TMX Group Inc. Reports Results for First Quarter 2010
- Revenue of $139.7 million for Q1/10, up 2% over Q1/09
- Diluted EPS of 66 cents for Q1/10, up 14% over Q1/09
- Cash flows from operating activities in Q1/10 of $71.6 million, up
18% over Q1/09
TORONTO, April 28 /CNW/ - TMX Group Inc. (TSX:X) announced results for the first quarter ended March 31, 2010.
Commenting on the first quarter, Thomas Kloet, Chief Executive Officer of TMX Group noted: "We are pleased to deliver solid financial results as we continue to see strong evidence of a rebound in investor and issuer confidence. This was reflected in a substantial increase in IPO activity on both of our equity exchanges as well as a marked increase in additional financing activity on TSX Venture Exchange. TSX Venture Exchange also experienced a significant increase in trading activity, signaling a renewed confidence in that area of our markets and in the Canadian economy. In addition, open interest and volumes increased on MX, which had a positive impact on Canadian derivatives trading and clearing revenue."
Michael Ptasznik, CFO of TMX Group added: "We were very pleased with how the overall increase in financing and trading activity on TSX Venture Exchange translated into improved operating performance. This was reflected in both higher initial and additional listing fees billed as well as higher equity trading revenue. We continue to realize the benefits from diversifying our revenue stream, with revenue growth resulting from the addition of crude oil trading and clearing activities and increases in revenue from fixed income trading being prime examples. While operating expenses were 2% lower in the first quarter compared with last year, we continue to invest in new technology initiatives and in expanding our business."
Summary of Financial Information
(in millions of dollars, except per share amounts)
$ %
Increase/ Increase/
Q1/10 Q1/09 (decrease) (decrease)
Revenue $ 139.7 $ 136.8 $ 2.9 2%
Operating expenses $ 69.6 $ 70.8 ($ 1.2) (2%)
Net income $ 49.1 $ 42.9 $ 6.2 14%
Earnings per share:
Basic $ 0.66 $ 0.58 $ 0.08 14%
Diluted $ 0.66 $ 0.58 $ 0.08 14%
Cash flows from operating
activities $ 71.6 $ 60.7 $ 10.9 18%
Net income was $49.1 million or $0.66 per common share for Q1/10 on a basic and diluted basis, compared with net income of $42.9 million or $0.58 per common share on a basic and diluted basis for Q1/09, representing an increase in net income of 14%. The increase in net income was largely due to higher revenue from issuer services and cash markets equity and fixed income trading as well as lower interest expense and a lower net mark-to-market adjustment on interest rate swaps, partially offset by lower revenue from our U.S. derivatives market trading and market data as well as lower investment income.
Select Segmented Financial Information
(in millions of dollars)
Energy
Deriva- Markets
Cash Markets tives - NGX and
- Equities Markets Shorcan
and Fixed - MX and Energy
Q1/10 Income BOX Brokers Total
Revenue $ 107.5 $ 22.8 $ 9.4 $ 139.7
Net Income $ 41.5 $ 5.5 $ 2.1 $ 49.1
Q1/09
Revenue $ 101.1 $ 27.1 $ 8.6 $ 136.8
Net Income $ 36.3 $ 3.5 $ 3.1 $ 42.9
On May 1, 2009, we completed the acquisition of NetThruPut Inc. (NTP), a leading Canadian electronic trading platform and clearing facility for crude oil products. We have included its results in our consolidated financial statements from that date.
Certain comparative figures have been reclassified in order to conform with the financial presentation adopted in the current year. In particular, commencing in 2010 provisions for doubtful accounts receivable are included in General and Administration expense whereas in 2009, these provisions were reflected as a reduction in various sources of revenue. The comparative figures for both revenue and expenses in 2009 have been reclassified to conform with the financial presentation adopted in 2010. The impact of the reclassification is not material.
Quarter Ended March 31, 2010 Compared with Quarter Ended March 31, 2009
Revenue
Revenue was $139.7 million in Q1/10, up $2.9 million, or 2% compared with $136.8 million for Q1/09, reflecting increased revenue from issuer services, cash markets fixed income and cash markets equities trading, partially offset by lower revenue from our U.S. derivatives market trading and market data.
Issuer Services Revenue
The following is a summary of issuer services revenue reported based on initial and additional listing fee revenue reported, and issuer services revenue based on initial and additional listing fees billed* (reconciled below in this section) in Q1/10 and Q1/09.
(in millions of dollars)
Reported
$ %
Q1/10 Q1/09 increase increase
Initial listing fees $ 4.5 $ 4.2 $ 0.3 7%
Additional listing fees $ 15.7 $ 13.7 $ 2.0 15%
Sustaining listing fees $ 16.0 $ 13.8 $ 2.2 16%
Other issuer services $ 3.5 $ 3.3 $ 0.2 6%
--------- --------- ---------
Total $ 39.7 $ 35.0 $ 4.7 13%
--------- --------- ---------
Billed*
$ %
Q1/10 Q1/09 increase increase
Initial listing fees $ 6.2 $ 2.0 $ 4.2 210%
Additional listing fees $ 23.6 $ 17.0 $ 6.6 39%
Sustaining listing fees $ 16.0 $ 13.8 $ 2.2 16%
Other issuer services $ 3.5 $ 3.3 $ 0.2 6%
--------- --------- ---------
Total $ 49.3 $ 36.1 $ 13.2 37%
--------- --------- ---------
Initial and additional listing fees are non-refundable fees paid by listed issuers for the listing or reserving of securities. These fees are recorded as "deferred revenue - initial and additional listing fees" and recognized on a straight-line basis over an estimated service period of ten years.
In the case of Toronto Stock Exchange, listed issuers are billed for initial and additional listing fees and there is a lag between the time when securities are issued or reserved and the time when these listing fees are paid by Toronto Stock Exchange listed issuers. For TSX Venture Exchange issuers, fees are paid either prior to, or at the time of, listing or reserving securities. The following is a reconciliation of initial and additional listing fees billed* to initial and additional listing fees reported:
Initial Listing Fees (in millions of dollars) Q1/10 Q1/09
Initial listing fees billed* $ 6.2 $ 2.0
Initial listing fees billed* and deferred
to future periods ($ 6.1) ($ 1.9)
Recognition of initial listing fees billed*
and previously included in deferred revenue $ 4.4 $ 4.1
--------- ---------
Initial listing fee revenue reported $ 4.5 $ 4.2
--------- ---------
Additional Listing Fees (in millions of dollars) Q1/10 Q1/09
Additional listing fees billed* $ 23.6 $ 17.0
Additional listing fees billed* and deferred
to future periods ($ 23.2) ($ 16.7)
Recognition of additional listing fees billed*
and previously included in deferred revenue $ 15.3 $ 13.4
--------- ---------
Additional listing fee revenue reported $ 15.7 $ 13.7
--------- ---------
- Initial and additional listing fees reported increased in Q1/10
compared with Q1/09, reflecting an increase in capital market
activity during the period from April 1, 2000 to March 31, 2010
compared with the period from April 1, 1999 to March 31, 2009.
Initial listing fees billed* and Additional listing fees billed*
in Q1/10 increased over Q1/09 due to an increase in initial
financings on Toronto Stock Exchange and TSX Venture Exchange. The
increase was also due to an increase in the value of additional
financings on TSX Venture Exchange. While the value of additional
financings on Toronto Stock Exchange decreased in Q1/10 compared with
Q1/09, there was an increase in Additional listing fees billed*.
This was a result of more transactions in Q1/10 compared with Q1/09
and to fee changes that were effective January 1, 2010.
- Issuers listed on Toronto Stock Exchange and TSX Venture Exchange pay
annual sustaining listing fees primarily based on their market
capitalization at the end of the prior calendar year, subject to
minimum and maximum fees. The increase in sustaining listing fees was
due to the overall higher market capitalization of listed issuers on
both exchanges at the end of 2009 compared with the end of 2008.
- Other issuer services revenue of $3.5 million increased from
$3.3 million in Q1/09, reflecting higher demand for investor
relations services.
------------------------
* See discussion under the heading "Non-GAAP Financial Measures".
Trading, Clearing and Related Revenue
(in millions of dollars)
$ %
increase/ increase/
Q1/10 Q1/09 (decrease) (decrease)
Cash markets revenue $ 31.3 $ 28.7 $ 2.6 9%
Derivatives markets revenue $ 18.4 $ 21.8 ($ 3.4) (16%)
Energy markets revenue $ 9.3 $ 8.5 $ 0.8 9%
--------- --------- ---------
Total $ 59.0 $ 59.0 - -
--------- --------- ---------
Cash Markets
- Cash markets equity trading revenue increased due to a 90% increase
in the volume of securities traded on TSX Venture Exchange in Q1/10
over Q1/09 (15.4 billion securities in Q1/10 versus 8.1 billion
securities in Q1/09). From a revenue perspective, we also had a
favourable change in the mix of customer and product trading activity
on Toronto Stock Exchange in Q1/10 compared with Q1/09.
- The increase was largely offset by the impact of a 16% decrease in
the volume of securities traded on Toronto Stock Exchange in Q1/10
over Q1/09 (25.3 billion securities in Q1/10 versus 30.0 billion
securities in Q1/09) and the impact of changes to our equity trading
fee schedule, effective October 1, 2009 and March 1, 2010, which
included a reduction in active trading fees on stocks trading at less
than $1.00 in the post-open continuous market.
- Shorcan Brokers Limited (Shorcan) fixed income trading revenue
increased due to a favourable product mix in Q1/10 compared with
Q1/09.
Derivatives Markets
- The decrease in revenue reflects a 61% decrease in Boston Options
Exchange, LLC (BOX) volumes (17.68 million contracts in Q1/10 versus
45.70 million contracts traded in Q1/09) due to increased competition
in the U.S. equity options trading market in Q1/10 compared with
Q1/09. The decrease was somewhat offset by option regulatory fees
charged in Q1/10.
- The decrease was also somewhat offset by an increase in trading and
clearing revenue from Montréal Exchange Inc. (MX). MX volumes
increased by 24% (9.97 million contracts traded in Q1/10 versus
8.06 million contracts traded in Q1/09) reflecting increased trading
in the BAX(R) and CGB(R) contracts, as well as ETF options.
Energy Markets
- Energy markets revenue increased due to the inclusion of revenue from
crude oil trading and clearing following the acquisition of NTP on
May 1, 2009. Natural Gas Exchange Inc. (NGX) traded or cleared
14.16 million barrels of crude oil in Q1/10.
- In addition, Shorcan Energy Brokers Inc. (Shorcan Energy Brokers), a
wholly-owned subsidiary of Shorcan, recently launched trading in
energy products which resulted in an increase in revenue during
Q1/10.
- The increased revenue was also a result of NGX having deferred less
revenue in Q1/10, on a net basis, than in Q1/09 due to a reduced
level of forward contracts.
- The increases were somewhat offset by a decrease in revenue from
natural gas trading and clearing due to a 5% decrease in the volumes
of natural gas traded or cleared on NGX over Q1/09 (3.07 million
terajoules in Q1/10 compared to 3.23 million terajoules in Q1/09).
There was also a decrease in revenue due to the negative impact of
the depreciation of the U.S. dollar against the Canadian dollar in
Q1/10 compared with Q1/09.
Market Data Revenue
(in millions of dollars)
$ %
Q1/10 Q1/09 (decrease) (decrease)
$ 37.5 $ 38.8 ($ 1.3) (3%)
- The negative impact of the depreciation of the U.S. dollar against
the Canadian dollar in Q1/10 compared with Q1/09 was a significant
factor in the decrease in revenue.
- The decrease also reflects lower revenue from MX and BOX derivatives
market data. There was a 16% decrease in the number of MX market data
subscriptions (22,898 MX market data subscriptions at March 31, 2010
compared with 27,237 at March 31, 2009).
- The decreases were partially offset by higher revenue from indices,
data licensing, co-location services and price increases that were
effective January 1, 2010. There were also higher revenue recoveries
related to under-reported usage of real-time quotes in Q1/10 compared
with Q1/09.
- Overall, there was a 1% decrease in the number of professional and
equivalent real-time market data subscriptions to Toronto Stock
Exchange and TSX Venture Exchange products (151,744 professional and
equivalent real-time market data subscriptions at March 31, 2010
compared with 153,515 at March 31, 2009).
Business Services and Other Revenue
(in millions of dollars)
$ %
Q1/10 Q1/09 (decrease) (decrease)
$ 3.6 $ 4.1 ($ 0.5) (12%)
- Business services revenue decreased primarily due to net foreign
exchange losses on U.S. dollar accounts receivable, partially offset
by revenue from development work related to licensing our SOLA(R)
technology.
Operating Expenses
Operating expenses in Q1/10 were $69.6 million, down $1.2 million, or 2%, from $70.8 million in Q1/09 due to lower organizational transition costs, reduced headcount and lower general and administration expenses somewhat offset by higher costs related to technology initiatives.
Compensation and Benefits
(in millions of dollars)
$ %
Q1/10 Q1/09 (decrease) (decrease)
$ 32.2 $ 33.7 ($ 1.5) (4%)
- Compensation and benefits costs decreased primarily due to lower
organizational transition costs, as well as an overall reduction in
salary costs relating to reduced headcount, partially offset by
higher costs associated with short term performance incentives
compared with Q1/09.
- There were 836 employees at March 31, 2010, which included 10 NTP and
Shorcan Energy Brokers employees, versus 851 employees at March 31,
2009.
Information and Trading Systems
(in millions of dollars)
$ %
Q1/10 Q1/09 increase increase
$ 12.1 $ 11.1 $ 1.0 9%
- Information and trading systems costs increased due to higher costs
related to technology initiatives.
General and Administration
(in millions of dollars)
$ %
Q1/10 Q1/09 (decrease) (decrease)
$ 16.9 $ 18.3 ($ 1.4) (8%)
- General and administration costs decreased as a result of lower
capital tax expense and lower directors' fees.
Amortization
(in millions of dollars)
$ %
Q1/10 Q1/09 increase increase
$ 8.4 $ 7.7 $ 0.7 9%
- Amortization costs increased due to higher obligations under capital
leases for which the related assets are amortized.
- The increase was also due to higher amortization of the intangible
assets related to the TMX Smart Order Router, TSX Quantum(TM) Order
Entry Gateway and SOLA Clearing. The increases were somewhat offset
by reduced amortization relating to assets that were fully
depreciated by Q1/10.
Income from Investment in Affiliate
(in millions of dollars)
$
Q1/10 Q1/09 increase
$ 0.3 $ 0.1 $ 0.2
- Income from investment in affiliate represents TSX Inc.'s share of
CanDeal.ca Inc. (CanDeal) income for Q1/10 based on its 47% interest
in CanDeal, an electronic trading system for the institutional debt
market.
Investment Income
(in millions of dollars)
$ %
Q1/10 Q1/09 (decrease) (decrease)
$ 0.8 $ 1.6 ($ 0.8) (50%)
- Investment income decreased due to lower overall returns on short-
term bond and mortgage fund investments during Q1/10 compared with
Q1/09.
Interest Expense
(in millions of dollars)
$ %
Q1/10 Q1/09 (decrease) (decrease)
$ 1.2 $ 2.1 ($ 0.9) (43%)
- Interest expense decreased as a result of lower interest rates on the
debt outstanding. On April 30, 2008, we borrowed $430.0 million in
Canadian funds related to financing the cash consideration of the
purchase price for MX (see Long-term Debt).
Mark-to-Market on Interest Rate Swaps - Loss
(in millions of dollars)
$ %
Q1/10 Q1/09 (decrease) (decrease)
$ 0.1 $ 0.9 ($ 0.8) (89%)
- We entered into a series of interest rate swap agreements to
partially manage our exposure to interest rate fluctuations on our
long-term debt, effective August 28, 2008 (see Long-term Debt).
- During Q1/10, unrealized gains of $1.6 million and realized losses of
$1.7 million were reflected in net income, compared with unrealized
gains of $0.9 million and realized losses of $1.8 million recognized
in Q1/09.
Income Taxes
(in millions of dollars)
Effective
tax rate (%)
Q1/10 Q1/09 Q1/10 Q1/09
$ 21.1 $ 20.1 30% 32%
- The effective tax rate for Q1/10 was lower than that for Q1/09 due to
changes in federal income and Ontario corporate tax rates.
Non-Controlling Interests
(in millions of dollars)
$ %
Q1/10 Q1/09 (decrease) (decrease)
($ 0.4) $ 1.6 ($ 2.0) (125%)
- MX holds a 53.8% ownership interest in BOX. BOX results are
consolidated into our consolidated statements of income. The non-
controlling interests represent the other BOX unitholders' share of
BOX's loss or profit in the period. The decrease in Q1/10 was due to
declining profitability resulting from lower volumes somewhat offset
by option regulatory fees charged in Q1/10.
Comprehensive Income
Comprehensive Income was $46.4 million for Q1/10 and is comprised of Net Income of $49.1 million net of Other Comprehensive Losses of $2.7 million.
Other comprehensive losses includes the unrealized loss on the foreign currency translation of BOX and other related self-sustaining foreign operations, which amounted to $2.7 million for Q1/10.
Accumulated Other Comprehensive Income of $0.6 million as at March 31, 2010 is included as a component of Shareholders' Equity.
Comprehensive Income was $48.5 million for Q1/09 which was comprised of Net Income of $42.9 million and Other Comprehensive Income of $5.6 million.
Other comprehensive income includes the unrealized gain on the foreign currency translation of BOX and other related self-sustaining foreign operations, which amounted to $5.6 million for Q1/09.
Our Accumulated Other Comprehensive Income of $29.7 million as at March 31, 2009 is included as a component of Shareholders' Equity.
Liquidity and Capital Resources
Cash, Cash Equivalents and Marketable Securities
(in millions of dollars)
March 31, December 31, $
2010 2009 increase
$ 226.0 $ 191.1 $ 34.9
- The increase was largely due to cash generated from operating
activities of $71.6 million, partially offset by dividend payments of
$28.0 million and capital expenditures of $4.9 million.
Total Assets
(in millions of dollars)
March 31, December 31, $
2010 2009 increase
$3,552.5 $3,524.5 $ 28.0
- Total assets increased due to higher energy contracts receivable of
$794.1 million at March 31, 2010 related to the clearing operations
of NGX, compared with $714.5 million at the end of 2009. The higher
level of receivables reflected both higher delivered volumes of crude
oil and natural gas as well as higher crude oil and electricity
prices at the end of March 2010 compared with the end of December
2009. As the clearing counterparty to every trade, NGX also carries
offsetting liabilities in the form of energy contracts payable, which
were $794.1 million at March 31, 2010 compared with $714.5 million at
the end of 2009.
- The increase was also due to an increase in current assets related to
the fair value of open energy contracts ($329.8 million as at
March 31, 2010, compared with $202.8 million at December 31, 2009).
The increased level of open energy contracts largely reflected the
impact of higher volatility in natural gas prices for the relevant
measuring period during March 2010 compared with the corresponding
period in December 2009. NGX also carried offsetting liabilities
related to the fair value of open energy contracts which were
$329.8 million at March 31, 2010 compared with $202.8 million at
December 31, 2009.
- The overall increase was largely offset by lower MX daily settlements
and cash deposits of $321.7 million as at March 31, 2010 related to
MX's clearing operations, compared with $565.4 million at the end of
2009. MX also carried offsetting liabilities related to daily
settlements and cash deposits which were $321.7 million at March 31,
2010 compared with $565.4 million at the end of 2009. Daily
settlements due from/to clearing members consist of amounts due
from/to clearing members as a result of marking open futures
positions to market and settling options transactions each day that
are required to be collected from/paid to clearing members prior to
the commencement of the next trading day.
- Total assets also included an increase in cash and marketable
securities of $34.9 million as well as an increase in accounts
receivable of $20.4 million.
Credit Facilities and Guarantee
Long-term Debt
(in millions of dollars)
March 31, December 31, $
2010 2009 increase
$ 429.2 $ 429.0 $ 0.2
- In connection with the combination with MX, we established a non-
revolving three-year term unsecured credit facility of
$430.0 million, the Term Facility. In addition, we also established a
revolving three-year unsecured credit facility of $50.0 million with
the same syndicate. We may draw on these facilities in Canadian
dollars by way of prime rate loans and/or Bankers' Acceptances or in
U.S. dollars by way of LIBOR loans and/or U.S. base rate loans.
Currently, TMX Group's acceptance fee or spread on the loan is 0.45%.
On April 30, 2008, we borrowed $430.0 million in Canadian funds on
the Term Facility to satisfy the cash consideration of the purchase
price for MX.
- We entered into a series of interest rate swap agreements which took
effect on August 28, 2008 in order to partially manage our exposure
to interest rate fluctuations on our $430.0 million non-revolving
three-year term facility. The interest rate swaps in place at
March 31, 2010 are as follows:
Interest rate
Notional value we will pay under swap Maturity date
(in millions of dollars) (excludes 0.45% fee) of swap
-------------------------------------------------------------------------
Swap No. 2 - $100.0 3.749% August 31, 2010
Swap No. 3 - $100.0 3.829% April 18, 2011
These credit facilities contain customary covenants, including a
requirement that TMX Group maintain:
- a maximum debt to adjusted EBITDA ratio of 3.5:1, where adjusted
EBITDA means earnings on a consolidated basis before interest, taxes,
extraordinary, unusual or non-recurring items, depreciation and
amortization, all determined in accordance with Canadian generally
accepted accounting principles (GAAP) but adjusted to include initial
and additional listing fees billed and to exclude initial and
additional listing fees reported as revenue;
- a minimum consolidated net worth covenant based on a pre-determined
formula; and
- a debt incurrence test whereby debt to adjusted EBITDA must not
exceed 3.0:1.
At March 31, 2010, all covenants were met.
Other Credit Facilities and Guarantee
To backstop its clearing operations, NGX currently has a credit agreement in place with a Canadian chartered bank which includes a US$100.0 million clearing backstop fund. We are NGX's unsecured guarantor for this fund up to a maximum of US$100.0 million.
CDCC has also arranged a total of $30.0 million in revolving standby credit facilities with a Canadian Schedule I bank to provide liquidity in the event of default by a clearing member.
These facilities had not been drawn upon at March 31, 2010.
NGX also has an Electronic Funds Transfer (EFT) Daylight facility of $300.0 million in place with a Canadian chartered bank.
Shareholders' Equity
(in millions of dollars)
March 31, December 31, $
2010 2009 increase
$ 789.7 $ 770.6 $ 19.1
- We earned $49.1 million of net income during Q1/10 and paid
$28.0 million in dividends.
- We also recorded an unrealized foreign exchange loss of $2.7 million
on the foreign currency translation of BOX and other related self-
sustaining foreign operations.
- At March 31, 2010, there were 74,313,041 common shares issued and
outstanding. In Q1/10, 6,000 common shares were issued on the
exercise of share options. At March 31, 2010, 4,127,110 common shares
were reserved for issuance upon the exercise of options granted under
the share option plan. At March 31, 2010, there were 1,774,518
options outstanding.
- At April 26, 2010, there were 74,315,547 common shares issued and
outstanding and 1,763,050 options outstanding under the share option
plan.
Cash Flows from Operating Activities
(in millions of dollars)
Increase
Q1/10 Q1/09 in cash
Cash Flows from Operating Activities $ 71.6 $ 60.7 $ 10.9
Cash Flows from Operating Activities were $10.9 million higher in Q1/10 compared with Q1/09 due to:
(in millions of dollars)
Increase/
(decrease)
Q1/10 Q1/09 in cash
Net income $ 49.1 $ 42.9 $ 6.2
Amortization $ 8.4 $ 7.7 $ 0.7
Net (increase) in future income taxes ($ 1.6) ($ 0.9) ($ 0.7)
Unrealized (gain) on interest
rate swaps ($ 1.6) ($ 0.9) ($ 0.7)
Unrealized loss on marketable
securities $ 0.4 $ 0.6 ($ 0.2)
(Increase) in accounts receivable
and prepaid expenses ($ 23.1) ($ 15.8) ($ 7.3)
(Increase)/decrease in other assets ($ 0.4) $ 0.4 ($ 0.8)
Net (decrease) in accounts payable,
accrued liabilities and long-term
liabilities ($ 13.1) ($ 7.6) ($ 5.5)
Increase in deferred revenue $ 61.3 $ 46.4 $ 14.9
Net (decrease) in income taxes payable ($ 8.0) ($ 14.7) $ 6.7
Net increase in other items $ 0.2 $ 2.6 ($ 2.4)
--------- --------- ---------
Cash Flows from Operating Activities $ 71.6 $ 60.7 $ 10.9
--------- --------- ---------
Cash Flows from (used in) Financing Activities
(in millions of dollars)
Increase
Q1/10 Q1/09 in cash
Cash Flows from (used in) Financing
Activities ($ 28.9) ($ 61.6) $ 32.7
Cash Flows (used in) Financing Activities were $32.7 million lower in Q1/10 compared with Q1/09 due to:
(in millions of dollars)
Increase/
(decrease)
Q1/10 Q1/09 in cash
Dividends paid on common shares ($ 28.0) ($ 28.3) $ 0.3
Repurchase of common shares under NCIB - ($ 30.4) $ 30.4
Dividends paid to BOX non-controlling
interests - ($ 3.2) $ 3.2
Net (decrease) in other items ($ 0.9) $ 0.3 ($ 1.2)
--------- --------- ---------
Cash Flows from (used in) Financing
Activities ($ 28.9) ($ 61.6) $ 32.7
--------- --------- ---------
Cash Flows from (used in) Investing Activities
(in millions of dollars)
(Decrease)
Q1/10 Q1/09 in cash
Cash Flows from (used in) Investing
Activities ($ 63.8) ($ 23.2) ($ 40.6)
Cash Flows (used in) Investing Activities were $40.6 million higher in Q1/10 compared with Q1/09 due to:
(in millions of dollars)
Increase/
(decrease)
Q1/10 Q1/09 in cash
Cost of acquisitions and investments,
net of cash acquired - ($ 0.7) $ 0.7
Capital expenditures primarily related
to technology investments and
leasehold improvements ($ 4.9) ($ 0.4) ($ 4.5)
Additions to intangible assets
including TSX Quantum Gateway,
TMX Smart Order Router (2009) and
SOLA internal development costs ($ 2.1) ($ 3.4) $ 1.3
Net (purchases) of marketable
securities ($ 56.8) ($ 18.7) ($ 38.1)
--------- --------- ---------
Cash Flows from (used in) Investing
Activities ($ 63.8) ($ 23.2) ($ 40.6)
--------- --------- ---------
Financial Statements Governance Practice
The Finance & Audit Committee of the Board of Directors of TMX Group reviewed this press release as well as the Q1/10 unaudited consolidated financial statements and related Management's Discussion and Analysis (MD&A), and recommended they be approved by the Board of Directors. Following review by the full Board, the financial statements, MD&A and the contents of this press release were approved.
Consolidated Financial Statements
TMX Group's Q1/10 unaudited consolidated financial statements and MD&A have been prepared in accordance with Canadian GAAP and are reported in Canadian dollars. The financial information in this press release is in Canadian dollars unless otherwise indicated and is based on financial statements prepared in accordance with Canadian GAAP, unless otherwise noted.
TMX Group expects to file its Q1/10 unaudited consolidated financial statements and MD&A with Canadian securities regulators today, after which time the statements and related MD&A may be accessed through www.sedar.com, or on the TMX Group website at www.tmx.com. We are not incorporating information contained on the website in this press release. In addition, copies of these documents will be available upon request, at no cost, by contacting TMX Group Investor Relations by phone at (416) 947-4277 or by e-mail at [email protected].
Non-GAAP Financial Measures
Certain measures used in this MD&A do not have standardized meanings prescribed by Canadian GAAP and therefore are unlikely to be comparable to similar measures presented by other Canadian issuers.
"Initial listing fees billed" and "additional listing fees billed"
Toronto Stock Exchange customers are billed for initial and additional listing fees, and there is a lag between the time when securities are issued or reserved and the time when these listing fees are paid by Toronto Stock Exchange listed issuers. For TSX Venture Exchange issuers, fees are paid either prior to, or at the time of, listing or reserving securities. In order to reflect these activities, we use the terms "initial listing fees billed" and "additional listing fees billed".
Management uses these measures to assess the effectiveness of our strategy to serve our listed issuers and to manage the listings portion of our business. This is how our international peers, who currently report using International Financial Reporting Standards (IFRS), account for these fees. These non-GAAP revenue measures provide investors with an indication of how initial and additional listing activity and the fees billed or received in connection with the listing or reserving of securities impact the financial performance and cash flows of our business.
Caution Regarding Forward-Looking Information
This press release contains "forward-looking information" (as defined in applicable Canadian securities legislation) that is based on expectations, assumptions, estimates, projections and other factors that management believes to be relevant as of the date of this press release. Often, but not always, such forward-looking information can be identified by the use of forward-looking words such as "plans", "expects", "is expected", "budget", "scheduled", "targeted", "estimates", "forecasts", "intends", "anticipates", "believes", or variations or the negatives of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved or not be taken, occur or be achieved. Forward-looking information, by its nature, requires us to make assumptions and is subject to significant risks and uncertainties which may give rise to the possibility that our expectations or conclusions will not prove to be accurate and that our assumptions may not be correct.
Examples of such forward-looking information in this press release include, but are not limited to, factors relating to stock, derivatives and energy exchanges and clearing houses and the business, strategic goals and priorities, market condition, pricing, proposed technology and other initiatives, financial condition, operations and prospects of TMX Group, which are subject to significant risks and uncertainties. These risks include: competition from other exchanges or marketplaces, including alternative trading systems and new technologies, on a national and international basis; dependence on the economy of Canada; adverse effects on our results caused by global economic uncertainties; failure to retain and attract qualified personnel; geopolitical and other factors which could cause business interruption; dependence on information technology; vulnerability of our networks and third party service providers to security risks; failure to implement our strategies; regulatory constraints; risks of litigation; dependence on adequate numbers of customers; failure to develop or gain acceptance of new products; currency risk; adverse effect of new business activities; not being able to meet cash requirements because of our holding company structure and restrictions on paying dividends; dependence and restrictions imposed by licenses and other arrangements; dependence of trading operations on a small number of clients; new technologies making it easier to disseminate our information; risks associated with our clearing operations; challenges related to international expansion; restrictions on ownership of TMX Group shares; inability to protect our intellectual property; dependence on third party suppliers; adverse effect of a systemic market event on our derivatives business; risks associated with the credit of customers; cost structures being largely fixed; risks associated with integrating the operations, systems, and personnel of new acquisitions; and dependence on market activity that cannot be controlled.
The forward looking information contained in this press release is presented for the purpose of assisting readers of this document in understanding our financial condition and results of operations and our strategies, priorities and objectives and may not be appropriate for other purposes. Actual results, events, performances, achievements and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking information contained in this press release.
Such forward-looking information is based on a number of assumptions which may prove to be incorrect, including, but not limited to, assumptions in connection with the ability of TMX Group to successfully compete against global and regional marketplaces; business and economic conditions generally; exchange rates (including estimates of the U.S. dollar - Canadian dollar exchange rate), the level of trading and activity on markets, and particularly the level of trading in TMX Group's key products; the continued availability of financing on appropriate terms for future projects; productivity at TMX Group, as well as that of TMX Group's competitors; market competition; research & development activities; the successful introduction of new derivatives and equity products; tax benefits/changes; the impact on TMX Group and its customers of various regulations; TMX Group's ongoing relations with its employees; and the extent of any labour, equipment or other disruptions at any of its operations of any significance other than any planned maintenance or similar shutdowns.
While we anticipate that subsequent events and developments may cause our views to change, we have no intention to update this forward-looking information, except as required by applicable securities law. This forward-looking information should not be relied upon as representing our views as of any date subsequent to the date of this press release. We have attempted to identify important factors that could cause actual actions, events or results to differ materially from those current expectations described in forward-looking information. However, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended and that could cause actual actions, events or results to differ materially from current expectations. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. These factors are not intended to represent a complete list of the factors that could affect us. A description of the above-mentioned items is contained in our 2009 Annual MD&A under the heading Risks and Uncertainties.
About TMX Group (TSX-X)
-----------------------
TMX Group's key subsidiaries operate cash and derivative markets for multiple asset classes including equities, fixed income and energy. Toronto Stock Exchange, TSX Venture Exchange, Montreal Exchange, Natural Gas Exchange, Boston Options Exchange, Shorcan, Equicom and other TMX Group companies provide trading markets, clearing facilities, data products and other services to the global financial community. TMX Group is headquartered in Toronto with offices in Montreal, Calgary and Vancouver. For more information about TMX Group, visit our website at www.tmx.com.
Teleconference/Audio Webcast
TMX Group will host a teleconference/audio webcast to discuss the financial results for Q1/10.
Time: 8:00 a.m. - 9:00 a.m. EDT on Wednesday, April 28, 2010.
To teleconference participants: Please call the following number at least 15 minutes prior to the start of the event.
Teleconference Number: 647-427-7450 or 1-888-231-8191
AudioWebcast: www.tmx.com, under Investor Relations
Audio Replay: 416-849-0833 or 1-800-642-1687
The passcode for the replay is 67665637 followed by the number sign.
TMX GROUP INC.
Interim Consolidated Balance Sheets
(In thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
March 31, December 31,
2010 2009
(audited)
-------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 66,481 $ 87,978
Marketable securities 159,536 103,169
Restricted cash 879 911
Accounts receivable 99,800 79,427
Energy contracts receivable 794,089 714,545
Fair value of open energy contracts 329,751 202,760
Daily settlements and cash deposits 321,666 565,408
Prepaid expenses 8,641 6,032
Income taxes recoverable 9,435 4,619
Future income tax assets 28,110 26,675
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1,818,388 1,791,524
Premises and equipment 34,501 31,556
Future income tax assets 147,628 144,551
Other assets 28,169 27,745
Investment in affiliate, at equity 13,098 12,845
Intangible assets 927,678 932,443
Goodwill 583,072 583,811
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Total Assets $ 3,552,534 $ 3,524,475
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 32,925 $ 44,883
Energy contracts payable 794,089 714,545
Fair value of open energy contracts 329,751 202,760
Daily settlements and cash deposits 321,666 565,408
Deferred revenue 66,647 15,074
Deferred revenue - initial and additional
listing fees 80,463 78,001
Fair value of interest rate swaps 1,312 2,117
Future income tax liabilities 65 118
Obligations under capital leases 3,792 3,413
Income taxes payable 86 3,232
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1,630,796 1,629,551
Accrued employee benefits payable 12,780 12,787
Obligations under capital leases 5,521 5,512
Future income tax liabilities 237,700 234,697
Other liabilities 20,611 21,832
Deferred revenue 957 882
Deferred revenue - initial and additional
listing fees 412,353 405,123
Fair value of interest rate swaps 2,792 3,584
Term loan 429,200 429,016
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Total Liabilities 2,752,710 2,742,984
Non-controlling Interests 10,165 10,915
Shareholders' Equity:
Share capital 1,102,699 1,102,619
Share option plan 9,337 8,708
Deficit (322,941) (343,975)
Accumulated other comprehensive income 564 3,224
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Total Shareholders' Equity 789,659 770,576
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 3,552,534 $ 3,524,475
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TMX GROUP INC.
Interim Consolidated Statements of Income
(In thousands of Canadian dollars, except per share amounts)
(Unaudited)
-------------------------------------------------------------------------
Three Months Ended March 31,
2010 2009
-------------------------------------------------------------------------
Revenue:
Issuer services $ 39,703 $ 35,051
Trading, clearing and related 58,970 58,956
Market data 37,453 38,753
Business services and other 3,580 4,058
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Total revenue 139,706 136,818
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Expenses:
Compensation and benefits 32,246 33,711
Information and trading systems 12,107 11,115
General and administration 16,923 18,267
Amortization 8,365 7,729
-----------------------------------------------------------------------
Total operating expenses 69,641 70,822
-----------------------------------------------------------------------
Income from operations 70,065 65,996
Income from investment in affiliate 254 71
Investment income 772 1,570
Interest expense (1,203) (2,081)
Net mark to market on interest rate swaps (75) (916)
-------------------------------------------------------------------------
Income before income taxes 69,813 64,640
Income taxes 21,123 20,149
-------------------------------------------------------------------------
Net income before non-controlling interests 48,690 44,491
Non-controlling interests (392) 1,573
-------------------------------------------------------------------------
Net income $ 49,082 $ 42,918
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per share:
Basic $ 0.66 $ 0.58
Diluted $ 0.66 $ 0.58
Share information:
Weighted average number of common
shares outstanding 74,310,141 73,922,505
Diluted weighted average number of
common shares outstanding 74,400,694 74,089,541
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TMX GROUP INC.
Interim Consolidated Statements of Comprehensive Income
(In thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
Three Months Ended March 31,
2010 2009
-------------------------------------------------------------------------
Net income $ 49,082 $ 42,918
Other comprehensive (loss) income:
Unrealized (loss) gain on translating
financial statements of self-sustaining
foreign operations (net of tax - $nil) (2,660) 5,613
-------------------------------------------------------------------------
Comprehensive income $ 46,422 $ 48,531
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TMX GROUP INC.
Interim Consolidated Statements of Changes in Shareholders' Equity
(In thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
Three Months Ended March 31,
2010 2009
-------------------------------------------------------------------------
Common shares:
Balance, beginning of period $ 1,102,619 $ 1,084,399
Proceeds from options exercised 64 31
Cost of exercised options 16 38
Purchased under normal course issuer bid - (14,575)
-----------------------------------------------------------------------
Balance, end of period 1,102,699 1,069,893
Share option plan:
Balance, beginning of period 8,708 5,969
Cost of exercised options (16) (38)
Cost of share option plan 645 887
-----------------------------------------------------------------------
Balance, end of period 9,337 6,818
Deficit:
Balance, beginning of period (343,975) (319,843)
Net income 49,082 42,918
Dividends on common shares (28,048) (28,275)
Shares purchased under normal course
issuer bid - (15,860)
-----------------------------------------------------------------------
Balance, end of period (322,941) (321,060)
Accumulated other comprehensive income:
Balance, beginning of period 3,224 24,104
Unrealized (loss) gain on translating
financial statements of self-sustaining
foreign operations (2,660) 5,613
-----------------------------------------------------------------------
Balance, end of period 564 29,717
-------------------------------------------------------------------------
Shareholders' equity, end of period $ 789,659 $ 785,368
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TMX GROUP INC.
Interim Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
Three Months Ended March 31,
2010 2009
-------------------------------------------------------------------------
Cash flows from (used in) operating
activities:
Net income $ 49,082 $ 42,918
Adjustments to determine net cash flows:
Amortization 8,365 7,729
Unrealized loss on marketable securities 424 630
Income from investment in affiliate (254) (71)
Cost of share option plan 645 887
Amortized financing fees 184 184
Non-controlling interests (392) 1,573
Unrealized (gain) on interest rate swaps (1,597) (928)
Unrealized foreign exchange loss (gain) 40 (36)
Future income taxes (1,562) (944)
Accounts receivable and prepaid expenses (23,109) (15,772)
Other assets (424) 379
Accounts payable and accrued liabilities (11,896) (12,286)
Long-term accrued and other liabilities (1,228) 4,684
Deferred revenue 61,340 46,396
Income taxes (7,984) (14,658)
---------------------------------------------------------------------
71,634 60,685
Cash flows from (used in) financing activities:
Reduction in obligations under capital
leases (938) -
Restricted cash 32 233
Proceeds from exercised options 64 31
Dividends on common shares (28,048) (28,275)
Shares purchased under normal course
issuer bid - (30,435)
Dividends paid to non-controlling interests - (3,193)
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(28,890) (61,639)
Cash flows from (used in) investing activities:
Additions to premises and equipment (4,877) (386)
Additions to intangible assets (2,133) (3,406)
Marketable securities (56,791) (18,745)
Acquisitions, net of cash acquired - (647)
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(63,801) (23,184)
Unrealized foreign exchange (loss) gain
on cash and cash equivalents held in
foreign subsidiaries (440) 676
-------------------------------------------------------------------------
Decrease in cash and cash equivalents (21,497) (23,462)
Cash and cash equivalents, beginning of period 87,978 102,442
-------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 66,481 $ 78,980
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Supplemental cash flow information:
Interest paid $ 1,031 $ 1,795
Interest received $ 1,486 $ 2,169
Income taxes paid $ 30,518 $ 36,178
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TMX GROUP INC.
Market Statistics*
(Unaudited)
-------------------------------------------------------------------------
Three months ended
March 31
-------------------------------------------------------------------------
2010 2009
-------------------------------------------------------------------------
Toronto Stock Exchange:
Volume (millions) 25,337.6 30,032.2
Value ($ billions) 318.3 345.9
Transactions (000s) 43,111.6 51,924.8
Issuers Listed 1,465 1,541
New Issuers Listed: 49 15
Number of Initial Public Offerings 36 8
Number of graduates from TSX Venture/NEX 8 4
New Equity Financing: ($ millions) 9,298.7 11,852.1
Initial Public Offering Financings
($ millions) 1,787.8 281.1
Secondary Offering Financings(1)
($ millions) 4,046.3 6,774.4
Supplementary Financings ($ millions) 3,464.6 4,796.6
Market Cap of Issuers Listed ($ billions) 1,845.5 1,266.0
S&P/TSX Composite Index(2) Close 12,037.7 8,720.4
TSX Venture Exchange:(3)
Volume (millions) 15,373.5 8,069.4
Value ($ millions) 7,096.9 1,774.2
Transactions (000s) 2,012.8 799.5
Issuers Listed 2,378 2,449
New Issuers Listed 38 24
New Equity Financing: ($ millions) 1,747.6 531.4
Initial Public Offering Financings
($ millions) 37.8 7.4
Secondary Offering Financings(1)
($ millions) 356.5 206.3
Supplementary Financings ($ millions) 1,353.3 317.7
Market Cap of Issuers Listed: ($ billions) 40.3 20.9
S&P/TSX Venture Composite Index(2) Close 1,576.6 956.8
Toronto Stock Exchange and TSX Venture Exchange:
Professional and Equivalent Real-time
Data Subscriptions 151,744 153,515
NGX:
Natural Gas Volume (TJs) 3,065,613 3,233,803
Electricity Volume (Gwh) 17,267 14,029
Crude Oil Volume (MBbls) 14,160 -
Montreal Exchange:
Volume (Contracts) (000s) 9,969.3 8,059.7
Open Interest (Contracts) (000s)
as at March 31 2,867.8 2,250.3
Data Subscriptions 22,898 27,237
Boston Options Exchange:
Volume (Contracts) (000s) 17,675.3 45,700.2
(1) Secondary Offering Financings includes prospectus offerings on both a
treasury and secondary basis.
(2) S&P is a trade-mark owned by The McGraw-Hill Companies, Inc. and is
used under license.
(3) TSX Venture Exchange market statistics do not include data for debt
securities. 'New Issuers Listed' and 'S&P/TSX Venture Composite Index
Close' statistics exclude data for issuers on NEX. All other TSX
Venture Exchange market statistics include data for issuers on NEX,
which is a board that was established on August 18, 2003 for issuers
that have fallen below TSX Venture's listing standards (180 issuers
at March 31, 2009 and 204 issuers at March 31, 2010).
* Certain comparative figures have been restated.
SUPPLEMENTARY INFORMATION ON DEFERRED REVENUE - INITIAL AND ADDITIONAL
LISTING FEES(1)
As at March 31, 2010
(in millions of dollars)
-------------------------------------------------------------------------
Future amortization of deferred revenue - initial and additional listing
fees
-------------------------------------------------------------------------
Q1 Q2 Q3 Q4 Total Year
-------------------------------------------------------------------------
2010 - 20.3 20.2 20.0 60.5
2011 19.9 19.7 19.5 19.3 78.4
2012 19.0 18.7 18.4 18.1 74.2
2013 17.8 17.5 17.1 16.5 68.9
2014 16.0 15.5 15.1 14.5 61.1
2015 13.9 13.3 12.7 12.3 52.2
2016 11.7 10.8 10.1 9.4 42.0
2017 8.7 7.7 6.8 6.0 29.2
2018 5.3 4.7 4.0 3.5 17.5
2019 3.0 2.5 1.9 1.1 8.5
2020 0.3 - - - 0.3
Total deferred revenue - initial and additional listing fees $ 492.8
Note: only includes initial and additional listing fees billed up to
March 31, 2010 (and is calculated based on an estimated service
period of ten years)
(1) Please refer to Forward-Looking Information.
For further information: Carolyn Quick, Director, Corporate Communications, TMX Group, (416) 947-4597, [email protected]; Paul Malcolmson, Director, Investor and Government Relations, TMX Group, (416) 947-4317, [email protected]
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