HIGHLIGHTS - Q1/2008 VS. Q1/2007 - Revenues of $20.7 million compared to $21.9 million - Strong performance in equity and index derivatives - Adjusted net earnings of $8.0 million, up 5%; adjusted diluted earnings per share of $0.26 compared to $0.27 - Net earnings of $8.4 million, diluted earnings per share of $0.27 - Strong control over operating expenses with 4% decrease in expenses, excluding other items - Cash of $128.7 million at quarter end - Green light for the historic merger of the MX and the TSX Group, to create the TMX Group effective date: May 1, 2008 and election deadline: April 29, 2008 NOTE TO EDITORS: ALL REFERENCES TO EARNINGS PER SHARE HAVE BEEN RESTATED TO REFLECT THE THREE-FOR-ONE STOCK SPLIT THAT MX EFFECTED ON MARCH 15, 2007. ALL DOLLAR AMOUNTS IN THIS PRESS RELEASE ARE STATED IN CANADIAN DOLLARS.
MONTREAL, April 23 /CNW Telbec/ - Montreal Exchange Inc. (MX) (TSX: MXX) announced today its financial results for the first quarter ended March 31, 2008.
Revenues for the first quarter 2008 amounted to $20.7 million, compared to $21.9 million for the first quarter 2007, a decrease of 6% that is due primarily to the decline in market trading volumes. Net earnings reached $8.4 million, or $0.27 per diluted share, up 50% compared to the first quarter 2007. Adjusted net earnings(1), excluding other items and unrealized gains on foreign exchange on temporary investments, totalled $8.0 million or $0.26 per diluted share for the first quarter 2008, compared to $7.6 million or $0.27 per diluted share for the first quarter 2007. The increase in adjusted net earnings compared to the first quarter 2007 is mainly due to a decline in operating expenses and a rise in investment income, which more than offset the revenue decrease. Expenses in the first quarter 2008 decreased by 4% compared to the first quarter 2007, excluding other items.
Revenues for the first quarter 2008, compared to those for the preceding quarter ended December 31, 2007, were up 6%. Net earnings rose 33% while adjusted net earnings increased by 14%.
"I am very pleased with MX's first quarter earnings and with the 41% increase in combined trading activities on the Montreal Exchange and the Boston Options Exchange platforms," commented MX President and Chief Executive Officer, Luc Bertrand. "We have benefited from the very strong performance of index and equity derivatives, up 35% and 22% respectively, and built on our operating efficiency to limit the impact on our results of weak trading volumes for interest rate derivatives. It is also encouraging to see that the BAX, the Three-Month Canadian Bankers' Acceptance Futures contract, also posted a 22% increase in average daily trading compared to the preceding quarter."
"From an organizational standpoint, MX has completed the regulatory process leading to the historic merger between the Montreal Exchange and the TSX Group and to the creation of the new TMX Group," added Mr. Bertrand. "The MX team firmly believes in its growth potential within the new group. We are firmly committed to the future and to the idea of contributing to the development of a Canadian exchange group that will have unique resources to meet the needs of market participants," Mr. Bertrand concluded.
MX announced on April 18, 2008 that the effective date of the combination with TSX Group Inc. will be May 1, 2008. This is subject to all customary closing conditions and follows the receipt of all required approvals. Furthermore, MX shareholders holding share certificates that wish to make an election with respect to the consideration to be received under the amalgamation must deliver a completed transmittal and election form to CIBC Mellon Trust Company by 5:00 p.m., Montreal time, on April 29, 2008. For complete information, please refer to the April 18, 2008 news release on MX website.
The Q1 2008 Quarterly Report is available on the MX website at www.m-x.ca and the SEDAR website at www.sedar.com.
(1): Non-GAAP Performance Measures
Adjusted net earnings, adjusted operating earnings, and ratios using these measures, including adjusted diluted earnings per share, are financial measures not recognized by or calculated in accordance with Canadian generally accepted accounting principles. MX defines adjusted operating earnings as operating earnings excluding other items which are described in MX's Management's Discussion and Analysis. Adjusted net earnings is defined as net earnings excluding other items (net of tax) and unrealized gains on foreign exchange on temporary investments (net of tax). For more information, please refer to the Management's Discussion and Analysis released today.
Forward-Looking Statements
This press release contains forward-looking information within the meaning of the Quebec Securities Act and the Ontario Securities Act. Forward-looking information often contains terms such as "believe," "anticipate," "estimate," "plan," "expect," "intend," "may," "will" and similar expressions. This forward-looking information is based on current expectations, estimates, forecasts and projections about the industry in which we operate, as well as certain assumptions made by our management. Although we believe that the expectations and assumptions reflected in the forward-looking information are reasonable, forward-looking information involves known and unknown risks and uncertainties and is not a guarantee of future performance. Factors that could cause actual results to differ materially from those contemplated by this forward-looking information include, but are not limited to, risks associated with general market and economic conditions, evolving national and international competition, credit risks and clearing house risk, reliability of information systems and regulatory risks. We caution you that this list of factors is not exhaustive. The forward-looking information in this press release is subject to the risks identified in our periodic filings with the Canadian securities regulatory authorities. Given the uncertainty of forward-looking information, you are cautioned not to place undue reliance on this information. We disclaim any obligation to update any forward-looking information, except as may be required by applicable law.
About Montreal Exchange Inc.
The Montreal Exchange (MX) is the Canadian derivatives exchange. The MX offers trading in Canadian interest rate, index and equity derivatives. Clearing, settlement and risk management services are provided by an AA rated clearing house, the Canadian Derivatives Clearing Corporation, fully owned by the MX. Our integrated trading and clearing services are supported by a proprietary suite of exchange technologies, known as SOLA(R). The MX also has interests in: the Boston Options Exchange (BOX), a U.S. automated equity options market, for which MX is the technical operator; the Canadian Resources Exchange (CAREX), a new corporation created with NYMEX that is dedicated to developing the Canadian energy market; and the Montreal Climate Exchange (MCeX), a joint venture with the Chicago Climate Exchange(R), aiming to establish the leading market for publicly traded environmental products in Canada. For more information about the Montreal Exchange, please visit www.m-x.ca.
MONTREAL EXCHANGE INC.
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
(unaudited)
-------------------------------------------------------------------------
March 31, December 31,
2008 2007
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Assets
Current assets:
Cash and cash equivalents $ 71,136 $ 46,648
Temporary investments 57,588 80,023
Restricted cash 1,377 1,650
Receivables 8,961 7,841
Daily settlements due from clearing members 71,213 23,817
Clearing members' cash margin deposits 30,800 492
Clearing fund cash deposits 22,715 22,949
Prepaid expenses 1,153 1,166
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264,943 184,586
Long-term investment 11,768 10,869
Capital assets 15,376 15,454
Future income taxes 2,019 2,359
Other assets 2,075 1,988
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$ 296,181 $ 215,256
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accruals $ 9,121 $ 13,848
Daily settlements due to clearing members 71,213 23,817
Clearing members' cash margin deposits 30,800 492
Clearing fund cash deposits 22,715 22,949
Income taxes payable 322 1,154
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134,171 62,260
Future income taxes 1,624 1,606
Accrued employee benefits liability 1,069 999
Shareholders' equity:
Capital stock 139,812 139,712
Contributed surplus 658 572
Retained earnings 20,928 12,553
Accumulated other comprehensive loss (2,081) (2,446)
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159,317 150,391
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$ 296,181 $ 215,256
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MONTREAL EXCHANGE INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands of dollars, except per share amounts and number of shares)
(unaudited)
-------------------------------------------------------------------------
Three months ended
March 31, March 31,
2008 2007
-------------------------------------------------------------------------
Revenues:
Transactions $ 8,996 $ 10,768
Clearing and option exercise 3,306 3,899
Information systems services 4,334 3,600
Market data 2,978 2,635
Participants 932 870
Other 133 141
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20,679 21,913
Expenses:
Compensation and benefits 6,897 6,342
Occupancy 997 816
Computer licences and maintenance 488 1,288
Amortization of capital assets and other assets 872 806
General and administrative 1,762 2,362
Telecommunications 804 620
Public affairs 377 482
Interest on obligations under capital leases
and debts due within one year - 14
Other items 410 2,725
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12,607 15,455
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Operating Earnings 8,072 6,458
Investment income 3,239 665
Equity in results of a company subject to
significant influence 534 656
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Earnings before income taxes 11,845 7,779
Income taxes
Current 3,104 1,677
Future 366 528
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3,470 2,205
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Net earnings $ 8,375 $ 5,574
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Basic earnings per share $ 0.27 $ 0.20
Diluted earnings per share $ 0.27 $ 0.20
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Weighted average number of shares
outstanding - basic 30,633,959 27,792,659
Weighted average number of shares
outstanding - diluted 30,656,800 28,216,474
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MONTREAL EXCHANGE INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands of dollars)
(unaudited)
-------------------------------------------------------------------------
Three months ended
March 31, March 31,
2008 2007
-------------------------------------------------------------------------
Net earnings $ 8,375 $ 5,574
Other comprehensive income (loss)
Unrealized gain or (loss) on translating
financial statements of a self-sustaining
foreign operation 365 (113)
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Comprehensive income $ 8,740 $ 5,461
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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands of dollars)
(unaudited)
-------------------------------------------------------------------------
March 31, March 31,
2008 2007
-------------------------------------------------------------------------
Capital stock at beginning of period $ 139,712 $ 49,258
Issuance of common shares
New issuance of common shares - 90,866
Transaction fees related to issued common
shares, net of income taxes of $391 - (1,199)
Stock Option Plan - 103
Variation of shares held in guarantee 100 1,928
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Capital stock at end of period 139,812 140,956
-------------------------------------------------------------------------
Contributed surplus at beginning of period 572 434
Stock option expense 86 -
Employee share purchase plan expense 19 23
Stock options exercised and share purchase plan
reimbursed (19) (23)
-------------------------------------------------------------------------
Contributed surplus at end of period 658 434
-------------------------------------------------------------------------
Retained earnings at beginning of period 12,553 16,991
Net earnings 8,375 5,574
Impact of initial adoption of new accounting
standards - 571
Dividends - (9,293)
-------------------------------------------------------------------------
Retained earnings, end of period 20,928 13,843
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Accumulated other comprehensive loss, beginning
of period (2,446) (966)
Impact of changes in currency rates on net
investment in self-sustaining foreign operation
and impact resulting from distributions from a
company subject to significant influence 365 (113)
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Accumulated other comprehensive loss, end of
period (2,081) (1,079)
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Shareholders' equity, end of period $ 159,317 $ 154,154
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MONTREAL EXCHANGE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
(unaudited)
-------------------------------------------------------------------------
Three months ended
March 31, March 31,
2008 2007
-------------------------------------------------------------------------
Cash flows from (used in) operating activities:
Net earnings $ 8,375 $ 5,574
Adjustments for:
Amortization of capital assets and other
assets 872 806
Equity in results of a company subject to
significant influence (534) (656)
Amortization of premium on investments 15 20
Interest income on discount investments 46 (295)
Future income taxes 366 137
Cost of stock option plan and employee share
purchase plan 105 23
Change in fair value of financial instruments
held for trading (589) 56
Unrealized gain on foreign exchange (1,067) -
Net change in non-cash operating assets and
liabilities:
Receivables (1,120) (1,267)
Prepaid expenses 13 413
Accounts payable, accruals and income taxes
payable (5,567) (5,305)
Increase in the accrued employee benefits
liability 70 -
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985 (494)
Cash flows from (used in) investing activities:
Purchase of capital assets (693) (854)
(Increase) decrease in other assets (188) 278
Purchase of investments (71,999) (301,575)
Sale of investments 96,029 303,160
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23,149 1,009
Cash flows from (used in) financing activities:
Restricted cash 273 749
Repayment of obligations under capital leases
and debts - (372)
Share issuance 81 91,675
Dividends - (13,910)
-------------------------------------------------------------------------
354 78,142
-------------------------------------------------------------------------
Net increase in cash and cash equivalents 24,488 78,657
Cash and cash equivalents, beginning of period 46,648 22,919
-------------------------------------------------------------------------
Cash and cash equivalents, end of period 71,136 101,576
Temporary investments, end of period 57,588 36,074
-------------------------------------------------------------------------
Cash and cash equivalents, and temporary
investments, end of period $ 128,724 $ 137,650
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Supplemental cash flow information:
Interest paid $ - $ 14
Income taxes paid 3,952 4,718
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