KANSAS CITY, Mo., Nov. 13, 2008 (GLOBE NEWSWIRE) -- FCStone Group, Inc. (Nasdaq:FCSX), a commodity risk management firm, today announced higher year-over-year revenues for its fourth fiscal quarter ended August 31, 2008.
Fourth Quarter Results
Revenues, net of cost of commodities sold, a non-GAAP financial measure, were $88.3 million in the three months ended August 31, 2008, compared to $75.8 million in the same prior year quarter, an increase of 16.5%. Net income decreased to $7.4 million, or $0.25 per diluted share, for the fourth quarter, compared to $12.0 million, or $0.42 per diluted share, in the prior year quarter.
Net income from continuing operations decreased to $8.1 million, or $0.28 per diluted share for the fourth quarter, compared to $12.0 million, or $0.42 per diluted share, in the same prior year quarter.
Results for the fourth quarter of 2008 and the fourth quarter of 2007 were affected by the following:
* A charge in the fourth quarter of 2008 of $0.8 million,
equal to $0.03 per diluted share, net of tax in connection
with the company's decision to freeze all benefit accruals
under its pension plans. For the upcoming fiscal year
2009, we expect to realize a savings of approximately $0.9
million, net of tax, in pension related expenses related
to the freezing of the pension plans,
* A charge in the fourth quarter of 2008 of $0.7 million,
equal to $0.03 per diluted share, net of tax in connection
with the impairment losses from the Green Diesel biodiesel
plant and losses from the discontinuation of operations of
such plant and its disposal,
* An effective tax rate for the fourth quarter of 47.5%
resulting from the year end tax calculations. The income
tax calculations for the full year were based on the 2007
tax return which was filed in June 2008. As a result of
the sale of the Company's majority stake of the Grain
Merchandising segment, the Company realized an approximate
2.0% increase in the effective state tax rates. For the
full fiscal year 2008 the Company's effective tax rate was
39.5% as a result of these adjustments, and
* Amounts for the fourth quarter of 2007, net of tax, of
$800,000, equal to $0.03 per diluted share, for special or
one-time items, including a $2.6 million gain on the sale
of a portion of the Company's membership units of FGDI, LLC,
a $0.5 million dividend received on Chicago Board of Trade
stock, a $3.7 million gain on the sale of CME Group, Inc.
common stock and a loss of $5.6 million from investments
managed by Sentinel Management.
The following table presents results on a total and per share basis.
Financial Highlights
(In thousands, except per share amounts)
Three Months Ended Year Ended
August 31, August 31,
-------------------- ----------------------
2008 2007 2008 2007
-------- -------- --------- ---------
Non-GAAP Revenues,
net of cost of
commodities sold
(1)(3) $88,227 $75,754 $336,457 $257,757
Income from
continuing
operations before
income tax
expense(1)(3) $15,497 $19,297 $ 78,288 $ 53,588
Net income from
continuing
operations $ 8,130 $12,097 $ 47,421 $ 33,588
Loss from
discontinued
operations, net
of tax $ (746) $ (123) $ (6,829) $ (311)
Net income(2)(4) $ 7,384 $11,974 $ 40,592 $ 33,277
Diluted weighted
average shares
outstanding 28,793 28,753 28,934 25,051
Diluted earnings
per share,
continuing
operations $ 0.28 $ 0.42 $ 1.64 $ 1.34
Diluted loss per
share,
discontinued
operations (0.03) -- (0.24) (0.01)
Diluted earnings
per share $ 0.25 $ 0.42 $ 1.40 $ 1.33
(1) Amounts for the three months ended and year ended August 31, 2007 include a net amount of $1.2 million for special or one-time items, which include a $2.6 million gain on the sale of a portion of the Company's membership units of FGDI, LLC, a $0.5 million dividend received on Chicago Board of Trade stock, a $3.7 million gain on the sale of CME Group, Inc. common stock and a loss of $5.6 million from investments managed by Sentinel Management.
(2) Amounts for the three months ended and year ended August 31, 2007 include after tax effect of the items noted in (1) above of approximately $0.8 million.
(3) Amounts for the three months ended August 31, 2008 include $1.5 million charge related to the freezing of all benefit accruals under the Company's pension plan.
(4) Amounts for the three months ended August 31, 2008 include after tax effect of the items noted in (3) above of approximately ($0.8) million.
The increase in fourth quarter revenues, net of cost of commodities sold, from the prior year fourth quarter was driven by higher exchange traded and over-the-counter (OTC) volumes. This growth was primarily related to continued volatility in the grain, energy, metals, and soft commodity markets and higher OTC volumes from our energy, renewable fuels and Brazilian customers. These volumes have been slightly offset by lower interest income due to prevailing market rates, although interest income was positively influenced by higher customer segregated assets and increased margin requirements.
Costs and expenses, exclusive of cost of commodities sold, were higher compared to the prior year primarily due to higher volume-related costs of broker commissions and pit brokerage and clearing fees and a $1.5 million charge related to the Company's decision to freeze all benefit accruals under its pension plans. The Company estimates this action will result in an estimated pre-tax savings of $1.5 million in fiscal year 2009.
"Despite the turmoil in the broader economy, FCStone continued along the path of steady growth in our core business segments during our fourth fiscal quarter," said Pete Anderson, President and Chief Executive Officer of FCStone. "Looking back on fiscal 2008, the success and operating results we achieved are evidence of our core business strength and ability to generate improved earnings, growing revenues and strong operating cash flows during unprecedented volatility in many of the markets we serve. A large portion of this growth is attributable to the ability of our risk management consultants to continually react to the changing needs of the customer by identifying new products, structures and solutions to manage their commodity risk. We believe that the Company will continue to advance in the current market environment in all of our core business segments that have been the foundation of FCStone, with steady growth driven by our Commodity and Risk Management Services Segment."
Fiscal Year Results
Revenues, net of cost of commodities sold, a non-GAAP financial measure, were $336.5 million for the fiscal year 2008, compared to $257.8 million during the fiscal year 2007, an increase of 30.5%. Net income increased 21.9% to $40.6 million for the fiscal year 2008, or $1.40 per diluted share, compared to $33.3 million, or $1.33 per diluted share during fiscal year 2007.
Net income from continuing operations increased to $47.4 million, or $1.64 per diluted share for the fiscal year 2008, compared to $33.6 million, or $1.34 per diluted share during the fiscal year 2007.
"It's important to note that unlike previous quarters in 2008, the market interest rate environment remained stable during our fourth fiscal quarter," said Bill Dunaway, Chief Financial Officer. "Taking in to account the current economic headwinds, we believe that this recent quarter shows the resiliency of our business model and our ability to operate in an extremely volatile marketplace. We are pleased to report that both our over the counter and exchange traded contract volumes have continued to exceed expectations and for the second quarter in a row, have put out new record highs. We believe this core business momentum will continue to deliver strong growth for FCStone going forward."
Operating Segments
FCStone's income (loss) from continuing operations before minority interest and income tax expense by segment and certain other data are outlined below for the periods noted.
Three Months Ended Year Ended
August 31, August 31,
---------------------- ---------------------
2008 2007 2008 2007
---- ---- ---- ----
Segment Data: ($ in thousands)
Income (loss) from
continuing
operations before
minority interest
and income tax
expense:
Commodity and Risk
Management
Services(1)(2) $ 13,272 $ 19,083 $ 67,550 $ 45,721
Clearing and
Execution
Services(1)(2) 5,089 (1,231) 20,161 9,610
Financial Services 506 48 1,689 1,052
Grain Merchandising -- -- -- 2,130
Corporate and
Other(1)(2) (3,466) 1,397 (11,258) (4,286)
---------- -------- ---------- --------
$ 15,401 $ 19,297 $ 78,142 $ 54,227
========== ======== ========== ========
Other Data:
Non-GAAP -
EBITDA(1) $ 17,458 $ 20,557 $ 85,989 $ 65,273
Exchange contract
trading volume
(000's) 21,545 20,515 98,611 60,979
Customer
Segregated
Assets, end of
period(000's) $1,528,028 $997,436 $1,528,028 $997,436
(1) Amounts for the three months ended and year ended August 31, 2007 include the following special or one-time items by segment: a $2.6 million gain from the sale of FGDI stock in the Corporate and Other segment; a $0.5 million dividend received on CBOT stock and a $3.7 million gain on the sale of CME stock included in the Commodity and Risk Management Services segment; and a $5.6 million loss from investments managed by Sentinel Management included in the Clearing and Execution Services segment.
(2) Amounts for the three months ended August 31, 2008 include a charge related to the freezing of all benefit accruals under the Company's pension plans in the following segments: $0.9 million in the Commodity and Risk Management Services segment; $0.2 million in the Clearing and Execution segment; and $0.4 million in the Corporate segment.
In the Commodity and Risk Management Services segment, revenues, net of cost of commodities sold, were $49.2 million in the fourth quarter ended August 31, 2008, compared to $45.5 million in the prior year quarter, an increase of 8%. Segment income before minority interest and income tax for the fourth quarter 2008 decreased to $13.3 million, compared to $19 million in the same prior year quarter. This was primarily a result of $2.1 million in lower interest income in 2008 and a $4.2 million gain on CME and CBOT stock in 2007.
For the Clearing and Execution Services segment, revenues, net of cost of commodities sold, were $36.7 million in the fourth quarter ended August 31, 2008, compared to $26.0 million in the prior year quarter, an increase of 41.2%. Segment income before minority interest and income tax was $5.0 million in the fourth quarter, compared to a net loss of $1.2 million in the prior year quarter, resulting from a $5.6 million charge from investments managed by Sentinel Management.
The Financial Services segment reported revenues, net of cost of commodities sold, of $1.3 million in the fourth quarter ended August 31, 2008, compared to $1.6 million in the prior year quarter, a decrease of 19%. Segment income increased to $506 thousand for the fourth quarter, compared to $48 thousand in the prior year quarter.
Our Corporate and Other segment included income primarily from our minority interest in a grain merchandising business during the three months ended August 31, 2008, similar to the same period a year ago.
Business Outlook
Commenting on the Company's fiscal year results and future expectations, Anderson said, "Demand for prudent risk management programs has never been greater, particularly as economic stress points continue to build across virtually every commodity market. We continue to advise and provide value for our customers amidst market conditions of increased volatility and stringent credit conditions. While FCStone is not immune to market volatility and credit risks, we have renewed our focus on providing reliable risk management solutions for our customers, which should provide long-term value to our shareholders."
Conference Call & Web Cast
A conference call will be held today, November 13th, 2008 at 9:00 a.m. (ET). A live web cast of the conference call as well as a replay will be available online on the Company's corporate web site at http://www.fcstone.com. Participants can also access the call by dialing (800) 240-5318 (within the United States and Canada), or (303) 262-2053 (international callers). A replay of the call will be available approximately two hours after the call has ended and will be available until 11:59 p.m. (CT) on Friday, December 12, 2008. To access the replay, dial (800) 405-2236 (within the United States and Canada), or (303) 590-3000 (international callers) and enter the conference ID number: 11122158#.
About FCStone Group, Inc.
FCStone Group, Inc., along with its affiliates, is an integrated commodity risk management company providing risk management consulting and transaction execution services to commercial commodity intermediaries, end-users and producers. The firm assists primarily middle market customers in optimizing their profit margins and mitigating exposure to commodity price risk. In addition to risk management consulting services, FCStone, LLC, operates one of the leading independent clearing and execution platforms for exchange-traded futures and options contracts. FCStone Group, Inc., serves more than 8,000 customers and in the 12 months ended August 31, 2008, executed 100.0 million derivative contracts in the exchange-traded and over-the-counter markets. The FCStone Group companies work in all the major commodity areas including agriculture, energy, renewable fuels, foods, forestry, cotton and textile, dairy and currency exchange. Headquartered in the Midwest, it has offices located throughout the world and is a clearing member of all major North American futures exchanges. FCStone Group, Inc., trades on the NASDAQ Global Select Market under the symbol "FCSX."
Forward Looking Statements
This press release may include forward-looking statements regarding, among other things, our plans, strategies and prospects, both business and financial. All statements other than statements of current or historical fact contained in this press release are forward-looking statements. The words "believe," "expect," "anticipate," "should," "plan," "will," "may," "could," "intend," "estimate," "predict," "potential," "continue" or the negative of these terms and similar expressions, as they relate to FCStone Group, Inc., are intended to identify forward-looking statements.
We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. They can be affected by inaccurate assumptions, including the risks, uncertainties and assumptions described in the Company's filings with the Securities and Exchange Commission. In light of these risks, uncertainties and assumptions, the forward-looking statements in this press release may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. When you consider these forward-looking statements, you should keep in mind these risk factors and other cautionary statements in this press release.
Our forward-looking statements speak only as of the date of this press release. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Use of NON-GAAP Financial Information
In this press release we disclose "revenues, net of cost of commodities sold", and "EBITDA", both of which are non-GAAP financial measures. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure, calculated and prepared in accordance with generally accepted accounting principles in the United Sates (GAAP). Revenues, net of cost of commodities sold, is not a substitute for the GAAP measure of total revenues. EBITDA is not a substitute for the GAAP measure of net income or cash flows. Such non-GAAP financial measures are reconciled to its closest GAAP measure, in accordance with the Securities and Exchange Commission rules, and are included in the attached supplemental data. Management believes that these non-GAAP financial measures are useful to both management and its stockholders in their analysis of the company's business and operating performance.
FCSTONE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
Three Months Ended Year Ended
August 31, August 31,
------------------ ---------------------
2008 2007 2008 2007
------- ------- -------- ----------
Revenues:
Commissions and
clearing fees $46,479 $43,530 $179,188 $ 145,077
Service, consulting
and brokerage fees 28,904 18,527 97,700 47,679
Interest 10,759 11,785 48,294 42,957
Other 2,105 1,917 10,372 4,497
Sales of commodities 14 -- 1,972 1,101,752
------- ------- -------- ----------
Total revenues 88,261 75,759 337,526 1,341,962
------- ------- -------- ----------
Costs and expenses:
Cost of commodities
sold 34 5 1,069 1,084,205
Employee compensation
and broker
commissions 19,394 14,900 65,936 49,524
Pit brokerage and
clearing fees 30,483 20,796 104,045 67,978
Introducing broker
commissions 8,411 10,842 33,304 36,050
Employee benefits and
payroll taxes 3,934 2,426 13,746 10,678
Interest 1,301 868 5,705 9,937
Depreciation and
amortization 660 412 1,996 1,748
Bad debt expense 93 -- 1,998 1,632
Other expenses 8,550 6,213 31,585 25,983
------- ------- -------- ----------
Total costs and expenses 72,860 56,462 259,384 1,287,735
------- ------- -------- ----------
Income from continuing
operations before
income tax expense and
minority interest 15,401 19,297 78,142 54,227
Minority interest (96) -- (146) 639
------- ------- -------- ----------
Income from continuing
operations before
income tax expense 15,497 19,297 78,288 53,588
Income tax expense 7,367 7,200 30,867 20,000
------- ------- -------- ----------
Net income from
continuing operations 8,130 12,097 47,421 33,588
Loss from discontinued
operations, net of tax (746) (123) (6,829) (311)
------- ------- -------- ----------
Net income $ 7,384 $11,974 $ 40,592 $ 33,277
======= ======= ======== ==========
Basic shares outstanding 27,966 27,419 27,749 24,500
Diluted shares
outstanding 28,793 28,753 28,934 25,051
Basic earnings (loss)
per share:
Continuing operations $ 0.29 $ 0.44 $ 1.71 $ 1.37
Discontinued
operations (0.02) -- (0.25) (0.01)
------- ------- -------- ----------
Net income $ 0.27 $ 0.44 $ 1.46 $ 1.36
======= ======= ======== ==========
Diluted earnings (loss)
per share:
Continuing operations $ 0.28 $ 0.42 $ 1.64 $ 1.34
Discontinued operations (0.03) -- (0.24) (0.01)
------- ------- -------- ----------
Net income $ 0.25 $ 0.42 $ 1.40 $ 1.33
======= ======= ======== ==========
FCSTONE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
(in thousands, except share amounts)
August 31, August 31,
2008 2007
---------- ----------
ASSETS
Cash and cash equivalents:
Unrestricted $ 73,646 $ 90,053
Segregated 8,355 14,250
Commodity deposits and receivables:
Commodity exchanges and clearing
organizations--customer segregated 1,306,477 686,441
Proprietary commodity accounts 253,998 77,690
Receivables from customers, net of
allowance for doubtful accounts 19,603 16,868
---------- ----------
Total commodity deposits and
receivables 1,580,078 780,999
---------- ----------
Marketable securities, at fair value--
customer segregated and other 241,333 307,828
Counterparty deposits and trade accounts
receivable, net of allowance for doubtful
accounts 71,714 20,746
Open contracts receivable 308,016 120,219
Notes receivable and advances 77,979 49,291
Exchange memberships and stock 11,473 10,366
Equipment, furniture, software and
improvements, net of accumulated
depreciation 7,267 4,763
Assets held for sale 3,664 --
Other assets 37,953 21,679
---------- ----------
Total assets $2,421,478 $1,420,194
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Commodity and customer regulated accounts
payable $1,486,299 $ 935,515
Trade accounts payable and advances 257,941 115,145
Open contracts payable 297,926 121,101
Accrued expenses 51,709 38,632
Notes payable and repurchase obligations 79,190 35,133
Subordinated debt 16,000 1,000
---------- ----------
Total liabilities 2,189,065 1,246,526
---------- ----------
Minority interest 4,855 --
Stockholders' equity:
Common stock, $0.0001 par value, authorized
40,000,000 at August 31, 2007 and
August 31, 2008, respectively; issued and
outstanding 27,416,567 and 27,911,127
shares at August 31, 2007 and August 31,
2008, respectively 108,016 104,267
Additional paid-in capital 10,777 1,115
Treasury stock (2,185) (376)
Accumulated other comprehensive loss (1,632) (3,620)
Retained earnings 112,582 72,282
---------- ----------
Total stockholders' equity 227,558 173,668
---------- ----------
Commitments and contingencies
Total liabilities and stockholders'
equity $2,421,478 $1,420,194
========== ==========
FCSTONE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Year Ended August 31,
------------------------------------
2008 2007 2006
-------- --------- --------
Cash flows from operating
activities:
Net income $ 40,592 $ 33,277 $ 15,257
Plus: Loss from discontinued
operations 6,829 311 --
------------------------------------
Income from continuing
operations 47,421 33,588 15,257
Adjustments to reconcile
income from continuing
operations to net cash flows
from operating activities:
Depreciation and amortization 1,996 1,748 1,674
Other 101 (55) (46)
Gain on sale of FGDI
membership units -- (2,595) --
Gain on sale and conversion
of exchange memberships,
stock and trading rights (3,748) (3,776) --
Gain on sale of other assets (930) -- --
Stock compensation 1,698 -- --
Excess tax benefit of stock
options (8,382) -- --
Equity in earnings of
affiliates, net of
distributions (2,533) (294) 591
Minority interest, net of
distributions (146) 639 (237)
Change in commodity accounts
receivable/payable,
marketable securities,
customer segregated funds,
counterparty deposits and
advances, net (89,234) (51,901) 8,328
Change in open contracts
receivable/payable, net (10,972) (21,371) (30,001)
Decrease in trade accounts
receivable and advances 1,326 2,989 1,191
Increase in inventories-
grain, fertilizer and fuel -- (4,635) (12,023)
Increase in other assets 3,945 (5,290) (3,588)
Decrease (increase) in trade
accounts payable and
advances 5,261 10,018 50,632
Increase in accrued expenses 11,194 11,176 9,233
------------------------------------
Net cash (used in) provided
by operating activities (43,003) (29,759) 41,011
------------------------------------
Cash flows from investing
activities:
Purchase of furniture,
equipment, software and
improvements (4,425) (2,847) (1,255)
Proceeds from the sale of
FGDI membership units, net
of cash held by FGDI -- 3,934 --
Acquisition of equity
investment -- -- (2,405)
Acquisition of minority
interest -- -- (911)
Acquisition of businesses (7,000) -- --
Purchase of marketable
securities -- (25,000) --
Issuance of notes receivable,
net (39,366) (27,342) (5,458)
Purchase of exchange
memberships and stock -- (1,855) (5,403)
Proceeds from the sale and
conversion of exchange
memberships, stock and
trading rights 5,164 4,237 613
Proceeds from the sale of
other intangibles 1,972 -- --
Purchase of other intangibles (1,054) -- --
------------------------------------
Net cash used in investing
activities (44,709) (48,873) (14,819)
------------------------------------
Cash flows from financing
activities:
(Decrease) increase in checks
written in excess of bank
balance -- (1,656) 1,556
Proceeds from notes payable,
net 40,729 35,996 11,258
Proceeds from initial public
offering, net of issuance
and registration costs -- 129,643 --
Proceeds from issuance of
common stock, net of
registration costs -- 1,373 --
Proceeds from exercises of
stock options 3,749 -- --
Proceeds from issuance of
redeemable common stock
held by ESOP -- -- 223
Proceeds from issuance of
subsidiary stock, net of
costs 4,583 -- --
Payment for redemption of
common stock -- (48,496) --
Treasury stock acquired (1,809) -- --
Excess tax benefit of stock
option exercises 8,382 -- --
Dividends paid -- (6,057) (2,898)
Payments under capital lease -- (413) (550)
Proceeds from subordinated
debt 31,000 9,500 4,500
Payment of subordinated debt (16,000) (14,500) (3,000)
Monies deposited in escrow -- (54) (2,600)
Monies released from escrow -- 3,623 --
------------------------------------
Net cash provided by
financing activities 70,634 108,959 8,489
------------------------------------
Cash flows provided by
discontinued operations:
Net cash from operating
activities 2,382 -- --
Net cash used in investing
activities (1,711) -- --
------------------------------------
Net cash provided by
discontinued operations 671 -- --
------------------------------------
Net (decrease) increase in
cash and cash equivalents
-unrestricted (16,407) 30,327 34,681
Cash and cash equivalents
-unrestricted-
at beginning of year 90,053 59,726 25,045
------------------------------------
Cash and cash equivalents
-unrestricted-at end of year $ 73,646 $ 90,053 $ 59,726
====================================
Supplemental disclosures of
cash flow information:
Cash paid during the year for:
Interest $ 6,164 $ 10,196 $ 5,587
Income taxes 26,612 19,632 10,335
Non-GAAP Financial Measures
The following table reconciles revenues, net of cost of
commodities sold, with our total revenues.
Three Months Ended Year Ended
------------------ ---------------------
August 31, August 31,
2008 2007 2008 2007
-------- ------- -------- ---------
($ in thousands)
Revenues:
Commissions and clearing
fees $ 46,479 $43,530 $179,188 $ 145,077
Service, consulting and
brokerage fees 28,904 18,527 97,700 47,679
Interest 10,759 11,785 48,294 42,957
Other 2,105 1,917 10,372 4,497
Sales of commodities 14 1,972 1,101,752
Total revenues 88,261 75,759 337,526 1,341,962
Less: Cost of commodities
sold 34 5 1,069 1,084,205
-------- ------- -------- ----------
Revenues, net of cost of
commodities sold $ 88,227 $75,754 $336,457 $ 257,757
======== ======= ======== ==========
The following table
reconciles EBITDA with
our net income.
Three Months Ended Year Ended
------------------ ---------------------
August 31, August 31,
2008 2007 2008 2007
-------- ------- -------- ---------
($ in thousands)
Net income: $ 7,384 $ 11,974 $ 40,592 $ 33,277
Plus: interest expense 1,301 868 5,705 9,937
Plus: depreciation and
amortization 660 412 1,996 1,748
Plus: income tax expense 7,367 7,200 30,867 20,000
Plus: loss on
discontinued operations
net of tax 746 123 6,829 311
-------- ------- -------- ----------
EBITDA $ 17,458 $ 20,577 $ 85,989 $ 65,273
======== ======= ======== ==========
Commodity and Risk Management Services Segment:
The following table provides the financial performance
for this segment.
Three Months
Ended Year Ended
August 31, August 31,
----------------- ------------------
2008 2007 2008 2007
------ ------ ------- ------
($ in thousands)
Sales of commodities $14 $(1) $1,972 $3,806
Cost of commodities sold 34 5 1,069 3,727
------ ------ ------- ------
Gross profit on
commodities sold (20) (6) 903 79
Commissions and clearing
fees 15,659 16,277 55,871 54,367
Service, consulting and
brokerage fees 29,033 18,679 98,140 48,227
Interest 4,184 6,264 18,972 20,445
Other revenues (1) 372 4,329 3,475 4,476
------ ------ ------- ------
Revenues, net of cost of
commodities sold 49,228 45,543 177,361 127,594
Other costs and expenses:
Expenses (excluding
interest expense) (2) 35,596 26,351 109,118 81,480
Interest expense 360 109 693 393
------ ------ ------- ------
Total costs and expenses
(excluding cost of
commodities sold) 35,956 26,460 109,811 81,873
------ ------ ------- ------
Segment income before
minority interest and
income taxes (1) (2) $13,272 $19,083 $67,550 $45,721
======= ======= ======= =======
Exchange contract trading
volume (000's) 1,090 888 3,543 3,121
OTC Contract volume (000's) 396 288 1,361 751
(1) Includes $4.2 million from the combined gain on the sale of
CME stock and dividends from CBOT stock in the three months ended and
year ended August 31, 2007.
(2) Includes ($0.9) million charge related to the freezing of all
benefit accruals related to the Company's pension plans.
Clearing and Execution Segment:
The following table provides the financial
performance for this segment.
Three Months
Ended Year Ended
August 31, August 31,
------------------ ------------------
2008 2007 2008 2007
------ ------ ------- ------
($ in thousands)
Sales of commodities $ -- $ -- $ -- $ --
Cost of commodities sold -- -- -- --
------ ------- ------- ------
Gross profit on
commodities sold -- -- -- --
Commissions and clearing
fees 30,891 27,533 124,070 91,486
Service, consulting and
brokerage fees -- -- -- --
Interest 5,388 3,985 22,237 15,707
Other revenues (1) 453 (5,525) 878 (5,420)
------ ------- ------- ------
Revenues, net of cost of
commodities sold 36,732 25,993 147,185 101,773
Other costs and expenses:
Expenses (excluding
interest expense) (2) 31,631 27,203 126,957 91,570
Interest expense 12 21 67 593
------ ------ ------- ------
Total costs and expenses
(excluding cost of
commodities sold) 31,643 27,224 127,024 92,163
------ ------ ------- ------
Segment income before
minority interest and
income taxes (1) (2) $ 5,089 $ (1,231) $ 20,161 $ 9,610
======= ========= ======== =======
Exchange contract trading
volume (000's) 20,456 19,627 95,068 57,858
(1) Includes a loss of $5.6 million from investments managed by
Sentinel Management in the three months ended and year ended August,
31, 2007
(2) Includes ($0.2) million charge related to the freezing of all
benefit accruals related to the Company's pension plans.
Financial Services Segment:
The following table provides the financial
performance for this segment.
Three Months
Ended Year Ended
August 31, August 31,
------------------ -----------------
2008 2007 2008 2007
------ ----- ------ -------
($ in thousands)
Sales of commodities $ -- $ 1 $ -- $20,007
Cost of commodities sold -- -- -- 19,904
------ ----- ------ -------
Gross profit on
commodities sold -- 1 -- 103
Commissions and clearing
fees -- -- -- --
Service, consulting and
brokerage fees -- -- -- --
Interest 1,025 1,118 6,494 7,179
Other revenues 320 463 2,692 1,798
------ ----- ------ -------
Revenues, net of cost of
commodities sold 1,345 1,582 9,186 9,080
Other costs and expenses:
Expenses (excluding
interest expense) (122) 723 2,378 2,344
Interest expense 961 811 5,119 5,684
------ ----- ------ -------
Total costs and expenses
(excluding cost of
commodities sold) 839 1,534 7,497 8,028
------ ----- ------ -------
Segment income (loss)
before minority interest
and income taxes $ 506 $ 48 $1,689 $1,052
====== ===== ====== ======
Quarterly Financial Highlights:
The following table provides summary financial highlights
Trending by quarter for fiscal year 2008
Three Months Ended
-------------------------------------------
Nov. 30, Feb. 29, May 31, Aug. 31,
2007 2008 2008 2008
------- ------------------- --------
($ in thousands)
NON GAAP-Revenues,
net of cost of
commodities sold $73,634 $91,212 $83,384 $88,227
Income from continuing
operations before
income tax
expense (1) $21,081 $28,489 $13,221 $15,497
Net income from
continuing
operations $13,131 $17,789 $8,371 $8,130
Loss from
discontinued
operations, net of
tax ($46) ($5,673) ($364) ($746)
Net income $13,085 $12,116 $8,007 $7,384
(1) The three months ended November 30, 2007 included a pre-tax gain on
the sale of exchange stock and trading rights of $2.9 million. The three
months ended November 30, 2007 and February 29, 2008 included pre-tax
gains related to interest rate derivative contracts of $0.7 million and
$4.4 million, respectively. The three months ended May 31, 2008 included
pre-tax losses related to interest rate derivative contracts of $5.0
million. The three months ended August 31, 2008 include a pre-tax charge
related to the freeze of all benefit accruals in the Company's pension
plans.
Without these items our quarterly income from continuing operations
before income tax expense for the first, second, third, and fourth
quarters would have been $17.5 million, $24.1 million, $18.2 million, and
$17.0 million, respectively.