Year-Over-Year Financial Highlights
Revenues, less Section 31 fees[1], for third-quarter 2005 were $277.5 million, up $6.8 million or 2.5% versus the third-quarter of 2004. Regulatory fees increased $4.6 million or 15.9% to $33.8 million due to higher gross FOCUS (Financial and Operational Combined Uniform Single Report) revenues reported for the period. Investment and other income was $24.5 million, an increase of $11.6 million or 90.4% versus the year-ago quarter. The increase in investment and other income was the result of a portfolio restructuring in December 2004 to higher-yielding investments combined with a higher-interest-rate environment, additional fine income and non-recurring insurance claims received during the third-quarter 2005. Listing fee revenue was $85.4 million, an increase of $2.6 million or 3.2% due to additional shares outstanding. Declines in data-processing fees of $9.6 million or 17.8% were the result of decreased third-party usage of services provided by SIAC[2]. Trading fees decreased by $3.1 million or 8.7%, even as NYSE average daily volume increased 14.7%. The decrease in trading fees is due to a one-time reimbursement of $2.4 million during the third quarter of 2005 and certain pricing caps being met by members.
Expenses were $240.6 million, down $27.9 million or 10.4% from third-quarter 2004. The decreases were due to reductions in professional services of $6.9 million or 18.2%, systems and related support of $4.1 million or 12.5%, and compensation costs of $11.4 million or 8.6%. These decreases were driven by cost-savings initiatives within NYSE including reduced spending in general and administrative expenses, down $11.1 million or 42.9%. In addition to the costs savings initiatives, professional services were impacted by the reduction in legal expenses of $5.7 million for the quarter. Somewhat offsetting these decreases of expenses was an increase in depreciation and amortization expense of $5.2 million or 25.1% to $25.9 million primarily due to the acceleration of certain useful lives following a fourth-quarter 2004 review of depreciation policies.
Quarter-Over-Quarter Financial Highlights
Compared to the second quarter of 2005, third-quarter revenues, less Section 31 fees[1], increased 0.4% or $1.2 million. Investment and other income increased by $10.6 million or 76.9% primarily due to additional fine income recognized during third-quarter 2005. Trading fees decreased by $5.2 million or 13.7% to $32.6 million as NYSE average daily volume decreased by 2.0%. In addition, a one-time reimbursement during the third quarter 2005 and certain pricing caps being met by members resulted in the decrease in trading fees. Data-processing fees decreased by $3.7 million or 7.7% to $44.1 million as a result of decreased third-party usage of services provided by SIAC. A decline in market-information fees of $3.3 million or 7.1% to $43.0 million was due to a decrease in NYSE share of trades from 89.0% to 86.7%.
Expenses decreased by $14.1 million or 5.5% quarter over quarter. While expenses were down generally, professional services, systems and related support and general and administrative costs were the main drivers of the decrease. Professional services decreased by $4.6 million or 12.8% as a result of a $4.5 million reduction in legal expenses. Systems and related support decreased by $2.9 million or 9.2% due to continued cost-savings initiatives across the organization. General and administrative expenses decreased by $3.1 million or 17.5% during the third quarter 2005 as compared to the second quarter primarily due to reduced advertising spending. Fourth quarter expenses, however, are expected to increase, primarily due to increased legal expenses.
Income Taxes
The effective consolidated income tax rate for the third quarter ended September 30, 2005 was 38.1%, up from 34.3% from the previous quarter. The increase is a result of the items that impact the effective tax rate, such as municipal interest, having a reduced effect on the increase of income before taxes for the quarter. For the third quarter of 2004, the NYSE had a tax benefit of $71 thousand as a result of the elimination of non-taxable items from income before taxes.
Capital
As of September 30, 2005, total members' equity was $825.2 million and equity per member having distributive rights equaled $604,000.
About the NYSE
The New York Stock Exchange is the world’s leading equities market and home to 2,777 companies whose total global market capitalization is $21.0 trillion, including $7.6 trillion for 447 non-U.S. companies from 47 countries. Buyers and sellers meet directly in a fair, open and orderly market to realize the best possible price through the interplay of supply and demand. On an average day, 1.58 billion shares, valued at $55.0 billion, are traded on the NYSE. The NYSE provided the most competitive quotes in its listed stocks creating the National Best Bid and Offer more than 89% of the time. For more information please visit http://www.nyse.com
[1] The NYSE pays SEC fees pursuant to Section 31 of the Exchange Act. These fees are designed to recover the costs of the government for the supervision and regulation of securities markets and securities professionals. The NYSE collects activity assessment fees from members and pays Section 31 fees (formerly named “SEC Activity Remittance”) to the SEC based on fee schedules determined by the SEC. The NYSE records activity assessment revenue and Section 31 fee expense on its condensed consolidated statement of income
[2] SIAC operates on a cost-recovery model driven by its customers' demands. Under this model, any increases or decreases in SIAC's expenses result in a corresponding change in its revenue.
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Condensed Consolidated Statement of Financial Condition (pdf) |
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Year-Over-Year Financial Highlights (pdf) |
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Operating data (pdf) |
Important Acquisition Information with Respect to the Merger
In connection with the proposed merger of the New York Stock Exchange, Inc. (“NYSE”) and Archipelago Holdings, Inc. (“Archipelago”), NYSE Group, Inc. filed with the Securities and Exchange Commission (“SEC”) a registration statement on Form S-4 (File no: 333-126780), containing a preliminary joint proxy statement/prospectus regarding the proposed transaction. The registration statement has not yet become effective. The parties will file other relevant documents concerning the proposed transaction with the SEC.
Such final documents, however, are not currently available. NYSE MEMBERS AND ARCHIPELAGO STOCKHOLDERS ARE URGED TO READ THE FINAL JOINT PROXY STATEMENT/ PROSPECTUS ‘REGARDINGTHE PROPOSED TRANSACTION WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. NYSE members and Archipelago stockholders can obtain a free copy of the final joint proxy statement/ prospectus, as well as other filings containing information about NYSE and Archipelago without charge, at the SEC’s website (http://www.sec.gov). Copies of the final joint proxy statement/ prospectus can also be obtained, without charge, once they are filed with the SEC, by directing a request to the Office of the Corporate Secretary, NYSE, 11 Wall Street, New York, New York 10005, 212-656-2061 or to Archipelago, Attention: Investor Relations, 100 S. Wacker Drive, Suite 1800, Chicago, Illinois 60606 or calling (888) 514-7284.
The NYSE, Archipelago and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from Archipelago stockholders in respect of the proposed transaction. Information regarding Archipelago’s directors and executive officers is available in Archipelago’s proxy statement for its 2005 annual meeting of stockholders, dated March 31, 2005.
Additional information regarding the interests of such potential participants will be included in the joint proxy statement/prospectus and the other relevant documents filed with the SEC when they become available. This document shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Forward-Looking Statements
Certain statements in this document may contain forward-looking information regarding the NYSE and Archipelago and the combined company after the completion of the transactions that are intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, the benefits of the business combination transaction involving the NYSE and Archipelago, including future financial and operating results, the new company’s plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the NYSE’s and Archipelago’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements.
The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the ability to obtain governmental approvals of the transaction on the proposed terms and schedule; the failure of the NYSE members or Archipelago shareholders to approve the transaction; the risk that the businesses will not be integrated successfully; the risk that the cost savings and any other synergies from the transaction may not be fully realized or may take longer to realize than expected; disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; competition and its effect on pricing, spending, third party relationships and revenues; social and political conditions such as war, political unrest or terrorism; general economic conditions and normal business uncertainty. Additional risks and factors are identified in Archipelago’s filings with the Securities Exchange Commission, including its Report on Form 10-K for the fiscal year ending December 31, 2004 which is available on Archipelago’s website at http://www.Archipelago.com, and the registration statement on Form S-4 (File no: 333-126780) filed by NYSE Group, Inc. with the SEC.
You should not place undue reliance on forward-looking statements, which speak only as of the date of this document. Except for any obligation to disclose material information under the federal securities laws, none of the NYSE, Archipelago or the combined company after the completion of the transactions undertake any obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this document.
The NYSE, Archipelago and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from Archipelago stockholders in respect of the proposed transaction. Information regarding Archipelago’s directors and executive officers is available in Archipelago’s proxy statement for its 2005 annual meeting of stockholders, dated March 31, 2005. Additional information regarding the interests of such potential participants will be included in the joint proxy statement/prospectus and the other relevant documents filed with the SEC when they become available.
This document shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
