NYSE Group, Inc. (NYSE: NYX) today reported net income of $68.0 million, or $0.43 per diluted share, for the three months ended September 30, 2006, a 209% increase compared to $22.0 million, or $0.19 per diluted share, for the three months ended September 30, 2005. These results are presented in accordance with U.S. Generally Accepted Accounting Principles (GAAP).
Third quarter 2006 results include the full quarter results from the operations of NYSE Arca, Inc. (formerly known as the Archipelago Exchange, or ArcaEx(R), and the Pacific Exchange). The merger between NYSE, Inc. and Archipelago Holdings, Inc. (or "Archipelago") was completed on March 7, 2006. Fiscal 2005 results include only the operations of NYSE, Inc., the predecessor of NYSE Group.
Included in the third quarter results are $7.7 million in merger expenses consisting of lease termination, severance and related exit costs ($5.1 million), and other professional fees incurred in connection with both the integration of the Archipelago businesses and the contemplated merger with Euronext N.V. ($2.6 million). Also included in the third quarter results is a $7.2 million gain for a one-time payment received from the National Securities Clearing Corporation and Fixed Income Clearing Corporation in connection with the previously announced phase out of their service agreement with SIAC, a subsidiary of NYSE Group.
On a non-GAAP basis, giving effect to the Archipelago transaction as if it occurred at the beginning of the earliest period presented, and excluding the above merger expenses, exit costs and one-time gain, the net income of NYSE Group for the three months ended September 30, 2006 would have been $68.2 million, or $0.43 per diluted share, a $38.6 million or 130% increase as compared to net income, on a non-GAAP basis, of $29.6 million, or $0.18 per diluted share, for the three months ended September 30, 2005. A full reconciliation of these non-GAAP results is included in the attached tables.
"NYSE Group's financial results reflect our continued focus on expanding our operating margins, and delivering sustained revenue and overall business growth," said Nelson Chai, NYSE Group Executive Vice President and Chief Financial Officer. "We remain focused on reducing costs, increasing efficiencies and driving towards the completion of the merger with Euronext. These directives are clearly reflected in our quarterly financial results and business highlights."
"This quarter's introduction of NYSE Arca Options coupled with our double-digit growth in trading volumes in all product areas, strategic pricing initiatives and comprehensive order execution platforms, such as the recently-implemented Hybrid Market(SM), ensure that NYSE Group is well positioned to maintain its standing as a leading global market and a significant competitive force in the marketplace."
Other Financial Highlights -- Excluding the effect of activity assessment fees and Section 31 fees, the pre-tax margin of NYSE Group on a non-GAAP basis was 26.2% of total revenues for the three months ended September 30, 2006 as compared to 13.2% of total revenues for the three months ended September 30, 2005. -- As of September 30, 2006, NYSE Group had $842.3 million of cash, cash equivalents, investment and other securities (including $64.6 million related to Section 31 fees collected from market participants and due to the Securities and Exchange Commission) and no debt obligation. Third Quarter Business Highlights -- The total number of NYSE listed issuers at September 30, 2006 rose to 2,704 compared to 2,697 at June 30, 2006 and 2,639 at September 30, 2005. -- For the nine months ended September 30, 2006, the NYSE added 127 new issuer listings (72 operating companies, 13 closed-end funds, and 42 exchange-traded funds or ETFs), 19 of which were non-U.S. listings. Trading in non-U.S. companies represented 11.6% of the overall NYSE volume, up from 9.9% in the same period a year ago. -- For the three months ended September 30, 2006 compared to the same period a year ago, NYSE Group has recorded increased average daily volumes across all categories of securities, including handled volume increases of 11% in NYSE listed issues, 37% in NYSE Arca and Amex listed issues, 27% in Nasdaq listed issues, 61% in ETFs, and 40% in equity options contracts. -- For the three months ended September 30, 2006, NYSE Group handled 111.6 billion shares of NYSE listed issues, or 72.4% of the trading in NYSE listed issues, versus 124.0 billion shares, or 76.3%, and 102.5 billion shares, or 80.0%, for the three months ended June 30, 2006 and September 30, 2005, respectively. -- NYSE Group's share of trading in NYSE Arca and Amex listed issues increased to 38.4% for the three months ended September 30, 2006 compared to 34.4% for the three months ended June 30, 2006 and 32.7% for the three months ended September 30, 2005. -- NYSE Group's share of trading in Nasdaq listed issues increased to 25.5% for the three months ended September 30, 2006 compared to 25.2% for the three months ended June 30, 2006 and 22.8% for the three months ended September 30, 2005. -- NYSE Group's share of trading in ETFs increased to 43.5% for the three months ended September 30, 2006 compared to 42.9% for the three months ended June 30, 2006 and 38.4% for the three months ended September 30, 2005. -- NYSE Group's share of trading in equity options contracts increased to 10.3% for the three months ended September 30, 2006 compared to 9.4% for the three months ended June 30, 2006 and 9.6% for the three months ended September 30, 2005. -- August 7, 2006 marked the launch of NYSE Arca Options, a new automated trading system for equity options offering immediate, cost-effective electronic order execution in nearly 2,000 options. -- The NYSE began full Phase III implementation of the Hybrid Market(SM) on October 6, 2006 in two stocks: American Express (AX) and Equity Office Properties Trust (EOP). Currently, Phase III incorporates 91 listed securities with complete rollout of all NYSE listed securities anticipated to conclude in December 2006. -- As a significant step towards completion of the merger with Euronext, NYSE Euronext, Inc. filed with the Securities and Exchange Commission a Form S-4 Registration Statement on September 21, 2006 related to the proposed merger of NYSE Group, Inc. and Euronext N.V. -- In the third quarter of 2006, NYSE Group added to the suite of trading services for its customers with the acquisition of MatchPoint Trading, a financial services technology company specializing in call market portfolio trading and technologies, and the purchase of a stake in Marco Polo Network, a leading electronic platform allowing global investors to trade equities and derivatives listed on emerging market exchanges. -- In the first nine months of 2006, NYSE Group continued its success in listings with a number of sizeable IPOs, such as Mastercard, J. Crew, New Oriental Education, Mindray Medical and WNS Holdings, and 15 transfers from other markets year-to-date. The NYSE also welcomed its 143rd Nasdaq domestic transfer to the NYSE since 2000. -- On September 29, 2006, NYSE Arca celebrated its newest listings with the transfers of Evergreen Energy Inc. (EEE) and BFC Financial Group (BFF) from Amex and Nasdaq, respectively. -- In the third quarter of 2006, NYSE Group listed 6 ETFs and NYSE Arca announced the October 20th listing of its first primary ETFs, 15 iShares(R) transfers from Amex. Including these listings, the NYSE Group currently has 131 primary ETF listings. -- In addition to the August 1, 2006 implementation of new fees for trading NYSE-listed shares on the NYSE, NYSE Group announced several additional fee changes for trading NYSE-listed securities in the third quarter of 2006. -- The NYSE Composite Index (NYA) continued to outperform other broad based indexes through the first nine months of 2006, up 8.5% as compared to 8.2% for the DJIA, 6.6% for the S&P 500, and 2.4% for the Nasdaq Composite.
To supplement NYSE Group's consolidated financial statements prepared in accordance with GAAP and to better reflect period-over-period comparisons, NYSE Group uses non-GAAP financial measures of operating performance. A non-GAAP financial measure is a numerical measure of performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure, calculated and presented in accordance with GAAP. Non-GAAP financial measures do not replace and are not superior to the presentation of GAAP financial results, but are provided to (i) present the effects of certain merger expenses, exit costs, and settlement gain and (ii) improve overall understanding of NYSE Group's current financial performance and its prospects for the future. Specifically, NYSE Group believes the non-GAAP financial results provide useful information to both management and investors regarding certain additional financial and business trends relating to financial condition and operating results. In addition, management uses these measures for reviewing financial results and evaluating financial performance.
About NYSE Group, Inc.
NYSE Group, Inc. (NYSE: NYX) operates two securities exchanges: the New York Stock Exchange LLC (the "NYSE") and NYSE Arca, Inc. (formerly known as the Archipelago Exchange, or ArcaEx(R), and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. In the third quarter of 2006, on an average trading day, 2.2 billion shares, valued at $80.1 billion, were traded on the exchanges of the NYSE Group.
The NYSE is the world's largest and most liquid cash equities exchange. The NYSE provides a reliable, orderly, liquid and efficient marketplace where investors buy and sell listed companies' common stock and other securities. On September 30, 2006, the operating companies listed on the NYSE represented a total global market capitalization of $23.1 trillion.
NYSE Arca operates NYSE Arca, Inc., the first open, all-electronic stock exchange in the United States, and has a leading position in trading exchange-traded funds and exchange-listed securities. NYSE Arca, Inc. is also an exchange for trading equity options. NYSE Arca's trading platforms provide customers with fast electronic execution and open, direct and anonymous market access.
NYSE Regulation, an independent not-for-profit subsidiary, regulates member organizations through the enforcement of marketplace rules and federal securities laws. NYSE Regulation also ensures that companies listed on the NYSE and NYSE Arca meet their financial and corporate governance listing standards.
For more information on NYSE Group, go to: www.nyse.com. Information contained on our website does not constitute a part of the prospectus relating to the proposed offering.
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on NYSE Group's current expectations and involve risks and uncertainties that could cause NYSE Group's actual results to differ materially from those set forth in the statements. There can be no assurance that such expectations will prove to be correct. Actual results may differ materially from those expressed or implied in the forward-looking statements. Factors that could cause NYSE Group's results to differ materially from current expectations include, but are not limited to: NYSE Group's ability to implement its strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk and U.S. and global competition, and other factors detailed in NYSE Group's Annual Report on Form 10-K and other periodic reports filed with the U.S. Securities and Exchange Commission. In addition, these statements are based on a number of assumptions that are subject to change. Accordingly, actual results may be materially higher or lower than those projected. The inclusion of such projections herein should not be regarded as a representation by NYSE Group that the projections will prove to be correct. We undertake no obligation to release any revisions to any forward-looking statements.
NYSE Group, Inc. Condensed 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, ------------------------ -------------------------- 2006 2005 2006 2005 ---------- ---------- ----------- ----------- Revenues Activity assessment fees $ 163,408 $ 198,660 $ 492,383 $ 433,373 Transaction 179,979 32,633 454,139 108,392 Listing 89,019 85,428 266,255 256,888 Market data 57,510 42,989 166,115 133,429 Data processing 27,697 44,098 108,969 136,764 Regulatory 50,136 34,437 135,300 96,671 Licensing, facility and other 35,188 14,158 94,252 42,197 ---------- ---------- ----------- ----------- Total revenues 602,937 452,403 1,717,413 1,207,714 Section 31 fees (163,408) (198,660) (492,383) (433,373) Merger expenses and related exit costs (7,701) - (21,038) - Compensation (130,211) (124,831) (436,840) (381,845) Liquidity payments (66,173) - (159,964) - Routing and clearing fees (20,084) - (49,687) - Systems and communications (30,382) (28,951) (90,966) (92,746) Professional services (28,333) (29,275) (85,527) (90,326) Depreciation and amortization (35,120) (25,903) (99,360) (78,522) Occupancy (22,872) (17,649) (62,936) (51,588) Marketing and other (23,922) (14,497) (70,246) (46,255) Regulatory fine income 10,680 10,896 33,841 32,872 ---------- ---------- ----------- ----------- Operating income 85,411 23,533 182,307 65,931 Investment and other income, net 29,433 13,366 63,271 36,558 Gain on sale of equity investment - - 20,925 - ---------- ---------- ----------- ----------- Income before income tax provision and minority interest 114,844 36,899 266,503 102,489 Income tax provision (46,252) (14,064) (104,517) (40,288) Minority interest (627) (835) (2,500) (1,195) ---------- ---------- ----------- ----------- Net income $ 67,965 $ 22,000 $ 159,486 $ 61,006 ========== ========== =========== =========== Basic earnings per share $ 0.43 $ 0.19 $ 1.09 $ 0.53 Diluted earnings per share $ 0.43 $ 0.19 $ 1.08 $ 0.53 Basic weighted average shares outstanding 156,481 115,699 (a) 146,645 115,699 (a) Diluted weighted average shares outstanding 157,460 115,699 (a) 147,742 115,699 (a) (a) Adjusted to reflect the merger with Archipelago on March 7, 2006 giving retroactive effect to the issuance of shares to former NYSE members.
NYSE Group, Inc. Condensed consolidated statements of income including non-GAAP financial measures (unaudited) (in thousands, except per share data) We use non-GAAP financial measures of operating performance. Non-GAAP measures do not replace and are not superior the presentation of our GAAP financial results but are provided to improve overall understanding of our current financial performance and our prospects for the future. Three months ended September 30, 2006 -------------------------------------- GAAP Adjustments Non-GAAP ------------ ------------ ---------- Revenues Activity assessment fees $ 163,408 $ - $ 163,408 Transaction 179,979 - 179,979 Listing 89,019 - 89,019 Market data 57,510 - 57,510 Data processing 27,697 - 27,697 Regulatory 50,136 - 50,136 Licensing, facility and other 35,188 - 35,188 ------------ ------------ ---------- Total revenues 602,937 - 602,937 Section 31 fees (163,408) - (163,408) Merger expenses and related (a) exit costs (7,701) 7,701 - Compensation (130,211) - (130,211) Liquidity payments (66,173) - (66,173) Routing and clearing fees (20,084) - (20,084) Systems and communications (30,382) - (30,382) Professional services (28,333) - (28,333) Depreciation and amortization (35,120) (35,120) Occupancy (22,872) - (22,872) Marketing and other (23,922) - (23,922) Regulatory fine income 10,680 10,680 ------------ ------------ ---------- Operating income 85,411 7,701 93,112 Investment and other income, net 29,433 (7,215)(b) 22,218 ------------ ------------ ---------- Income before income tax provision and minority interest 114,844 486 115,330 Income tax provision (46,252) (197)(c) (46,449) Minority interest (627) - (627) ------------ ------------ ---------- Net income $ 67,965 $ 289 $ 68,254 ============ ============ ========== Basic earnings per share $ 0.44 Diluted earnings per share $ 0.43 Basic weighted average shares outstanding 156,481 Diluted weighted average shares outstanding 157,460 (a) To eliminate merger expenses and related exit costs as they represent nonrecurring charges directly attributable to either the merger of the NYSE and Archipelago or the announced merger with NYSE Group and Euronext N.V. (b) To reverse the one-time gain recorded in connection with the phase out of NSCC and FICC's service agreement with SIAC. (c) To adjust the income tax provision for the effect of the non-GAAP adjustment based upon a combined income tax rate of 40.5%.
NYSE Group, Inc. Condensed consolidated statements of income including non-GAAP financial measures (unaudited) (in thousands, except per share data) We use non-GAAP financial measures of operating performance. Non-GAAP measures do not replace and are not superior the presentation of our GAAP financial results but are provided to improve overall understanding of our current financial performance and our prospects for the future. Three months ended September 30, (a) ------------------------ 2006 2005 ---------- ---------- Revenues Activity assessment fees $ 163,408 $ 241,959 Transaction 179,979 141,191 Listing 89,019 85,563 Market data 57,510 58,916 Data processing 27,697 44,098 Regulatory 50,136 37,235 Licensing, facility and other 35,188 15,833 ---------- ---------- Total revenues 602,937 624,795 Section 31 fees (163,408) (241,959) Compensation (130,211) (143,792) Liquidity payments (66,173) (49,457) Routing and clearing fees (20,084) (16,268) Systems and communications (30,382) (36,189) Professional services (28,333) (30,861) Depreciation and amortization (35,120) (36,200) Occupancy (22,872) (20,604) Marketing and other (23,922) (24,394) Regulatory fine income 10,680 10,896 ---------- ---------- Operating income 93,112 35,967 Investment and other income, net 22,218 14,738 ---------- ---------- Income before income tax provision and minority interest 115,330 50,705 Income tax provision (46,449) (20,265) Minority interest (627) (835) ---------- ---------- Net income $ 68,254 $ 29,605 ========== ========== Basic earnings per share $ 0.44 $ 0.18 Diluted earnings per share $ 0.43 $ 0.18 Basic weighted average shares outstanding 156,481 161,260 (b) Diluted weighted average shares outstanding 157,460 162,346 (b) (a) The results of operations of NYSE Group, Inc. are presented as if the following transactions had been completed at the beginning of the earliest period presented: 1. The acquisition of PCX Holdings and subsidiaries by Archipelago, 2. The disposition of Wave Securities by Archipelago, and 3. The merger between Archipelago and NYSE. In addition, merger expenses and related exit costs of $7,701 and $5,525 have been eliminated from the results of operations for the three months ended September 30, 2006 and 2005, respectively, as they represent nonrecurring charges directly attributable to either the merger of the NYSE and Archipelago or the announced merger of NYSE Group and Euronext N.V. (b) Adjusted to reflect the merger with Archipelago on March 7, 2006 giving retroactive effect to the issuance of shares to former NYSE members.
NYSE Group, Inc. Condensed Consolidated Statements of Financial Condition (in thousands) September 30, December 31, 2006 2005 -------------- ------------- (unaudited) Assets Current assets: Cash and cash equivalents $ 255,604 $ 43,492 Investment and other securities 586,646 1,108,479 Accounts receivable, net 284,133 184,185 Deferred income taxes 89,847 91,919 Other current assets 43,224 36,142 -------------- ------------- Total current assets 1,259,454 1,464,217 Property and equipment, net 393,000 343,534 Goodwill 535,790 - Other intangible assets, net 582,984 - Deferred income taxes 344,009 290,145 Other assets 104,925 106,249 -------------- ------------- Total assets $3,220,162 $2,204,145 ============== ============= Liabilities and stockholders' equity Current liabilities: Accounts payable and accrued expenses $ 344,793 $ 322,263 Section 31 fees payable 64,600 232,146 Deferred revenue 174,320 105,313 Deferred income taxes 50,751 25,238 -------------- ------------- Total current liabilities 634,464 684,960 Accrued employee benefits 332,638 323,373 Deferred revenue 320,971 329,197 Deferred income taxes 267,440 9,289 Other liabilities 23,395 23,037 -------------- ------------- Total liabilities 1,578,908 1,369,856 Minority interest 38,092 35,164 Stockholders' equity 1,603,162 799,125 -------------- ------------- Total liabilities and stockholders' equity $3,220,162 $2,204,145 ============== =============
NYSE Group, Inc. Selected Statistical Data (shares and contracts in millions) Three Months Ended Nine Months Ended -------------------------- ----------------- Sept.30, June 30, Sept.30, Sept.30, Sept.30, 2006 2006 2005 2006 2005 -------- -------- -------- -------- -------- (unaudited) NYSE Company listings(1): NYSE listed issuers(2) 2,704 2,697 2,639 2,704 2,639 Number of new issuer listings(3) 29 24 35 82 108 NYSE Listed Issues (4): NYSE Group Matched Volume (5) 108,826 121,582 100,820 344,061 304,779 NYSE Group Handled Volume (6) 111,584 124,024 102,543 351,297 309,549 Total NYSE Listed Consolidated Volume 154,161 162,452 128,248 467,454 381,186 NYSE Group Share of Total Consolidated Volume: Matched Volume (5) 70.6% 74.8% 78.6% 73.6% 80.0% Handled Volume (6) 72.4% 76.3% 80.0% 75.2% 81.2% NYSE Arca and Amex Listed Issues: NYSE Group Matched Volume (5) 6,873 7,843 5,083 20,731 13,423 NYSE Group Handled Volume (6) 7,939 9,069 5,906 23,925 15,468 Total NYSE Arca and Amex Listed Consolidated Volume 20,663 26,366 18,076 67,883 50,340 NYSE Group Share of Total Consolidated Volume: Matched Volume (5) 33.3% 29.7% 28.1% 30.5% 26.7% Handled Volume (6) 38.4% 34.4% 32.7% 35.2% 30.7% Nasdaq Listed Issues: NYSE Group Matched Volume (5) 24,700 27,844 19,115 76,781 62,572 NYSE Group Handled Volume (6) 30,022 33,974 23,958 94,068 78,618 Total Nasdaq Listed Consolidated Volume 117,785 134,959 104,898 383,437 339,162 NYSE Group Share of Total Consolidated Volume: Matched Volume (5) 21.0% 20.6% 18.2% 20.0% 18.4% Handled Volume (6) 25.5% 25.2% 22.8% 24.5% 23.2% Exchange-Traded Funds (4),(7): NYSE Group Matched Volume (5) 9,663 11,078 6,041 29,294 16,807 NYSE Group Handled Volume (6) 10,794 12,253 6,816 32,617 18,824 Total ETF Consolidated Volume 24,819 28,590 17,743 75,779 52,579 NYSE Group Share of Total Consolidated Volume: Matched Volume (5) 38.9% 38.7% 34.0% 38.7% 32.0% Handled Volume (6) 43.5% 42.9% 38.4% 43.0% 35.8% Equity Options (8): NYSE Group Options Contracts 44.0 44.2 32.0 136.7 98.3 Total Consolidated Options Contracts 429.4 470.0 333.0 1,345.8 966.7 NYSE Group Share of Total 10.3% 9.4% 9.6% 10.2% 10.2% Market Information: (9) Tape A share of trades (%) 82.0% 86.1% 89.8% 85.0% 91.1% Tape B share of trades (%) 35.2% 33.7% 47.4% 37.2% 47.9% Tape C share of trades and shares (%) 24.5% 24.2% 21.3% 23.5% 21.1% Professional subscribers 417,642 417,329 415,138 417,642 415,138 Regulatory Fees: Gross FOCUS revenues ($ billions) (10) 77.6 66.1 49.2 204.8 134.0 Data Processing Fees: % SIAC revenues from customers other than NYSE 35.7% 43.5% 43.6% 42.3% 43.2% Operating Expenses: Headcount (including SIAC employees) 2,914 3,010 3,389 2,914 3,389
(1) Number does not include issuers listed on NYSE Arca. There were 12 operating companies exclusively listed on NYSE Arca as of September 30, 2006. (2) Number of listed operating companies, closed-end funds and ETFs as of period end. (3) Includes initial public offerings, quotations and transfers from other markets of common equity securities. (4) Includes all NYSE Group Crossing Sessions 1, 2, 3 and 4. (5) Represents the total number of shares of equity securities and exchange-traded funds (ETFs) executed on the NYSE Group's exchanges. (6) Represents the total number of shares of equity securities and ETFs internally matched on the NYSE Group's exchanges or routed to and executed at an external market center. NYSE Arca routing includes odd-lots. (7) Data included in previously identified categories. (8) Includes trading in U.S. equity options contracts, not equity- index options. (9) Represents the NYSE Group share of qualifying trades for Tapes A and B reported by the NYSE Group to the consolidated tape, as compared to the total number of qualifying trades for Tapes A and B reported to the consolidated tape by all other participating market centers. NYSE Group share of Tape C represents the average of: (i) the share of qualifying trades for Tape C reported by the NYSE Group to the consolidated tape, as compared to the total number of qualifying trades for Tape C reported to the consolidated tape by all other participating market centers; and (ii) the share of qualifying share volume for Tape C reported by the NYSE Group to the consolidated tape, as compared to the total qualifying share volume for Tape C reported by all other participating market centers. The consolidated tape refers to the collection of market data that multiple markets make available on a consolidated basis. (10) Gross FOCUS revenues represent revenues generated by member broker-dealers as reported on their "FOCUS" report (a report that is required to be filed with the SEC). A member broker- dealer's regulatory fee is based on the revenues reported. The NYSE records revenue on a six-month lag; the data is provided on this basis.