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Financial Reports
NASDAQ Announces Fourth Quarter 2007 Results
Operating Income Up 49.2 Percent From Prior Year
NEW YORK - The Nasdaq Stock Market, Inc., reported fourth quarter 2007 net income of $79.0 million, or $0.52 per diluted share, an increase of $16.0 million from $63.0 million, or $0.43 per diluted share, in the fourth quarter of 2006. Net income for the fourth quarter 2007 declined when compared to $365.0 million, or $2.41 per diluted share, reported in the third quarter 2007. Net income for the full year 2007 increased to $518.4 million, or $3.46 per diluted share, when compared to net income applicable to common stockholders of $127.2 million, or $0.95 per diluted share, for the full year 2006. Included in third quarter and full year 2007 results are pre-tax gains of $431.4 million associated with NASDAQ's sale of its share capital of the London Stock Exchange Group plc, which had the impact of increasing diluted earnings per share by $1.95 for both periods.
Fourth quarter 2007 results include pre-tax gains of $18.2 million
related to foreign currency option contracts, as well as pre-tax
charges of $1.1 million related to the early extinguishment of debt and
$0.6 million in workforce reduction expenses. When excluding these
items net income on a non-GAAP basis was $69.1 million, or $0.46 per
diluted share. This represents an increase when compared to non-GAAP
net income of $32.5 million, or $0.23 per diluted share for the fourth
quarter of 2006, and $62.1 million, or $0.42 per diluted share for the
third quarter of 2007.
Revenues less liquidity rebates, brokerage, clearance and exchange fees
("net exchange revenues") were $211.6 million in the fourth quarter of
2007, an increase of 15.6% from $183.1 million in the year-ago period,
and up $1.6 million from $210.0 million reported in the third quarter
of 2007.
"Our fourth quarter results cap off a truly defining year for NASDAQ,"
commented Bob Greifeld, NASDAQ's President and Chief Executive Officer.
"During 2007 we were able to dramatically improve our financial and
operational performance, leaving us stronger and better positioned for
future success. We solidified our global footprint with the agreement
to combine with OMX and invest strategically into the emerging markets
of the Middle East. Additionally, we took steps to diversify our
business into derivatives, clearing and other new products through the
planned acquisitions of both the Philadelphia and Boston Stock
Exchanges and through OMX's announced acquisition of NordPool. As we
enter 2008, we are even more excited about the opportunities in front
of us as we execute our plans for geographic expansion and product
diversification."
Recent Highlights
* NASDAQ expanded its leadership position as the largest single
pool of liquidity in which to trade U.S. listed equities,
matching a record high of 29.7% of all volume for the fourth
quarter of 2007. NASDAQ also achieved new market share highs in
the trading of NYSE- and Amex-listed securities, matching 18.8%
and 35.2% of volume, respectively, during the quarter.
* Announced the proposed acquisition of the Philadelphia Stock
Exchange, the third largest options market in the U.S. and the
nation's oldest stock exchange. This transaction significantly
diversifies NASDAQ's product portfolio by providing NASDAQ with
one of the premier options trading platforms in the U.S.
* Received the necessary regulatory and shareholder approvals to
allow NASDAQ to proceed with plans to combine with OMX and invest
in DIFX. NASDAQ expects to complete this transaction in the first
quarter of 2008.
* Expanded the Select Market Maker Program to NYSE-listed companies.
The program is designed to bring NYSE-listed companies and the
NASDAQ market making community together, while providing companies
access to utilize NASDAQ's Market Intelligence Desk(r) (MID) and
proprietary NASDAQ Online(r) (NOL) at no cost. The Select Market
Maker Program is focused on providing issuers with direct access to
market information from market participants.
* In partnership with a group of leading securities firms, NASDAQ
announced its intention to form The PORTAL Alliance, an industry
standard facility designed to serve the market for 144A equity
securities. The PORTAL Alliance will work with third-party service
providers to create an open, industry-standard facility for the
private offering, trading, shareholder tracking and settlement of
unregistered equity securities sold to qualified institutional
buyers ("QIBs").
"NASDAQ's financial performance continued to be strong during the
quarter," commented NASDAQ's Chief Financial Officer, David Warren.
"Net exchange revenues, which have grown for thirteen consecutive
quarters, were up 15.6% over last year's fourth quarter, while
operating income increased nearly 50%. Our ability to increase our
operating leverage afforded us the flexibility to invest in key growth
initiatives, while at the same time delivering exceptional results. We
plan to utilize this same operating philosophy as we complete our
previously announced transactions with OMX, the Philadelphia Stock
Exchange, and the Boston Stock Exchange, to ensure that we continue to
achieve all of our strategic and financial goals."
2008 Guidance
NASDAQ has decided to forgo providing guidance as a standalone entity
at this time given the transactions that are expected to close during
the first half of 2008 and the contributions that each will have on the
financial results of the consolidated organization.
Financial Review
Net exchange revenues increased 15.6% in the fourth quarter to $211.6
million, up from $183.1 million in the prior year quarter, and up $1.6
million from $210.0 million reported in the third quarter of 2007.
Market Services
Market Services net exchange revenues increased to $137.9 million, up
18.9% from the prior year quarter, and up 0.9% from the prior quarter.
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