TMX Group Inc. Reports Results for the First Quarter 2012

• Revenue of $162.3 million in Q1/12, down 7% from Q1/11 and in line with Q4/11
  
  
• Diluted earnings per share of 76 cents in Q1/12, down 10% over Q1/11 and up 9% from Q4/11
  
  
• Adjusted diluted earnings per share of 76 cents in Q1/12, down 22% over Q1/11 and up   3% from Q4/11
  
  

TORONTO, May 11, 2012 /CNW/ - TMX Group Inc. [TSX:X] announced results for the first quarter ended March 31, 2012.

Commenting on the first quarter of 2012, Thomas Kloet, Chief Executive Officer of TMX Group said: "Despite a somewhat challenging economic environment globally so far in 2012, we remain focused on growth. We continue to make very good progress on some key initiatives, including the launch of REPO clearing by CDCC, the integration of Razor Risk Technologies within our technology services operation and the development of TMX Quantum XA. We remain committed to investing in our existing business and other new opportunities while looking for additional ways to realize efficiencies."

Michael Ptasznik, Chief Financial Officer of TMX Group said, "The impact of market conditions on our equity business was somewhat offset by our diversified business model during the first quarter. While issuer services, cash markets and energy markets trading revenue declined year over year, revenue in other key areas of our business grew over the first quarter of last year. Higher volumes on BOX and MX contributed to growth in derivatives revenues. In addition, we have experienced growth through diversification within our information services operation as we have expanded into other services including those provided by TMX Atrium."

Summary of Financial Information

(in millions of dollars, except per share amounts)

	Q1/12	Q1/11	$ Increase/ (decrease)	% Increase/ (decrease)
Revenue	$162.3	$174.7	($12.4)	(7%)
Operating expenses	$83.1	$77.1	$6.0	8%
Net income attributable to TMX Group shareholders	$56.8	$63.1	($6.3)	(10%)
Earnings per share^v:
Basic	$0.76	$0.85	($0.09)	(11%)
Diluted	$0.76	$0.84	($0.08)	(10%)
Cash flows from operating activities	$ 12.2	$ 72.1	($59.9)	(83%)

Net income attributable to TMX Group shareholders was $56.8 million, or $0.76 per common share on a basic and diluted basis for Q1/12, a decrease of 10% compared with net income attributable to TMX Group shareholders of $63.1 million, or $0.85 per common share ($0.84 on a diluted basis) for Q1/11. The decrease in net income attributable to TMX Group shareholders was largely due to lower revenue from issuer services and cash markets trading, partially offset by higher revenue from derivatives markets trading and clearing as well as higher information services revenue. The decrease in net income was also due to higher compensation and benefits expenses and increased information and trading systems costs, somewhat offset by a decrease in income tax expense and lower general and administration expenses (due to the inclusion in Q1/11 of a commodity tax adjustment of $4.8 million relating to prior periods) in Q1/12 compared with Q1/11. Net income in Q1/11 was reduced by $8.3 million (pre-tax) of costs related to the proposed merger with London Stock Exchange Group plc (LSEG); whereas in Q1/12, net income was reduced by $0.5 million (pre-tax) of costs related to the Maple Group Acquisition Corporation (Maple) transaction.

Cash Flows from Operating Activities were $12.2 million in Q1/12, which were net of $4.1 million of cash outlays pertaining to Maple related costs, compared with $72.1 million of cash flows from operating activities in Q1/11, which were net of $1.2 million of cash outlays pertaining to LSEG related costs. The decrease of $59.9 million was primarily due to lower income before income taxes and an increase in trade receivables reflecting later billing and collecting of sustaining listing fees for 2012.

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^v Earnings per share information is based on net income attributable to TMX Group shareholders.

Adjusted Earnings per Share Reconciliation for Q1/12 and Q1/11**

The following is a reconciliation of earnings per share to adjusted earnings per share^**:

	Q1/12		Q1/11
	Basic	Diluted	Basic	Diluted
Earnings per share	$0.76	$0.76	$0.85	$0.84
Adjustment related to Maple and LSEG related costs, net of income tax	$0.01	-	$0.08	$0.08
Adjustment related to commodity tax adjustment^*, net of income tax	-	-	$0.05	$0.05
Adjusted earnings per share**	$0.77	$0.76	$0.98	$0.97

Adjusted earnings per share** of $0.77 per common share ($0.76 on a diluted basis) was lower than adjusted earnings per share of $0.98 per common share ($0.97 on a diluted basis) for Q1/11. The decrease in adjusted earnings per share was largely due to lower revenue from issuer services and cash markets trading, partially offset by higher revenue from derivatives markets trading and clearing as well as higher information services revenue. The decrease in adjusted earnings per share was also due to higher compensation and benefits expenses and increased information and trading systems costs, somewhat offset by a decrease in income tax expense in Q1/12 compared with Q1/11.

_________________________________________

^** The terms adjusted earnings per share and adjusted diluted earnings per share do not have standardized meanings prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. We present adjusted earnings per share and adjusted diluted earnings per share to indicate operating performance exclusive of Maple related costs we reported in Q1/12 and LSEG related costs and a commodity tax adjustment reported in Q1/11, each net of tax. Management uses these measures to assess our financial performance exclusive of these costs and to enable comparability across periods.

^* See "General and Administration" section.

Selected Segmented Financial Information

(in millions of dollars)

	Cash Markets and Other (includes Maple and LSEG related costs)	Derivatives Markets - MX, CDCC and BOX	Energy Markets - NGX and Shorcan Energy Brokers	Total
Q1/12
Revenue	$116.0	$35.0	$11.3	$162.3
Net income attributable to TMX Group shareholders	$45.8	$8.2	$2.8	$56.8
Q1/11
Revenue	$131.9	$31.4	$11.4	$174.7
Net income attributable  to TMX Group shareholders	$51.8	$8.2	$3.1	$63.1

Quarter Ended March 31, 2012 Compared with Quarter Ended March 31, 2011

Revenue

Revenue was $162.3 million in Q1/12, down $12.4 million, or 7% compared with $174.7 million for Q1/11, reflecting lower revenue from issuer services and cash markets trading. These decreases were partially offset by increased revenue from derivatives markets trading and clearing, information services, (including revenue from TMX Atrium, acquired July 29, 2011), and technology services and other (including revenue from Razor Risk Technologies Limited (Razor), consolidated from February 14, 2012).

Issuer services revenue

(in millions of dollars)

	Q1/12	Q1/11	$ Increase/ (decrease)	% Increase/ (decrease)
Initial listing fees	$3.9	$ 8.3	($  4.4)	(53%)
Additional listing fees	$ 25.0	$ 31.7	($  6.7)	(21%)
Sustaining listing fees	$ 17.4	$ 18.9	($  1.5)	(8%)
Other issuer services	$  3.9	$  3.1	$  0.8	26%
Total	$ 50.2	$ 62.0	($ 11.8)	(19%)

• Initial listing fees in Q1/12 were lower due to a decrease in the number and value of new listings on Toronto Stock Exchange compared with Q1/11. Initial listing fees were significantly higher in Q1/11 compared with Q1/12 due to the large number of issuers who converted from income trusts to corporate entities in the period, which resulted in revenue of approximately $3.0 million.
  
  
• Additional listing fees in Q1/12 decreased compared with Q1/11 primarily due to a decrease in the number and value of additional financings on TSX Venture Exchange and the number of additional financings on Toronto Stock Exchange. While there was a significant increase in the value of additional listings on Toronto Stock Exchange in Q1/12 compared with Q1/11, this was driven by a number of high value transactions where the issuers paid the maximum listing fee.
  
  
• 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 on both exchanges at the end of 2011 compared with the end of 2010. The decrease was also due to a reduction in fees charged to ETFs effective January 1, 2012.
  
  
• The increased revenue from Other issuer services included higher revenue from The Equicom Group Inc., which provides investor relations and corporate communications services.

Trading, clearing and related revenue

(in millions of dollars)

	Q1/12	Q1/11	$ increase/ (decrease)	% increase/ (decrease)
Cash markets revenue	$   24.6	$  33.6	($  9.0)	(27%)
Derivatives markets revenue	$   29.9	$  26.3	$  3.6	14%
Energy markets revenue	$   10.9	$  11.4	($  0.5)	(4%)
Total	$  65.4	$  71.3	($  5.9)	(8%)

Cash Markets

• Cash markets equity trading revenue decreased primarily due to a 43% decrease in the volume of securities traded on TSX Venture Exchange in Q1/12 compared with Q1/11 (14.41 billion securities in Q1/12 versus a record volume quarter with 25.23 billion securities traded in Q1/11) and a 19% decrease in the volume of securities traded on Toronto Stock Exchange in Q1/12 compared with Q1/11 (24.67 billion securities in Q1/12 versus 30.32 billion securities in Q1/11). Cash markets revenue also included revenue from TMX Select, which was launched in July 2011 (0.7 billion securities traded in Q1/12).
  
  
• The decrease was also as a result of changes to our equity trading fee schedule effective March 1, 2011, which reduced the fees for significant usage for our Market on Open (MOO) facility and introduced net credit payments for trading in our continuous limit order book and additional changes effective April 1, 2011, which provided cost savings to participants that trade equities where the trade price per-security is lower than $1.00. Effective October 1, 2011, we also made changes to our market making fee schedule for Toronto Stock Exchange, including introducing monthly credits.
  
  
• The decrease in overall cash markets revenue also reflected lower volumes from Shorcan Brokers Limited (Shorcan) fixed income trading in Q1/12 compared with Q1/11.

Derivatives Markets

• The increase in derivatives markets revenue reflects higher revenues from Boston Options Exchange (BOX) primarily as a result of a 23% increase in BOX volumes (38.93 million contracts in Q1/12 versus 31.67 million contracts traded in Q1/11).
  
  
• The increase in derivatives markets revenue also reflects an increase in trading and clearing revenue from Montreal Exchange Inc. (MX) and the Canadian Derivatives Clearing Corporation (CDCC). Volumes increased by 12% over Q1/11 (16.35 million contracts traded in Q1/12 versus 14.55 million contracts traded in Q1/11) reflecting increased trading in the CGB contracts as well as in ETF and equity options. The increase in revenue was partially offset by the impact of price changes since Q1/11. Open interest was up 27% at March 31, 2012 compared with March 31, 2011.
  
  
• Derivatives markets revenue for Q1/12 also includes fees earned by CDCC for providing the clearing service on fixed income repurchase and reverse repurchase agreement (REPO) transactions as well as bank fees that are charged back to Clearing Members (see Other Credit and Liquidity Facilities and Guarantee). This service was launched on February 21, 2012.

Energy Markets

• The decrease in energy markets revenue reflects NGX deferring more revenue in Q1/12 due to an increase in the number of forward contracts compared with Q1/11.
  
  
• The decrease in revenue also reflects lower NGX crude oil volumes due to limited acceptance of NGX's clearing services and increased competition from voice brokers, including from Shorcan Energy Brokers Inc. (Shorcan Energy Brokers), a wholly-owned subsidiary of Shorcan. This decrease in NGX crude oil revenue was essentially offset by higher revenue from Shorcan Energy Brokers driven by higher volumes in Q1/12 compared with Q1/11.
  
  
• There was a 2% decrease in total energy volume^# traded on NGX from Q1/11 (4.01 million terajoules in Q1/12 compared to 4.11 million terajoules in Q1/11), which included a 1% decline in total natural gas volumes.

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^# NGX total energy volume includes trading and clearing in natural gas, crude oil and electricity.

Information services revenue

(in millions of dollars)

Q1/12	Q1/11	$ increase	% increase
$ 42.8	$ 40.0	$2.8	7%

• The increase was primarily due to revenue from TMX Atrium, acquired July 29, 2011, and higher revenue from TMXnet, co-location services, feeds and PC-Bond. The increase was also due to higher revenue recoveries related to under-reported usage of real-time quotes in prior periods during Q1/12 compared with Q1/11.
  
  
• There was a 14% increase in the average number of MX market data subscriptions (27,178⁺ MX market data subscriptions in Q1/12 compared with 23,748⁺ in Q1/11).
  
  
• The increases were partially offset by price reductions effective October 1, 2011, and lower revenue from usage based quotes.
  
  
• Overall, there was a 2% decrease in the average number of professional and equivalent real-time market data subscriptions to Toronto Stock Exchange and TSX Venture Exchange products compared with Q1/11 (155,524⁺ professional and equivalent real-time market data subscriptions in Q1/12 compared with 159,072⁺ in Q1/11).

Technology services and other revenue

(in millions of dollars)

Q1/12	Q1/11	$ increase	% increase
$ 3.9	$ 1.4	$2.5	179%

• Technology services and other revenue increased primarily due to income from Razor, consolidated from February 14, 2012, and lower net foreign exchange losses on U.S. dollar accounts receivable in Q1/12 compared with Q1/11.

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⁺ Includes a base number of subscriptions for customers that have entered into enterprise agreements.

REPO interest 

(in millions of dollars)

	Q1/12	Q1/11	$ increase/ (decrease)	% increase/ (decrease)
Interest income	$   0.8	$  -	$  0.8	-
Interest expense	($  0.8)	$  -	($ 0.8)	-
Net REPO interest	$   -	$  -	$  -	-

• On February 21, 2012, CDCC launched the clearing of fixed income REPO agreements. The interest income and interest expense arising from the REPO agreements are equal. However, as CDCC does not have a legal right to offset these amounts, they are recognized separately on the condensed consolidated income statement.
  
  
• Fees earned by CDCC for providing the clearing service for the REPO agreements are included in Derivatives Markets Trading, clearing and related revenue.

Operating Expenses

Operating expenses in Q1/12 were $83.1 million, up $6.0 million, or 8%, from $77.1 million in Q1/11 primarily due to the inclusion of approximately $5.0 million of expenses related to TMX Atrium, acquired July 29, 2011, Razor, consolidated from February 14, 2012 and ir2020, LLC (ir2020), the assets of which were acquired December 23, 2011. There was an overall increase in salary and benefits costs and information and trading systems costs, somewhat offset by lower general and administration costs due to the inclusion in Q1/11 of a commodity tax adjustment of $4.8 million relating to prior periods.

Compensation and Benefits

(in millions of dollars)

Q1/12	Q1/11	$ increase	% increase
$ 40.3	$ 36.8	$3.5	10%

• Compensation and benefits costs increased due to an overall increase in salary and benefits costs relating to increased headcount and merit increases. There were 956 employees at March 31, 2012, including 31 from Razor consolidated from February 14, 2012, 2 from ir2020, acquired December 23, 2011, and 24 from TMX Atrium, acquired July 29, 2011, versus 856 employees at March 31, 2011. The increased headcount attributable to TMX Atrium, Razor and ir2020 contributed to the higher costs. In addition, we continue to invest in our leading technologies, and over the past year we have continued to add resources to generate future revenue growth.
  
  
• The higher costs were partially offset by higher capitalization of costs associated with technology initiatives.

Information and Trading Systems

(in millions of dollars)

Q1/12	Q1/11	$ increase	% increase
$ 14.8	$ 10.6	$4.2	40%

• Information and trading systems expenses were higher due to the inclusion of costs related to TMX Atrium, acquired July 29, 2011.
  
  
• The increase was also due to higher spending on new technology initiatives in Q1/12 compared with Q1/11. We invested in a number of new projects, including TMX Quantum XA, REPO clearing and corporate software conversions.

General and Administration

(in millions of dollars)

Q1/12	Q1/11	$ (decrease)	% (decrease)
$ 20.1	$ 23.1	($3.0)	(13%)

• In Q1/11, General and Administration costs included a commodity tax adjustment of $4.8 million relating to prior periods. The lower costs were partially offset by the inclusion of costs related to TMX Atrium, acquired July 29, 2011, and Razor, consolidated from February 14, 2012. In addition, we incurred bank fees relating to the REPO initiative, some of which have been charged back to the Clearing Members on a pro rated basis based on service usage, and are included in Derivatives Markets Trading, clearing and related revenue.

Depreciation and Amortization

(in millions of dollars)

Q1/12	Q1/11	$ increase	% increase
$ 7.9	$ 6.6	$1.3	20%

• Depreciation and amortization costs increased due to increased amortization of intangible assets related to REPO clearing, on-book Dark Order types, TMX Select, TSX Quantum feeds as well as intangible assets related to acquisitions including TMX Atrium, Razor and ir2020.

Maple and LSEG Related Costs

(in millions of dollars)

Q1/12	Q1/11	$ (decrease)	% (decrease)
$ 0.5	$ 8.3	($ 7.8)	(94%)

• In Q1/12, these costs included legal, advisory and other costs incurred related to the Maple transaction.
  
  
• In Q1/11, these costs included legal, advisory and other costs incurred related to the LSEG transaction.

Finance Income

(in millions of dollars)

Q1/12	Q1/11	$ increase	% increase
$ 1.7	$ 1.2	$0.5	42%

• The increase in Finance income reflected an increase in cash available for investment in Q1/12 compared with Q1/11.

Finance Costs

(in millions of dollars)

Q1/12	Q1/11	$ increase	% increase
$ 2.4	$ 2.0	$0.4	20%

• Finance costs increased as a result of higher interest rates and fees on the debt outstanding (see Term Loan).

Income Tax Expense

(in millions of dollars)

				Effective tax rate (%)
Q1/12			Q1/11	Q1/12	Q1/11
$ 20.2			$ 24.7	26%	28%

• The effective tax rate for Q1/12 was lower than that for Q1/11 due to a decrease in federal and Ontario corporate income tax rates.

Net Income Attributable to Non-Controlling Interests

(in millions of dollars)

Q1/12	Q1/11	$ increase	% increase
$1.8	$1.2	$0.6	50%

• MX holds a 53.8% ownership interest in BOX. The results for BOX are consolidated in our Income Statement.
  
  
• Net income attributable to non-controlling interests represents the other BOX unitholders' share of BOX's net income in the period. In Q1/12, the net income of $1.8 million reflected significantly higher BOX trading volumes compared with Q1/11.

Quarter Ended March 31, 2012 Compared with Quarter Ended December 31, 2011

(in millions of dollars, except per share amounts)

	Q1/12	Q4/11	$ Increase	% Increase
Revenue	$162.3	$161.7	$0.6	-
Earnings per share^v:
Basic	$0.76	$0.70	$0.06	9%
Diluted	$0.76	$0.70	$0.06	9%

• Revenue in Q1/12 was in line with Q4/11. In Q1/12, we had higher cash markets trading and derivatives markets trading and clearing revenue as well as higher technology services and other revenue including revenue from Razor (consolidated from February 14, 2012) and lower net foreign exchange losses on U.S. dollar accounts receivable compared with Q4/11. 
  
  
• The increases in revenue were offset by lower issuer services revenue, primarily related to initial and sustaining listing fees, as well as reduced energy markets trading and clearing revenue and lower information services revenue.
  
  
• Basic and diluted earnings per share for Q1/12 increased over Q4/11 primarily due to lower Maple related costs.

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^v Earnings per share information is based on net income attributable to TMX Group shareholders.

Liquidity and Capital Resources

Cash, Cash Equivalents and Marketable Securities

(in millions of dollars)

March 31, 2012		December 31, 2011		$ (decrease)
$ 447.2		$ 490.4		($ 43.2)

• The decrease was largely due to dividend payments of $29.9 million, additions to intangible assets of $5.4 million, capital expenditures of $7.0 million and acquisitions of $9.7 million. In Q1/12, we generated $12.2 million of cash from operating activities, net of $4.1 million of cash outlays pertaining to Maple related costs.

Total Assets

(in millions of dollars)

March 31, 2012		December 31, 2011		$ increase
$ 4,606.6		$ 3,394.8		$1,211.8

• Our condensed consolidated balance sheet as at March 31, 2012 includes outstanding balances on open REPO agreements within Balances with Clearing Members (formerly MX daily settlements and cash deposits), following CDCC's launch of clearing of fixed income REPO agreements on February 21, 2012. Over-the-counter (OTC) REPO agreements between buying and selling clearing members of CDCC (Clearing Members) are novated to CDCC whereby the rights and obligations of the Clearing Members under the REPO agreements are cancelled and replaced by new agreements with CDCC. Once novation occurs, CDCC becomes the counterparty to both the buying and selling Clearing Member. As a result, the contractual right to receive and return the principal amount of the REPO as well as the contractual right to receive and pay interest on the REPO is transferred to CDCC. Receivable and payable balances outstanding with the same Clearing Member are offset when they are in the same currency and are to be settled on the same day, as CDCC has a legally enforceable right to offset. Balances with Clearing Members include outstanding balances on open REPO transactions, including both the original principal amount of the REPO and the accrued interest which are both carried at amortized cost. As CDCC is the central counterparty, an equivalent amount is recognized in both assets and liabilities.
  
  
• The increase was also due to an increase in trade and other receivables of $72.4 million reflecting later billing and collecting of sustaining listing fees for 2012.
  
  
• The overall increase was partially offset by a decrease in energy contracts receivable of $230.8 million related to the clearing operations of NGX and a decrease in cash and marketable securities of $43.2 million at March 31, 2012 compared with December 31, 2011.

Credit and Liquidity Facilities and Guarantee

Term Loan

(in millions of dollars)

March 31, 2012		December 31, 2011		$ increase
$429.9		$429.8		$ 0.1

• In connection with the combination with MX, we established a non-revolving three-year term unsecured credit facility of $430.0 million (the Term Loan). On April 30, 2008, we borrowed $430.0 million in Canadian funds under the Term Loan to satisfy the cash consideration of the purchase price for MX. On December 16, 2011, we extended and amended this facility. The revised credit facility remains at $430.0 million and will expire on June 29, 2012. We plan to renew the facility prior to this date.
  
  
• This credit facility contains 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 IFRS;
  
  
• 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, 2012, all covenants were met.

Other Credit and Liquidity Facilities and Guarantee

To backstop its clearing operations, NGX currently has a credit agreement in place with a Canadian Schedule I 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. This facility had not been drawn upon at March 31, 2012.

NGX also has an Electronic Funds Transfer (EFT) Daylight liquidity facility of $300.0 million in place with a Canadian Schedule I chartered bank.

In 2011, CDCC put in place a $300.0 million daylight liquidity facility with a Canadian Schedule I bank. In January 2012, CDCC increased its revolving standby liquidity facility from $50.0 million to $100.0 million and signed an additional daylight liquidity facility for $400.0 million with a Canadian Schedule 1 chartered bank, for a total of $700.0 million in daylight liquidity facilities. CDCC's revolving standby liquidity facility is in place to provide end of day liquidity in the event that CDCC is unable to clear the daylight liquidity facilities to zero. This would only occur in the event of a Clearing Member default.  Advances under the revolving facility will be secured by collateral in the form of securities that have been received by CDCC.  CDCC's daylight liquidity facilities are in place to provide liquidity on the basis of collateral in the form of securities that have been received by CDCC. The daylight liquidity facilities must be cleared to zero at the end of each day. The revolving facilities had not been drawn upon at March 31, 2012.

In February 2012, CDCC signed a $1.2 billion repurchase facility with a syndicate of six Canadian Schedule 1 chartered banks (the syndicated REPO facility). The facility is comprised of $300.0 million in committed liquidity and $900.0 million in uncommitted liquidity. In April 2012, the CDCC syndicated REPO facility was increased from $1.2 billion to $4.8 billion. The revised facility is comprised of $1.2 billion in committed liquidity and $3.6 billion in uncommitted liquidity. The facility remains with the same syndicate of six Canadian Schedule 1 chartered banks. CDCC's syndicated REPO facility is also in place to provide end of day liquidity in the event that CDCC is unable to clear the daylight liquidity facilities to zero. This would only occur in the event of a Clearing Member default. The facility will provide liquidity in exchange for securities that have been received by CDCC. The bank fees for this facility are included in General and Administration costs. However, these bank fees are charged back to the Clearing Members on a pro rated basis based on service usage, and are included in Derivatives Markets Trading, clearing and related revenue. The syndicated REPO facility had not been drawn upon at March 31, 2012.

In April 2012, CDCC signed an agreement that would allow the Bank of Canada to provide emergency last-resort liquidity to CDCC at the discretion of the Bank of Canada. This facility is intended to provide end of day liquidity only in the event that CDCC is unable to access liquidity from the revolving standby liquidity facility and the syndicated REPO facility. Use of this facility would be on a fully collateralized basis.

Total Equity attributable to Shareholders of TMX Group

(in millions of dollars)

March 31, 2012		December 31, 2011		$ increase
$ 1,224.6		$ 1,196.5		$ 28.1

• We earned $56.8 million of net income attributable to TMX Group shareholders during Q1/12 and paid $29.9 million in dividends.
  
  
• At March 31, 2012, there were 74,691,248 common shares issued and outstanding. In Q1/12, 51,215 common shares were issued on the exercise of share options. At March 31, 2012, 3,741,168 common shares were reserved for issuance upon the exercise of options granted under the share option plan. At March 31, 2012, there were 1,773,071 options outstanding.
  
  
• At May 9, 2012, there were 74,693,248 common shares issued and outstanding and 1,768,538 options outstanding under the share option plan.

Cash Flows from Operating Activities

(in millions of dollars)

	Q1/12	Q1/11	(Decrease) in cash
Cash Flows from Operating Activities	$ 12.2	$ 72.1	($59.9)

Cash Flows from Operating Activities were $12.2 million in Q1/12, which were net of $4.1 million of cash outlays pertaining to Maple related costs, compared with $72.1 million of cash flows from operating activities in Q1/11, which were net of $1.2 million of cash outlays pertaining to LSEG related costs. The decrease of $59.9 million was primarily due to lower income before income taxes and an increase in trade receivables reflecting later billing and collecting of sustaining listing fees for 2012:

(in millions of dollars)

	Q1/12	Q1/11	Increase/ (decrease) in cash
Income before income taxes	$ 78.8	$ 89.0	($ 10.2)
Depreciation and amortization	$ 7.9	$ 6.6	$ 1.3
(Increase) in trade and other receivables and prepaid expenses	($ 74.0)	($ 47.0)	($ 27.0)
Maple and LSEG related costs	$ 0.5	$ 8.3	($ 7.8)
Maple and LSEG related cash outlays	($ 4.1)	($ 1.2)	($ 2.9)
Net (decrease) in trade and other payables, long-term accrued and other non-current liabilities	($ 16.9)	($ 19.0)	$ 2.1
Increase in deferred revenue	$  54.4	$ 58.3	($ 3.9)
Income taxes paid	($ 31.3)	($ 29.2)	($ 2.1)
(Decrease) / increase in provisions, including commodity tax adjustment	($ 4.3)	$ 5.4	($ 9.7)
Net increase in other items	$ 1.2	$ 0.9	$ 0.3
Cash Flows from Operating Activities	$ 12.2	$ 72.1	($59.9)

Cash Flows from (used in) Financing Activities

(in millions of dollars)

	Q1/12	Q1/11	(Decrease) in cash
Cash Flows from (used in) Financing Activities	($ 32.3)	($ 24.6)	($ 7.7)

Cash Flows (used in) Financing Activities were $7.7 million higher in Q1/12 compared with Q1/11 due to:

(in millions of dollars)

			Increase/ (decrease) in cash
	Q1/12	Q1/11
Dividends paid on common shares	($ 29.9)	($ 29.8)	($ 0.1)
Proceeds from exercised share options	$  1.6	$ 6.1	($ 4.5)
BOX dividend to non-controlling interest	($  3.7)	-	($ 3.7)
Net (decrease) in other items	($ 0.3)	($ 0.9)	$  0.6
Cash Flows from (used in) Financing Activities	($32.3)	($ 24.6)	($ 7.7)

Cash Flows from (used in) Investing Activities

(in millions of dollars)

	Q1/12	Q1/11	Increase in cash
Cash Flows from (used in) Investing Activities	$ 34.9	($ 33.0)	$ 67.9

Cash Flows from Investing Activities were $67.9 million higher in Q1/12 compared with Q1/11 due to:

(in millions of dollars)

			Increase/ (decrease) in cash
	Q1/12	Q1/11
Capital expenditures primarily related to our co-location facility, TMX Atrium's network and hardware as well as leasehold improvements	($  7.0)	($ 0.3)	($  6.7)
Additions to intangible assets including TMX Quantum XA (2012), SOLA internal development costs (2012), development costs related to REPO clearing (2012 and 2011), TSX Quantum Feeds (2011) and on-book Dark Order types (2011)	($ 5.4)	($  2.5)	($ 2.9)
Acquisitions, net of cash acquired	($ 9.7)	($  1.0)	($ 8.7)
Proceeds on disposal of EDX investment	-	$  3.2	($ 3.2)
Net sales/(purchases) of marketable securities	$ 57.0	($ 32.4)	$ 89.4
Cash Flows from (used in) Investing Activities	$ 34.9	($ 33.0)	$ 67.9

Financial Statements Governance Practice

The Finance & Audit Committee of the Board of Directors of TMX Group reviewed this press release as well as the Q1/12 condensed 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 Q1/12 financial statements, MD&A and the contents of this press release were approved.

Consolidated Financial Statements

Our Q1/12 unaudited condensed consolidated financial statements and MD&A are prepared in accordance with International Financial Reporting Standards (IFRS) and are reported in Canadian dollars unless otherwise indicated.

TMX Group expects to file its Q1/12 financial statements and MD&A with Canadian securities regulators today, after which time these documents 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 [phone] or by e-mail at [email protected].

Caution Regarding Forward-Looking Information

This press release of TMX Group 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 including changes in business cycles that impact our sector; 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 or regulatory proceedings; dependence on adequate numbers of customers; failure to develop, market 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 on third party suppliers and service providers; dependence of trading operations on a small number of clients; risks associated with our clearing operations; challenges related to international expansion; restrictions on ownership of TMX Group shares; inability to protect our intellectual property; 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; business development and marketing and sales activity; 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 and client acceptance of new products; successful introduction of various technology assets and capabilities; 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 2011 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, TMX Select, Montreal Exchange, Canadian Derivatives Clearing Corporation, Natural Gas Exchange, Boston Options Exchange (BOX), Shorcan, Shorcan Energy Brokers, Equicom and other TMX Group companies provide listing markets, trading markets, clearing facilities, data products and other services to the global financial community. TMX Group is headquartered in Toronto and operates offices across Canada (Montreal, Calgary and Vancouver), in key U.S. markets (New York, Houston, Boston and Chicago) as well as in London and Beijing. For more information about TMX Group, visit our website at www.tmx.com. Follow TMX Group on Twitter at http://twitter.com/tmxgroup.

Teleconference / Audio Webcast

TMX Group will host a teleconference / audio webcast to discuss the financial results for Q1/12.

Time: 8:00 a.m. - 9:00 a.m. EST on Friday, May 11, 2012.

To teleconference participants: Please call the following number at least 15 minutes prior to the start of the event.

The audio webcast of the conference call will also be available on TMX Group's website at www.tmx.com, under Investor Relations.

Teleconference Number: 647-427-7450 or 1-888-231-8191

Audio Replay: 416-849-0833 or 1-855-859-2056

The passcode for the replay is 71017711

TMX GROUP INC.  
Condensed Consolidated Balance Sheets  
(In millions of Canadian dollars)
(Unaudited)

			March 31, 2012	December 31, 2011 (audited)
Assets
Current assets:
	Cash and cash equivalents		$                  101.6	$                   87.2
	Marketable securities		345.6	403.2
	Trade and other receivables		151.4	79.0
	Energy contracts receivable		414.9	645.7
	Fair value of open energy contracts		144.0	159.0
	Balances with Clearing Members		1,953.1	550.8
	Prepaid expenses		9.0	6.9
	Current income tax assets		13.7	3.8
			3,133.3	1,935.6
Non-current assets:
Premises and equipment			34.3	29.5
Investment in equity accounted investees			17.1	16.3
Goodwill			437.7	432.8
Other intangible assets			925.6	919.0
Deferred income tax assets			49.5	52.6
Other non-current assets			9.1	9.0
Total Assets			$               4,606.6	$              3,394.8
Liabilities and Equity
Current liabilities:
	Trade and other payables		$                    59.1	$                   81.7
	Energy contracts payable		414.9	645.7
	Fair value of open energy contracts		144.0	159.0
	Balances with Clearing Members		1,953.1	550.8
	Deferred revenue		74.9	19.4
	Provisions		3.2	7.5
	Current income tax liabilities		0.1	4.4
	Term loan		429.9	429.8
			3,079.2	1,898.3
Non-current liabilities:
Accrued employee benefits payable			14.3	14.0
Deferred income tax liabilities			231.8	230.0
Other non-current liabilities			33.6	30.5
Total Liabilities			3,358.9	2,172.8
Equity:
	Share capital		970.2	968.3
	Retained earnings		243.7	216.8
	Contributed surplus - share option plan		14.4	14.0
	Accumulated other comprehensive loss		(3.7)	(2.6)
Total Equity attributable to Shareholders of the Company			1,224.6	1,196.5
Non-controlling interests			23.1	25.5
Total Equity			1,247.7	1,222.0
Total Liabilities and Equity			$               4,606.6	$              3,394.8

TMX GROUP INC.  
Condensed Consolidated Income Statements
(In millions of Canadian dollars, except per share amounts)
(Unaudited)

					Three months ended March 31,
					2012	2011
Revenue:
	Issuer services				$                    50.2	$                   62.0
	Trading, clearing and related				65.4	71.3
	Information services				42.8	40.0
	Technology services and other				3.9	1.4
	REPO interest:
			Interest income		0.8	-
			Interest expense		(0.8)	-
			Net REPO interest		-	-
	Total revenue				162.3	174.7
Expenses:
	Compensation and benefits				40.3	36.8
	Information and trading systems				14.8	10.6
	General and administration				20.1	23.1
	Depreciation and amortization				7.9	6.6
	Total operating expenses				83.1	77.1
Income from operations					79.2	97.6
Share of net income of equity accounted investees					0.8	0.4
Gain on disposal of available for sale investment					-	0.2
Maple and LSEG related costs					(0.5)	(8.3)
Finance income (costs):
	Finance income				1.7	1.2
	Finance costs				(2.4)	(2.0)
	Net mark to market on interest rate swaps				-	(0.1)
	Net finance costs				(0.7)	(0.9)
Income before income taxes					78.8	89.0
Income tax expense					20.2	24.7
Net income					$                 58.6	$                   64.3
Net income attributable to:
	Equity holders of the Company				$                 56.8	$                   63.1
	Non-controlling interests				1.8	1.2
					$                 58.6	$                   64.3
Earnings per share (attributable to equity holders of the Company):
	Basic				$                 0.76	$                   0.85
	Diluted				$                 0.76	$                   0.84
Share information:
		Weighted average number of common shares outstanding			74,662,492	74,465,825
		Diluted weighted average number of common shares outstanding			74,930,839	74,694,888

TMX GROUP INC.  
Condensed Consolidated Statements of Comprehensive Income
(In millions of Canadian dollars)
(Unaudited)

			Three months ended March 31,
			2012	2011
Net income			$                 58.6	$                 64.3
Other comprehensive loss:
	Unrealized loss on translating financial statements of foreign operations (net of tax of $nil in 2012 and $nil in 2011)		(1.6)	(1.6)
Total comprehensive income			$                 57.0	$                 62.7
Total comprehensive income attributable to:
	Equity holders of the Company		$                 55.7	$                 62.0
	Non-controlling interests		1.3	0.7
			$                 57.0	$                 62.7

TMX GROUP INC.  
Condensed Consolidated Statements of Changes in Equity
(In millions of Canadian dollars)
(Unaudited)

				Attributable to equity holders of the Company
				Share capital	Contributed surplus - share option plan	Accumulated other comprehensive loss	Retained earnings	Total attributable to equity holders	Non- controlling interests	Total equity
Balance at January 1, 2012				$      968.3	$            14.0	$            (2.6)	$      216.8	$     1,196.5	$          25.5	$     1,222.0
	Net income			-	-	-	56.8	56.8	1.8	58.6
	Other comprehensive loss:
		Foreign currency translation differences, net of taxes		-	-	(1.1)	-	(1.1)	(0.5)	(1.6)
	Total comprehensive (loss) income			-	-	(1.1)	56.8	55.7	1.3	57.0
Dividend to equity holders				-	-	-	(29.9)	(29.9)	-	(29.9)
BOX dividend to non-controlling interest				-	-	-	-	-	(3.7)	(3.7)
Proceeds from exercised share options				1.6	-	-	-	1.6	-	1.6
Cost of exercised share options				0.3	(0.3)	-	-	-	-	-
Cost of share option plan				-	0.7	-	-	0.7	-	0.7
Balance at March 31, 2012				$      970.2	$            14.4	$             (3.7)	$      243.7	$     1,224.6	$          23.1	$     1,247.7
Balance at January 1, 2011				$      959.4	$            12.0	$            (3.2)	$      102.4	$     1,070.6	$          18.8	$     1,089.4
	Net income			-	-	-	63.1	63.1	1.2	64.3
	Other comprehensive loss:
		Foreign currency translation differences, net of taxes		-	-	(1.1)	-	(1.1)	(0.5)	(1.6)
	Total comprehensive (loss) income			-	-	(1.1)	63.1	62.0	0.7	62.7
Dividend to equity holders				-	-	-	(29.8)	(29.8)	-	(29.8)
Proceeds from exercised share options				6.1	-	-	-	6.1	-	6.1
Cost of exercised share options				1.4	(1.4)	-	-	-	-	-
Cost of share option plan				-	1.0	-	-	1.0	-	1.0
Balance at March 31, 2011				$      966.9	$            11.6	$            (4.3)	$      135.7	$     1,109.9	$          19.5	$     1,129.4

TMX GROUP INC.  
Condensed Consolidated Statements of Cash Flows
(In millions of Canadian dollars)
(Unaudited)

				Three months ended March 31,
				2012	2011
Cash flows from (used in) operating activities:
	Income before income taxes			$                    78.8	$                       89.0
	Adjustments to determine net cash flows:
		Depreciation and amortization		7.9	6.6
		Net finance costs		0.7	0.9
		Share of net income of equity accounted investees		(0.8)	(0.4)
		Gain on disposal of available for sale investment		-	(0.2)
		Cost of share option plan		0.7	1.0
		Unrealized foreign exchange loss		(0.1)	-
		Maple and LSEG related costs		0.5	8.3
		Maple and LSEG related cash outlays		(4.1)	(1.2)
		Trade and other receivables, and prepaid expenses		(74.0)	(47.0)
		Other non-current assets		(0.1)	0.1
		Trade and other payables		(19.9)	(21.3)
		Provisions		(4.3)	5.4
		Deferred revenue		54.4	58.3
		Long-term accrued and other non-current liabilities		3.0	2.3
		Realized gain (loss) on marketable securities		0.1	(0.2)
		Realized loss on interest rate swaps		-	(0.6)
		Interest paid		(1.5)	(1.6)
		Interest received		2.2	1.9
		Income taxes paid		(31.3)	(29.2)
				12.2	72.1
Cash flows from (used in) financing activities:
		Reduction in obligations under finance leases		(0.3)	(0.2)
		Proceeds from exercised share options		1.6	6.1
		Financing fees on term loan		-	(0.7)
		Dividends on common shares		(29.9)	(29.8)
		BOX dividend to non-controlling interest		(3.7)	-
				(32.3)	(24.6)
Cash flows from (used in) investing activities:
		Additions to premises and equipment		(7.0)	(0.3)
		Additions to intangible assets		(5.4)	(2.5)
		Acquisitions, net of cash acquired		(9.7)	(1.0)
		Proceeds on disposal of available-for-sale investment		-	3.2
		Marketable securities		57.0	(32.4)
				34.9	(33.0)
Increase in cash and cash equivalents				14.8	14.5
Cash and cash equivalents, beginning of the period				87.2	69.9
Unrealized foreign exchange loss on cash and cash equivalents held in foreign currencies				(0.4)	(0.2)
Cash and cash equivalents, end of the period				$                  101.6	$                       84.2

 

TMX GROUP INC.

Market Statistics

(Unaudited)
			Three months ended
			March 31
			2012	2011
Toronto Stock Exchange:
	Volume (millions)		24,665.1	30,315.8
	Value ($ billions)		357.0	418.8
	Transactions (000s)		53,331.0	53,129.7
	Issuers Listed		1,581	1,516
	New Issuers Listed:		31	43
		Number of Initial Public Offerings	21	31
		Number of graduates from TSXV/NEX	9	6
	New Equity Financing: ($ millions)		15,336.6	10,944.2
		Initial Public Offering Financings ($ millions)	470.4	1,557.2
		Secondary Offering Financings^1($ millions)	9,985.2	5,287.5
		Supplementary Financings ($ millions)	4,881.0	4,099.5
	Market Cap of Issuers Listed ($ billions)		2,123.7	2,318.8
	S&P/TSX Composite Index^2 Close		12,392.2	14,116.1
TSX Venture Exchange:^3
	Volume (millions)		14,412.0	25,231.0
	Value ($ millions)		8,524.2	17,021.4
	Transactions (000s)		2,876.4	4,613.3
	Issuers Listed		2,473	2,403
	New Issuers Listed		55	48
	New Equity Financing: ($ millions)		1,753.4	3,441.4
		Initial Public Offering Financings ($ millions)	35.8	99.2
		Secondary Offering Financings^1 ($ millions)	571.8	1,018.8
		Supplementary Financings ($ millions)	1,145.8	2,323.4
	Market Cap of Issuers Listed: ($ billions)		52.3	77.5
	S&P/TSX Venture Composite Index^2Close		1,566.4	2,296.0
Toronto Stock Exchange and TSX Venture Exchange:
	Professional and Equivalent Real-time Data Subscriptions*		155,330	159,249
NGX:
Total Volume (TJs)**			4,009,577	4,106,934
			Three months ended
			March  31
			2012	2011
Montreal Exchange:
		Volume (Contracts) (000s)	16,346.1	14,553.7
		Open Interest (Contracts) (000s) as at March 31	4,946.3	3,886.3
	Data Subscriptions*		27,102	23,772
Boston Options Exchange:
		Volume (Contracts) (000s)	38,930.1	31,673.4

 

^1Secondary Offering Financings includes prospectus offerings on both a treasury and secondary basis.
^2 "S&P" as part of the composite mark S&P/TSX is a  trade-mark of Standard & Poor's Financial Services LLC and is used under license and "TSX" is a trade-mark of TSX Inc.
^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 (203 issuers at March 31, 2012 and 226 issuers at March 31, 2011).
* TMX and MX data subscriptions include a base number of subscriptions for customers that have entered into enterprise agreements.
**NGX Total Energy Volume includes trading and clearing in natural gas, crude oil and electricity.
Conversions:
Power:
MWH/100=TJ
Crude:
Total Barrels (Crude Oil Conversion Factor (6.29287 for Sweet Crude;  6.28981 for Heavy Crude)/1000) = TJ

 

 

 

 

 

 

 

Carolyn Quick 
Director, Corporate Communications 
TMX Group 
416-947-4597 
[email protected] 
 
Paul Malcolmson
Director, Investor Relations
TMX Group
416-947-4317
[e-mail]