- First Quarter Operating Revenues Increase 27% to $208.9 Million
- Net Income Increases 27% to $71.2 Million
- Reports GAAP EPS of $0.75; Excluding Merger-Related Expense EPS was $0.83
- GAAP Pre-tax Margin of 72%; Excluding Merger-Related Costs Pre-tax Margin Was 76%
NYMEX Holdings, Inc. (NYSE: NMX), parent company of the New York Mercantile Exchange, Inc. (NYMEX), today reported that total operating revenues for the first quarter ended March 31, 2008 rose 27% to a record $208.9 million compared to $164.2 million for the first quarter 2007. Net income for the first quarter 2008 increased 27% to a record $71.2 million compared to $56.2 million for the first quarter 2007. Diluted earnings per share for the first quarter 2008 were $0.75, based on 95.0 million shares outstanding, compared to $0.59, based on 94.8 million shares outstanding, for the first quarter 2007.
Included in the first quarter 2008 results are $7.9 million of merger-related expenses, of which approximately $6.7 million are considered non-deductible for income tax purposes, and consist primarily of professional fees incurred in connection with NYMEX's proposed merger with CME Group Inc. (CME). Excluding these merger-related expenses, net income for the quarter ending March 31, 2008 was $78.6 million or $0.83 per diluted share, on a non-GAAP basis.
The Board of Directors approved a regular quarterly dividend of 10 cents per share to shareholders of record as of June 6, 2008, payable on June 27, 2008.
NYMEX Chairman Richard Schaeffer said, "The first quarter of 2008 was significant for NYMEX, as we have continued to strengthen our competitive position and marketplace offerings, while also improving our financial performance. Our strong financial performance is the result of growth trends in volume, strength in average rate per contract fees, and disciplined expense management. The credit risk mitigation, price discovery and risk management that our trading and clearing venues provide market participants are even more valued in the current challenging economic environment, and contribute to the growing participation in our markets and continuing strength of our business."
Mr. Schaeffer continued, "The decision to combine with CME, which we announced on March 17, 2008, allows us to take our business and growth to a much higher level, and create value for our customers and shareholders. We believe this combination serves the best interests of NYMEX members and shareholders and all those who participate in the global commodities and derivatives markets. Other recent initiatives such as the launch of environmental contracts for The Green Exchange venture, as well as our historic alliance with LCH.Clearnet to offer futures and options contracts cleared in Europe, have strengthened our market position globally, as well as across asset classes."
NYMEX President and Chief Executive Officer James E. Newsome stated, "During the first quarter, we continued to build on the strong fundamentals of our core business. We set electronic trading records, including COMEX gold and other metals, natural gas, heating oil, as well as overall electronic trading volume. New product innovation continues to be our strength, and in the first quarter we launched more than 40 new contracts that we believe will add volume over time, including ethanol and electricity futures contracts, a Brent crude oil options contract, and innovative crude oil futures indexes called the Crude Oil MACI and Backwardation / Contango Index. Our Dubai Mercantile Exchange venture in the Middle East has been growing in open interest each month, recently reaching 14,000. We continue to make great progress toward launch in mid-2008 of our new and distinct slate of OTC and futures products for clearing through LCH.Clearnet. We are also excited by the rapid development of trading and addition of new partners in The Green Exchange venture, which launched contracts on March 17."
First Quarter Results
Clearing and transaction fees rose 30% for the first quarter 2008 to $179.1 million compared to $138.2 million for the year ago period. Market data fees increased 13% for the first quarter 2008, to $26.2 million versus $23.1 million for the first quarter 2007. A new fee schedule for each of the NYMEX and COMEX Divisions became effective on January 1, 2008, and an increase in market data fees became effective on February 1, 2008.
Average daily volume was a record 1.871 million contracts during the first quarter 2008, a 24% increase over the first quarter of 2007. NYMEX electronic trading volume on CME Globex averaged 814,306 contracts per day and represented a 36% increase over first quarter 2007 electronic trading volume. NYMEX floor-traded energy futures and options averaged 236,894 contracts a day for the first quarter of 2008, versus 329,524 contracts per day for the same period of 2007. COMEX electronic trading volume on CME Globex averaged 204,899 contracts per day, an increase of 127% over first quarter 2007 electronic trading volume. COMEX metals open outcry average daily volume was 47,828 contracts for the first quarter of 2008, versus 55,808 contracts per day for the same period of 2007. Average daily volume on NYMEX ClearPort was 462,544 contracts in the first quarter of 2008, as compared to 373,357 contracts in the same period of 2007. The remaining average daily volume of 104,597 per day consisted of other transactions which includes position transfers and exchanges.
Total operating expenses, excluding direct transaction costs of $28.1 million and merger-related expenses of $7.9 million, decreased 10% to $40.0 million for the first quarter of 2008, compared to $44.4 million for the same period in 2007. This decrease was the result of the management team's ongoing disciplined expense management.
Income before provision for income taxes was $134.4 million for the first quarter 2008, compared to $99.7 million for the first quarter 2007. Pre-tax margin, defined as income before provision for income taxes divided by operating revenues, investment income and interest income from securities lending (net of interest expense/fees from securities lending and direct transaction costs), was 72% in the first quarter 2008, compared to 68% in first quarter 2007. Excluding merger-related expenses, pre-tax margin was 76% for the first quarter of 2008.
Investor Conference Call / Webcast Details
NYMEX will hold a conference call to discuss 2008 first quarter results today, May 1, 2008 at 8:00 AM Eastern Time. Those wishing to participate in the conference call can dial (800) 299-0148 (U.S. and Canada) or (617) 801-9711 (International), using the confirmation code 91241097. A live audio webcast of the call will also be available on the Investor Relations section of the NYMEX website at http://investor.nymex.com/. An archived version of the conference call will also be available within approximately 90 minutes of the conclusion of the call.
About NYMEX Holdings, Inc.
NYMEX Holdings, Inc. (NYSE: NMX) is the parent company of the New York Mercantile Exchange, Inc., the world's largest physical commodities exchange, offering futures and options trading in energy and metals contracts and clearing services for more than 400 off-exchange contracts. Through a hybrid model of open outcry floor trading and electronic trading on CME Globex® and NYMEX ClearPort®, NYMEX offers crude oil, petroleum products, natural gas, coal, electricity, gold, silver, copper, aluminum, platinum group metals, emissions, and soft commodities contracts for trading and clearing virtually 24 hours each day. Further information about NYMEX Holdings, Inc. and the New York Mercantile Exchange, Inc. is available on the NYMEX website at http://www.nymex.com/.
Forward Looking and Cautionary Statements
This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect to our future performance, operating results, strategy, and other future events. Such statements generally include words such as could, can, anticipate, believe, expect, seek, pursue, and similar words and terms, in connection with any discussion of future results. Forward-looking statements involve a number of assumptions, risks, and uncertainties, any of which may cause actual results to differ materially from the anticipated, estimated, or projected results referenced in forward-looking statements. In particular, the forward-looking statements of NYMEX Holdings, Inc., and its subsidiaries are subject to the following risks and uncertainties: the success and timing of new futures contracts and products; changes in political, economic, or industry conditions; the unfavorable resolution of material legal proceedings; the impact and timing of technological changes and the adequacy of intellectual property protection; the impact of legislative and regulatory actions, including without limitation, actions by the Commodity Futures Trading Commission; and terrorist activities and international hostilities, which may affect the general economy as well as oil and other commodity markets. We assume no obligation to update or supplement our forward-looking statements.
NYMEX HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands, except for share data)
Three Months Ended
March 31,
Operating Revenues 2008 2007
Clearing and transaction fees $179,051 $138,177
Market data fees 26,213 23,137
Other, net 3,611 2,912
Total operating revenues 208,875 164,226
Operating Expenses
Direct transaction costs 28,083 24,102
Salaries and employee benefits 19,976 21,038
Occupancy and equipment 5,760 5,943
Depreciation and amortization, net
of deferred credit amortization 3,458 3,531
General and administrative 4,621 4,697
Professional services 3,126 4,186
Telecommunications 1,250 1,423
Marketing 1,350 1,933
(1)Other expenses 8,363 1,661
Total operating expenses 75,987 68,514
Operating income 132,888 95,712
Non-Operating Income and Expenses
Investment income 3,614 6,707
Interest income from securities lending 7,768 29,406
Interest expense/fees from securities
lending (6,048) (28,889)
Interest expense (1,586) (1,612)
Losses from unconsolidated investments (2,210) (1,643)
Total non-operating income and
expenses 1,538 3,969
Income before provision for income taxes 134,426 99,681
Provision for income taxes 63,241 43,461
Net income $71,185 $56,220
Earnings per Share
Basic $0.75 $0.60
Diluted $0.75 $0.59
Weighted Average Number of Common Shares
Outstanding
Basic 94,780,000 94,450,000
Diluted 94,964,000 94,808,000
(1) Included in other expenses are $7.9 million of merger-related expenses
incurred in connection with the proposed merger with CME Group Inc.
NYMEX HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
March 31, December 31,
Assets 2008 2007
Cash and cash equivalents $2,631 $3,296
Collateral from securities lending program 819,618 842,444
Marketable securities, at market value 554,822 461,142
Clearing and transaction fees receivable,
net of allowance for member credits 66,879 38,443
Prepaid expenses 8,628 8,786
Margin deposits and guaranty funds 28,131 170,192
Other current assets 21,208 34,097
Total current assets 1,501,917 1,558,400
Property and equipment, net 176,485 176,471
Goodwill and indefinite-lived intangible
asset 307,125 307,125
Long-term investments 161,005 178,036
Other assets 7,077 7,121
Total assets $2,153,609 $2,227,153
Liabilities and Stockholders' Equity
Accounts payable and accrued liabilities $20,228 $15,723
Accrued salaries and related liabilities 9,212 17,107
Payable under securities lending program 827,395 847,581
Margin deposits and guaranty funds 28,131 170,192
Income tax payable 47,333 2,704
Other current liabilities 43,492 31,122
Total current liabilities 975,791 1,084,429
Grant for building construction
deferred credit 103,485 104,021
Long-term debt 77,464 77,464
Retirement obligation 11,995 12,038
Other liabilities 12,773 23,646
Total liabilities 1,181,508 1,301,598
Total stockholders' equity 972,101 925,555
Total liabilities and stockholders'
equity $2,153,609 $2,227,153
Non-GAAP Reconciliation
The Company evaluates its financial performance using various measures.
One measure is to exclude one-time gains and losses from its results to
arrive at a pro forma earnings per share amount. Pro forma earnings per
share is a non-GAAP (generally accepted accounting principles) performance
measure, however, the Company believes that it is useful to assist
investors in gaining an understanding of the trends and operating results
of the Company's business. Pro forma earnings per share should be viewed
in addition to, and not in lieu of, the Company's reported results under
U.S. GAAP.
During the first quarter of 2008, the Company recorded $7.9 million of
merger-related expenses, of which approximately $6.7 million are
considered non-deductible for income tax purposes. These costs were
incurred in connection with the Company's proposed merger with CME Group
Inc. and are recorded in other expenses under the caption "Operating
Expenses" on its consolidated statements of income. The following is a
reconciliation of U.S. GAAP results to pro forma results for the periods
presented:
(in thousands, except
share amounts)
Three Months Ended
March 31, 2008
Net income $71,185
Add: Merger-related expenses, net of tax effect 7,405
Pro forma net income $78,590
Earnings per common share on net income:
Basic $0.75
Diluted $0.75
Pro forma earnings per common share on pro forma net income:
Pro forma basic $0.83
Pro forma diluted $0.83
Weighted average common shares outstanding:
Basic 94,780,000
Diluted 94,964,000
Q1 2008 Q4 2007 Q3 2007 Q2 2007 Q1 2007
Trading Days 61 64 63 63 61
Average Daily Volume (round turns, in thousands)
Q1 2008 Q4 2007 Q3 2007 Q2 2007 Q1 2007
NYMEX Floor 237 229 229 257 330
NYMEX Electronic 814 704 687 608 597
COMEX Floor 48 42 36 42 56
COMEX Electronic 205 147 114 101 90
NYMEX ClearPort 463 310 351 309 373
Other 104 107 74 79 68
Total 1,871 1,539 1,491 1,396 1,513
Gross Clearing and Transaction Revenue (in thousands)
Q1 2008 Q4 2007 Q3 2007 Q2 2007 Q1 2007
NYMEX Floor $23,040 $21,517 $20,824 $19,966 $23,664
NYMEX Electronic 65,695 54,243 54,285 50,520 43,271
COMEX Floor 4,787 3,948 3,072 3,249 4,244
COMEX Electronic 20,373 14,572 10,786 9,791 8,253
NYMEX ClearPort 53,375 38,217 46,905 44,281 49,609
Other 11,780 12,433 9,387 9,583 9,136
Total $179,051 $144,930 $145,259 $137,390 $138,177
Net Rates Per Contract
Q1 2008 Q4 2007 Q3 2007 Q2 2007 Q1 2007
NYMEX Floor $1.59 $1.47 $1.45 $1.23 $1.18
NYMEX Electronic 1.05 0.92 0.97 1.02 0.89
COMEX Floor 1.64 1.46 1.34 1.24 1.25
COMEX Electronic 1.36 1.26 1.16 1.19 1.20
NYMEX ClearPort 1.50 1.51 1.67 1.72 1.66
Other 1.85 1.81 2.02 1.92 2.19
Total Net RPC 1.32 1.23 1.28 1.29 1.24
Direct Cost 0.25 0.24 0.27 0.28 0.26
Gross RPC $1.57 $1.47 $1.55 $1.56 $1.50
Note: any differences in above tables are due to rounding
