TMX Group Inc. Reports Results for Third Quarter 2009
Commenting on the Company's performance this quarter, Thomas Kloet, Chief Executive Officer of TMX Group noted: "While we experienced reductions in revenues in certain areas of the business, due in part to the global economic slowdown, we are encouraged by the improving market conditions, which have already resulted in a substantial increase in the value of IPO and secondary financing activities as well as overall volumes on the
Michael Ptasznik, Chief Financial Officer of TMX Group added: "Despite market challenges in the third quarter, we remain highly focused on our operating results and on managing our overall cost base while continuing to invest to deliver maximum shareholder value. Our diversified portfolio allowed us to maintain momentum in key areas with revenue growth in energy, fixed income and TSX Venture Exchange trading."
Summary of Financial Information
(in millions of dollars, except per share amounts)
$ %
Increase/ Increase/
Q3/09 Q3/08 (decrease) (decrease)
Revenue $ 130.2 $ 139.2 ($ 9.0) (6%)
Operating expenses $ 68.4 $ 62.2 $ 6.2 10%
Net income $ 41.7 $ 50.9 ($ 9.2) (18%)
Earnings per share:
Basic $ 0.56 $ 0.66 ($ 0.10) (15%)
Diluted $ 0.56 $ 0.66 ($ 0.10) (15%)
Cash flows from operating
activities $ 37.4 $ 54.6 ($ 17.2) (32%)
Net income was
(in millions of dollars, except per share amounts)
Nine months ended
$ %
Sept. Sept. Increase/ Increase/
30/09 30/08 (decrease) (decrease)
Revenue $ 403.3 $ 381.6 $ 21.7 6%
Operating expenses $ 205.5 $ 161.7 $ 43.8 27%
Net income $ 131.5 $ 132.9 ($ 1.4) (1%)
Earnings per share:
Basic $ 1.78 $ 1.82 ($ 0.04) (2%)
Diluted $ 1.77 $ 1.82 ($ 0.05) (3%)
Cash flows from operating
activities $ 148.4 $ 183.3 ($ 34.9) (19%)
Net income was
The following is a reconciliation of earnings per share to adjusted earnings per share prior to a loss on termination of joint venture(xx) in the first nine months of 2008:
Reconciliation for nine months ended September 30, 2009 and September 30,
2008
Nine months ended
Sept. 30/09 Sept. 30/08
Basic Diluted Basic Diluted
Earnings per share $ 1.78 $ 1.77 $ 1.82 $ 1.82
Adjustment related to loss
on termination of joint
venture - - $ 0.21 $ 0.20
--------- ---------
Adjusted earnings per share
prior to loss on termination
of joint venture(xx) $ 1.78 $ 1.77 $ 2.03 $ 2.02
--------- --------- --------- ---------
Select Segmented Financial Information
(in millions of dollars)
Cash Markets Derivatives
- Equities and Markets
Q3/09 Fixed Income - MX and BOX Energy Markets Total
Revenue $ 95.3 $ 24.8 $ 10.2 $ 130.2
Net Income $ 33.6 $ 5.3 $ 2.9 $ 41.7
Q3/08
Revenue $ 108.2 $ 23.3 $ 7.7 $ 139.2
Net Income $ 41.9 $ 6.9 $ 2.2 $ 50.9
(in millions of dollars)
Nine months Cash Markets Derivatives
ended - Equities and Markets
Sept. 30/09 Fixed Income - MX and BOX Energy Markets Total
Revenue $ 296.0 $ 78.1 $ 29.2 $ 403.3
Net Income $ 107.9 $ 14.8 $ 8.9 $ 131.5
Nine months
ended
Sept. 30/08
Revenue $ 322.7 $ 37.2 $ 21.7 $ 381.6
Net Income $ 116.9 $ 10.7 $ 5.3 $ 132.9
On
On
On
Certain comparative figures have been reclassified in order to conform with the financial presentation adopted in the current year.
Quarter Ended September 30, 2009 Compared with Quarter Ended
September 30, 2008
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 Q3/09 and Q3/08.
(in millions of dollars)
Reported
$ %
increase/ increase/
Q3/09 Q3/08 (decrease) (decrease)
Initial listing fees $ 4.2 $ 4.1 $ 0.1 2%
Additional listing fees $ 14.6 $ 13.1 $ 1.5 11%
Sustaining listing fees(xxx) $ 13.6 $ 17.5 ($ 3.9) (22%)
Other issuer services $ 2.7 $ 3.3 ($ 0.6) (18%)
--------- --------- ---------
Total $ 35.1 $ 38.0 ($ 2.9) (8%)
--------- --------- ---------
(in millions of dollars)
Billed(xx)
$ %
increase/ increase/
Q3/09 Q3/08 (decrease) (decrease)
Initial listing fees $ 3.0 $ 4.3 ($ 1.3) (30%)
Additional listing fees $ 22.4 $ 17.2 $ 5.2 30%
Sustaining listing fees(xxx) $ 13.6 $ 17.5 ($ 3.9) (22%)
Other issuer services $ 2.7 $ 3.3 ($ 0.6) (18%)
--------- --------- ---------
Total $ 41.7 $ 42.3 ($ 0.6) (1%)
--------- --------- ---------
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) Q3/09 Q3/08
Initial listing fees billed(xx) $ 3.0 $ 4.3
Initial listing fees billed(xx) and deferred to
future periods ($ 2.9) ($ 4.2)
Recognition of initial listing fees billed(xx) and
previously included in deferred revenue $ 4.1 $ 4.0
--------- ---------
Initial listing fee revenue reported $ 4.2 $ 4.1
--------- ---------
Additional Listing Fees (in millions of dollars) Q3/09 Q3/08
Additional listing fees billed(xx) $ 22.4 $ 17.2
Additional listing fees billed(xx) and deferred to
future periods ($ 22.0) ($ 16.9)
Recognition of additional listing fees billed(xx)
and previously included in deferred revenue $ 14.2 $ 12.8
--------- ---------
Additional listing fee revenue reported $ 14.6 $ 13.1
--------- ---------
- Initial and additional listing fees reported increased in Q3/09
compared with Q3/08, reflecting an increase in capital market
activity during the period from October 1, 1999 to September 30, 2009
compared with the period from October 1, 1998 to September 30, 2008.
Initial and additional listing fees billed(xx) increased in Q3/09, as
compared with Q3/08, due to an increase in initial and additional
financings on Toronto Stock Exchange, somewhat offset by a decrease
in initial and additional financings on TSX Venture Exchange. While
there was significant increase in the value of initial and additional
financings on Toronto Stock Exchange in Q3/09 compared with Q3/08,
this was driven by a number of high value transactions where 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 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 $2.7 million decreased from
$3.3 million in Q3/08, reflecting lower demand for investor relations
services compared with Q3/08.
-----------------------------
* 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.
Trading, Clearing and Related Revenue(1)
(in millions of dollars)
$ %
increase/ increase/
Q3/09 Q3/08 (decrease) (decrease)
Cash markets:
- Toronto Stock Exchange $ 15.2 $ 26.0 ($ 10.8) (42%)
- TSX Venture Exchange $ 7.5 $ 5.6 $ 1.9 34%
--------- --------- ---------
$ 22.7 $ 31.6 ($ 8.9) (28%)
- Shorcan $ 4.0 $ 2.8 $ 1.2 43%
--------- --------- ---------
Cash markets revenue $ 26.7 $ 34.4 ($ 7.7) (22%)
Derivatives markets revenue $ 19.4 $ 16.9 $ 2.5 15%
Energy markets revenue $ 10.3 $ 7.6 $ 2.7 36%
--------- --------- ---------
Total $ 56.4 $ 58.9 ($ 2.5) (4%)
--------- --------- ---------
(1) The "Trading, Clearing and Related Revenue" section above contains
certain forward-looking statements. Please refer to "Forward-Looking
Information" for a discussion of risks and uncertainties related to
such statements.
Cash Markets
- Cash markets equity trading revenue from Toronto Stock Exchange
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 electronic
liquidity providers (ELP), a reduction in the spread between active
fees and passive credits, and the elimination of a premium fee on ETF
transactions. This decrease was partially offset by a 10% increase in
the volume of securities traded on Toronto Stock Exchange in Q3/09
over Q3/08 (28.3 billion securities in Q3/09 versus 25.7 billion
securities in Q3/08).
- Cash markets equity trading revenue from TSX Venture Exchange
increased due to a 56% increase in the volume of securities traded in
Q3/09 over Q3/08 (12.5 billion securities in Q3/09 versus 8.0 billion
securities in Q3/08). The increase was partially offset by fee
reductions that were effective in 2009.
- In October 2008, we indicated that based on historical trading
activity, patterns and product mix, changes to the equity trading fee
structure put into place effective January 1, 2009 could reduce
trading revenue by approximately $11.0 to $14.0 million on an annual
basis if offsetting benefits, including increased volumes, were not
realized. During Q3/09, there were changes in customer and product
mix including a higher proportion of volumes coming from new ELP
market participants. These changes, together with the change in fee
structure, led to a larger than anticipated reduction in cash markets
equity trading revenue.
- On August 14, 2009, we announced changes to the equity trading fee
schedule that took effect October 1, 2009. Fees under the ELP Program
have been replaced with a single tier model which reduces the passive
credit paid to ELP Program participants. The active fee paid by ELP
Program participants has also been reduced in some cases. In
addition, the revised fee schedule is expected to provide all
participants with an average reduction of 24% in active trading fees
on stocks trading at less than $1 in the post-open continuous market.
It is expected that these fee changes will have a neutral impact on
our revenues based on historical volumes and product and customer
mix. The ongoing impact of these fee changes on actual cash markets
equity trading revenue will depend on future trading activity and
product and customer mix.
- The increase in revenue from Shorcan Brokers Limited (Shorcan),
primarily reflects an increase in trading of Government of Canada
bonds and swaps in Q3/09 versus Q3/08.
Derivatives Markets
- Derivatives markets revenue includes $19.4 million in trading and
clearing revenue from MX and trading revenue from BOX, versus
$16.9 million in trading and clearing revenue from MX in Q3/08 and
trading revenue from 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 16% (8.3 million contracts traded in Q3/09
versus 9.9 million contracts traded in Q3/08) reflecting reduced
trading in both the BAX and CGB contracts, partially offset by an
increase in ETFs derivatives trading. We believe the reduction in
fixed income futures trading is a reflection of the current interest
rate environment of historically low rates with little volatility.
- BOX volumes decreased by 30% (34.1 million contracts in Q3/09 versus
48.9 million contracts traded in Q3/08).
Energy Markets
- Energy markets revenue increased due to a 6% increase in the volumes
of natural gas and electricity contracts traded or cleared on NGX
over Q3/08 (3.8 million terajoules in Q3/09 versus 3.6 million
terajoules in Q3/08). 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. We
traded 10.5 million barrels of crude oil in Q3/09.
Market Data Revenue
(in millions of dollars)
$ %
Q3/09 Q3/08 (decrease) (decrease)
$ 34.5 $ 35.3 ($ 0.8) (2%)
- This decrease reflects a 12% decrease in the number of professional
and equivalent real-time market data subscriptions to Toronto Stock
Exchange and TSX Venture Exchange products (over 145,000 professional
and equivalent real-time market data subscriptions at September 30,
2009 versus over 165,000 at September 30, 2008).
- The decrease was also due to lower revenue recoveries related to
under-reported usage of real-time quotes in Q3/09 compared with
Q3/08.
- The decrease was largely offset by higher revenues from data feeds
and co-location services as well as pricing changes that were
effective January 1, 2009.
- Market data revenue included $3.7 million in data revenue from MX and
BOX, compared with $3.4 million in market data revenue related to MX
in Q3/08 and market data revenue from BOX from August 29, 2008. There
were over 22,000 MX market data subscriptions at September 30, 2009
compared with over 28,000 at September 30, 2008, a decrease of 21%.
Business Services and Other Revenue
(in millions of dollars)
$ %
Q3/09 Q3/08 (decrease) (decrease)
$ 4.3 $ 7.0 ($ 2.7) (39%)
- Business services revenue in Q3/08 included two months of revenue
from BOX (prior to consolidation on August 29, 2008) for technology
and other services provided by MX. This revenue has been eliminated
as BOX is now a subsidiary of MX. The decrease in Q3/09 was somewhat
offset by the inclusion of revenue from the technology services
arrangement with the London Stock Exchange Group plc (LSE).
- The decrease was also due to net foreign exchange losses on U.S.
dollar accounts receivable.
Operating Expenses(2)
Operating expenses in Q3/09 were
These higher expenses were partially offset by the cost synergies related to the integration with MX of approximately
In keeping with our commitment to deliver state of the art levels of technology to our markets, we are continuing to invest in and are planning a multi-phased initiative to upgrade the infrastructure across our trading enterprise. In order to increase speed and improve performance, we are upgrading our internal networks. In addition, we are also working to expand our message storage capabilities in order to handle higher speed transactions and the increasing number of messages that need to be stored. We are planning to have this completed in Q1/10. We expect to incur annual operating expenses of approximately
----------------------------
(2) The "Operating Expenses" section above contains certain forward-
looking statements. Please refer to "Forward-Looking Information" for
a discussion of risks and uncertainties related to such statements.
Compensation and Benefits
(in millions of dollars)
$ %
Q3/09 Q3/08 increase increase
$ 32.5 $ 32.1 $ 0.4 1%
- Compensation and benefits costs include $6.4 million in costs related
to MX and BOX in Q3/09, unchanged from MX compensation and benefits
costs in Q3/08 and compensation and benefits costs from BOX from
August 29, 2008.
- The increase was attributable to higher costs associated with
technology initiatives, partially offset by lower costs related to
short term performance incentives.
- There were 845 employees at September 30, 2009, which included 6 NTP
employees, versus 850 employees at September 30, 2008.
Information and Trading Systems
(in millions of dollars)
$ %
Q3/09 Q3/08 increase increase
$ 12.1 $ 9.2 $ 2.9 32%
- Information and trading systems costs included $1.8 million in costs
related to MX and BOX, compared with $1.5 million related to MX in
Q3/08 and from BOX from August 29, 2008.
- Information and trading systems costs increased due to costs
associated with our technology initiatives including data centre
enhancements, the TSX Quantum gateway and enterprise expansion.
General and Administration
(in millions of dollars)
$ %
Q3/09 Q3/08 increase increase
$ 16.2 $ 13.8 $ 2.4 17%
- General and administration costs included $5.8 million in costs
related to MX and BOX, compared with $4.5 million from MX in Q3/08
and from BOX from August 29, 2008.
- General and administration costs also increased as a result of
increased spending related to our technology initiatives.
Amortization
(in millions of dollars)
$ %
Q3/09 Q3/08 increase increase
$ 7.6 $ 7.0 $ 0.6 9%
- Amortization costs increased reflecting amortization of $4.0 million
related to MX and BOX, compared with $3.3 million from MX in Q3/08
and from BOX from August 29, 2008.
Investment Income
(in millions of dollars)
$ %
Q3/09 Q3/08 (decrease) (decrease)
$ 1.3 $ 2.9 ($ 1.6) (55%)
- Investment income decreased due to a reduction in cash available for
investment and lower overall returns on investments during Q3/09
compared with Q3/08.
Interest Expense
(in millions of dollars)
$ %
Q3/09 Q3/08 (decrease) (decrease)
$ 1.3 $ 4.3 ($ 3.0) (70%)
- Interest expense decreased as a result of lower interest rates in
Q3/09 compared with Q3/08. On April 30, 2008, we borrowed
$430.0 million in Canadian funds on a three-year term facility (Term
Facility) related to financing the cash consideration of the purchase
price for MX (see Long-term Debt).
Income Taxes(3)
(in millions of dollars)
Effective tax rate (%)
Q3/09 Q3/08 Q3/09 Q3/08
$ 19.4 $ 24.8 32% 33%
- The effective tax rate for Q3/09 was somewhat lower than the
effective tax rate of 33% for Q3/08 due to a lower federal income tax
rate in Q3/09 compared with Q3/08.
- In the 2009 Ontario budget, the government proposed new tax reforms,
which, if enacted, would reduce the general corporate tax rate from
14% in 2009 to 12% by July 1, 2010, with further reductions to 10% by
July 1, 2013. Since these reforms were not substantively enacted
during Q3/09, there was no impact on Income Taxes. If the legislation
becomes substantively enacted, based on the future income tax asset
as at September 30, 2009, we estimate there will be a net reduction
in the value of the future income tax asset of approximately
$8.0 million and a corresponding increase in Income Taxes of
approximately $8.0 million. While this accounting adjustment will
have no immediate impact on cash flow, the decline in tax rates will
reduce taxes payable in future periods.
----------------------
(3) The "Income Taxes" section above contains certain forward-looking
statements. Please refer to "Forward-Looking Information" for a
discussion of risks and uncertainties related to such statements.
Nine Months Ended September 30, 2009 Compared with Nine Months Ended
September 30, 2008
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 the first nine months of 2009 and the first nine months of 2008.
(in millions of dollars)
Reported
Nine months ended
$ %
Sept. Sept. increase/ increase/
30/09 30/08 (decrease) (decrease)
Initial listing fees $ 12.6 $ 11.9 $ 0.7 6%
Additional listing fees $ 42.4 $ 37.9 $ 4.5 12%
Sustaining listing fees(xxx) $ 40.9 $ 52.1 ($ 11.2) (21%)
Other issuer services $ 9.7 $ 12.0 ($ 2.3) (19%)
--------- --------- ---------
Total $ 105.6 $ 113.9 ($ 8.3) (7%)
--------- --------- ---------
Billed(xx)
Nine months ended
$ %
Sept. Sept. increase/ increase/
30/09 30/08 (decrease) (decrease)
Initial listing fees $ 6.9 $ 15.4 ($ 8.5) (55%)
Additional listing fees $ 62.4 $ 61.1 $ 1.3 2%
Sustaining listing fees(xxx) $ 40.9 $ 52.1 ($ 11.2) (21%)
Other issuer services $ 9.7 $ 12.0 ($ 2.3) (19%)
--------- --------- ---------
Total $ 119.9 $ 140.6 ($ 20.7) (15%)
--------- --------- ---------
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
Nine months ended
Sept. Sept.
Initial Listing Fees (in millions of dollars) 30/09 30/08
Initial listing fees billed(xx) $ 6.9 $ 15.4
Initial listing fees billed(xx) and deferred
to future periods ($ 6.6) ($ 14.7)
Recognition of initial listing fees billed(xx)
and previously included in deferred revenue $ 12.3 $ 11.2
--------- ---------
Initial listing fee revenue reported $ 12.6 $ 11.9
--------- ---------
Nine months ended
Sept. Sept.
Additional Listing Fees (in millions of dollars) 30/09 30/08
Additional listing fees billed(xx) $ 62.4 $ 61.1
Additional listing fees billed(xx) and deferred
to future periods ($ 60.0) ($ 58.6)
Recognition of additional listing fees billed(xx)
and previously included in deferred revenue $ 40.0 $ 35.4
--------- ---------
Additional listing fee revenue reported $ 42.4 $ 37.9
--------- ---------
- Initial and additional listing fees reported increased in the first
nine months of 2009 compared with the first nine months of 2008,
reflecting an increase in capital market activity during the period
from April 1, 1999 to September 30, 2009 compared with the period
from April 1, 1998 to September 30, 2008. Initial and additional
listing fees billed(xx) decreased in the first nine months of 2009,
as compared with the first nine months of 2008, due to a decrease in
initial and additional financings on TSX Venture Exchange, somewhat
offset by an increase in initial and additional financings on Toronto
Stock Exchange. While the value of initial and additional financings
on Toronto Stock Exchange in the first nine months of 2009 increased
compared with the first nine months of 2008, this was driven by a
larger proportion of high value transactions, where issuers paid the
maximum additional 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 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 $9.7 million decreased from $12.0
million in the first nine months of 2008, reflecting lower demand for
investor relations services compared with the first nine months of
2008.
------------------------------------
(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 period.
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.
Trading, Clearing and Related Revenue(4)
(in millions of dollars)
Nine months ended $ %
Sept. Sept. increase/ increase/
30/09 30/08 (decrease) (decrease)
Cash markets:
- Toronto Stock Exchange $ 54.8 $ 74.3 ($ 19.5) (26%)
- TSX Venture Exchange $ 18.4 $ 22.8 ($ 4.4) (19%)
--------- --------- ---------
$ 73.2 $ 97.1 ($ 23.9) (25%)
- Shorcan $ 12.6 $ 9.2 $ 3.4 37%
--------- --------- ---------
Cash markets revenue $ 85.8 $ 106.3 ($ 20.5) (19%)
Derivatives markets revenue $ 61.3 $ 25.8 $ 35.5 138%
Energy markets revenue $ 29.4 $ 21.5 $ 7.9 37%
--------- --------- ---------
Total $ 176.5 $ 153.6 $ 22.9 15%
--------- --------- ---------
------------------------------------
(4) The "Trading, Clearing and Related Revenue" section above contains
certain forward-looking statements. Please refer to "Forward-Looking
Information" for a discussion of risks and uncertainties related to
such statements.
Cash Markets
- Cash markets equity trading revenue from Toronto Stock Exchange
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. This decrease was partially offset by a 20% increase in
the volume of securities traded on Toronto Stock Exchange in the
first nine months of 2009 over the first nine months of 2008 (91.3
billion securities in the first nine months of 2009 versus 76.2
billion securities in the first nine months of 2008).
- Cash markets equity trading revenue from TSX Venture Exchange
decreased due to a 5% decrease in the volume of securities traded in
the first nine months of 2009 over the first nine months of 2008
(31.6 billion securities in the first nine months of 2009 versus 33.3
billion securities in the first nine months of 2008). The decrease
was also due to fee reductions that were effective in 2009.
- In October 2008, we indicated that based on historical trading
activity, patterns and product mix, changes to the equity trading fee
structure put into place effective January 1, 2009 could reduce
trading revenue by approximately $11.0 to $14.0 million on an annual
basis if offsetting benefits, including increased volumes, were not
realized. During the first nine months of 2009, there were changes in
customer and product mix including a higher proportion of volumes
coming from new ELP market participants. These changes, together with
the change in fee structure, led to a larger than anticipated
reduction in cash markets equity trading revenue.
- On August 14, 2009, we announced changes to the equity trading fee
schedule that took effect October 1, 2009. Fees under the ELP Program
have been replaced with a single tier model which reduces the passive
credit paid to ELP Program participants. The active fee paid by ELP
Program participants has also been reduced in some cases. In
addition, the revised fee schedule is expected to provide all
participants with an average reduction of 24% in active trading fees
on stocks trading at less than $1 in the post-open continuous market.
It is expected that these fee changes will have a neutral impact on
our revenues based on historical volumes and product and customer
mix. The ongoing impact of these fee changes on actual cash markets
equity trading revenue will depend on future trading activity and
product and customer mix.
- The increase in revenue from Shorcan primarily reflects an increase
in trading of Government of Canada bonds and swaps in the first nine
months of 2009 versus the first nine months of 2008.
Derivatives Markets
- Derivatives markets revenue reflects $61.3 million in trading and
clearing revenue from MX and trading revenue from BOX, compared with
$25.8 million from MX in the first nine months of 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 16% (24.9 million contracts traded in the
first nine months of 2009 versus 29.8 million contracts traded in the
first nine months of 2008) reflecting reduced trading in both the BAX
and CGB contracts, as well as index derivatives, partially offset by
an increase in ETFs derivatives and equity options trading.
- BOX volumes decreased by 11% (118.9 million contracts in the first
nine months of 2009 versus 134.1 million contracts traded in the
first nine months of 2008).
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. We
traded 20.6 million barrels of crude oil between May 1, 2009 and
September 30, 2009.
- The increase was also due to pricing changes on natural gas contracts
that were effective January 1, 2009 and also as a result of NGX
having deferred less revenue in the first nine months of 2009, on a
net basis, than in the first nine months of 2008 due to a reduced
level of forward contracts.
- The increased revenue was also due to the change in the exchange rate
of the U.S. dollar relative to the Canadian dollar in the first nine
months of 2009 compared with the first nine months of 2008.
- NGX traded or cleared 11.0 million terajoules in natural gas and
electricity contracts in the first nine months of 2009 and in the
first nine months of 2008. This excludes Watt-Ex volumes.
Market Data Revenue
(in millions of dollars)
Nine months ended
Sept. Sept.
30/09 30/08 $ increase % increase
$ 109.1 $ 97.4 $ 11.7 12%
- Market data revenue included $12.7 million in revenue related to the
business operations of MX and BOX in the first nine months of 2009,
compared with $5.3 million from MX from May 1, 2008 and BOX from
August 29, 2008. There was an 11% decrease in the average number of
MX market data subscriptions in the first nine months of 2009
compared with the five months from May 1, 2008 to September 30, 2008.
There were over 22,000 MX market data subscriptions at September 30,
2009.
- The increase was also due to the change in the exchange rate of the
U.S. dollar relative to the Canadian dollar in the first nine months
of 2009 compared with the first nine months of 2008, higher revenues
from data feeds, usage-based quotes and co-location services 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 the first nine months of 2009 compared with the first
nine months of 2008. There were over 145,000 professional and
equivalent real-time market data subscriptions at September 30, 2009.
Business Services and Other Revenue
(in millions of dollars)
Nine months ended
Sept. Sept.
30/09 30/08 $(decrease) %(decrease)
$ 12.1 $ 16.6 ($ 4.5) (27%)
- Business services revenue in first nine months of 2008 included four
months of revenue from BOX for technology and other services provided
by MX, which in the first nine months of 2009 has been eliminated on
consolidation as BOX is now a subsidiary of MX. The decrease was
somewhat offset by the inclusion of revenue from the technology
licensing arrangement with LSE.
- The decrease was also due to net foreign exchange losses on U.S.
dollar accounts receivable.
Operating Expenses
Operating expenses in the first nine months of 2009 were
Compensation and Benefits
(in millions of dollars)
Nine months ended
Sept. Sept.
30/09 30/08 $ increase % increase
$ 97.4 $ 81.4 $ 16.0 20%
- Compensation and benefits costs increased primarily due to the
inclusion of $22.6 million in costs related to MX and BOX. There were
$10.6 million in costs related to MX in the first nine months of 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 the
first nine months of 2008.
- There were 845 employees at September 30, 2009, which included 6 NTP
employees, versus 850 employees at September 30, 2008.
Information and Trading Systems
(in millions of dollars)
Nine months ended
Sept. Sept.
30/09 30/08 $ increase % increase
$ 35.0 $ 25.0 $ 10.0 40%
- Information and trading systems costs included $5.2 million in costs
related to MX and BOX, compared with $2.4 million in costs related to
MX in the first nine months of 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 data centre
enhancements, the TSX Quantum gateway, the smart order router and
enterprise expansion. In addition, there were higher expenses related
to NGX's arrangement with ICE.
General and Administration
(in millions of dollars)
Nine months ended
Sept. Sept.
30/09 30/08 $ increase % increase
$ 51.0 $ 38.0 $ 13.0 34%
- General and administration costs included $18.0 million in costs
related to MX and BOX, compared with $7.0 million in costs related to
MX in the first nine months of 2008 following the combination on May
1, 2008 and BOX from August 29, 2008.
- General and administration costs also increased as a result of
increased spending related to our technology initiatives and higher
insurance costs.
Amortization
(in millions of dollars)
Nine months ended
Sept. Sept.
30/09 30/08 $ increase % increase
$ 22.2 $ 17.3 $ 4.9 28%
- Amortization costs increased reflecting amortization of $11.7 million
related to MX and BOX, compared with $5.3 million related to MX in
the first nine months of 2008 following the combination on May 1,
2008 and BOX from August 29, 2008.
- 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)
Nine months ended
Sept. Sept.
30/09 30/08 $(decrease)
$ 0.2 $ 1.0 ($ 0.8)
- Income from investments in affiliates of $0.2 million represents TSX
Inc.'s share of CanDeal.ca Inc. (CanDeal) income for the first nine
months of 2009 based on its 47% interest in CanDeal, compared with
$0.3 million from the first nine months of 2008. CanDeal is an
electronic trading system for the institutional debt market.
- In the first nine months of 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.
Investment Income
(in millions of dollars)
Nine months ended
Sept. Sept.
30/09 30/08 $(decrease) %(decrease)
$ 4.3 $ 10.7 ($ 6.4) (60%)
- Investment income decreased due to a reduction in cash available for
investment and lower overall returns on investments during the first
nine months of 2009 compared with the first nine months of 2008.
Interest Expense
(in millions of dollars)
Nine months ended
Sept. Sept.
30/09 30/08 $(decrease) %(decrease)
$ 4.7 $ 7.1 ($ 2.4) (34%)
- 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 on a Term Facility related to financing the cash
consideration of the purchase price for MX (see Long-term Debt).
Other Acquisition Related Expenses
(in millions of dollars)
Nine months ended
Sept. Sept.
30/09 30/08 $(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, which was accrued in Q1/08.
- 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 Q2/08.
Income Taxes(5)
(in millions of dollars)
Effective tax rate (%)
Nine months ended Nine months ended
Sept. Sept. Sept. Sept.
30/09 30/08 30/09 30/08
$ 62.2 $ 75.3 32% 36%
- The effective tax rate in the first nine months of 2009 was lower
than the effective tax rate of 36% for the first nine months of 2008
primarily due to the impact of paying $15.2 million to ISE Ventures
in 2008, which was not deducted for income tax purposes.
- The effective tax rate for the first nine months of 2009 was also
somewhat lower than that for the first nine months of 2008 due to an
increase in income attributable to the Province of Quebec in the
first nine months of 2009, compared with the period from May 1, 2008
to September 30, 2008. In our case, this income is taxed at a lower
effective tax rate in Quebec. In addition, there was a lower federal
income tax rate in the first nine months of 2009 compared with the
first nine months of 2008.
- In the 2009 Ontario budget, the government proposed new tax reforms,
which, if enacted, would reduce the general corporate tax rate from
14% in 2009 to 12% by July 1, 2010, with further reductions to 10% by
July 1, 2013. Since these reforms were not substantively enacted
during the first nine months of 2009, there was no impact on Income
Taxes. If the legislation becomes substantively enacted, based on the
future income tax asset as at September 30, 2009, we estimate there
will be a net reduction in the value of the future income tax asset
of approximately $8.0 million and a corresponding increase in Income
Taxes of approximately $8.0 million. While this accounting adjustment
will have no immediate impact on cash flow, the decline in tax rates
will reduce taxes payable in future periods.
Non-controlling Interests(6)
As a result of the acquisition of control of BOX on August 29, 2008, the
results of BOX were fully consolidated into our consolidated statements of
income. MX now has a 53.8% ownership interest in BOX. The non-controlling
interests represent the other BOX unitholders' share of BOX's income before
taxes.
------------------------------------
(5) The "Income Taxes" section above contains certain forward-looking
statements. Please refer to "Forward-Looking Information" for a
discussion of risks and uncertainties related to such statements.
(6) In October 2008, BOX repurchased some of its units thereby increasing
MX's ownership interest from 53.3% to 53.8%.
Liquidity and Capital Resources
Cash, Cash Equivalents and Marketable Securities
(in millions of dollars)
September 30, December 31, $
2009 2008 (decrease)
$ 172.3 $ 198.7 ($ 26.4)
- The decrease was due to three dividend payments of $0.38 per common
share, or $84.7 million in aggregate, as well as to payments
totalling $30.4 million relating to the repurchase of 1,000,000
common shares under our normal course issuer bid (NCIB) program in
the first nine months of 2009.
- In addition, we paid $24.2 million in relation to the May 1, 2009
acquisition of NTP, net of cash acquired.
- We also paid $7.7 million for a 19.9% interest in EDX London Limited
(EDX), the equity derivatives business of LSE on May 7, 2009.
- The decrease was also due to non-acquisition related additions to
intangible assets of $10.4 million, the payment of $6.4 million in
dividends to non-controlling interests in BOX and $4.6 million in
capital expenditures.
- The decrease was somewhat offset by cash generated from operating
activities of $148.4 million.
Total Assets
(in millions of dollars)
September 30, December 31, $
2009 2008 (decrease)
$ 3,453.0 $ 3,688.6 ($ 235.6)
- Total assets decreased due to lower energy contracts receivable of
$487.5 million at September 30, 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 September 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
$487.5 million at September 30, 2009 compared with $976.4 million at
the end of 2008.
- The overall decrease was partially offset by higher MX daily
settlements and cash deposits of $610.1 million as at September 30,
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 $610.1
million at September 30, 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 ($247.1
million as at September 30, 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 $247.1 million
at September 30, 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 $30.9
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)
September 30, December 31, $
2009 2008 increase
$ 428.8 $ 428.3 $ 0.5
- In connection with the combination with MX, we established the Term
Facility 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.
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, 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
We entered into a series of interest rate swap agreements which took effect on
Other Credit Facilities and Guarantee
To backstop its clearing operations, NGX currently has a credit agreement in place with a Canadian chartered bank which includes a US$100.0 million clearing backstop fund. We are NGX's unsecured guarantor for this fund up to a maximum of US$100.0 million.
Canadian Derivatives Clearing Corporation (CDCC) has also arranged a total of
These facilities have not been drawn upon at
Shareholders' Equity
(in millions of dollars)
September 30, December 31, $
2009 2008 increase
$ 826.5 $ 794.6 $ 31.9
- 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 the first nine months of
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.
- We earned $131.5 million of net income and paid $84.7 million in
dividends during the first nine months of 2009.
- At September 30, 2009, there were 74,304,177 common shares issued and
outstanding. In the first nine months of 2009, 22,541 common shares
were issued on the exercise of share options. At September 30, 2009,
4,229,755 common shares were reserved for issuance upon the exercise
of options granted under the share option plan. At September 30,
2009, there were 1,406,554 options outstanding.
- At October 27, 2009, there were 74,305,041 common shares issued and
outstanding and 1,404,651 options outstanding under the share option
plan.
Cash Flows from Operating Activities
(in millions of dollars)
(Decrease)
Q3/09 Q3/08 in cash
Cash Flows from Operating Activities $ 37.4 $ 54.6 ($ 17.2)
Cash Flows from Operating Activities were
(in millions of dollars)
Increase/
(decrease)
Q3/09 Q3/08 in cash
Net income $ 41.7 $ 50.9 ($ 9.2)
Amortization $ 7.6 $ 7.0 $ 0.6
Unrealized (gain)/loss on marketable
securities ($ 0.6) $ 0.7 ($ 1.3)
Net (decrease) in future income taxes ($ 2.6) ($ 1.3) ($ 1.3)
Unrealized (gain) on interest
rate swaps ($ 2.2) - ($ 2.2)
(Increase)/decrease in accounts
receivable and prepaid expenses ($ 9.3) $ 8.6 ($ 17.9)
(Increase)/decrease in other assets ($ 0.9) $ 1.3 ($ 2.2)
Net increase/(decrease) in accounts
payable and accrued liabilities $ 4.8 ($ 2.5) $ 7.3
(Decrease) in deferred revenue ($ 1.9) ($ 13.2) $ 11.3
Net increase/(decrease) in income
taxes ($ 0.8) $ 2.2 ($ 3.0)
Net increase in other items $ 1.6 $ 0.9 $ 0.7
--------- --------- ---------
Cash Flows from Operating Activities $ 37.4 $ 54.6 ($ 17.2)
--------- --------- ---------
(in millions of dollars)
Nine months ended
Sept. Sept. (Decrease)
30/09 30/08 in cash
Cash Flows from Operating Activities $ 148.4 $ 183.3 ($ 34.9)
Cash Flows from Operating Activities were
(in millions of dollars)
Nine months ended
Increase/
Sept. Sept. (decrease)
30/09 30/08 in cash
Net income $ 131.5 $ 132.9 ($ 1.4)
Amortization $ 22.2 $ 17.3 $ 4.9
Unrealized (gain)/loss on marketable
securities ($ 0.3) ($ 0.2) ($ 0.1)
Payment to ISE Ventures related to
termination of joint venture - $ 15.2 ($ 15.2)
Net (decrease) in future income taxes ($ 2.6) ($ 5.2) $ 2.6
Unrealized (gain) on interest
rate swaps ($ 5.6) - ($ 5.6)
(Increase) in accounts receivable
and prepaid expenses ($ 13.1) - ($ 13.1)
(Increase)/decrease in other assets ($ 7.7) $ 5.1 ($ 12.8)
Net (decrease) in accounts payable
and accrued liabilities ($ 9.8) ($ 35.8) $ 26.0
Increase in deferred revenue $ 45.3 $ 52.1 ($ 6.8)
Net increase/(decrease) in
income taxes ($ 17.0) $ 0.5 ($ 17.5)
Net increase in other items $ 5.5 $ 1.4 $ 4.1
--------- --------- ---------
Cash Flows from Operating Activities $ 148.4 $ 183.3 ($ 34.9)
--------- --------- ---------
Cash Flows from (used in) Financing Activities
(in millions of dollars)
Increase
Q3/09 Q3/08 in cash
Cash Flows from (used in)
Financing Activities ($ 29.0) ($ 152.2) $ 123.2
Cash Flows (used in) Financing Activities were
(in millions of dollars)
Increase/
(decrease)
Q3/09 Q3/08 in cash
Dividends paid on common shares ($ 28.2) ($ 29.4) $ 1.2
Repurchase of common shares under NCIB - ($ 123.3) $ 123.3
Dividend paid to BOX non-controlling
interests ($ 1.2) - ($ 1.2)
Proceeds on term loan - ($ 0.2) $ 0.2
Proceeds from exercised options $ 0.4 $ 0.7 ($ 0.3)
--------- --------- ---------
Cash Flows from (used in)
Financing Activities ($ 29.0) ($ 152.2) $ 123.2
--------- --------- ---------
(in millions of dollars)
Nine months ended
Sept. Sept. (Decrease)
30/09 30/08 in cash
Cash Flows from (used in) Financing
Activities ($ 120.6) $ 91.5 ($ 212.1)
Cash Flows (used in) Financing Activities were
(in millions of dollars)
Nine months ended
Increase/
Sept. Sept. (decrease)
30/09 30/08 in cash
Dividends paid on common shares ($ 84.7) ($ 85.6) $ 0.9
Repurchase of common shares under NCIB ($ 30.4) ($ 257.6) $ 227.2
Dividends paid to BOX non-controlling
interests ($ 6.4) - ($ 6.4)
Proceeds on term loan - $ 427.8 ($ 427.8)
Proceeds from exercised options $ 0.5 $ 7.0 ($ 6.5)
Net increase in other items $ 0.4 ($ 0.1) $ 0.5
--------- --------- ---------
Cash Flows from (used in) Financing
Activities ($ 120.6) $ 91.5 ($ 212.1)
--------- --------- ---------
Cash Flows from (used in) Investing Activities
(in millions of dollars)
Decrease
Q3/09 Q3/08 in cash
Cash Flows from (used in) Investing
Activities ($ 3.3) $ 56.6 ($ 59.9)
Cash Flows (used in) Investing Activities were
(in millions of dollars)
Increase/
(decrease)
Q3/09 Q3/08 in cash
Additional payments related to the
2007 acquisition of The Equicom
Group Inc. (Equicom) and the 2008
acquisition of controlling interest
in BOX, net of cash acquired ($ 3.3) ($ 56.0) $ 52.7
Capital expenditures primarily
related to technology investments
and leasehold improvements ($ 2.4) ($ 1.6) ($ 0.8)
Additions to intangible assets
including TSX Quantum and SOLA
internal development costs ($ 1.9) ($ 1.6) ($ 0.3)
Net sale of marketable securities $ 4.3 $ 115.8 ($ 111.5)
--------- --------- ---------
Cash Flows from (used in) Investing
Activities ($ 3.3) $ 56.6 ($ 59.9)
--------- --------- ---------
(in millions of dollars)
Nine months ended
Sept. Sept. Increase
30/09 30/08 in cash
Cash Flows from (used in) Investing
Activities ($ 40.5) ($ 250.5) $ 210.0
Cash Flows (used in) Investing Activities were
(in millions of dollars)
Nine months ended
Increase/
Sept. Sept. (decrease)
30/09 30/08 in cash
Additional payments related to the
2007 acquisition of Equicom and
the acquisition of MX and
controlling interest in BOX,
net of cash acquired ($ 5.2) ($ 413.2) $ 408.0
Acquisition of NTP, net of cash
acquired ($ 24.2) - ($ 24.2)
Investment in EDX ($ 7.7) - ($ 7.7)
Payment to ISE Ventures related to
termination of joint venture - ($ 15.2) $ 15.2
Capital expenditures primarily
related to technology investments
and leasehold improvements ($ 4.6) ($ 4.8) $ 0.2
Additions to intangible assets
including TSX Quantum and SOLA
internal development costs ($ 10.4) ($ 5.6) ($ 4.8)
Net sale of marketable securities $ 11.6 $ 188.3 ($ 176.7)
--------- --------- ---------
Cash Flows from (used in) Investing
Activities ($ 40.5) ($ 250.5) $ 210.0
--------- --------- ---------
Co-location(7)
On
To meet the significantly-increased international demand and to accommodate the expanded co-location services, we are increasing the size of our co-location facilities. Construction has begun to prepare the new space for targeted rollout beginning in the first half of 2010. The new facility is designed to accommodate up to 200 co-location spaces, which will meet current and medium-term demand for the services. The capital expenditures associated with the expansion project are expected to be incurred between Q4/09 and Q2/10 at a cost of approximately
---------------------
(7) The "Co-location" section above contains certain forward-looking
statements. Please refer to "Forward-Looking Information" for a
discussion of risks and uncertainties related to such statements.
Financial Statements Governance Practice
The Finance & Audit Committee of the Board of Directors of TMX Group reviewed this press release as well as the Q3/09 unaudited consolidated financial statements and related Management's Discussion and Analysis (MD&A), and recommended they be approved by the Board of Directors. Following review by the full Board, the financial statements, MD&A and the contents of this press release were approved.
Consolidated Financial Statements
TMX Group's Q3/09 unaudited 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 Q3/09 unaudited consolidated financial statements and MD&A with Canadian securities regulators today, after which time the statements and related MD&A may be accessed through www.sedar.com, or on the TMX Group website at www.tmx.com. We are not incorporating information contained on the website in this press release. In addition, copies of these documents will be available upon request, at no cost, by contacting TMX Group Investor Relations by phone at (416) 947-4277 or by e-mail at [email protected].
Non-GAAP Financial Measures
Certain measures used in this press release, specifically "initial listing fees billed", "additional listing fees billed" and "issuer services revenue based on initial and additional listing fees billed" do not have standardized meanings prescribed by Canadian GAAP and therefore are unlikely to be comparable to similar measures presented by other issuers. We present these non-GAAP revenue measures as 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. 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.
We present "adjusted earnings per share prior to loss on termination of joint venture" as an indication of operating performance exclusive of the payment made on
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 involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of TMX Group to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information in this press release.
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, financial condition, operations and prospects of TMX Group, including the creation (through the combination with MX) of opportunities to create cost and revenue synergies, which are subject to significant risks and uncertainties, including competition from other exchanges or marketplaces, including alternative trading systems and new technologies, on a national and international basis; dependence on the economy of
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 exchanges; the accuracy, timing and ability to realize the projected synergies in respect of among others, cost savings, which will be dependent on, but not limited to, such factors as optimizing technology and data centres, reducing corporate costs and rationalizing premises (cost synergies are presented in this press release to provide one strategic rationale to support the benefits of the combination with MX and these estimated cost synergies should not be relied on for any other purpose); 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 2008 Annual MD&A under the heading Risks and Uncertainties; which risk factors are specifically incorporated by reference.
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 third quarter 2009.
Time:
To teleconference participants: Please call the following number at least 15 minutes prior to the start of the event.
Teleconference Number: 416-644-3425 or 1-800-732-1073
AudioWebcast: www.tsx.com, under Investor Relations
Audio Replay: 416-640-1917 and 1-877-289-8525
The passcode for the replay is 4169375 followed
by the number sign
TMX GROUP INC.
Interim Consolidated Balance Sheets
(In thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
September 30, December 31,
2009 2008
(audited)
-------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 87,412 $ 102,442
Marketable securities 84,895 96,251
Restricted cash 1,039 1,454
Accounts receivable 79,771 63,755
Energy contracts receivable 487,546 976,431
Fair value of open energy contracts 247,121 155,331
Daily settlements and cash deposits 610,111 497,312
Prepaid expenses 6,378 9,050
Income taxes recoverable 4,803 599
Future income tax assets 28,353 30,529
-----------------------------------------------------------------------
1,637,429 1,933,154
Premises and equipment 22,739 27,505
Future income tax assets 156,301 151,960
Other assets 26,243 21,072
Investment in affiliate, at equity 12,597 12,424
Intangible assets 934,876 891,976
Goodwill 662,844 650,554
-------------------------------------------------------------------------
Total Assets $ 3,453,029 $ 3,688,645
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 41,968 $ 59,311
Energy contracts payable 487,546 976,431
Fair value of open energy contracts 247,121 155,331
Daily settlements and cash deposits 610,111 497,312
Deferred revenue 42,986 12,353
Deferred revenue - initial and additional
listing fees 75,013 69,540
Fair value of interest rate swaps 2,772 1,787
Future income tax liabilities 106 66
Income taxes payable 1,473 14,121
-----------------------------------------------------------------------
1,509,096 1,786,252
Accrued employee benefits payable 13,407 12,916
Future income tax liabilities 242,101 236,995
Other liabilities 23,480 17,482
Deferred revenue 1,006 718
Deferred revenue - initial and additional
listing fees 392,231 383,315
Fair value of interest rate swaps 4,061 10,690
Term loan 428,831 428,278
-------------------------------------------------------------------------
Total Liabilities 2,614,213 2,876,646
Non-controlling Interests 12,330 17,370
Shareholders' Equity:
Share capital 1,102,417 1,084,399
Share option plan 7,995 5,969
Deficit (288,902) (319,843)
Accumulated other comprehensive income 4,976 24,104
-----------------------------------------------------------------------
Total Shareholders' Equity 826,486 794,629
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 3,453,029 $ 3,688,645
-------------------------------------------------------------------------
-------------------------------------------------------------------------
TMX GROUP INC.
Interim Consolidated Statements of Income
(In thousands of Canadian dollars, except per share amounts)
(Unaudited)
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
-------------------------------------------------------------------------
Revenue:
Issuer services $ 35,108 $ 38,024 $ 105,588 $ 113,936
Trading, clearing and
related 56,383 58,883 176,516 153,615
Market data 34,477 35,288 109,141 97,430
Business services and
other 4,275 6,988 12,097 16,583
-----------------------------------------------------------------------
Total revenue 130,243 139,183 403,342 381,564
-----------------------------------------------------------------------
Expenses:
Compensation and benefits 32,490 32,098 97,446 81,419
Information and trading
systems 12,105 9,178 34,952 24,987
General and administration 16,167 13,845 50,964 38,012
Amortization 7,607 7,031 22,157 17,258
-----------------------------------------------------------------------
Total operating expenses 68,369 62,152 205,519 161,676
-----------------------------------------------------------------------
Income from operations 61,874 77,031 197,823 219,888
(Loss) Income from
investments in affiliates (34) 503 172 1,002
Investment income 1,341 2,886 4,293 10,703
Interest expense (1,279) (4,260) (4,667) (7,055)
Net mark to market on
interest rate swaps (61) - (836) -
Other acquisition
related expenses - - - (15,902)
-------------------------------------------------------------------------
Income before income taxes 61,841 76,160 196,785 208,636
Income taxes 19,383 24,765 62,217 75,268
-------------------------------------------------------------------------
Net income before non-
controlling interests 42,458 51,395 134,568 133,368
Non-controlling interests 709 451 3,030 451
-------------------------------------------------------------------------
Net income $ 41,749 $ 50,944 $ 131,538 $ 132,917
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Earnings per share:
Basic $ 0.56 $ 0.66 $ 1.78 $ 1.82
Diluted $ 0.56 $ 0.66 $ 1.77 $ 1.82
Share information:
Weighted average number
of common shares
outstanding 74,298,278 77,025,461 74,076,037 73,017,868
Diluted weighted
average number of
common shares
outstanding 74,486,068 77,119,217 74,260,586 73,142,735
-------------------------------------------------------------------------
-------------------------------------------------------------------------
TMX GROUP INC.
Interim Consolidated Statements of Comprehensive Income
(In thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
-------------------------------------------------------------------------
Net income $ 41,749 $ 50,944 $ 131,538 $ 132,917
Other comprehensive
income (loss):
Unrealized (loss) gain
on translating
financial statements
of self-sustaining
foreign operations (11,947) 3,368 (19,128) 4,315
Unrealized fair value
(loss) on the interest
rate swaps designated
as cash flow hedges
(net of tax) - (2,277) - (2,277)
-------------------------------------------------------------------------
Comprehensive income $ 29,802 $ 52,035 $ 112,410 $ 134,955
-------------------------------------------------------------------------
-------------------------------------------------------------------------
TMX GROUP INC.
Interim Consolidated Statements of Changes in Shareholders' Equity
(In thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
Nine months ended
September 30,
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 503 6,959
Cost of exercised options 38 1,731
Purchased under normal course issuer bid (14,575) (95,969)
-----------------------------------------------------------------------
Balance, end of period 1,102,417 1,098,664
Share option plan:
Balance, beginning of period 5,969 5,060
Cost of exercised options (38) (1,731)
Cost of share option plan 2,064 1,912
-----------------------------------------------------------------------
Balance, end of period 7,995 5,241
Deficit:
Balance, beginning of period (319,843) (212,520)
Net income 131,538 132,917
Dividends on common shares (84,737) (85,591)
Shares purchased under normal course
issuer bid (15,860) (161,636)
-----------------------------------------------------------------------
Balance, end of period (288,902) (326,830)
Accumulated other comprehensive income:
Balance, beginning of period 24,104 -
Unrealized (loss) gain on translating
financial statements of self-sustaining
foreign operations (19,128) 4,315
Unrealized fair value (loss) on the
interest rate swaps designated as cash
flow hedges (net of tax) - (2,277)
-----------------------------------------------------------------------
Balance, end of period 4,976 2,038
-------------------------------------------------------------------------
Shareholders' equity, end of period $ 826,486 $ 779,113
-------------------------------------------------------------------------
-------------------------------------------------------------------------
TMX GROUP INC.
Interim Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
(Unaudited)
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
-------------------------------------------------------------------------
Cash flows from (used in)
operating activities:
Net income $ 41,749 $ 50,944 $ 131,538 $ 132,917
Adjustments to determine
net cash flows:
Amortization 7,607 7,031 22,157 17,258
Unrealized (gain) loss
on marketable securities (590) 685 (278) (157)
Loss (income) from
investments in
affiliates, at equity 34 (503) (172) (1,002)
Cost of share option plan 558 700 2,064 1,745
Payment on termination
of joint venture - - - 15,152
Amortized financing fees 185 197 554 307
Non-controlling interests 709 451 3,030 451
Unrealized (gain) on
interest rate swaps (2,176) - (5,644) -
Unrealized foreign
exchange loss 40 - 38 -
Future income taxes, net (2,589) (1,309) (2,604) (5,248)
Accounts receivable
and prepaid expenses (9,321) 8,576 (13,085) (15)
Other assets (861) 1,306 (7,723) 5,076
Accounts payable and
accrued liabilities 2,893 1,996 (16,329) (25,400)
Long-term accrued and
other liabilities 1,902 (4,538) 6,481 (10,425)
Deferred revenue (1,913) (13,188) 45,310 52,073
Income taxes (805) 2,219 (16,963) 531
---------------------------------------------------------------------
37,422 54,567 148,374 183,263
Cash flows from (used in)
financing activities:
Restricted cash 22 3 415 (71)
Proceeds from
exercised options 374 713 503 6,959
Dividends on common
shares (28,232) (29,433) (84,737) (85,591)
Shares purchased
under normal course
issuer bid - (123,233) (30,435) (257,605)
Proceeds from term
loan, net - (231) - 427,786
Dividends paid to
non-controlling
interests (1,143) - (6,353) -
---------------------------------------------------------------------
(28,979) (152,181) (120,607) 91,478
Cash flows from (used in)
investing activities:
Additions to premises
and equipment (2,472) (1,568) (4,597) (4,833)
Additions to intangible
assets (1,899) (1,597) (10,395) (5,648)
Marketable securities 4,312 115,766 11,634 188,269
Payment on termination
of joint venture - - - (15,152)
Cost of acquisitions
and investments, net
of cash acquired (3,282) (56,022) (37,101) (413,157)
---------------------------------------------------------------------
(3,341) 56,579 (40,459) (250,521)
Unrealized foreign
exchange (loss) on
cash and cash
equivalents held in
foreign subsidiaries (1,465) - (2,338) -
-------------------------------------------------------------------------
Increase (decrease) in
cash and cash equivalents 3,637 (41,035) (15,030) 24,220
Cash and cash equivalents,
beginning of period 83,775 118,653 102,442 53,398
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 87,412 $ 77,618 $ 87,412 $ 77,618
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental cash flow
information:
Interest paid $ 943 $ 2,904 $ 3,400 $ 8,044
Interest received 616 2,405 3,422 8,837
Income taxes paid 23,348 24,636 82,851 81,508
-------------------------------------------------------------------------
-------------------------------------------------------------------------
TMX GROUP INC.
Market Statistics
(Unaudited)
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
-------------------------------------------------------------------------
2009 2008 2009 2008
-------------------------------------------------------------------------
Toronto Stock Exchange:
Volume (millions) 28,310.6 25,694.3 91,338.7 76,202.0
Value ($ billions) 345.9 493.4 1,062.7 1,449.6
Transactions (000s) 44,003.2 46,008.0 147,650.3 126,175.5
Issuers Listed 1,475 1,587 1,475 1,587
New Issuers Listed: 16 21 53 99
Number of Initial
Public Offerings 8 6 36 45
Number of graduates
from TSX Venture/NEX 4 10 10 37
New Equity
Financing*:
($ millions) 18,900.5 3,726.5 44,506.3 22,112.5
Initial Public
Offering Financings
($ millions) 1,609.0 144.4 2,976.7 1,670.8
Secondary Offering
Financings*(1)
($ millions) 14,241.2 1,724.5 30,477.3 13,518.1
Supplementary
Financings
($ millions) 3,050.3 1,857.6 11,052.3 6,923.6
Market Cap of Issuers
Listed ($ billions) 1,688.6 1,661.8 1,688.6 1,661.8
S&P/TSX Composite
Index(2) Close 11,395.0 11,752.9 11,395.0 11,752.9
TSX Venture Exchange:(3)
Volume (millions) 12,452.3 7,988.7 31,571.4 33,311.3
Value ($ millions) 4,598.6 4,136.4 9,435.6 21,895.3
Transactions (000s) 1,460.5 1,201.7 3,373.3 5,007.7
Issuers Listed 2,377 2,431 2,377 2,431
New Issuers Listed 22 68 66 205
New Equity Financing:
($ millions) 1,066.8 1,607.3 2,341.8 4,984.2
Initial Public
Offering Financings
($ millions) 7.9 91.6 31.5 218.3
Secondary Offering
Financings(1)
($ millions) 1,058.9 1,515.7 2,310.3 4,765.9
Market Cap of Issuers
Listed: ($ billions) 29.9 30.2 29.9 30.2
S&P/TSX Venture
Composite Index(2)
Close 1,277.2 1,415.0 1,277.2 1,415.0
Toronto Stock Exchange
and TSX Venture
Exchange:
Professional and
Equivalent Real-time
Data Subscriptions 145,949 165,366 145,949 165,366
NGX:
Total Volume
(TJs)(4) 3,807,272.7 3,551,322.4 10,950,092.4 11,018,937.6
-------------------------------------------------------------------------
Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
-------------------------------------------------------------------------
Montreal Exchange:
Volume (Contracts)
(000s) 8,333.8 9,891.2 24,927.9 29,762.4
Open Interest
(Contracts) (000s)
as at September 30 2,703.3 2,800.4 2,703.3 2,800.4
Data Subscriptions 22,265 28,392 22,265 28,392
Boston Options Exchange:
Volume (Contracts)
(000s) 34,064.6 48,893.5 118,872.6 134,129.6
(1) Secondary Offering Financings includes prospectus offerings on both a
treasury and secondary basis.
(2) S&P is a trade-mark owned by The McGraw-Hill Companies, Inc. and is
used under license.
(3) TSX Venture Exchange market statistics do not include data for debt
securities. 'New Issuers Listed' and 'S&P/TSX Venture Composite Index
Close' statistics exclude data for issuers on NEX. All other TSX
Venture Exchange market statistics include data for issuers on NEX,
which is a board that was established on August 18, 2003 for issuers
that have fallen below TSX Venture's listing standards (170 issuers
at September 30, 2008 and 191 issuers at September 30, 2009).
(4) Natural gas volumes only.
SUPPLEMENTARY INFORMATION ON DEFERRED REVENUE - INITIAL AND ADDITIONAL
LISTING FEES(1)
As at Sept 30, 2009
Unaudited
(in millions of dollars)
-------------------------------------------------------------------------
Future amortization of deferred revenue - initial and additional listing
fees
-------------------------------------------------------------------------
Q1 Q2 Q3 Q4 Total Year
-------------------------------------------------------------------------
2009 19.0 19.0
2010 18.8 18.7 18.5 18.4 74.4
2011 18.3 18.1 17.9 17.7 72.0
2012 17.4 17.0 16.7 16.5 67.6
2013 16.2 15.9 15.4 14.9 62.4
2014 14.4 13.8 13.4 12.8 54.4
2015 12.3 11.7 11.1 10.7 45.8
2016 10.0 9.2 8.5 7.8 35.5
2017 7.0 6.1 5.1 4.4 22.6
2018 3.7 3.0 2.4 1.9 11.0
2019 1.4 0.9 0.2 - 2.5
Total deferred revenue - initial and additional listing fees $ 467.2
Note: only includes initial and additional listing fees billed up to
Sept 30, 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