of $277.3 million and pre-tax income of $76.0 million.

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Select Trade Statistics: U.S. Equity Market Making

 

		1Q15				4Q14				1Q14
Average daily dollar volume traded ($ millions)			31,025				31,621				27,321
Average daily trades (thousands)			3,947				4,036				3,958
Average daily shares traded (millions)			5,048				5,241				14,907
NYSE and NASDAQ shares traded			933				933				862
OTC Bulletin Board and OTC Market shares traded			4,115				4,308				14,045
Average revenue capture per U.S. equity dollar value traded (bps)			0.92				0.93				1.26

Global Execution Services

The Global Execution Services segment comprises agency execution services and trading venues. During the first quarter of 2015, the segment generated total revenues of $464.3 million and pre-tax income of $381.1 million. Excluding the gain on the sale of KCG Hotspot and related professional and compensation expenses, the segment generated total revenues of $79.2 million and pre-tax income of $7.2 million.

During the first quarter of 2015, KCG’s algorithmic trading continued to add leading institutions as clients. The ETF trading team posted a strong quarter by developing existing clients and converting additional prospects. KCG BondPoint generated record average daily par value traded with growth in volumes of Corporates, Municipals and CDs.

Mr. Coleman commented, “We believe algorithmic trading is a real, emerging strength at KCG. The product development process blends the firm’s deep intellectual capital with our advanced technologies. Client orders benefit from access to KCG’s naturally occurring liquidity from retail and institutional clients. We continue to focus on growing our business with buyside clients. During the first quarter, 10 asset management clients began using KCG algorithms, and we onboarded an additional 16 new asset management clients. The decline in volume quarter over quarter reflects a decrease in low margin order routing flow, which had a minimal impact on revenues.”

As previously announced, during the quarter, KCG completed the sale of KCG Hotspot to BATS Global Markets. First quarter 2015 financial results for the Global Execution Services segment includes contributions from KCG Hotspot encompassing 50 trading days until the completion of the sale on March 13, 2015.

In the fourth quarter of 2014, the segment generated total revenues of $93.4 million and pre-tax income of $10.0 million. Excluding a gain of $2.1 million from the sale of KCG’s futures commodity merchant (FCM), the segment generated total revenues of $91.3 million and pre-tax income for the quarter of $7.9 million. In the first quarter of 2014, the segment generated total revenues of $87.2 million and pre-tax income of $2.0 million.

Select Trade Statistics: Agency Execution and Trading Venues

 

		1Q15				4Q14				1Q14
Average daily KCG algorithmic trading and order routing U.S. equities shares traded (millions)			299.0				334.3				281.0
Average daily KCG BondPoint fixed income par value traded ($ millions)			145.8				130.8				144.2
Average daily KCG Hotspot notional foreign exchange dollar value traded ($ billions)*			31.1				31.6				32.2

 

*	Represents KCG Hotspot ADV from January 1, 2015 to March 12, 2015.

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Corporate and Other

The Corporate and Other segment includes strategic investments and corporate overhead expenses. During the first quarter of 2015, the segment generated total revenues of $7.3 million and pre-tax loss of $14.3 million.

In the fourth quarter of 2014, the segment generated total revenues of $14.0 million and a pre-tax loss of $26.1 million. Excluding net lease loss accruals of $6.1 million, the pre-tax loss for the quarter was $20.0 million. In the first quarter of 2014, the segment generated total revenues of $19.1 million and a pre-tax loss of $18.7 million. Excluding revenue of $9.6 million from the merger of BATS and Direct Edge and a write down of $7.6 million in capitalized debt costs and net lease loss benefit of $0.1 million, the pre-tax loss for the quarter was $20.8 million.

Financial Condition

As of March 31, 2015, KCG had $990.5 million in cash and cash equivalents. Total outstanding debt was $799.8 million (See Debt below). The Company had $1.78 billion in stockholders’ equity, equivalent to a book value of $15.10 per share and tangible book value of $13.86 per share based on total shares outstanding of 118.1 million, including restricted stock units.

KCG’s headcount at March 31, 2015 was 1,038 full-time employees as compared to 1,093 full-time employees at December 31, 2014, which included 40 full-time employees of KCG Hotspot.

During the first quarter of 2015, KCG did not repurchase any shares of KCG Class A Common Stock.

Debt

On March 13, 2015, KCG provided 30 days’ notice that it would call its 8.250% $305.0 million Senior Secured Notes due 2018 (“8.250% Notes”), effective April 13, 2015. KCG funded $330.2 million, an amount sufficient to redeem the outstanding aggregate principal amount of the 8.250% Notes plus accrued interest, a make whole premium and other costs into an escrow account. As the 8.250% Notes were redeemed in April, the $305.0 million remained on the Consolidated Statement of Financial Condition as of March 31, 2015. The charges for the make-whole premium of $16.5 million and the acceleration of capitalized debt costs of $8.8 million will be recorded in the second quarter of 2015. In addition, upon maturity on March 16, 2015, KCG repaid all of its outstanding $117.3 million aggregate principal amount of 3.50% Cash Convertible Senior Subordinated Notes.

Modified Dutch Auction Tender Offer

Subsequent to the first quarter of 2015, on April 2, 2015, KCG’s board of directors authorized an expanded share repurchase program of up to $400 million of KCG common stock and warrants (including the $55 million of remaining capacity under the previously authorized repurchase program). As part of this authority, KCG expects to commence, on May 4, 2015, a “modified Dutch auction” tender offer that will remain open for at least 20 business days. Under the proposed terms of the tender offer, stockholders will have the opportunity to sell stock to KCG at a specified price per share not less than $13.50 and not greater than $14.00. Upon expiration of the tender offer, and based on the number of shares tendered and the prices specified by the tendering stockholders, KCG will determine the lowest price within the range that will allow it to repurchase up to $330 million of KCG’s Class A common stock (or all Shares properly tendered and not properly withdrawn if the tender offer is not fully subscribed). All shares purchased by KCG in the tender offer will be purchased at the same price. If the aggregate purchase price for shares tendered at or below the specified purchase price exceeds $330 million, allocations will be made on a pro rata basis from stockholders tendering at or below the purchase price, except as otherwise specified in the Offer to Purchase. The tender offer range represents a premium of 5 percent to 9 percent above the closing price of KCG’s common stock on the New York Stock Exchange of $12.84 on April 30, 2015. Assuming the offer is fully subscribed, KCG will

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repurchase a minimum of 23.6 million shares, or 22 percent of its total shares outstanding excluding restricted stock units (RSUs) as of April 29, 2015. Assuming the tender offer is fully subscribed, approximately $70 million in authority will remain in the share repurchase program.

Additional Information Regarding the Tender Offer

The tender offer described in this press release has not yet commenced. This press release is for informational purposes only, is not a recommendation to buy or sell KCG common stock, and does not constitute an offer to buy or the solicitation to sell shares of KCG common stock. The tender offer will be made only pursuant to the Offer to Purchase, Letter of Transmittal and related materials that KCG expects to file Monday, May 4^th with the Securities and Exchange Commission. Stockholders should read carefully the Offer to Purchase, Letter of Transmittal and related materials because they contain important information, including the various terms of, and conditions to, the tender offer. Once the tender offer is commenced, stockholders will be able to obtain a free copy of the tender offer statement on Schedule TO, the Offer to Purchase, Letter of Transmittal and other documents that KCG will be filing with the Securities and Exchange Commission at the Commission’s website at www.sec.gov or the investor information section of KCG’s website at www.kcg.com.

Conference Call

KCG will hold a conference call to discuss first quarter 2015 financial results starting at 9:00 a.m. Eastern Time today, May 1, 2015. To access the call, dial 888-820-9418 (domestic) or 913-312-0399 (international) and enter passcode 2590902. In addition, the call will be webcast at http://www.media-server.com/m/acs/60eea8e00b3e41855fa9a4e355bdce2f. 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 first 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 March 31, 2015, December 31, 2014 and March 31, 2014. KCG believes the presentations provide a meaningful summary of revenues and results of operations for each of the three 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 sale of KCG Hotspot; (iv) changes in market structure, legislative, regulatory or financial reporting rules,

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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; (x) the effects of increased competition and KCG’s ability to maintain and expand market share; and (xi) the commencement and completion of the proposed tender offer. 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, 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

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Exhibit 1

KCG HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		For the three months ended
		March 31, 2015				December 31, 2014				March 31, 2014
		(In thousands, except per share amounts)
Revenues
Trading revenues, net		$	208,795			$	221,415			$	258,297
Commissions and fees			99,961				117,326				112,257
Interest, net			(23	)			(177	)			948
Investment income and other, net			387,423				7,575				12,155
Total revenues			696,156				346,139				383,657
Expenses
Employee compensation and benefits			106,718				116,214				122,319
Execution and clearance fees			68,473				82,377				75,501
Communications and data processing			33,764				36,945				36,796
Depreciation and amortization			20,615				21,224				20,103
Payments for order flow			15,221				14,698				22,032
Professional fees			11,181				5,695				5,402
Debt interest expense			8,463				7,721				9,524
Collateralized financing interest			8,456				7,973				6,162
Occupancy and equipment rentals			7,340				8,514				8,285
Business development			1,857				2,308				1,683
Lease loss accrual, net			132				6,117				266
Writedown of capitalized debt costs			—				—				7,557
Other			7,808				9,822				8,643
Total expenses			290,028				319,608				324,273
Income from continuing operations before income taxes			406,128				26,531				59,384
Income tax expense			156,827				562				22,467
Income from continuing operations, net of tax			249,301				25,969				36,917
Income (loss) from discontinued operations, net of tax			—				165				(1,253	)
Net Income		$	249,301			$	26,134			$	35,664
Basic earnings per share from continuing operations		$	2.25			$	0.24			$	0.32
Diluted earnings per share from continuing operations		$	2.19			$	0.23			$	0.31
Basic loss per share from discontinued operations		$	—			$	—			$	(0.01	)
Diluted loss per share from discontinued operations		$	—			$	—			$	(0.01	)
Basic earnings per share		$	2.25			$	0.24			$	0.31
Diluted earnings per share		$	2.19			$	0.23			$	0.30
Shares used in computation of basic earnings (loss) per share			110,782				109,654				115,569
Shares used in computation of diluted earnings (loss) per share			113,615				112,224				117,898

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Exhibit 2

KCG HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited)

 

		March 31, 2015				December 31, 2014
		(In thousands)
ASSETS
Cash and cash equivalents		$	990,542			$	578,768
Cash and cash equivalents segregated under federal and other regulations			3,000				3,361
Funds held in escrow			330,163				—
Financial instruments owned, at fair value:
Equities			2,366,225				2,479,910
Listed options			87,412				144,586
Debt securities			187,314				82,815
Other financial instruments			—				60
Total financial instruments owned, at fair value			2,640,951				2,707,371
Collateralized agreements:
Securities borrowed			1,685,850				1,632,062
Receivable from brokers, dealers and clearing organizations			822,248				1,188,833
Fixed assets and leasehold improvements, less accumulated depreciation and amortization			129,171				134,051
Investments			105,624				100,726
Goodwill and Intangible assets, less accumulated amortization			146,539				152,594
Deferred tax asset, net			164,298				154,759
Assets of business held for sale			—				40,484
Other assets			217,408				137,645
Total assets		$	7,235,794			$	6,830,654
LIABILITIES & EQUITY
Liabilities
Financial instruments sold, not yet purchased, at fair value:
Equities		$	1,950,860			$	2,069,342
Listed options			78,427				115,362
Debt securities			112,763				101,003
Other financial instruments			234				—
Total financial instruments sold, not yet purchased, at fair value			2,142,284				2,285,707
Collateralized financings:
Securities loaned			792,887				707,744
Financial instruments sold under agreements to repurchase			905,567				933,576
Total collateralized financings			1,698,454				1,641,320
Payable to brokers, dealers and clearing organizations			442,586				676,089
Payable to customers			12,126				22,110
Accrued compensation expense			41,831				114,559
Accrued expenses and other liabilities			161,850				136,977
Income taxes payable			148,481				—
Capital lease obligations			5,080				6,700
Liabilities of business held for sale			—				2,356
Debt			799,847				422,259
Total liabilities			5,452,539				5,308,077
Equity
Class A Common Stock			1,296				1,275
Additional paid-in capital			1,391,368				1,369,298
Retained earnings			522,081				272,780
Treasury stock, at cost			(133,188	)			(122,909	)
Accumulated other comprehensive income			1,698				2,133
Total equity			1,783,255				1,522,577
Total liabilities and equity		$	7,235,794			$	6,830,654

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Exhibit 3

KCG HOLDINGS, INC.

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

(In thousands)

(Unaudited)

 

		For the three months ended
		March 31, 2015				December 31, 2014				March 31, 2014
Market Making
Revenues		$	224,548			$	238,740			$	277,346
Expenses			185,208				196,030				201,314
Pre-tax earnings			39,340				42,710				76,032
Global Execution Services
Revenues			464,266				93,369				87,220
Expenses			83,208				83,401				85,204
Pre-tax earnings			381,058				9,968				2,016
Corporate and Other
Revenues			7,342				14,030				19,091
Expenses			21,612				40,177				37,755
Pre-tax loss			(14,270	)			(26,147	)			(18,664	)
Consolidated
Revenues			696,156				346,139				383,657
Expenses			290,028				319,608				324,273
Pre-tax earnings		$	406,128			$	26,531			$	59,384

 

*	Totals may not add due to rounding.

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Exhibit 4

KCG HOLDINGS, INC.

Regulation G Reconciliation of Non-GAAP financial measures (Continuing operations)*

(in thousands)

 

Three months ended March 31, 2015		Market Making				Global Execution Services				Corporate and Other				Consolidated
Reconciliation of GAAP Revenues to Non-GAAP Revenues:
GAAP Revenues		$	224,548			$	464,266			$	7,342			$	696,156
Gain on sale of KCG Hotspot			—				(385,026	)			—				(385,026	)
Non- GAAP Revenues		$	224,548			$	79,240			$	7,342			$	311,130
		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		$	39,340			$	381,058			$	(14,270	)		$	406,128
Gain on sale of KCG Hotspot			—				(385,026	)			—				(385,026	)
Professional fees related to the sale of KCG Hotspot			—				6,736				—				6,736
Compensation expense related to the sale of KCG Hotspot			—				4,457				—				4,457
Lease loss accrual, net			—				—				132				132
Non-GAAP Income (loss) from continuing operations before income taxes		$	39,340			$	7,225			$	(14,138	)		$	32,427
Three months ended December 31, 2014		Market Making				Global Execution Services				Corporate and Other				Consolidated
Reconciliation of GAAP Revenues to Non-GAAP Revenues:
GAAP Revenues		$	238,740			$	93,369			$	14,030			$	346,139
Gain on sale of FCM			—				(2,116	)			—				(2,116	)
Non- GAAP Revenues		$	238,740			$	91,253			$	14,030			$	344,023
		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	)
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 March 31, 2014		Market Making				Global Execution Services				Corporate and Other				Consolidated
Reconciliation of GAAP Revenues to Non-GAAP Revenues:
GAAP Revenues		$	277,346			$	87,220			$	19,091			$	383,657
Income resulting from the merger of BATS and Direct Edge, net			—				—				(9,644	)			(9,644	)
Non- GAAP Revenues		$	277,346			$	87,220			$	9,447			$	374,013
		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		$	76,032			$	2,016			$	(18,664	)		$	59,384
Writedown of capitalized debt costs			—				—				7,557				7,557
Income resulting from the merger of BATS and Direct Edge, net			—				—				(9,644	)			(9,644	)
Lease loss accrual, net			359				—				(93	)			266
Non-GAAP Income (loss) from continuing operations before income taxes		$	76,391			$	2,016			$	(20,844	)		$	57,563

 

*	Totals may not add due to rounding

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