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Second quarter 2006 results include the full quarter results from the operations of NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx(R), and the Pacific Exchange). The merger between NYSE, Inc. and Archipelago Holdings, Inc. closed on March 7, 2006. Fiscal 2005 results include only the operations of NYSE, Inc., the predecessor of NYSE Group.
Included in the second quarter results are $9.7 million in merger expenses and related exit costs consisting of severance costs ($5.8 million), legal, printing and accounting fees incurred in connection with the May 2006 selling shareholder offering of our common stock ($2.1 million), and other professional fees ($1.8 million).
On a non-GAAP basis, excluding these $9.7 million of expenses and exit costs directly attributable to the merger of the NYSE and Archipelago, the net income of NYSE Group for the three months ended June 30, 2006 was $66.9 million, or $0.42 per diluted share, a $14.2 million or 27% increase as compared to net income, on a non-GAAP basis, of $52.7 million, or $0.34 per diluted share, for the three months ended March 31, 2006. A full reconciliation of these non-GAAP results is included in the attached tables.
"NYSE Group's second quarter performance was strong, as the balance between revenue growth and cost management demonstrates," said Nelson Chai, Executive Vice President and Chief Financial Officer. "We remain focused on growing and delivering on our core business priorities. The strength of our transaction and listing businesses, the announcement of our plans to merge with Euronext N.V., and our new transaction pricing model reflect our commitment to these goals.
"Additionally, we continue to make significant progress on the NYSE-Archipelago merger integration initiative and with the approaching introduction of a number of new products and services in the coming months, NYSE Group is well positioned for future growth and substantial value creation for our shareholders. As we continue to meet our integration goals, we expect NYSE Group's results to reflect the realization of these efficiencies."
Other Financial Highlights
- For the three months ended June 30, 2006, total revenues, net of activity assessment fees, on a non-GAAP basis increased $40.9 million or 10% to $469.8 million as compared to total revenues, net of activity assessment fees, on a non-GAAP basis, of $428.9 million for the three months ended March 31, 2006. Driving this increase was a $25.8 million or 15% increase in transaction revenues, primarily reflecting the strong volume growth on the NYSE Arca trading platform.
- For the three months ended June 30, 2006, operating income on a non-GAAP basis increased $17.8 million or 23% to $93.7 million as compared to operating income on a non-GAAP basis of $75.9 million for the three months ended March 31, 2006.
- As of June 30, 2006, NYSE Group had $1.1 billion of cash, cash equivalents, investment and other securities (including $371.6 million related to Section 31 fees collected from market participants and due to the Securities and Exchange Commission) and no debt obligation.
- As of June 30, 2006, the stockholders' equity of NYSE Group was $1.5 billion.
Second Quarter Business Highlights
- On May 22, 2006, NYSE Group proposed an historic business combination with Euronext N.V., which will create the first truly global marketplace with an expected combined market capitalization of approximately $21 billion (EUR 16 billion). Both parties signed a definitive combination agreement on June 1 with an expected closing during the first quarter of 2007, following the satisfaction of certain conditions, including receipt of regulatory approvals and NYSE Group and Euronext shareholder approvals.
- On May 10, 2006, NYSE Group completed a selling shareholder offering of 28,750,000 shares of common stock at $61.50 per share.
- The total number of NYSE listed issuers at June 30, 2006 rose to 2,697 compared to 2,682 at March 31, 2006 and 2,637 at June 30, 2005.
- For the six months ended June 30, 2006, the NYSE added 53 new issuer listings.
- During the second quarter, NYSE Arca added its first new listing since the formation of NYSE Group with the May 18 IPO of Darwin Professional Underwriters, Inc., and the first transfer from Nasdaq to NYSE Arca, BFC Financial Corporation on June 22.
- For the three months ended June 30, 2006, NYSE Group handled 124.0 billion shares of NYSE listed issues, or 76.3% of the trading in NYSE listed issues, versus 115.7 billion shares, or 76.7%, and 104.5 billion shares, or 81.8%, for the three months ended March 31, 2006 and June 30, 2005, respectively.
- NYSE Group's share of trading in NYSE Arca and Amex listed issues increased to 34.4% for the three months ended June 30, 2006 compared to 33.2% for the three months ended March 31, 2006 and 31.6% for the three months ended June 30, 2005.
- NYSE Group's share of trading in Nasdaq listed issues increased to 25.2% for the three months ended June 30, 2006 compared to 23.0% for the three months ended March 31, 2006 and 23.1% for the three months ended June 30, 2005.
- NYSE Group's share of trading in exchange-traded funds (ETFs) increased to 42.9% for the three months ended June 30, 2006 compared to 42.8% for the three months ended March 31, 2006 and 35.9% for the three months ended June 30, 2005.
- For the three months ended June 30, 2006, NYSE Group's share of trading in equity options contracts decreased to 9.4% from 10.9% for the three months ended March 31, 2006 and was unchanged from 9.4% for the three months ended June 30, 2005.
- une 8, 2006, NYSE Arca achieved a new all-time record in daily trading volume with 1.49 billion shares traded, representing $55.0 billion. On April 27, NYSE Arca volume surpassed 1.0 billion shares traded for the first time. Including this milestone, NYSE Arca volume exceeded 1 billion shares 13 times during the second quarter.
- 1, 2006, NYSE Group launched NYSE OpenBook Real-Time(R), an information tool for investors and market professionals designed to offer customers immediate access to market information, increase the transparency of the NYSE market and support the implementation of the NYSE Hybrid Market(SM). This was followed by the SEC's June 9 approval of the NYSE InfoTools(SM) free 60-day trial program. NYSE InfoTools is a uniquely applicable information product designed to provide retail and institutional investors with in-depth analysis of NYSE-listed stock trading activity.
- e 30, 2006, NYSE Group announced transaction pricing changes for NYSE listed equities and NYSE Arca options, effective August 1, 2006. These initial changes increase pricing transparency and efficiency while supporting future product, volume and trading platform growth.
- il 5, 2006, the NYSE completed Phase I of the NYSE Hybrid Market(SM), marking a significant step in the Hybrid Market's implementation program. The NYSE launched Phase II on April 6, and on May 12 a pilot for Phase III was initiated for one NYSE listed stock.
- NYSE Arca filed option market structure rule revisions with the SEC on June 23, 2006. These market structure and pricing enhancements will be supported by a new options trading platform offering significant improvements in trading system performance, functionality and reliability expected to launch in third quarter 2006, pending SEC approval.
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, compensation expense and gains on sale of businesses and other investments and (ii) to 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 (the "NYSE") and NYSE Arca (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.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 June 30, 2006, our listed operating companies represent a total global market capitalization of over $22.6 trillion. In the second quarter 2006, on an average trading day, almost 1.8 billion shares, valued at over $68.5 billion, were traded on the NYSE.
NYSE Arca operates 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 is also an exchange for trading equity options. NYSE Arca's trading platform provides 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.
