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- Second Quarter Operating Revenues Increased 29% to Record $210.8 Million
- GAAP Net Income Increased 126% to $94.3 Million; Excluding Merger-Related Expenses and One-time Net Gain, Net Income was $78.6 Million
- Reports GAAP EPS of $0.99; Excluding Merger-Related Expenses and One-time Net Gain, EPS was $0.83
- 2Q GAAP Pre-tax Margin of 91%; Excluding Merger-Related Expenses and One-time Net Gain, Pre-tax Margin was 75%
- Declares Regular Quarterly Dividend of $0.10
NYMEX Holdings, Inc. (NYSE: NMX), parent company of the New York Mercantile Exchange, Inc. (NYMEX), today reported that total operating revenues for the second quarter ended June 30, 2008 rose 29% to a record $210.8 million compared to $163.6 million for the second quarter 2007. Net income for the second quarter 2008 increased 126% to $94.3 million compared to $41.7 million for the second quarter 2007. Diluted earnings per share for the second quarter 2008 were $0.99, based on 94.9 million shares outstanding, compared to $0.44, based on 94.8 million shares outstanding, for the second quarter 2007.
The second quarter 2008 results include $1.7 million of merger- related expenses, of which approximately $1.0 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). Included in the second quarter of 2008 is a one-time net gain on long term investments ("one time net gain") of $30.6 million, consisting of approximately $33.8 million investment gain on Montreal Exchange, and impairment loss of $3.2 million on its investment in Optionable Inc. In May 2008, Toronto Stock Exchange completed its merger with Montreal Exchange in which the Company received cash and shares of Toronto Stock Exchange. Also in the current quarter, the Company evaluated its investment in Optionable Inc. and determined that the remaining value has been impaired and thus recorded a pretax charge to earnings. Excluding these merger-related expenses as well as the one-time net gain, net income for the quarter ending June 30, 2008 was $78.6 million or $0.83 per diluted share compared to $56.4 million or $0.60 per diluted share for the second quarter of 2007, 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 August 15, 2008, payable on September 15, 2008.
For the six months ended June 30, 2008, NYMEX reported record total operating revenues of $419.7 million, a 28% increase from $327.8 million for the first half of 2007. Net income rose 69% to $165.5 million, versus $98.0 million in the first half of 2007. Diluted earnings per share for the 2008 first half was $1.74 versus $1.03 per diluted share in the 2007 period, based on 95.0 million and 94.8 million shares outstanding, respectively. Excluding merger related expenses of $9.6 million, and the one-time net gain, net income increased 40% to $157.2 million compared to $112.6 million in the comparable period of 2007, and diluted earnings per share was $1.66 compared to $1.19, for the six months ended June 30, 2008 and 2007, respectively.
NYMEX Chairman Richard Schaeffer said, "We continue to see strong demand from market participants for credit risk mitigation, price discovery and risk management, which contributes to our strong volumes and continued growth. Our strong second quarter performance is the result of volume growth, strength in average rate per contract fees, and the discipline we are applying to managing our expenses. We are constantly working to improve our competitive position, through new product launches, The Green Exchange venture, and our initiative with LCH.Clearnet where we will offer the marketplace enhanced capital efficiencies, distribution and industry leading trading and clearing platforms."
Mr. Schaeffer continued, "The proposed combination between NYMEX and CME will allow us to take our business and growth to a much higher level, and create value for our customers, members and shareholders."
NYMEX President and Chief Executive Officer James E. Newsome stated, "The second quarter continued to show growth in trading and clearing volumes, as evidenced in our strong average daily volume as well as records in natural gas, crude oil and total electronic volume. We continue to make significant progress to our launch of our new and distinct slate of OTC and futures products for clearing through LCH.Clearnet. We are also excited by the addition of new founding members in The Green Exchange venture. Finally, our Dubai Mercantile Exchange joint venture continues to innovate and offer new products to better serve market participants in managing their risk. We are pleased with our consistent strong performance and look forward to expanding our leadership in providing risk management solutions to the marketplace."
Second Quarter Results
Clearing and transaction fees rose 31% for the second quarter 2008 to $180.4 million compared to $137.4 million for the year ago period. Market data fees increased 15% for the second quarter 2008, to $26.9 million versus $23.4 million for the second quarter 2007.
Average daily volume was 1.812 million contracts during the second quarter 2008, a 30% increase compared to 1.396 million for the second quarter of 2007. NYMEX electronic trading volume on CME Globex averaged 865,149 contracts per day and represented a 42% increase over second quarter 2007 electronic trading volume. NYMEX floor-traded energy futures and options averaged 221,868 contracts a day for the second quarter of 2008, versus 256,635 contracts per day for the same period of 2007. COMEX electronic trading volume on CME Globex averaged 172,450 contracts per day, an increase of 70% over second quarter 2007 electronic trading volume. COMEX metals open outcry average daily volume was 38,755 contracts for the second quarter of 2008, versus 41,559 contracts for the same period of 2007. Average daily volume on NYMEX ClearPort was 417,601 contracts in the second quarter of 2008, as compared to 308,627 contracts in the same period of 2007. The remaining average daily volume of 96,059 per day consisted of other transactions which includes position transfers and exchanges.
Total operating expenses for the second quarter of 2008 were $71.5 million. Excluding direct transaction costs of $26.9 million, and merger-related expenses of $1.7 million, total operating expenses were $42.9 million for the second quarter of 2008, compared to $41.8 million for the same period in 2007. Operating expenses for the second quarter of 2008 included $1.8 million of expense from the initiative with LCH.Clearnet, and $0.8 million from The Green Exchange venture.
Income before provision for income taxes was $170.2 million for the second quarter 2008, compared to $74.0 million for the second 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 91% in the second quarter 2008, compared to 51% in second quarter 2007. Excluding merger-related expenses and the one-time net gain, pre-tax margin was 75% for the second quarter of 2008, as compared to 68% for the second quarter of 2007.
Six Month Results
Clearing and transaction fees rose 30% for the six months ended June 30, 2008 to $359.5 million, compared to $275.6 million for the year ago period. Market data fees were $53.1 million for the six month period, versus $46.5 million for the six months of 2007, an increase of 14%.
Average daily volume for the first six months of 2008 was 1.841 million contracts, a 27% increase over the first six months of 2007, compared with 1.454 million for the year ago period. NYMEX electronic volume on CME Globex was an average of 840,338 contracts per day and represented a 39% increase over the six month period of 2007 electronic volume. NYMEX floor-traded energy futures and options averaged 229,200 contracts a day for the first six months of 2008. COMEX electronic volume on CME Globex averaged 188,285 contracts per day, an increase of 96% over the first six months of 2007 electronic volume. COMEX metals open outcry average daily volume was 43,183 contracts a day for the first half of 2008. Average daily volume on NYMEX ClearPort increased 29% in the first half of 2008 to 439,533 contracts, compared to 340,470 contracts in the comparable period of 2007. The remaining average daily volume of 100,226 trades per day consisted of other transactions which includes position transfers and exchanges.
Total operating expenses for the first half of 2008 were $147.5 million. Excluding direct transaction costs of $55.0 million, and merger-related expenses of $9.6 million, total operating expenses were $82.9 million for the first six months of 2008. This represents a 4% decrease from $86.2 million for the same period in 2007, driven primarily by the Company's cost cutting initiatives.
Income before provision for income taxes was $304.6 million for the first six months of 2008, compared to $173.7 million for the same period of 2007. Pretax 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 81% in the first half of 2008 compared to 59% for the same period of 2007. Excluding the merger-related expenses and one-time net gain, pretax margin was 76% as compared to 68% for the first half of 2007.
Investor Conference Call / Webcast Details
NYMEX will hold a conference call to discuss 2008 second quarter results today, July 31, 2008 at 8:00 AM Eastern Time. Those wishing to participate in the conference call can dial (800) 798-2864 (U.S. and Canada) or (617) 614- 6206 (International), using the confirmation code 63226328. 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.
NYMEX HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands, except for share data)
Three Months Ended Six Months Ended
June 30, June 30,
Operating Revenues 2008 2007 2008 2007
Clearing and
transaction fees $180,400 $137,390 $359,451 $275,567
Market data fees 26,913 23,363 53,126 46,500
Other, net 3,495 2,844 7,106 5,756
Total operating
revenues 210,808 163,597 419,683 327,823
Operating Expenses
Direct transaction
costs 26,886 24,318 54,969 48,420
Salaries and employee
benefits 19,887 20,482 39,863 41,520
Occupancy and
equipment 5,893 5,604 11,653 11,547
Depreciation and
amortization, net of
deferred credit
amortization 3,571 3,614 7,029 7,145
General and
administrative 4,583 4,945 9,204 9,642
Professional services 5,079 3,922 8,205 8,108
Telecommunications 1,428 1,417 2,678 2,840
Marketing 2,013 1,626 3,363 3,559
(1) Other expenses 2,124 182 10,487 1,843
Total operating
expenses 71,464 66,110 147,451 134,624
Operating income 139,344 97,487 272,232 193,199
Non-Operating Income
and Expenses
Investment income 3,222 6,133 6,836 12,840
Interest income from
securities lending 4,829 31,087 12,597 60,493
Interest expense/fees
from securities
lending (4,233) (30,136) (10,281) (59,025)
Interest expense (1,587) (1,612) (3,173) (3,224)
(2) Gain (loss) from
unconsolidated
investments 28,616 (28,944) 26,406 (30,587)
Total non-operating
income and expenses 30,847 (23,472) 32,385 (19,503)
Income before
provision for income
taxes 170,191 74,015 304,617 173,696
Provision for income
taxes 75,879 32,270 139,120 75,731
Net income $94,312 $41,745 $165,497 $97,965
Earnings per Share
Basic $0.99 $0.44 $1.75 $1.04
Diluted $0.99 $0.44 $1.74 $1.03
Weighted Average Number
of Common Shares
Outstanding
Basic 94,791,000 94,450,000 94,786,000 94,450,000
Diluted 94,947,000 94,798,000 94,981,000 94,784,000
(1) Included in other expenses during the three and six months ended June
30, 2008 are $1.7 million and $9.6 million, respectively, of
merger-related expenses incurred in connection with the proposed
merger with CME Group Inc.
(2) Included in gain (losses) from unconsolidated investments during the
three and six months ended June 30, 2008 is a gain of $33.8 million
related to the merger of Montreal Exchange and Toronto Stock Exchange,
and the remaining loss of $3.2 of its investment in Optionable, Inc.,
compared to the prior year periods which included an impairment loss
in Optionable Inc. of $26.0 million.
NYMEX HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
June 30, December 31,
Assets 2008 2007
Cash and cash equivalents $2,411 $3,296
Collateral from securities
lending program 560,653 842,444
Marketable securities, at market
value 633,202 461,142
Clearing and transaction fees
receivable, net of allowance for
member credits 63,119 38,443
Prepaid expenses 8,962 8,786
Margin deposits and guaranty
funds 70,516 170,192
Other current assets 32,290 34,097
Total current assets 1,371,153 1,558,400
Property and equipment, net 173,707 176,471
Goodwill and indefinite-lived
intangible asset 307,125 307,125
Long-term investments 117,414 178,036
Other assets 7,115 7,121
Total assets $1,976,514 $2,227,153
Liabilities and Stockholders' Equity
Accounts payable and accrued liabilities $18,188 $15,723
Accrued salaries and related liabilities 13,155 17,107
Payable under securities lending program 571,009 847,581
Margin deposits and guaranty funds 70,516 170,192
Income tax payable 7,217 2,704
Other current liabilities 38,337 31,122
Total current liabilities 718,422 1,084,429
Grant for building construction
deferred credit 102,949 104,021
Long-term debt 77,464 77,464
Retirement obligation 11,884 12,038
Other liabilities 21,636 23,646
Total liabilities 932,355 1,301,598
Total stockholders' equity 1,044,159 925,555
Total liabilities and
stockholders' equity $1,976,514 $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 three and six months ended June 30, 2008, the Company recorded
$1.7 million and $9.6 million, respectively, of merger-related expenses,
of which approximately $7.7 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. In addition, during the three and six months ended
June 30, 2008, the Company realized a net gain on its long-term
investments of $30.6 million compared to the prior year periods which
included an impairment loss of $26.0 million. These gains and losses are
recorded under the caption "Gain (loss) from Unconsolidated Investments"
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 Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Net income $94,312 $41,745 $165,497 $97,965
Add: Merger-related
expenses 1,666 - 9,591 -
Less: Gain on long-
term investment (33,869) - (33,869) -
Add: Impairment loss
on long-term investment 3,228 25,962 3,228 25,962
Add: Income tax
expense/(benefit) of
merger-related expenses,
gain and loss of long-
term investments 13,278 (11,319) 12,758 (11,319)
Pro forma net income $78,615 $56,388 $157,205 $112,608
Earnings per common share
on net income:
Basic $0.99 $0.44 $1.75 $1.04
Diluted $0.99 $0.44 $1.74 $1.03
Pro forma earnings per
common share on pro forma
net income:
Pro forma basic $0.83 $0.60 $1.66 $1.19
Pro forma diluted $0.83 $0.60 $1.66 $1.19
Weighted average common
shares outstanding:
Basic 94,791,000 94,450,000 94,786,000 94,450,000
Diluted 94,947,000 94,798,000 94,981,000 94,784,000
Q2 2008 Q1 2008 Q4 2007 Q3 2007 Q2 2007
Trading Days 64 61 64 63 63
Average Daily Volume (round turns, in thousands)
Q2 2008 Q1 2008 Q4 2007 Q3 2007 Q2 2007
NYMEX Floor 222 237 229 229 257
NYMEX Electronic 865 814 704 687 608
COMEX Floor 39 48 42 36 42
COMEX Electronic 172 205 147 114 101
NYMEX ClearPort 418 463 310 351 309
Other 96 104 107 74 79
Total 1,812 1,871 1,539 1,491 1,396
Gross Clearing and Transaction Revenue (in thousands)
Q2 2008 Q1 2008 Q4 2007 Q3 2007 Q2 2007
NYMEX Floor $22,798 $23,040 $21,517 $20,824 $19,966
NYMEX Electronic 72,198 65,695 54,243 54,285 50,520
COMEX Floor 4,247 4,787 3,948 3,072 3,249
COMEX Electronic 18,834 20,373 14,572 10,786 9,791
NYMEX ClearPort 50,925 53,375 38,217 46,905 44,281
Other 11,398 11,780 12,433 9,387 9,583
Total $180,400 $179,051 $144,930 $145,259 $137,390
Net Rates Per Contract
Q2 2008 Q1 2008 Q4 2007 Q3 2007 Q2 2007
NYMEX Floor $1.60 $1.59 $1.47 $1.45 $1.23
NYMEX Electronic 1.03 1.05 0.92 0.97 1.02
COMEX Floor 1.71 1.64 1.46 1.34 1.24
COMEX Electronic 1.43 1.36 1.26 1.16 1.19
NYMEX ClearPort 1.57 1.50 1.51 1.67 1.72
Other 1.85 1.85 1.81 2.02 1.92
Total Net RPC 1.32 1.32 1.23 1.28 1.29
Direct Cost 0.23 0.25 0.24 0.27 0.28
Gross RPC $1.56 $1.57 $1.47 $1.55 $1.56
Note: any differences in above tables are due to rounding
