0000950136-03-002769 8-K 3 20031112 12 7 20031113 ESPEED INC 0001094831 7389 134063515 DE 1231 8-K 34 000-28191 03995642 135 E. 57TH STREET 135 E. 57TH STREET NEW YORK NY 10022 2129385000 135 E. 57TH STREET 135 E. 57TH STREET NEW YORK NY 10022 8-K 1 file001.htm FORM 8-K U.S. 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): November 12, 2003 [[Image Removed]] [[Image Removed]] [[Image Removed]][[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] eSpeed, Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware [[Image Removed]] 0-28191 [[Image Removed]] 13-4063515 (State or Other Jurisdiction of [[Image Removed]] (Commission File Number) [[Image Removed]] (I.R.S. Employer Incorporation) Identification No.) 135 East 57th Street, New York, New York [[Image Removed]] 10022 (Address of Principal Executive Offices) [[Image Removed]] (Zip Code) (212) 938-5000 (Registrant's Telephone Number, Including Area Code) Not applicable (Former Name or Address, if Changed Since Last Report) [[Image Removed]] -------------------------------------------------------------------------------- ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits. See Exhibit Index attached to this Current Report on Form 8-K. ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION On November 12, 2003, eSpeed, Inc. (the "Registrant") issued a press release announcing its preliminary operating statistics for the quarter ended September 30, 2003. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K. In accordance with the procedural guidance in SEC Release No. 33-8216, the information in this Current Report on Form 8-K and the Exhibit attached to this Current Report on Form 8-K are being furnished under Item 12 of Form 8-K. The information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such filing. In the press release, the Registrant uses non-GAAP financial measures of revenues, income before income tax provision, net income and earnings per share to supplement its consolidated financial statements presented in accordance with generally accepted accounting principles, or GAAP, and to better reflect its quarter-over-quarter and comparative first three quarters operating performance. The Registrant also provides a computation of free cash flows. These non-GAAP financial measures do not replace the presentation of GAAP financial results but are provided to enhance overall understanding of the Registrant's current financial performance and prospects for the future. Specifically, the Registrant's management believes that the non-GAAP financial results provide useful information to both management and investors regarding certain additional financial and business trends relating to its financial condition and results from operations. In addition, management uses these measures for reviewing the Registrant's financial results and evaluating its financial performance. 2 -------------------------------------------------------------------------------- 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 hereunto duly authorized. [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] eSpeed, Inc. Date: November 12, 2003 By: /s/ Howard W. Lutnick [[Image Removed]] Howard W. Lutnick Chairman, Chief Executive Officer and President [[Image Removed]] 3 -------------------------------------------------------------------------------- EXHIBIT INDEX [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] Exhibit [[Image Removed]] 99.1 Press release of eSpeed, Inc. dated November 12, 2003 [[Image Removed]] containing preliminary operating statistics for the quarter ended September 30, 2003. [[Image Removed]] -------------------------------------------------------------------------------- EX-99.1 4 file002.htm PRESS RELEASE EXHIBIT 99.1 ESPEED REPORTS RECORD THIRD QUARTER 2003 FULLY TAXED OPERATING EPS OF $0.19 AND GAAP EPS OF $0.17 PRE-TAX OPERATING EARNINGS PER SHARE OF $0.31 INCREASE 94 PERCENT AND QUARTERLY REVENUES GROW 34 PERCENT TO $44 MILLION YEAR OVER YEAR PRE-TAX OPERATING MARGINS EXPAND TO 40 PERCENT COMPANY EXPECTS STRONG RESULTS FOR FULL YEAR 2004, GUIDING FULLY TAXED OPERATING EPS OF $0.80-0.84 NEW YORK - November 12, 2003 - eSpeed, Inc. (NASDAQ:ESPD), a subsidiary of Cantor Fitzgerald and the leading developer of electronic trading technology, today reported results for the third quarter ended September 30, 2003. EARNINGS For the third quarter 2003, the Company reported fully taxed operating income of $10.8 million, or $0.19 per diluted share. eSpeed reports net operating income in order to reflect earnings generated from the Company's operations. In accordance with Generally Accepted Accounting Principles (GAAP), eSpeed reported net income of $10.0 million, or $0.17 per diluted share, for the third quarter 2003. The difference between fully taxed operating income and GAAP net income is a $0.4 million charge for a charitable contribution to the Cantor Fitzgerald Relief Fund related to the annual September 11th Charity Day and a $0.4 million non-cash charge for business partner securities. For comparative purposes, eSpeed reported pre-tax operating income of $17.7 million, or $0.31 per diluted share, in the third quarter 2003, a 94 percent increase over the $0.16 per diluted share reported in the third quarter 2002. REVENUE eSpeed's total revenues for the third quarter 2003 were $44.3 million, 34 percent higher than revenues of $33.0 million for third quarter 2002. On a sequential basis, total revenues increased 13 percent from $39.1 million reported in the second quarter 2003. Third quarter 2003 fully electronic revenues increased to $32.3 million, up 42 percent compared to $22.8 million in the third quarter 2002. Total revenues from Software Solutions in the third quarter 2003 were $6.1 million versus $4.8 million in the third quarter 2002, an increase of 27 percent. Third quarter 2003 pre-tax operating margins grew to 39.9 percent versus 26.8 percent in the third quarter 2002 and 35.5 percent in the second quarter 2003. VOLUME & TRANSACTIONS Fully electronic volume for the third quarter 2003 was $9.6 trillion, a 23 percent increase over $7.8 trillion for the second quarter 2003. eSpeed's total electronic volume, including fully electronic and voice-assisted transactions, for the third quarter 2003 was $12.4 trillion, up 19 percent from $10.4 trillion in the second quarter 2003. This growth compares to an 8 percent increase in US Treasury volume as reported by the Federal Reserve. The Company had anticipated Federal Reserve US Treasury average daily volume for the third quarter 2003 in a range of $440 - $460 billion. Actual Federal Reserve US Treasury average daily volume was $478 billion for the third quarter. Howard W. Lutnick, Chairman, CEO & President of eSpeed, Inc., commented, "Our strong results this quarter were primarily based on our unmatched position as the leading electronic platform in the US Treasury market. eSpeed's market position dramatically improved as evidenced by both our volume growth outpacing that of the Federal Reserve US Treasury average daily volumes as well as the success and continued traction of our Price Improvement (PI) product enhancement. During the third quarter, we saw increases in both the number of PI users as well as the number of transactions executed using Price Improvement." eSpeed's new product roll-outs remain on schedule. Lee Amaitis, Global Chief Operating Officer of eSpeed commented, "Our foreign exchange product has received excellent customer feedback, and we believe it has the potential to transform the foreign exchange market by increasing efficiency and broadening market participation. We remain on target with the roll-outs of both our mortgage backed securities and interest rate swaps products which will be on traders' desktops by the end of the year." FREE CASH FLOW & CASH The Company generated free cash flow (excluding related party receivables and payables) of $18.5 million during the third quarter 2003, 40 percent higher than the $13.2 million in the second quarter 2003. Including related party receivables and payables, free cash flow for the quarter was $17.2 million. As of September 30, 2003, eSpeed's cash and cash equivalents increased to approximately $217 million compared to $199 million as of June 30, 2003. OUTLOOK For the fourth quarter 2003, eSpeed expects average daily Federal Reserve US Treasury volume to be between $425 and $435 billion, down from the previously expected $440 - $460 billion. The Company anticipates that the seasonally slower fourth quarter, specifically due to the Thanksgiving, Christmas and New Year's holidays and two fewer trading days, will result in comparatively lower average daily volumes. For the fourth quarter 2003, the Company expects to generate operating income in the range of $0.14 - $0.15 per share diluted and after-tax. The Company maintains its full year 2003 operating income guidance in a range of $0.65 - $0.67 per share diluted and after-tax, which includes actual third quarter results and guidance for the fourth quarter. Full year 2003 guidance is predicated on the expectation that average daily Federal Reserve US Treasury volume will be between $436 and $439 billion. For the full year 2004, eSpeed expects to generate revenue in excess of $185 million and expects its pre-tax operating margins to exceed 41 percent for the full year. eSpeed anticipates that its incremental margins will exceed 75 percent for the full year 2004. Operating earnings for 2004 are expected to be in a range of $0.80 and $0.84 per share diluted and after-tax. This guidance is based on the Company's expectations that average daily Federal Reserve US Treasury volume will be between $490 and $510 billion for the full year 2004. In conclusion, Mr. Lutnick added, "With impressive results so far in 2003, we are well positioned to continue our growth in 2004. We expect 2004 will be characterized by continued US Treasury market issuance with additional US Treasury benchmark issues being added, further traction in our Price Improvement and Contingent Order product enhancements as well as new applications for each of these product enhancements, and a reasonable expectation of traction in our Foreign Exchange, Equities and other new products. We look forward to extending our solid leadership position into 2004 and beyond." NON-GAAP FINANCIAL MEASURES To supplement eSpeed's consolidated financial statements presented in accordance with GAAP and to better reflect the Company's quarter-over-quarter and comparative first three quarters operating performance, eSpeed uses non-GAAP financial measures of revenues, income before income tax provision, net income and earnings per share, which are adjusted to exclude certain non-operating expenses and gains. In addition, the Company provides a computation of free cash flows. These non-GAAP financial measurements do not replace the presentation of eSpeed's GAAP financial results but are provided to improve overall understanding of the Company's current financial performance and its prospects for the future. Specifically, eSpeed believes the non-GAAP financial results provide useful information to both management and investors regarding certain additional financial and business trends relating to the Company's financial condition and results from operations. In addition, eSpeed's management uses these measures for reviewing the Company's financial results and evaluating eSpeed's financial performance. In the third quarter 2003, the difference between GAAP net income and non-GAAP net operating income was $0.8 million. ABOUT ESPEED, INC. eSpeed, a subsidiary of Cantor Fitzgerald, is the leader in developing and deploying electronic marketplaces and related trading technology that offers traders access to the most liquid, efficient and neutral financial markets in the world. eSpeed operates multiple buyer, multiple seller real-time electronic marketplaces for the global capital markets, including the world's largest government bond markets and other fixed income and financial marketplaces. eSpeed's suite of marketplace tools provides end-to-end transaction solutions for the purchase and sale of financial and non-financial products over eSpeed's global private network or via the Internet. eSpeed's neutral platform, reliable network, straight-through processing and superior products make it the trusted source for electronic trading at the world's largest fixed income and foreign exchange trading firms, major exchanges and leading natural gas and electricity trading firms. To learn more, please visit www.espeed.com. Statements contained in this Press Release, which are not historical facts, are forward-looking statements, as the term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to: the effects of the attacks on the World Trade Center, market volatility, the limited operating history of eSpeed, Inc., and its ability to enter into marketing and strategic alliances, to effectively manage its growth, to expand the use of its electronic systems and to induce clients to use its marketplaces and services, and other factors that are discussed in eSpeed's Annual Report on Form 10-K, filed with the Securities and Exchange Commission. CONTACTS: INVESTORS: Maureen Murphy 212.610.2430 MEDIA: Tom Ryan 212.610.2425 ESPEED, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) Three Months Ended Nine Months Ended September 30, September 30, ----------------------- ----------------------- 2003 2002 2003 2002 --------- --------- --------- --------- Revenues: Transaction revenues with related parties Fully electronic transactions $ 32,300 $ 22,783 $ 82,348 $ 65,609 Voice-assisted brokerage transactions 5,153 4,649 14,959 13,479 Screen-assisted open outcry transactions 128 11 420 134 --------- --------- --------- --------- Total transaction revenues with related parties 37,581 27,443 97,727 79,222 Software Solutions fees from related parties 3,821 3,423 11,351 9,747 Software Solutions and licensing fees from unrelated parties 2,321 1,333 6,662 2,437 Interest income 547 780 1,652 2,222 --------- --------- --------- --------- Total revenues 44,270 32,979 117,392 93,628 --------- --------- --------- --------- Expenses: Compensation and employee benefits 9,790 9,113 27,873 27,748 Occupancy and equipment 8,191 6,338 22,939 18,048 Professional and consulting fees 953 1,149 2,927 4,264 Communications and client networks 1,715 1,465 5,024 4,516 Marketing 373 1,281 1,115 4,515 Administrative fees to related parties 2,579 2,292 7,747 6,579 Other 3,019 2,512 8,168 5,373 --------- --------- --------- --------- Total operating expenses 26,620 24,150 75,793 71,043 --------- --------- --------- --------- Pre-tax operating income 17,650 8,829 41,599 22,585 Income tax provision 6,873 123 12,323 351 --------- --------- --------- --------- Net operating income 10,777 8,706 29,276 22,234 --------- --------- --------- --------- Non-operating (loss) income: Amortization of business partner and non-employee securities, net of tax (395) (541) (1,317) (1,354) Charitable contribution Re: 9/11, net of tax (420) (500) (420) (500) Business interruption insurance proceeds from parent -- -- -- 12,833 --------- --------- --------- --------- Total non-operating (loss) income (815) (1,041) (1,737) 10,979 --------- --------- --------- --------- GAAP net income $ 9,962 $ 7,665 $ 27,539 $ 33,213 ========= ========= ========= ========= Per share data: Basic pre-tax operating income per share $ 0.32 $ 0.16 $ 0.75 $ 0.41 Basic tax provision per share $ (0.12) $ (0.00) $ (0.22) $ (0.01) --------- --------- --------- --------- Basic net operating income per share $ 0.19 $ 0.16 $ 0.53 $ 0.40 Basic non-operating (loss) income per share $ (0.01) $ (0.02) $ (0.03) $ 0.20 --------- --------- --------- --------- Basic GAAP earnings per share $ 0.18 $ 0.14 $ 0.50 $ 0.60 ========= ========= ========= ========= Diluted pre-tax operating income per share $ 0.31 $ 0.16 $ 0.73 $ 0.40 Diluted tax provision per share $ (0.12) $ (0.00) $ (0.22) $ (0.01) --------- --------- --------- --------- Diluted net operating income per share $ 0.19 $ 0.15 $ 0.51 $ 0.39 Diluted non-operating (loss) earnings per share $ (0.01) $ (0.02) $ (0.03) $ 0.19 --------- --------- --------- --------- Diluted GAAP earnings per share $ 0.17 $ 0.14 $ 0.48 $ 0.59 ========= ========= ========= ========= Basic weighted average shares of common stock outstanding 55,291 54,980 55,205 54,979 ========= ========= ========= ========= Diluted weighted average shares of common stock outstanding 57,730 56,499 57,171 56,683 ========= ========= ========= ========= Additional data: Pre-tax operating margin 39.9% 26.8% 35.4% 24.1% ========= ========= ========= ========= ESPEED, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME IN ACCORDANCE WITH GAAP (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) Three Months Ended Nine Months Ended September 30, September 30, ---------------------------- ---------------------------- 2003 2002 2003 2002 ----------- ----------- ----------- ----------- Revenues: Transaction revenues with related parties Fully electronic transactions $ 32,300 $ 22,783 $ 82,348 $ 65,609 Voice-assisted brokerage transactions 5,153 4,649 14,959 13,479 Screen-assisted open outcry transactions 128 11 420 134 ----------- ----------- ----------- ----------- Total transaction revenues with related parties 37,581 27,443 97,727 79,222 Software Solutions fees from related parties 3,821 3,423 11,351 9,747 Software Solutions and licensing fees from unrelated parties 2,321 1,333 6,662 2,437 Business interruption insurance proceeds from parent -- -- -- 12,833 Interest income 547 780 1,652 2,222 ----------- ----------- ----------- ----------- Total revenues 44,270 32,979 117,392 106,461 ----------- ----------- ----------- ----------- Expenses: Compensation and employee benefits 9,790 9,113 27,873 27,748 Occupancy and equipment 8,191 6,338 22,939 18,048 Professional and consulting fees 953 1,149 2,927 4,264 Communications and client networks 1,715 1,465 5,024 4,516 Marketing 373 1,281 1,115 4,515 Administrative fees to related parties 2,579 2,292 7,747 6,579 Amortization of business partner and non-employee securities 648 541 1,715 1,354 Other 3,706 3,012 8,855 5,873 ----------- ----------- ----------- ----------- Total expenses 27,955 25,191 78,195 72,897 ----------- ----------- ----------- ----------- Income before income tax provision 16,315 7,788 39,197 33,564 Income tax provision 6,353 123 11,658 351 ----------- ----------- ----------- ----------- Net income $ 9,962 $ 7,665 $ 27,539 $ 33,213 =========== =========== =========== =========== Per share data: Basic earnings per share $ 0.18 $ 0.14 $ 0.50 $ 0.60 =========== =========== =========== =========== Diluted earnings per share $ 0.17 $ 0.14 $ 0.48 $ 0.59 =========== =========== =========== =========== Basic weighted average shares of common stock outstanding 55,291 54,980 55,205 54,979 =========== =========== =========== =========== Diluted weighted average shares of common stock outstanding 57,730 56,499 57,171 56,683 =========== =========== =========== =========== ESPEED, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP (UNAUDITED) (IN THOUSANDS) Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2003 2002 2003 2002 --------- --------- --------- --------- Revenues $ 44,270 $ 32,979 $ 117,392 $ 93,628 Business interruption insurance proceeds from parent [a] -- -- -- 12,833 --------- --------- --------- --------- GAAP revenues $ 44,270 $ 32,979 $ 117,392 $ 106,461 --------- --------- --------- --------- Operating expenses $ 26,620 $ 24,150 $ 75,793 $ 71,043 Amortization of business partner and non-employee securities [b] 648 541 1,715 1,354 Charitable contribution Re: 9/11 [c] 687 500 687 500 --------- --------- --------- --------- GAAP expenses $ 27,955 $ 25,191 $ 78,195 $ 72,897 --------- --------- --------- --------- Pre-tax operating income $ 17,650 $ 8,829 $ 41,599 $ 22,585 Sum of reconciling items = [a] - [b] - [c] (1,335) (1,041) (2,402) 10,979 --------- --------- --------- --------- GAAP income before income tax provision $ 16,315 $ 7,788 $ 39,197 $ 33,564 --------- --------- --------- --------- Income tax provision 6,873 123 12,323 351 Income tax benefit on non-operating loss [d] (520) -- (665) -- --------- --------- --------- --------- GAAP income tax provision $ 6,353 $ 123 $ 11,658 $ 351 --------- --------- --------- --------- Net operating income $ 10,777 $ 8,706 $ 29,276 $ 22,234 Sum of reconciling items = [a] + [b] + [c] + [d] (815) (1,041) (1,737) 10,979 --------- --------- --------- --------- GAAP net income $ 9,962 $ 7,665 $ 27,539 $ 33,213 ========= ========= ========= ========= ESPEED, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (IN THOUSANDS, EXCEPT SHARE DATA) September 30, 2003 December 31, 2002 -------------------- --------------------- (unaudited) Assets Cash and cash equivalents $ 216,985 $ 187,999 Fixed assets, net 28,563 26,383 Investments 11,476 11,175 Intangible assets, net 19,288 19,528 Receivable from related parties 2,467 5,266 Other assets 6,776 2,360 -------------------- --------------------- Total assets $ 285,555 $ 252,711 -------------------- --------------------- Liabilities and Stockholders' Equity Liabilities: Payable to related parties $ 3,546 $ 18,857 Accounts payable and accrued liabilities 26,889 15,399 -------------------- --------------------- Total liabilities 30,435 34,256 -------------------- --------------------- Stockholders' Equity: Preferred stock, par value $0.01 per share; 50,000,000 shares authorized, 8,000,750 shares issued and outstanding 80 80 Class A common stock, par value $.01 per share; 200,000,000 shares authorized; 30,276,299 and 29,783,682 shares issued 303 298 Class B common stock, par value $.01 per share; 100,000,000 shares authorized; 25,362,809 and 25,388,814 shares issued and outstanding 254 254 Additional paid-in capital 280,040 270,656 Unamortized expense of business partner and non-employee securities (1,643) (3,252) Treasury stock, at cost; 186,399 and 24,600 shares of Class A common stock (2,094) (222) Accumulated deficit (21,820) (49,359) -------------------- --------------------- Total stockholders' equity 255,120 218,455 -------------------- --------------------- Total liabilities and stockholders' equity $ 285,555 $ 252,711 ==================== ===================== ESPEED, INC. & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS) Three Months Ended Nine Months Ended September 30, September 30, ---------------------------- ---------------------------- 2003 2002 2003 2002 ----------- ----------- ----------- ----------- Cash flows from operating activities: Net income $ 9,962 $ 7,665 $ 27,539 $ 33,213 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,604 4,644 13,044 10,037 Amortization of business partner and non-employee securities 648 541 1,715 1,353 Equity in net loss of unconsolidated investments 41 114 80 202 Deferred income tax expense 928 -- 3,481 -- Tax benefit from employee stock option exercises 1,778 -- 3,110 -- Issuance of securities under employee benefit plan 30 -- 160 55 Changes in operating assets and liabilities: Receivable from related parties (1,650) 1,694 2,800 1,694 Insurance claim receivable from parent -- 12,833 -- -- Other assets 991 1,636 (730) 359 Payable to related parties 393 2,970 (15,311) (864) Accounts payable and accrued liabilities 6,289 7,695 7,884 10,908 ----------- ----------- ----------- ----------- Net cash provided by operating activities 24,014 39,792 43,772 56,957 ----------- ----------- ----------- ----------- Cash flows from investing activities: Purchase of premises and equipment (2,569) (1,135) (4,471) (6,400) Sale of premises and equipment -- -- 2,752 -- Capitalization of software development costs (3,183) (2,784) (9,596) (5,963) Capitalization of patents and related defense costs (1,018) (8,470) (3,671) (10,231) ----------- ----------- ----------- ----------- Net cash used in investing activities (6,770) (12,389) (14,986) (22,594) ----------- ----------- ----------- ----------- Cash flows from financing activities: Repurchase of Class A common stock -- -- (1,872) -- Proceeds from exercises of stock options 5,158 -- 6,137 32 Receivable from broker on stock option exercises (4,065) -- (4,065) -- ----------- ----------- ----------- ----------- Net cash provided by financing activities 1,093 -- 200 32 ----------- ----------- ----------- ----------- Net increase in cash and cash equivalents 18,337 27,403 28,986 34,395 ----------- ----------- ----------- ----------- Cash and cash equivalents, beginning of period 198,648 166,891 187,999 159,899 ----------- ----------- ----------- ----------- Cash and cash equivalents, end of period $ 216,985 $ 194,294 $ 216,985 $ 194,294 =========== =========== =========== =========== ESPEED, INC. & SUBSIDIARIES COMPUTATION OF CONSOLIDATED FREE CASH FLOWS (UNAUDITED) (IN THOUSANDS) Three Months Ended Nine Months Ended September 30, September 30, -------------------------- -------------------------- 2003 2002 2003 2002 ----------- ----------- ----------- ----------- Pre-tax operating income $ 17,650 $ 8,829 $ 41,599 $ 22,585 Depreciation and amortization 4,604 4,644 13,044 10,037 Other non-cash items 71 114 240 256 ----------- ----------- ----------- ----------- Pre-tax operating income adjusted for depreciation, amortization and other 22,325 13,587 54,883 32,878 ----------- ----------- ----------- ----------- Income tax provision on operating income (6,873) (122) (12,323) (350) Income tax benefit on non-operating loss 520 -- 665 -- Deferred income tax expense 928 -- 3,481 -- Tax benefit from employee stock option exercises 1,778 -- 3,110 -- Income taxes paid 3,360 -- 3,360 -- ----------- ----------- ----------- ----------- Increase in current income tax payable (287) (122) (1,707) (350) Changes in related party receivable and payable, net (1,257) 4,664 (12,511) 830 Changes in other operating assets and liabilities, net 3,920 9,330 3,794 11,266 Charitable contribution Re: 9/11 (687) (500) (687) (500) Insurance claim receivable from parent -- 12,833 -- 12,833 ----------- ----------- ----------- ----------- Net cash provided by operating activities 24,014 39,792 43,772 56,957 ----------- ----------- ----------- ----------- Purchase of premises and equipment (2,569) (1,135) (4,471) (6,400) Capitalization of software development costs (3,183) (2,784) (9,596) (5,963) Capitalization of patents and related defense costs (1,018) (8,470) (3,671) (10,231) ----------- ----------- ----------- ----------- Free cash flows 17,244 27,403 26,034 34,363 ----------- ----------- ----------- ----------- Related party receivable and payable, net 1,257 (4,664) 12,511 (830) Insurance claim receivable from parent -- (12,833) -- (12,833) ----------- ----------- ----------- ----------- Free cash flows, net of related party activity $ 18,501 $ 9,906 $ 38,545 $ 20,700 =========== =========== =========== =========== ESPEED, INC. AND SUBSIDIARIES QUARTERLY MARKET ACTIVITY REPORT TREND ---------------------------------------------------------------- 3Q02 4Q02 1Q03 2Q03 ---------------------------------------------------------------- VOLUME (IN BILLIONS) Fully Electronic Volume 7,241 6,796 6,778 7,781 Voice-Assisted Volume 2,442 2,495 2,592 2,662 ---------------------------------------------------------------- Total Electronic Volume 9,683 9,291 9,369 10,443 ================================================================ ELECTRONIC TRANSACTION COUNT Fully Electronic Transactions 1,092,106 1,060,814 1,079,595 1,194,625 Voice-Assisted Transactions 159,074 128,648 151,770 148,223 ---------------------------------------------------------------- Total Transactions 1,251,180 1,189,462 1,231,365 1,342,848 ================================================================ Trading Days 64 62 61 63 Global Interest Rate Futures Volume (1) CBOT - US Treasury Contracts 58,920,377 55,710,144 60,743,312 71,290,686 CME - Euro $ Contracts 53,434,652 42,085,021 44,124,452 55,958,592 EUREX - Bund Contracts 55,962,133 45,319,604 65,864,492 63,455,364 Fed Quarterly UST Volume for Quarter End (in billions) (2) UST Volume 25,164 23,637 23,740 28,319 Average Daily UST Volume 393 381 389 450 NYSE - Volume (shares traded) - in millions (3) 99,189 93,353 86,585 92,981 - Transaction Value - in millions 2,627,565 2,410,169 2,173,033 2,497,359 NASDAQ - Volume (shares traded) - in millions (4) 110,226 105,200 88,636 112,524 - Transaction Value - in millions 1,495,032 1,583,382 1,390,364 1,739,506 % Change % Change -------------------------------------------------------- 3Q03 3Q03 vs 2Q03 3Q03 vs 3Q02 --------------- VOLUME (IN BILLIONS) Fully Electronic Volume 9,610 23.5% 32.7% Voice-Assisted Volume 2,825 6.1% 15.7% -------------------------------------------------------- Total Electronic Volume 12,435 19.1% 28.4% ======================================================== ELECTRONIC TRANSACTION COUNT Fully Electronic Transactions 1,465,263 22.7% 34.2% Voice-Assisted Transactions 157,901 6.5% (0.7%) -------------------------------------------------------- Total Transactions 1,623,164 20.9% 29.7% ======================================================== Trading Days 64 Global Interest Rate Futures Volume (1) CBOT - US Treasury Contracts 83,851,953 17.6% 42.3% CME - Euro $ Contracts 56,273,797 0.6% 5.3% EUREX - Bund Contracts 63,377,019 (0.1%) 13.2% Fed Quarterly UST Volume for Quarter End (in billions) (2) UST Volume 30,590 8.0% 21.6% Average Daily UST Volume 478 6.3% 21.6% NYSE - Volume (shares traded) - in millions (3) 87,303 (6.1%) (12.0%) - Transaction Value - in millions 2,475,689 (0.9%) (5.8%) NASDAQ - Volume (shares traded) - in millions (4) 110,672 (1.6%) 0.4% - Transaction Value - in millions 1,896,887 9.0% 26.9% Sources: (1) Futures Industry Association - Monthly Volume Report - (www.cbot.com, www.cme.com, www.eurexchange.com) (2) www.ny.frb.org/pihome/statistics/dealer - Federal Reserve Bank (3) NYSE - www.nyse.com (4) NASDAQ - www.marketdata.nasdaq.com ------------------------------------------------------------------------------------------------------------------------------- Fiscal Year 2002 Jan'02 Feb'02 Mar'02 Apr'02 May'02 Jun'02 Jul'02 Aug'02 Sep'02 Volume Data (in billions) Fully Electronic 1,992 1,811 2,158 1,953 2,169 2,119 2,630 2,482 2,129 Voice 731 677 642 622 608 601 800 737 904 Total 2,723 2,488 2,800 2,575 2,777 2,720 3,430 3,219 3,033 Transaction Count Fully Electronic 311,319 269,697 305,905 289,150 305,115 321,257 390,803 364,202 337,101 Voice 53,828 50,038 47,803 54,733 59,580 43,436 56,216 50,863 51,995 Total 365,147 319,735 353,708 343,883 364,695 364,693 447,019 415,065 389,096 Trading Days 21 19 20 22 22 20 22 22 20 ------------------------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------- Fiscal Year 2003 Jan'03 Feb'03 Mar'03 Apr'03 May'03 Jun'03 Jul'03 Aug'03 Sep'03 Volume Data (in billions) Fully Electronic 2,309 1,906 2,564 2,070 2,871 2,840 3,428 2,952 3,230 Voice 864 810 917 761 956 944 992 733 1,100 Total 3,173 2,716 3,481 2,831 3,827 3,784 4,419 3,686 4,330 Transaction Count Fully Electronic 370,992 305,296 403,307 338,281 425,213 431,131 512,447 453,324 499,492 Voice 49,801 48,449 53,520 44,767 49,946 53,510 55,258 44,804 57,839 Total 420,793 353,745 456,827 383,048 475,159 484,641 567,705 498,128 557,331 Trading Days 21 19 21 21 21 21 22 21 21 ------------------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------- Trading Days ---------------------------------------------------------------------- 2003 ---- Q1 Q2 Q3 Q4 -- -- -- -- 61 63 64 62 2002 ---- Q1 Q2 Q3 Q4 -- -- -- -- 60 64 64 62 ----------------------------------------------------------------------