TMX Group Inc. Reports Results for Fourth Quarter and Year End 2009
- Record revenue of $153.0 million for Q4/09
- Record revenue of $556.3 million for 2009
- Q4/09 diluted loss per share of $0.36 after non-cash goodwill
impairment charge and income tax charge related to reduction in
value of future tax assets and liabilities
- Adjusted diluted EPS in Q4/09 of 82 cents, up 26% over Q4/08(xx)
- Full year 2009 diluted EPS of $1.41 after non-cash goodwill
impairment charge and income tax charge related to reduction in
value of future tax assets and liabilities
- Full year 2009 adjusted diluted EPS of $2.59, down 3%
over 2008(xx)
Commenting on the past year, Thomas Kloet, Chief Executive Officer of TMX Group noted: "In 2009, we advanced our goal of diversifying our product and revenue mix, successfully completed the integration of the Montréal Exchange and strengthened our energy portfolio with the acquisition and integration of NetThruPut's crude oil business into NGX. We further expanded our geographic reach with the acquisition of 19.9% of EDX
In 2009, TMX Group executed several critical initiatives,
Looking ahead,
Michael Ptasznik, Chief Financial Officer of TMX Group added: "Increased revenue from issuer services, trading and market data, along with the revenue from licensing our SOLA technology, drove a sequential increase in income from operations in the fourth quarter. While we were required to take a non-cash goodwill write down of
Summary of Financial Information
(in millions of dollars, except per share amounts)
$ %
Increase/ Increase/
Q4/09 Q4/08 (decrease) (decrease)
Revenue $ 153.0 $ 151.1 $ 1.9 1%
Operating expenses $ 67.6 $ 65.6 $ 2.0 3%
Net income/(loss) ($ 26.8) $ 49.0 ($ 75.8) (155%)
Earnings/(loss) per share:
Basic ($ 0.36) $ 0.65 ($ 1.01) (155%)
Diluted ($ 0.36) $ 0.65 ($ 1.01) (155%)
Cash flows from operating
activities $ 56.5 $ 60.8 ($ 4.3) (7%)
Net loss was
Adjusted net income(xx) for Q4/09 of
The following is a reconciliation of net loss to adjusted net income(xx) prior to the non-cash goodwill impairment charge in 2009 related to BOX and income tax charges related to changes in Ontario corporate income tax rates which reduced the value of future tax assets and liabilities:
Net Income/(loss) GAAP to non-GAAP Reconciliation for Q4/09 and Q4/08
(in millions of dollars)
Q4/09 Q4/08
Net income/(loss) ($ 26.8) $ 49.0
Adjustment related to non-cash impairment of
goodwill pertaining to investment in BOX $ 77.3 -
Adjustment related to a reduction in the value
of future tax assets and liabilities $ 10.4 -
--------- ---------
Adjusted net income $ 60.9 $ 49.0
--------- ---------
The following is a reconciliation of loss per share to adjusted earnings per share(xx) prior to the non-cash goodwill impairment charge in 2009 related to BOX and income tax charges related to changes in Ontario corporate income tax rates which reduced the value of future tax assets and liabilities:
Earnings/(loss) per share GAAP to non-GAAP Reconciliation for Q4/09 and
Q4/08
Q4/09 Q4/08
Basic Diluted Basic Diluted
Earnings/(loss) per share ($ 0.36) ($ 0.36) $ 0.65 $ 0.65
Adjustment related to
non-cash impairment of
goodwill pertaining to
investment in BOX $ 1.04 $ 1.04 - -
Adjustment related to a
reduction in the value
of future tax assets and
liabilities $ 0.14 $ 0.14 - -
--------- --------- --------- ---------
Adjusted earnings per share $ 0.82 $ 0.82 $ 0.65 $ 0.65
--------- --------- --------- ---------
Summary of Financial Information
(in millions of dollars, except per share amounts)
$ %
Increase/ Increase/
2009 2008 (decrease) (decrease)
Revenue $ 556.3 $ 532.6 $ 23.7 4%
Operating expenses $ 273.1 $ 227.2 $ 45.9 20%
Net income $ 104.7 $ 182.0 ($ 77.3) (42%)
Earnings per share:
Basic $ 1.41 $ 2.48 ($ 1.07) (43%)
Diluted $ 1.41 $ 2.47 ($ 1.06) (43%)
Cash flows from
operating activities $ 204.9 $ 244.2 ($ 39.3) (16%)
Net income was
Adjusted net income(xx) for 2009 of
The following is a reconciliation of net income to adjusted net income(xx) prior to the non-cash goodwill impairment charge in 2009 related to BOX, income tax charges which reduced the value of future tax assets and liabilities in 2009 and a loss on termination of joint venture in 2008:
Net Income GAAP to non-GAAP Reconciliation for 2009 and 2008
(in millions of dollars)
2009 2008
Net Income $ 104.7 $ 182.0
Adjustment related to non-cash impairment
of goodwill pertaining to investment in BOX $ 77.3 -
Adjustment related to a reduction in the
value of future tax assets and liabilities $ 10.4 -
Adjustment related to loss on termination of ---------
joint venture - $ 15.2
--------- ---------
Adjusted net income $ 192.4 $ 197.2
--------- ---------
The following is a reconciliation of earnings per share to adjusted earnings per share(xx) prior to the non-cash goodwill impairment charge in 2009 related to BOX, income tax charges which reduced the value of future tax assets and liabilities in 2009 and a loss on termination of joint venture in 2008:
Earnings per share GAAP to non-GAAP Reconciliation for 2009 and 2008
2009 2008
Basic Diluted Basic Diluted
Earnings per share $ 1.41 $ 1.41 $ 2.48 $ 2.47
Adjustment related to
non-cash impairment of
goodwill pertaining to
investment in BOX $ 1.04 $ 1.04 - -
Adjustment related to a
reduction in the value of
future tax assets and
liabilities $ 0.14 $ 0.14 - -
Adjustment related to loss
on termination of joint
venture - - $ 0.21 $ 0.21
--------- --------- --------- ---------
Adjusted earnings
per share $ 2.59 $ 2.59 $ 2.69 $ 2.68
--------- --------- --------- ---------
Select Segmented Financial Information
(in millions of dollars)
Deriva-
Cash Markets tives
- Equities Markets
and Fixed - MX and Energy
Q4/09 Income BOX Markets Total
Revenue $ 107.1 $ 35.8 $ 10.1 $ 153.0
Net Income/(loss) $ 25.7 ($ 57.7) $ 5.2 ($ 26.8)
Q4/08
Revenue $ 116.3 $ 26.3 $ 8.5 $ 151.1
Net Income $ 38.8 $ 7.4 $ 2.8 $ 49.0
(in millions of dollars)
Deriva-
Cash Markets tives
- Equities Markets
and Fixed - MX and Energy
2009 Income BOX Markets Total
Revenue $ 403.1 $ 113.9 $ 39.3 $ 556.3
Net Income $ 133.5 ($ 42.9) $ 14.1 $ 104.7
2008
Revenue $ 438.9 $ 63.5 $ 30.2 $ 532.6
Net Income $ 155.7 $ 18.1 $ 8.2 $ 182.0
On
On
On
Certain comparative figures have been reclassified in order to conform with the financial presentation adopted in the current year.
Quarter Ended
Revenue
Revenue was
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(xx) (reconciled below in this section) in Q4/09 and Q4/08.
(in millions of dollars)
Reported
$ %
Increase/ Increase/
Q4/09 Q4/08 (decrease) (decrease)
Initial listing fees $ 4.3 $ 4.1 $ 0.2 5%
Additional listing fees $ 15.2 $ 13.4 $ 1.8 13%
Sustaining listing fees(xxx) $ 13.8 $ 17.6 ($ 3.8) (22%)
Other issuer services $ 3.2 $ 3.2 - -
--------- --------- ---------
Total $ 36.5 $ 38.3 ($ 1.8) (5%)
--------- --------- ---------
Billed(xx)
$ %
Increase/ Increase/
Q4/09 Q4/08 (decrease) (decrease)
Initial listing fees $ 5.9 $ 3.2 $ 2.7 84%
Additional listing fees $ 29.5 $ 15.7 $ 13.8 88%
Sustaining listing fees(xxx) $ 13.8 $ 17.6 ($ 3.8) (22%)
Other issuer services $ 3.2 $ 3.2 - -
--------- --------- ---------
Total $ 52.4 $ 39.7 $ 12.7 32%
--------- --------- ---------
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
Initial Listing Fees (in millions of dollars) Q4/09 Q4/08
Initial listing fees billed(xx) $ 5.9 $ 3.2
Initial listing fees billed(xx) and deferred
to future periods ($ 5.8) ($ 3.1)
Recognition of initial listing fees billed(xx)
and previously included in deferred revenue $ 4.2 $ 4.0
--------- ---------
Initial listing fee revenue reported $ 4.3 $ 4.1
--------- ---------
Additional Listing Fees (in millions of dollars) Q4/09 Q3/08
Additional listing fees billed(xx) $ 29.5 $ 15.7
Additional listing fees billed(xx) and deferred
to future periods ($ 29.0) ($ 15.5)
Recognition of additional listing fees billed(xx)
and previously included in deferred revenue $ 14.7 $ 13.2
--------- ---------
Additional listing fee revenue reported $ 15.2 $ 13.4
--------- ---------
- Initial and additional listing fees reported increased in Q4/09
compared with Q4/08, reflecting an increase in capital market
activity during the period from January 1, 2000 to December 31, 2009
compared with the period from January 1, 1999 to December 31, 2008.
Initial and additional listing fees billed(xx) increased in Q4/09, as
compared with Q4/08, due to an increase in initial and additional
financings on Toronto Stock Exchange and TSX Venture Exchange.
- 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 decrease in sustaining listing fees was
due to the overall lower market capitalization of listed issuers at
the end of 2008 compared with the end of 2007, slightly offset by
price changes on Toronto Stock Exchange that were effective
January 1, 2009.
- Other issuer services revenue of $3.2 million was unchanged from
Q4/08.
Trading, Clearing and Related Revenue
(in millions of dollars)
$ %
Increase/ Increase/
Q4/09 Q4/08 (decrease) (decrease)
Cash markets revenue $ 33.6 $ 39.4 ($ 5.8) (15%)
Derivatives markets revenue $ 17.2 $ 21.4 ($ 4.2) (20%)
Energy markets revenue $ 10.0 $ 8.3 $ 1.7 20%
--------- --------- ---------
Total $ 60.8 $ 69.1 ($ 8.3) (12%)
--------- --------- ---------
Cash Markets
- Cash markets equity trading revenue decreased in Q4/09 due to the
impact of changes to our equity trading fee schedule which were
effective January 1, 2009, and a change in trading mix. The fee
changes included increased credits to ELP market participants, a
reduction in the spread between active fees and passive credits, and
the elimination of a premium fee on ETF transactions. We implemented
further changes to the equity trading fee schedule on October 1,
2009. Fees under the ELP Program were replaced with a single tier
model which reduced the passive credit paid to ELP Program
participants. The active fee paid by ELP Program participants was
also reduced in some cases. Effective October 1, 2009, there was also
a reduction in active trading fees on stocks trading at less than $1
in the post-open continuous market.
- In addition, during 2009, there were changes in customer and product
mix including a higher proportion of volumes coming from new ELP
market participants.
- This decrease was also partially due to an 18% decrease in the volume
of securities traded on Toronto Stock Exchange in Q4/09 over Q4/08
(27.2 billion securities in Q4/09 versus 33.1 billion securities in
Q4/08).
- The decrease was partially offset by an increase in the volume of
securities traded on TSX Venture Exchange in Q4/09 over Q4/08 (15.3
billion securities in Q4/09 versus 10.7 billion securities in Q4/08).
- The decrease in Cash Markets equity trading revenue also was
partially offset by an increase in Shorcan Brokers Limited (Shorcan)
Cash Markets fixed income trading revenue primarily reflecting an
increase in trading of Government of Canada bonds and provincial
bonds in Q4/09 versus Q4/08.
Derivatives Markets
- Derivatives markets revenue from MX increased primarily due to higher
volumes of contracts traded. MX volumes increased by 18% (9.8 million
contracts traded in Q4/09 versus 8.3 million contracts traded in
Q4/08) reflecting increased trading in ETFs derivatives trading and
in both the BAX Three-Month Canadian Bankers' Acceptance Futures and
CGB Ten-Year Government of Canada Bond Futures contracts.
- Derivatives markets revenue from BOX decreased primarily due to a 58%
decrease in volumes of contracts traded (18.9 million contracts in
Q4/09 versus 44.5 million contracts traded in Q4/08), reflecting
increased competition and a weakening market share in the U.S. equity
options trading market.
Energy Markets
- Energy markets revenue increased due to a 9% increase in the volumes
of natural gas, over the counter, or OTC, bilateral and crude oil
contracts traded or cleared on NGX over Q4/08 (3.7 million terajoules
in Q4/09 compared to 3.4 million terajoules in Q4/08). This excludes
the Alberta Watt Exchange Limited (Watt-Ex) volumes.
- The increase was also due to pricing changes on natural gas contracts
that were effective January 1, 2009 and the inclusion of revenue from
crude oil trading following the acquisition of NTP on May 1, 2009.
NGX's crude oil volumes for Q4/09 averaged over 4.1 million Bbls/mo
(135,000 barrels per day).
Market Data Revenue
(in millions of dollars)
$ %
Q4/09 Q4/08 (decrease) (decrease)
$ 36.8 $ 38.0 ($ 1.2) (3%)
- This decrease reflects a 6% decrease in the number of professional
and equivalent real-time market data subscriptions to Toronto Stock
Exchange and TSX Venture Exchange products (over 153,000 professional
and equivalent real-time market data subscriptions at December 31,
2009 versus over 162,000 at December 31, 2008). The decrease also
reflects a 20% decrease in MX market data subscriptions (over 22,000
at December 31, 2009 versus over 28,000 at December 31, 2008).
- The decrease was also attributable to the change in the exchange rate
of the U.S. dollar relative to the Canadian dollar in Q4/09 compared
with Q4/08.
- The decrease was partially offset by pricing changes that were
effective January 1, 2009.
Business Services and Other Revenue
(in millions of dollars)
$ %
Q4/09 Q4/08 increase increase
$ 18.8 $ 5.7 $ 13.1 230%
- Business services revenue increased in Q4/09 due to $13.5 million in
revenue received from the LSE under our technology license agreement.
Operating Expenses
Operating expenses in Q4/09 were
These higher expenses were partially offset by the cost synergies related to the integration with MX. By Q4/09, we had achieved the previously announced
Compensation and Benefits
(in millions of dollars)
$ %
Q4/09 Q4/08 increase increase
$ 31.9 $ 29.2 $ 2.7 9%
- Compensation and benefits costs increased due to higher overall costs
related to certain performance incentives as well as technology
initiatives, partially offset by lower costs related to an accounting
adjustment to post retirement benefit costs of $0.8 million.
- There were 849 employees at December 31, 2009, which included 7 NTP
employees, versus 845 employees at December 31, 2008. The number of
additional employees related to technology initiatives was more than
offset by a reduction in the number of employees due to efficiencies
realized through the integration of MX.
Information and Trading Systems
(in millions of dollars)
$ %
Q4/09 Q4/08 increase increase
$ 11.2 $ 10.6 $ 0.6 6%
- Information and trading systems costs increased due to costs
associated with our technology initiatives including enterprise
expansion.
- In addition, there were higher expenses related to NGX's arrangement
with ICE.
- During Q4/09, we reclassified some leases as capital leases versus
operating leases. As a result, Information and Trading Systems costs
were reduced and amortization of the related costs increased (see
Amortization).
General and Administration
(in millions of dollars)
$ %
Q4/09 Q4/08 (decrease) (decrease)
$ 14.5 $ 17.7 ($ 3.2) (18%)
- General and administration costs decreased primarily as a result of
lower fees paid to external advisors as well as lower lease costs of
$1.3 million resulting from a change in estimate of a lease
liability.
Amortization
(in millions of dollars)
$ %
Q4/09 Q4/08 increase increase
$ 10.0 $ 8.1 $ 1.9 23%
- Amortization costs increased primarily due to increased obligations
under capital leases for which the related cost is amortized. During
Q4/09, we entered into a number of new capital leases. In addition,
we reclassified some leases as capital leases versus operating
leases. As a result, Amortization costs increased by $2.7 million.
- The increase was somewhat offset by reduced amortization relating to
assets that were fully depreciated by 2009.
Investment Income
(in millions of dollars)
$ %
Q4/09 Q4/08 (decrease) (decrease)
$ 0.3 $ 4.1 ($ 3.8) (93%)
- Investment income decreased due to a reduction in cash available for
investment and lower overall returns on investments during Q4/09
compared with Q4/08.
Impairment of Goodwill
(in millions of dollars)
$
Q4/09 Q4/08 Increase
$ 77.3 - $ 77.3
- Primarily due to increased competition and a weakening market share
in the U.S. equity options trading market, which resulted in a
decline in current and forecasted revenues, we recorded a non-cash
goodwill impairment charge of $77.3 million related to our investment
in BOX.
Interest Expense
(in millions of dollars)
$ %
Q4/09 Q4/08 (decrease) (decrease)
$ 1.4 $ 3.5 ($ 2.1) (60%)
- Interest expense decreased as a result of lower interest rates in
Q4/09 compared with Q4/08.
Mark to Market on Interest Rate Swaps - Loss
(in millions of dollars)
$ %
Q4/09 Q4/08 (decrease) (decrease)
$ 0.6 $ 13.3 ($ 12.7) (95%)
- 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 Q4/09, unrealized gains of $1.1 million and realized losses of
$1.7 million were reflected in net income, compared with $12.5
million of unrealized losses recorded in Q4/08 and $0.8 million of
realized losses recognized in Q4/08. Included in the Q4/08 amounts is
$3.4 million, which represents an unrealized loss related to Q3/08
and reflected in Other Comprehensive Income in Q3/08.
Income Taxes
(in millions of dollars)
Effective
tax rate (%)
Q4/09 Q4/08 Q4/09 Q4/08
$ 34.7 $ 22.9 41%(+) 31%
- In November 2009, the Ontario government substantively enacted
legislation to reduce the general corporate tax rate from 14% in 2009
to 12% effective July 1, 2010, with further reductions to 10% by
July 1, 2013. As a result of these changes to Ontario corporate tax
rates, there was a reduction in the value of future tax assets and
liabilities and a corresponding net increase in income taxes of $10.4
million.
Non-controlling Interests(1)
(in millions of dollars)
$ %
Q4/09 Q4/08 (decrease) (decrease)
($ 1.2) $ 1.4 ($ 2.6) (186%)
- MX has a 53.8% ownership interest in BOX. The non-controlling
interests represent the other BOX unitholders' share of BOX's income
or loss before taxes.
- The Q4/09 loss is attributable to BOX's lower revenues in Q4/09
compared with Q4/08, reflecting increased competition and a
significant decline in market share.
Year Ended
Revenue
Revenue was
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(xx) (reconciled below in this section) in 2009 and 2008.
(in millions of dollars)
Reported
$ %
Increase/ Increase/
2009 2008 (decrease) (decrease)
Initial listing fees $ 16.9 $ 16.0 $ 0.9 6%
Additional listing fees $ 57.6 $ 51.3 $ 6.3 12%
Sustaining listing fees $ 54.7 $ 69.6 ($ 14.9) (21%)
Other issuer services $ 12.9 $ 15.3 ($ 2.4) (16%)
--------- --------- ---------
Total $ 142.1 $ 152.2 ($ 10.1) (7%)
--------- --------- ---------
(in millions of dollars)
Billed(xx)
$ %
Increase/ Increase/
2009 2008 (decrease) (decrease)
Initial listing fees $ 12.8 $ 18.6 ($ 5.8) (31%)
Additional listing fees $ 92.0 $ 76.9 $ 15.1 20%
Sustaining listing fees $ 54.7 $ 69.6 ($ 14.9) (21%)
Other issuer services $ 12.9 $ 15.3 ($ 2.4) (16%)
--------- --------- ---------
Total $ 172.4 $ 180.4 ($ 8.0) (4%)
--------- --------- ---------
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
Initial Listing Fees (in millions of dollars) 2009 2008
Initial listing fees billed(xx) $ 12.8 $ 18.6
Initial listing fees billed(xx) and deferred
to future periods ($ 12.3) ($ 17.4)
Recognition of initial listing fees billed(xx)
and previously included in deferred revenue $ 16.4 $ 14.8
--------- ---------
Initial listing fee revenue reported $ 16.9 $ 16.0
--------- ---------
Additional Listing Fees (in millions of dollars) 2009 2008
Additional listing fees billed(xx) $ 92.0 $ 76.9
Additional listing fees billed(xx) and deferred
to future periods ($ 87.5) ($ 72.6)
Recognition of additional listing fees billed(xx)
and previously included in deferred revenue $ 53.1 $ 47.0
--------- ---------
Additional listing fee revenue reported $ 57.6 $ 51.3
--------- ---------
- Initial and additional listing fees reported increased in 2009
compared with 2008, reflecting an increase in capital market activity
during the period from April 1, 1999 to December 31, 2009 compared
with the period from April 1, 1998 to December 31, 2008. Initial
listing fees billed(xx) decreased in 2009 compared with 2008. While
the value of initial financings on Toronto Stock Exchange in 2009
increased compared with 2008, substantially all IPOs related to ETFs
or structured products, for which we charge a lower fee. The
corporate IPOs were high value transactions, for which issuers paid
the maximum listing fee. In addition, there was also a decrease
in initial financings on TSX Venture Exchange. Additional listing
fees billed(xx) in 2009 increased over 2008 due to an increase in
additional financings on Toronto Stock Exchange. While the value of
additional financings on Toronto Stock Exchange increased in 2009,
this was driven by a larger proportion of high value transactions,
for which issuers paid the maximum additional listing fee. The
positive impact from additional financings on Toronto Stock Exchange
was somewhat offset by a decrease in additional financings on TSX
Venture Exchange.
- 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 decrease in sustaining listing fees was
due to the overall lower market capitalization of listed issuers at
the end of 2008 compared with the end of 2007, somewhat offset by
price changes on Toronto Stock Exchange that were effective
January 1, 2009.
- Other issuer services revenue of $12.9 million decreased from $15.3
million in 2008, reflecting lower demand for investor relations
services.
Trading, Clearing and Related Revenue
(in millions of dollars)
$ %
Increase/ Increase/
2009 2008 (decrease) (decrease)
Cash markets revenue $ 119.4 $ 145.7 ($ 26.3) (18%)
Derivatives markets revenue $ 78.5 $ 47.2 $ 31.3 66%
Energy markets revenue $ 39.4 $ 29.8 $ 9.6 32%
--------- --------- ---------
Total $ 237.3 $ 222.7 $ 14.6 7%
--------- --------- ---------
Cash Markets
- Cash markets equity trading revenue decreased due to the impact of
changes to our equity trading fee schedule which were effective
January 1, 2009, and a change in trading mix. The fee changes
included increased credits to ELP market participants, a reduction in
the spread between active fees and passive credits, and the
elimination of a premium fee on ETF transactions. We implemented
further changes to the equity trading fee schedule on October 1,
2009. Fees under the ELP Program were replaced with a single tier
model which reduced the passive credit paid to ELP Program
participants. The active fee paid by ELP Program participants was
also reduced in some cases. Effective October 1, 2009, there was also
a reduction in active trading fees on stocks trading at less than $1
in the post-open continuous market
- In addition, during 2009, there were changes in customer and product
mix including a higher proportion of volumes coming from market
makers and new ELP market participants.
- This decrease was partially offset by a 9% increase in the volume of
securities traded on Toronto Stock Exchange in 2009 over 2008 (118.5
billion securities in 2009 versus 109.2 billion securities in 2008)
and a 6% increase in the volume of securities traded on TSX Venture
Exchange in 2009 over 2008 (46.8 billion securities in 2009 versus
44.1 billion securities in 2008).
- The decrease in Cash Markets equity trading revenue was partially
offset by an increase in Shorcan Cash Markets fixed income trading
revenue related to Government of Canada bonds and provincial bonds in
2009 versus 2008.
Derivatives Markets
- Derivatives markets revenue reflects $78.5 million in trading and
clearing revenue from MX and trading revenue from BOX for the full
year 2009, compared with $47.2 million from MX in 2008 following the
combination on May 1, 2008 and BOX from August 29, 2008 when BOX's
results were consolidated into our financial statements, with an
adjustment for non-controlling interests.
- MX volumes decreased by 9% (34.8 million contracts traded in 2009
versus 38.1 million contracts traded in 2008) reflecting reduced
trading in both the BAX and CGB contracts, as well as stock index
derivatives, partially offset by an increase in stock options and ETF
options derivatives trading. We believe the reduction in fixed income
futures trading was a reflection of the recent interest rate
environment of historically low rates with little volatility.
- BOX volumes decreased by 23% (137.8 million contracts in 2009 versus
178.7 million contracts traded in 2008), reflecting increased
competition and a weakening market share in the U.S. equity options
trading market.
Energy Markets
- Energy markets revenue increased due to the inclusion of revenue from
crude oil trading following the acquisition of NTP on May 1, 2009.
NGX's crude oil volumes for 2009 averaged over 4.1 million Bbls/mo or
135,000 barrels per day.
- The increase was also due to pricing changes on natural gas contracts
that were effective January 1, 2009, the change in the exchange rate
of the U.S. dollar relative to the Canadian dollar in 2009 compared
with 2008 and also as a result of NGX having deferred less revenue in
2009, on a net basis, than in 2008 due to a reduced level of forward
contracts.
- Energy markets revenue also increased due to a 3% increase in the
volumes of natural gas, over the counter, or OTC, bilateral and crude
oil contracts traded or cleared on NGX over 2008 (14.8 million
terajoules in 2009 compared to 14.4 million terajoules in 2008). This
excludes the Alberta Watt Exchange Limited (Watt-Ex) volumes.
Market Data Revenue
(in millions of dollars)
$ %
2009 2008 increase increase
$ 146.0 $ 135.4 $ 10.6 8%
- Market data revenue included $16.2 million in revenue related to the
business operations of MX and BOX in 2009, compared with $9.4 million
from MX from May 1, 2008 and BOX from August 29, 2008. There was a
13% decrease in the average number of MX market data subscriptions in
2009 compared with the eight months from May 1, 2008 to December 31,
2008. There were over 22,000 MX market data subscriptions at
December 31, 2009.
- The increase was also due to higher revenue from data feeds, index
products, usage-based quotes, indices and other data products, the
change in the exchange rate of the U.S. dollar relative to the
Canadian dollar in 2009 compared with 2008, as well as pricing
changes that were effective January 1, 2009.
- The increase was partially offset by an 8% decrease in the average
number of professional and equivalent real-time market data
subscriptions to Toronto Stock Exchange and TSX Venture Exchange
products in 2009 compared with 2008. There were over 153,000
professional and equivalent real-time market data subscriptions at
December 31, 2009.
- In addition, the increase was partially offset by lower revenue
recoveries related to under-reported usage of real-time quotes in
2009 compared with 2008 and an increase in revenue provisions.
Business Services and Other Revenue
(in millions of dollars)
$ %
2009 2008 increase increase
$ 30.9 $ 22.3 $ 8.6 39%
- Business services revenue increased primarily due to $13.5 million in
revenue received from the LSE under our technology license agreement.
- The increase was partially offset by the elimination of revenue from
BOX for technology and other services provided by MX. Business
services revenue in 2008 included four months of related revenue from
BOX. This revenue has been eliminated as BOX is now a consolidated
subsidiary of MX.
- The increase was also partially offset by net foreign exchange losses
on U.S. dollar accounts receivable.
Operating Expenses
Operating expenses in 2009 were
These higher expenses were partially offset by the cost synergies related to the integration with MX. By Q4/09, we had achieved the previously announced
Compensation and Benefits
(in millions of dollars)
$ %
2009 2008 increase increase
$ 129.4 $ 110.6 $ 18.8 17%
- Compensation and benefits costs increased primarily due to the
inclusion of $28.6 million in costs related to MX and BOX. There were
$16.9 million in costs related to MX in 2008 following the
combination on May 1, 2008 and BOX from August 29, 2008.
- The increase was also attributable to higher costs associated with
technology initiatives, increased overall costs related to certain
performance incentives, higher organizational transition costs and
increased costs associated with salary increases compared with 2008,
partially offset by lower costs related to an accounting adjustment
to post retirement benefit costs of $0.8 million.
- There were 849 employees at December 31, 2009, which included 7 NTP
employees, versus 845 employees at December 31, 2008. The number of
additional employees related to technology initiatives was more than
offset by a reduction in the number of employees due to efficiencies
realized through the integration of MX.
Information and Trading Systems
(in millions of dollars)
$ %
2009 2008 increase increase
$ 46.1 $ 35.6 $ 10.5 29%
- Information and trading systems costs included $6.6 million in costs
related to MX and BOX, compared with $3.9 million in costs related to
MX in 2008 following the combination on May 1, 2008 and BOX from
August 29, 2008.
- Information and trading systems costs also increased due to costs
associated with our technology initiatives including enterprise
expansion, the TSX Quantum gateway and the smart order router.
- In addition, there were higher expenses related to NGX's arrangement
with ICE.
- During Q4/09, we reclassified some leases as capital leases versus
operating leases. As a result, Information and Trading Systems costs
were reduced and amortization of the related costs increased (see
Amortization)
General and Administration
(in millions of dollars)
$ %
2009 2008 increase increase
$ 65.5 $ 55.7 $ 9.8 18%
- General and administration costs included $23.5 million in costs
related to MX and BOX, compared with $13.0 million in costs related
to MX in 2008 following the combination on May 1, 2008 and BOX from
August 29, 2008.
- General and administration costs also increased as a result of higher
insurance costs relating to NTP, which were more than offset by lower
lease costs resulting from a change in estimate of a lease liability.
Amortization
(in millions of dollars)
$ %
2009 2008 increase increase
$ 32.2 $ 25.3 $ 6.9 27%
- Amortization costs increased reflecting amortization of $15.2 million
related to MX and BOX, compared with $9.5 million related to MX in
2008 following the combination on May 1, 2008 and BOX from August 29,
2008.
- During Q4/09, we entered into a number of new capital leases. In
addition, we reclassified some leases as capital leases versus
operating leases. As a result, Amortization costs increased by $2.7
million.
- The increase was somewhat offset by reduced amortization relating to
assets that were fully depreciated by 2009.
Income from Investments in Affiliates
(in millions of dollars)
$
2009 2008 (decrease)
$ 0.4 $ 1.4 ($ 1.0)
- Income from investments in affiliates of $0.4 million represents TSX
Inc.'s share of CanDeal.ca Inc. (CanDeal) income for 2009 based on
its 47% interest in CanDeal, compared with $0.7 million from 2008.
CanDeal is an electronic trading system for the institutional debt
market.
- In 2008, Income from investments in affiliates included $0.7 million
representing MX's share of BOX income, based on its 31.4% interest in
BOX from May 1, 2008 to August 28, 2008.
Impairment of Goodwill
(in millions of dollars)
$
2009 2008 Increase
$ 77.3 - $ 77.3
- Primarily due to increased competition and a weakening market share
in the U.S. equity options trading market, which resulted in a
decline in current and forecasted revenues, we recorded a non-cash
goodwill impairment charge of $77.3 million related to our investment
in BOX.
Investment Income
(in millions of dollars)
$ %
2009 2008 (decrease) (decrease)
$ 4.6 $ 14.8 ($10.2) (69%)
- Investment income decreased due to a reduction in cash available for
investment and lower overall returns on investments during 2009
compared with 2008.
Interest Expense
(in millions of dollars)
$ %
2009 2008 (decrease) (decrease)
$ 6.1 $ 10.5 ($ 4.4) (42%)
- 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)
$ %
2009 2008 (decrease) (decrease)
$ 1.4 $ 13.3 ($ 11.9) (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 2009, unrealized gains of $6.8 million and realized losses of
$8.2 million were reflected in net income, compared with unrealized
losses of $12.5 million recorded in 2008 and realized losses of $0.8
million recognized in 2008.
Other Acquisition Related Expenses
(in millions of dollars)
$
2009 2008 (decrease)
$ - $ 15.9 ($ 15.9)
- In August 2007, TMX Group and ISE Ventures announced the execution of
a shareholders' agreement for CDEX Inc. (CDEX), which was created to
operate DEX, a new Canadian derivatives exchange scheduled to begin
operations in March 2009. In connection with the agreement to combine
with MX, we provided ISE Ventures with a notice of a competing
transaction as required under the terms of the CDEX shareholders'
agreement, and subsequently paid ISE Ventures $15.2 million on
April 1, 2008.
- When we acquired NGX in 2004, TMX Group entered into an arrangement
with MX for $5.0 million. TMX Group amortized this amount over five
years, the remaining term of the 1999 Memorandum of Agreement with
MX. As a result of the May 1, 2008 business combination with MX, we
expensed the unamortized balance of $0.7 million in 2008.
Income Taxes
(in millions of dollars)
Effective
tax rate (%)
2009 2008 2009 2008
$ 97.0 $ 98.1 48% 35%
- In November 2009, the Ontario government substantively enacted
legislation to reduce the general corporate tax rate from 14% in 2009
to 12% effective July 1, 2010, with further reductions to 10% by
July 1, 2013. As a result of these changes to Ontario corporate tax
rates, there was a reduction in the value of future tax assets and
liabilities and a corresponding net increase in income taxes of $10.4
million. Excluding this revaluation, the effective tax rate for 2009
was lower compared with 2008 due to an increase in income
attributable to the Province of Quebec in 2009, compared with the
period from May 1, 2008 to December 31, 2008. In our case, this
income is taxed at a lower tax rate in Quebec due to a tax holiday
which ends after 2010.
- The goodwill impairment charge in 2009 of $77.3 million increased the
effective tax rate, as this amount is non-deductible for income tax
purposes.
- In addition, there was a lower federal income tax rate in 2009
compared with 2008.
- In 2008, we paid $15.2 million to ISE Ventures in 2008, which was not
deducted for income tax purposes.
Non-controlling Interests(2)
(in millions of dollars)
$ %
2009 2008 increase increase
$ 1.8 $ 1.8 - -
- As a result of the acquisition of control of BOX on August 29, 2008,
the results of BOX are now fully consolidated into our consolidated
statements of income. MX holds a 53.8% ownership interest in BOX. The
non-controlling interests represent the other BOX unitholders' share
of BOX's income before taxes.
Comprehensive Income
Comprehensive Income was
Other comprehensive losses include the unrealized loss on the foreign currency translation of BOX, a self-sustaining foreign operation, which amounted to
Accumulated Other Comprehensive Income of
Comprehensive Income was
Other comprehensive income includes the unrealized gain on the foreign currency translation of BOX, a self-sustaining foreign operation, which amounted to
Our Accumulated Other Comprehensive Income of
Liquidity and Capital Resources
Cash, Cash Equivalents and Marketable Securities
(in millions of dollars)
December December $
31, 2009 31, 2008 (decrease)
$ 191.1 $ 198.7 ($ 7.6)
- The decrease was due to:
- Four dividend payments of $0.38 per common share, or $113.0
million in aggregate, as well as to payments totalling $30.4
million relating to the repurchase of 1,000,000 common shares
under our NCIB program in 2009.
- Cash paid of $24.2 million in relation to the May 1, 2009
acquisition of NTP, net of cash acquired.
- Cash paid of $7.7 million for a 19.9% interest in EDX on May 7,
2009.
- Non-acquisition related additions to intangible assets of $13.2
million, the payment of $6.4 million in dividends to non-
controlling interests in BOX and $7.1 million in capital
expenditures.
- The decrease was largely offset by cash generated from operating
activities of $204.9 million.
Total Assets
(in millions of dollars)
December December $
31, 2009 31, 2008 (decrease)
$3,524.5 $3,688.6 ($ 164.1)
- Total assets decreased due to lower energy contracts receivable of
$714.5 million at December 31, 2009 related to the clearing
operations of NGX, compared with $976.4 million at the end of 2008.
The lower level of receivables reflected lower natural gas prices at
the end of December 2009 compared with the end of December 2008. As
the clearing counterparty to every trade, NGX also carries offsetting
liabilities in the form of energy contracts payable, which were
$714.5 million at December 31, 2009 compared with $976.4 million at
the end of 2008.
- Total assets also decreased due to the reduction in goodwill related
to the impairment charge of $77.3 million related to BOX.
- The overall decrease was partially offset by higher MX daily
settlements and cash deposits of $565.4 million as at December 31,
2009 related to MX's clearing operations, compared with $497.3
million at the end of 2008. MX also carried offsetting liabilities
related to daily settlements and cash deposits which were $565.4
million at December 31, 2009 compared with $497.3 million at the end
of 2008. 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.
- The decrease was also partially offset by an increase in current
assets related to the fair value of open energy contracts ($202.8
million as at December 31, 2009, compared with $155.3 million at
December 31, 2008). NGX also carried offsetting liabilities related
to the fair value of open energy contracts which were $202.8 million
at December 31, 2009 compared with $155.3 million at December 31,
2008.
- In addition, the overall decrease in Total assets was partially
offset due to recording $49.6 million in intangible assets and $30.6
million in goodwill related to the purchase of NTP on May 1, 2009,
less cash paid of $24.2 million related to the acquisition.
Credit Facilities and Guarantee
Long-term Debt
(in millions of dollars)
December December $
31, 2009 31, 2008 increase
$ 429.0 $ 428.3 $ 0.7
- In connection with the combination with MX, we established a
non-revolving three-year term unsecured credit facility of
$430.0 million, with a syndicate of seven financial institutions. 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. On August 31, 2009, swap agreements with a
notional value of $100.0 million (Swap No.1), representing one third
of the total notional value of the swaps, matured. The interest rate
swaps in place at December 31, 2009 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 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 December 31, 2009, 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 U.S.
CDCC has also arranged a total of
These facilities had not been drawn upon in the year ended
NGX also has an Electronic Funds Transfer (EFT) Daylight facility of
Shareholders' Equity
(in millions of dollars)
December December $
31, 2009 31, 2008 (decrease)
$ 770.6 $ 794.6 ($ 24.0)
- We earned $104.7 million of net income during 2009 and paid $113.0
million in dividends.
- We also recorded an unrealized foreign exchange loss of $20.9 million
on translating the financial statements of BOX.
- Shareholders' equity increased due to an increase of $32.1 million in
share capital following the issuance of 878,059 TMX Group common
shares in satisfaction of a portion of the purchase price for NTP on
May 1, 2009.
- On August 14, 2008, we received approval from Toronto Stock Exchange
to repurchase up to 7,595,585 of our common shares pursuant to an
NCIB. Shareholders' equity decreased partially due to the repurchase
of shares in connection with our NCIB. In 2009, we repurchased for
cancellation 1,000,000 shares for $30.4 million pursuant to two
private agreements between TMX Group and an arm's length third-party
seller. These common shares were cancelled and the NCIB expired
August 17, 2009.
- At December 31, 2009, there were 74,307,041 common shares issued and
outstanding. In 2009, 25,405 common shares were issued on the
exercise of share options. At December 31, 2009, 4,143,100 common
shares were reserved for issuance upon the exercise of options
granted under the share option plan. At December 31, 2009, there were
1,382,569 options outstanding.
- At February 9, 2010, there were 74,310,047 common shares issued and
outstanding and 1,338,859 options outstanding under the share option
plan.
Cash Flows from Operating Activities
(in millions of dollars)
(Decrease)
Q4/09 Q4/08 in cash
Cash Flows from Operating Activities $ 56.5 $ 60.8 ($ 4.3)
Cash Flows from Operating Activities were
(in millions of dollars)
Increase/
(decrease)
Q4/09 Q4/08 in cash
Net income ($ 26.8) $ 49.0 ($ 75.8)
Amortization $ 10.0 $ 8.1 $ 1.9
Non-cash impairment charge
related to BOX $ 77.3 - $ 77.3
Net increase/(decrease) in future
income taxes $ 6.1 ($ 4.1) $ 10.2
Unrealized (gain)/loss on interest
rate swaps ($ 1.1) $ 12.5 ($ 13.6)
(Increase)/decrease in accounts
receivable and prepaid expenses $ 0.6 ($ 1.2) $ 1.8
(Increase) in other assets ($ 1.5) ($ 0.1) ($ 1.4)
Net increase in accounts payable and
accrued liabilities $ 1.9 $ 8.3 ($ 6.4)
(Decrease) in deferred revenue ($ 12.2) ($ 17.5) $ 5.3
Net increase in income taxes $ 1.9 $ 4.5 ($ 2.6)
Net increase in other items $ 0.3 $ 1.3 ($ 1.0)
--------- --------- ---------
Cash Flows from Operating Activities $ 56.5 $ 60.8 ($ 4.3)
--------- --------- ---------
Cash Flows from Operating Activities
(in millions of dollars)
(Decrease)
2009 2008 in cash
Cash Flows from Operating Activities $ 204.9 $ 244.2 ($ 39.3)
Cash Flows from Operating Activities were
(in millions of dollars)
Increase/
(decrease)
2009 2008 in cash
Net income $ 104.7 $ 182.0 ($ 77.3)
Amortization $ 32.2 $ 25.3 $ 6.9
Non-cash impairment charge
related to BOX $ 77.3 - 77.3
Payment to ISE Ventures related to
termination of joint venture - $ 15.2 ($ 15.2)
Net increase/(decrease) in future
income taxes $ 3.5 ($ 9.3) $ 12.8
Unrealized (gain)/loss on interest
rate swaps ($ 6.8) $ 12.5 ($ 19.3)
(Increase) in accounts receivable and
prepaid expenses ($ 12.5) ($ 1.2) ($ 11.3)
(Increase)/decrease in other assets ($ 9.2) $ 5.0 ($ 14.2)
Net (decrease) in accounts payable
and accrued liabilities ($ 7.9) ($ 27.3) $ 19.4
Increase in deferred revenue $ 33.2 $ 34.6 ($ 1.4)
Net (decrease)/increase in
income taxes ($ 15.0) $ 5.0 ($ 20.0)
Net increase in other items $ 5.4 $ 2.4 $ 3.0
--------- --------- ---------
Cash Flows from Operating Activities $ 204.9 $ 244.2 ($ 39.3)
--------- --------- ---------
Cash Flows from (used in) Financing Activities
(in millions of dollars)
Increase
Q4/09 Q4/08 in cash
Cash Flows from (used in) Financing
Activities ($ 30.8) ($ 58.2) $ 27.4
Cash Flows (used in) Financing Activities were
(in millions of dollars)
Increase/
(decrease)
Q4/09 Q4/08 in cash
Dividends paid on common shares ($ 28.2) ($ 28.5) $ 0.3
Repurchase of common shares under NCIB - ($ 27.8) $ 27.8
Dividends paid to BOX non-controlling
interests - ($ 1.9) $ 1.9
Obligation under capital lease ($ 2.8) - ($ 2.8)
Net increase in other items $ 0.2 - $ 0.2
--------- --------- ---------
Cash Flows from (used in) Financing
Activities ($ 30.8) ($ 58.2) $ 27.4
--------- --------- ---------
Cash Flows from (used in) Financing Activities
(in millions of dollars)
(Decrease)
2009 2008 in cash
Cash Flows from (used in) Financing
Activities ($ 151.4) $ 33.1 ($ 184.5)
Cash Flows (used in) Financing Activities were
(in millions of dollars)
Increase/
(decrease)
2009 2008 in cash
Dividends paid on common shares ($ 113.0) ($ 114.1) $ 1.1
Repurchase of common shares under NCIB ($ 30.4) ($ 285.4) $ 255.0
Dividends paid to BOX non-controlling
interests ($ 6.4) ($ 2.0) ($ 4.4)
Proceeds on term loan - $ 427.8 ($ 427.8)
Proceeds from exercised options $ 0.6 $ 7.0 ($ 6.4)
Net (decrease) in other items ($ 2.2) ($ 0.2) ($ 2.0)
--------- --------- ---------
Cash Flows from (used in) Financing
Activities ($ 151.4) $ 33.1 ($ 184.5)
--------- --------- ---------
Cash Flows from (used in) Investing Activities
(in millions of dollars)
(Decrease)
Q4/09 Q4/08 in cash
Cash Flows from (used in) Investing
Activities ($ 24.8) $ 19.9 ($ 44.7)
Cash Flows (used in) Investing Activities were
(in millions of dollars)
Increase/
(decrease)
Q4/09 Q4/08 in cash
Cost of acquisitions, net of
cash acquired ($ 0.8) $ 7.9 ($ 8.7)
Capital expenditures primarily related
to technology investments and
leasehold improvements ($ 2.5) ($ 0.5) ($ 2.0)
Additions to intangible assets
including the TSX Quantum gateway and
SOLA internal development costs ($ 2.8) ($ 2.8) -
Net sale/(purchases) of marketable
securities ($ 18.7) $ 15.3 ($ 34.0)
--------- --------- ---------
Cash Flows from (used in) Investing
Activities ($ 24.8) $ 19.9 ($ 44.7)
--------- --------- ---------
Cash Flows from (used in) Investing Activities
(in millions of dollars)
Increase
2009 2008 in cash
Cash Flows from (used in) Investing
Activities ($ 65.3) ($ 230.6) $ 165.3
Cash Flows (used in) Investing Activities were
(in millions of dollars)
Increase/
(decrease)
2009 2008 in cash
Cost of acquisitions and investments,
net of cash acquired ($ 37.9) ($ 405.3) $ 367.4
Payment to ISE Ventures related to
termination of joint venture - ($ 15.2) $ 15.2
Capital expenditures primarily related
to technology investments and
leasehold improvements ($ 7.1) ($ 5.3) ($ 1.8)
Additions to intangible assets including
TSX Quantum gateway, smart order router
and SOLA internal development costs ($ 13.2) ($ 8.4) ($ 4.8)
Net (purchases)/sale of marketable
securities ($ 7.1) $ 203.6 ($ 210.7)
-------- --------- ---------
Cash Flows from (used in) Investing
Activities ($ 65.3) ($ 230.6) $ 165.3
-------- --------- ---------
Financial Statements Governance Practice
The Finance & Audit Committee of the Board of Directors of TMX Group reviewed this press release as well as the 2009 audited annual 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 2009 audited consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles (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 2009 audited 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 press release 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"
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.
"Adjusted net income" and "Adjusted earnings per share"
We present "adjusted net income" and "adjusted earnings per share" as an indication of operating performance exclusive of:
(i) income tax charge related to lower Ontario corporate income tax
rates which reduced the value of future tax assets and
liabilities;
(ii) the non-cash goodwill impairment charge in 2009 related to our
investment in BOX; and
(iii) the payment made on April 1, 2008 to ISE Ventures, a wholly-owned
subsidiary of International Securities Exchange Holdings, Inc.
(ISE), related to terminating DEX, our proposed derivatives joint
venture.
These measures allow management and investors to assess operating performance excluding non-cash items such as the net impact from a reduction in the value of future tax assets and liabilities, and the non-cash impairment charge related to BOX. In addition, they allow them to assess operating performance excluding the impact of non-recurring payments such as that made to ISE Ventures in 2008.
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
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 derivatives markets for multiple asset classes including equities, fixed income and energy.
Teleconference/Audio Webcast
TMX Group will host a teleconference/audio webcast to discuss the financial results for fourth quarter 2009.
Time:
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 49804549 followed
by the number sign
------------------------------
* Based on MX's ownership interest in BOX, prior to acquisition of
control.
(xx) See discussion under the heading "Non-GAAP Financial Measures".
(xxx)Sustaining listing fees billed, as shown in this table, represents
the amount recognized for accounting purposes during the quarter.
Sustaining listing fees are billed during the first quarter of the
year, recorded as deferred revenue and amortized over the year on a
straight-line basis.
(+) The goodwill impairment charge in Q4/09 of $77.3 million has been
excluded from income before taxes in calculating the effective tax
rate.
(1) In October 2008, BOX repurchased some of its common shares thereby
increasing MX's ownership interest from 53.3% to 53.8%.
(2) In October 2008, BOX repurchased some of its common shares thereby
increasing MX's ownership interest from 53.3% to 53.8%.
Consolidated Balance Sheets
(In thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
December 31, December 31,
2009 2008
-------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 87,978 $ 102,442
Marketable securities 103,169 96,251
Restricted cash 911 1,454
Accounts receivable 79,427 63,755
Energy contracts receivable 714,545 976,431
Fair value of open energy contracts 202,760 155,331
Daily settlements and cash deposits 565,408 497,312
Prepaid expenses 6,032 9,050
Income taxes recoverable 4,619 599
Future income tax assets 26,675 30,529
-----------------------------------------------------------------------
1,791,524 1,933,154
Premises and equipment 31,556 27,505
Future income tax assets 144,551 151,960
Other assets 27,745 21,072
Investment in affiliate, at equity 12,845 12,424
Intangible assets 932,443 891,976
Goodwill 583,811 650,554
-------------------------------------------------------------------------
Total Assets $ 3,524,475 $ 3,688,645
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 44,883 $ 59,240
Energy contracts payable 714,545 976,431
Fair value of open energy contracts 202,760 155,331
Daily settlements and cash deposits 565,408 497,312
Deferred revenue 15,074 12,353
Deferred revenue - initial and additional
listing fees 78,001 69,540
Fair value of interest rate swaps 2,117 1,787
Future income tax liabilities 118 66
Obligations under capital leases 3,413 42
Income taxes payable 3,232 14,121
-----------------------------------------------------------------------
1,629,551 1,786,223
Accrued employee benefits payable 12,787 12,916
Obligations under capital leases 5,512 29
Future income tax liabilities 234,697 236,995
Other liabilities 21,832 17,482
Deferred revenue 882 718
Deferred revenue - initial and additional
listing fees 405,123 383,315
Fair value of interest rate swaps 3,584 10,690
Term loan 429,016 428,278
-------------------------------------------------------------------------
Total Liabilities 2,742,984 2,876,646
Non-controlling Interests 10,915 17,370
Shareholders' Equity:
Share capital 1,102,619 1,084,399
Share option plan 8,708 5,969
Deficit (343,975) (319,843)
Accumulated other comprehensive income 3,224 24,104
-----------------------------------------------------------------------
Total Shareholders' Equity 770,576 794,629
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 3,524,475 $ 3,688,645
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated Statements of Income
(In thousands of Canadian dollars, except per share amounts)
(Unaudited)
-------------------------------------------------------------------------
Three months ended Twelve months ended
December 31, December 31,
-------------------------------------------------------------------------
2009 2008 2009 2008
-------------------------------------------------------------------------
Revenue:
Issuer services $ 36,530 $ 38,273 $ 142,118 $ 152,209
Trading, clearing and
related 60,829 69,088 237,345 222,703
Market data 36,835 37,977 145,976 135,407
Business services and
other 18,780 5,712 30,877 22,295
-----------------------------------------------------------------------
Total revenue 152,974 151,050 556,316 532,614
-----------------------------------------------------------------------
Expenses:
Compensation and benefits 31,923 29,162 129,369 110,581
Information and trading
systems 11,168 10,630 46,120 35,617
General and administration 14,486 17,693 65,450 55,705
Amortization 10,037 8,082 32,194 25,340
-----------------------------------------------------------------------
Total operating expenses 67,614 65,567 273,133 227,243
-----------------------------------------------------------------------
Income from operations 85,360 85,483 283,183 305,371
Income from investments in
affiliates 248 424 420 1,426
Investment income 330 4,121 4,623 14,824
Goodwill impairment charge (77,255) - (77,255) -
Interest expense (1,404) (3,453) (6,071) (10,508)
Net mark to market on
interest rate swaps (578) (13,289) (1,414) (13,289)
Other acquisition related
expenses - - - (15,902)
-------------------------------------------------------------------------
Income before income taxes 6,701 73,286 203,486 281,922
Income taxes 34,735 22,881 96,952 98,149
-------------------------------------------------------------------------
Net income (loss) before
non-controlling interests (28,034) 50,405 106,534 183,773
Non-controlling interests (1,197) 1,370 1,833 1,821
-------------------------------------------------------------------------
Net income (loss) $ (26,837) $ 49,035 $ 104,701 $ 181,952
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per share:
Basic $ (0.36) $ 0.65 $ 1.41 $ 2.48
Diluted $ (0.36) $ 0.65 $ 1.41 $ 2.47
Share information:
Weighted average number
of common shares
outstanding 74,305,951 74,866,873 74,131,244 73,443,944
Diluted weighted
average number of
common shares
outstanding 74,402,189 74,941,186 74,255,480 73,540,390
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated Statements of Comprehensive Income (Loss)
(In thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
Three months ended Twelve months ended
December 31, December 31,
-------------------------------------------------------------------------
2009 2008 2009 2008
-------------------------------------------------------------------------
Net income (loss) $ (26,837) $ 49,035 $ 104,701 $ 181,952
Other comprehensive (loss)
income:
Unrealized (loss) gain
on translating financial
statements of self-
sustaining foreign
operations (net of
tax - $nil) (1,752) 19,789 (20,880) 24,104
Unrealized fair value
gain on the interest
rate swaps designated
as cash flow hedges
(net of taxes) - 2,277 - -
-------------------------------------------------------------------------
Comprehensive income
(loss) $ (28,589) $ 71,101 $ 83,821 $ 206,056
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated Statements of Changes in Shareholders' Equity
(In thousands of Canadian dollars)
(Unaudited)
Years ended December 31, 2009 and 2008
-------------------------------------------------------------------------
2009 2008
-------------------------------------------------------------------------
Common shares:
Balance, beginning of period $ 1,084,399 $ 379,370
Issuance of common shares 32,052 806,573
Proceeds from options exercised 573 6,959
Cost of exercised options 170 1,731
Purchased under normal course issuer bid (14,575) (110,234)
----------------------------------------------------------------------
Balance, end of period 1,102,619 1,084,399
Share option plan:
Balance, beginning of period 5,969 5,060
Cost of exercised options (170) (1,731)
Cost of share option plan 2,909 2,640
-----------------------------------------------------------------------
Balance, end of period 8,708 5,969
Deficit:
Balance, beginning of period (319,843) (212,520)
Net income 104,701 181,952
Dividends on common shares (112,973) (114,099)
Shares purchased under normal course
issuer bid (15,860) (175,176)
-----------------------------------------------------------------------
Balance, end of period (343,975) (319,843)
Accumulated other comprehensive income:
Balance, beginning of period 24,104 -
Unrealized (loss) gain on translating
financial statements of self-sustaining
foreign operations (20,880) 24,104
-----------------------------------------------------------------------
Balance, end of period 3,224 24,104
-------------------------------------------------------------------------
Shareholders' equity, end of period $ 770,576 $ 794,629
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
Three months ended Twelve months ended
December 31, December 31,
-------------------------------------------------------------------------
2009 2008 2009 2008
-------------------------------------------------------------------------
Cash flows from (used in)
operating activities:
Net income (loss) $ (26,837) $ 49,035 $ 104,701 $ 181,952
Adjustments to determine
net cash flows:
Amortization 10,037 8,082 32,194 25,340
Unrealized loss (gain)
on marketable
securities 431 (1,049) 153 (1,206)
Income from investments
in affiliates, at
equity (248) (424) (420) (1,426)
Cost of share option
plan 845 728 2,909 2,473
Payment on termination
of joint venture - - - 15,152
Amortized financing fees 185 185 738 492
Non-controlling
interests (1,197) 1,370 1,833 1,821
Goodwill impairment
charge 77,255 - 77,255 -
Unrealized (gain) loss
on interest rate swaps (1,132) 12,477 (6,776) 12,477
Unrealized foreign
exchange loss 304 401 343 401
Future income taxes 6,080 (4,059) 3,476 (9,307)
Accounts receivable
and prepaid expenses 561 (1,160) (12,524) (1,175)
Other assets (1,502) (122) (9,226) 4,954
Accounts payable and
accrued liabilities 5,920 10,170 (10,409) (15,063)
Long-term accrued and
other liabilities (3,976) (1,838) 2,506 (12,263)
Deferred revenue (12,156) (17,507) 33,154 34,566
Income taxes 1,933 4,470 (15,030) 5,001
---------------------------------------------------------------------
56,503 60,759 204,877 244,189
Cash flows from (used in)
financing activities:
Reduction in obligation
under capital lease (2,754) (10) (2,754) (177)
Restricted cash 128 24 543 (47)
Proceeds from exercised
options 70 - 573 6,959
Dividends on common
shares (28,236) (28,508) (112,973) (114,099)
Shares purchased under
normal course issuer
bid - (27,805) (30,435) (285,410)
Proceeds from term
loan, net - - - 427,786
Dividends paid to
non-controlling
interests - (1,946) (6,353) (1,946)
---------------------------------------------------------------------
(30,792) (58,245) (151,399) 33,066
Cash flows from (used in)
investing activities:
Additions to premises
and equipment (2,539) (474) (7,136) (5,306)
Additions to intangible
assets (2,757) (2,803) (13,152) (8,451)
Marketable securities (18,705) 15,277 (7,071) 203,546
Payment on termination
of joint venture - - - (15,152)
Acquisitions, net of
cash acquired (831) 7,875 (37,932) (405,283)
---------------------------------------------------------------------
(24,832) 19,875 (65,291) (230,646)
Unrealized foreign
exchange (loss) gain
on cash and cash
equivalents held in
foreign subsidiaries (313) 2,435 (2,651) 2,435
-------------------------------------------------------------------------
(Decrease) increase in cash
and cash equivalents 566 24,824 (14,464) 49,044
Cash and cash equivalents,
beginning of period 87,412 77,618 102,442 53,398
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 87,978 $ 102,442 $ 87,978 $ 102,442
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental cash flow
information:
Interest paid $ 1,219 $ 2,994 $ 4,619 $ 11,038
Interest received 540 3,811 3,962 12,648
Income taxes paid 27,499 25,606 110,350 107,114
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Market Statistics
(Unaudited)
-------------------------------------------------------------------------
Three months ended Twelve months ended
December 31 December 31
-------------------------------------------------------------------------
2009 2008 2009 2008
-------------------------------------------------------------------------
Toronto Stock Exchange:
Volume (millions) 27,187.2 33,073.7 118,525.9 109,239.7
Value ($ billions) 335.6 403.6 1,398.4 1,853.2
Transactions (000s) 43,670.9 56,726.0 191,321.2 182,901.5
Issuers Listed 1,462 1,570 1,462 1,570
New Issuers Listed: 47 27 100 126
Number of Initial
Public Offerings 24 7 60 52
Number of graduates
from TSX Venture/NEX 10 8 20 45
New Equity Financing:
($ millions) 15,535.1 13,199.5 60,041.4 35,312.0
Initial Public
Offering Financings
($ millions) 1,791.2 258.2 4,767.9 1,929.0
Secondary Offering
Financings*(1)
($ millions) 10,642.9 11,005.7 41,120.2 24,523.8
Supplementary
Financings
($ millions) 3,101.0 1,935.6 14,153.3 8,859.3
Market Cap of Issuers
Listed ($ billions) 1,771.9 1,279.3 1,771.9 1,279.3
S&P/TSX Composite
Index(2) Close 11,746.1 8,987.7 11,746.1 8,987.7
TSX Venture Exchange:(3)
Volume (millions) 15,254.0 10,740.9 46,825.3 44,052.2
Value ($ millions) 6,656.9 1,900.8 16,092.6 23,796.1
Transactions (000s) 1,962.8 904.9 5,336.0 5,912.6
Issuers Listed 2,375 2,443 2,375 2,443
New Issuers Listed 41 28 107 233
New Equity Financing:
($ millions) 2,721.2 576.0 5,062.9 5,560.2
Initial Public
Offering Financings
($ millions) 58.8 6.8 90.3 225.1
Secondary Offering
Financings(1)
($ millions) 2,662.4 569.2 4,972.6 5,335.1
Market Cap of Issuers
Listed: ($ billions) 36.3 17.1 36.3 17.1
S&P/TSX Venture
Composite Index(2)
Close 1,520.7 797.0 1,520.7 797.0
Toronto Stock Exchange
and TSX Venture
Exchange:
Professional and
Equivalent Real-time
Data Subscriptions 153,119 162,460 153,119 162,460
NGX:
Total Volume
(TJs)(4) 3,746,366.2 3,441,275.7 14,800,701.1 14,460,338.1
-------------------------------------------------------------------------
Three months ended Twelve months ended
December 31 December 31
-------------------------------------------------------------------------
2009 2008 2009 2008
-------------------------------------------------------------------------
Montreal Exchange:
Volume (Contracts)
(000s) 9,825.1 8,302.6 34,753.1 38,064.9
Open Interest
(Contracts) (000s)
as at December 31 2,769.8 2,085.9 2,769.8 2,085.9
Data Subscriptions 22,876 28,461 22,876 28,461
Boston Options Exchange:
Volume (Contracts)
(000s) 18,912.0 44,521.0 137,784.6 178,650.5
(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 Exchange's listing standards (181
issuers at December 31, 2008 and 197 issuers at December 31, 2009).
(4) Includes natural gas volumes, OTC, bilateral and crude oil business.
SUPPLEMENTARY INFORMATION ON DEFERRED REVENUE - INITIAL AND ADDITIONAL
LISTING FEES(1)
As at December 31, 2009
(Unaudited)
(in millions of dollars)
------------------------------------------------------------------------
Future amortization of deferred revenue - initial and additional listing
fees
-------------------------------------------------------------------------
Q1 Q2 Q3 Q4 Total Year
-------------------------------------------------------------------------
2010 19.7 19.6 19.4 19.3 78.0
2011 19.1 19.0 18.8 18.5 75.4
2012 18.3 17.9 17.6 17.3 71.1
2013 17.0 16.8 16.3 15.8 65.9
2014 15.3 14.8 14.3 13.7 58.1
2015 13.2 12.6 11.9 11.5 49.2
2016 10.9 10.1 9.4 8.7 39.1
2017 7.9 7.0 6.0 5.3 26.2
2018 4.6 3.9 3.3 2.8 14.6
2019 2.3 1.8 1.1 0.3 5.5
Total deferred revenue - initial and additional listing fees $ 483.1
Note: only includes initial and additional listing fees billed up to
December 31, 2009 (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, Office: (416) 947-4597, E-Mail: [email protected]; Paul Malcolmson, Director, Investor and Government Relations, TMX Group, Office: (416) 947-4317, E-Mail: [email protected]
Share this article