FCStone Group, Inc. Announces Strong Fiscal 2007 Second Quarter Results
Friday April 13, 8:00 am ET
WEST DES MOINES, Iowa, April 13, 2007 (PRIME NEWSWIRE) -- FCStone Group, Inc. (NasdaqGS:FCSX - News), a commodity risk management firm, today announced the company's fiscal second quarter 2007 results. The company reported higher year-over-year revenues and net income.
``We were very pleased with our second quarter performance,'' said Pete Anderson, President and Chief Executive Officer. ``Our derivatives contract growth continues to show strong momentum, with record volumes highlighted by the agricultural and energy sectors. Also, our consistent focus on the core risk management business has established trust and confidence among our clients, which has translated into greater use of our services and improved bottom-line results for our customers. As we grow and leverage our existing infrastructure, we expect to see ongoing improvement in nearly every area of the business.''
Financial Highlights
(In thousands, except per share amounts)
Three Months Ended Six Months Ended,
February 28, February 28,
-------------------- --------------------
2006 2007 2006 2007
-------- -------- -------- --------
NON GAAP-Revenues,
net of cost of
commodities sold $ 42,278 $ 60,098 $ 81,584 $117,446
GAAP-Income after
minority interest
and before income
tax expense $ 6,496 $ 11,045 $ 11,919 $ 21,159
GAAP-Net income $ 3,936 $ 6,920 $ 7,319 $ 13,234
Basic & diluted
earnings per share $ 0.27 $ 0.48 $ 0.51 $ 0.91
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Second Quarter Results
Revenues, net of cost of commodities sold, a non-GAAP financial measure, were $60.1 million in the three months ended February 28, 2007, compared to $42.3 million in the prior year quarter, an increase of 42%. Net income increased 76% to $6.9 million, or $0.48 per diluted share, for the second quarter, compared to $3.9 million, or $0.27 per diluted share in the prior year quarter.
The increase in second quarter revenues, net of cost of commodities sold from the prior year second quarter was primarily related to higher exchange-traded volumes resulting from continued volatility in the grain and energy markets, increased foreign exchange (Forex) commissions as a result of several significant new customers, higher over-the-counter (OTC) volumes primarily from its renewable fuels and Brazilian customers, and higher interest income as a result of additional investable segregated and OTC customer funds as well as higher short-term interest rates.
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, pit brokerage and clearing fees, and introducing broker commissions; and increased interest expense as a result of higher volume in the financial services grain repurchase program combined with increased borrowings in the grain merchandising segment because of higher grain prices.
Year-To-Date Results
Revenues, net of cost of commodities sold, a non-GAAP financial measure, were $117.4 million for the first six months of fiscal year 2007, compared to $81.6 million during the same period of fiscal year 2006, an increase of 44%. Net income increased 81% to $13.2 million for the first six months of fiscal year 2007, or $0.91 per diluted share, compared to $7.3 million, or $0.51 per diluted share during the same period of fiscal year 2006.
``The combination of an optimal operating environment in the first half of 2007 along with our enhanced, customer-focused service offering allowed us to generate record revenues, operating income and net income during the period,'' said Bob Johnson, Chief Financial Officer. ``As we continue to manage our expenses responsibly, additional investments made in people and technology will allow us to provide a stronger mix of products and services to our customers.''
Operating Segments
FCStone's income (loss) before minority interest and income tax expense by segment and certain other data are outlined below for the periods noted.
Three Months Ended Six Months Ended,
February 28, February 28,
-------------------- --------------------
2006 2007 2006 2007
-------- -------- -------- --------
Segment Data: ($ in thousands)
Income (loss) before
minority interest
and income tax
expense:
Commodity and Risk
Management Services $ 5,253 $ 9,153 $ 9,675 $ 16,717
Clearing and
Execution Services 2,822 3,431 5,202 7,040
Financial Services 3 419 (101) 447
Grain Merchandising 284 340 282 1,460
Corporate (1,806) (2,196) (3,131) (4,067)
-------- -------- -------- --------
$ 6,556 $ 11,147 $ 11,927 $ 21,597
======== ======== ======== ========
Other Data:
EBITDA $ 8,460 $ 15,739 $ 15,443 $ 28,528
Exchange contract
trading volume
(in millions) 11.0 12.9 22.1 26.3
Customer Segregated
Assets, end of period $611,992 $861,780 $611,992 $861,780
In the Commodity and Risk Management Services segment, revenues, net of cost of commodities sold, were $27.3 million in the second quarter ended February 28, 2007, compared to $18.1 million in the prior year quarter, an increase of 51%. Segment income increased 74% to $9.2 million for the second quarter, compared to $5.3 million in the prior year quarter.
For the Clearing and Execution Services segment, revenues, net of cost of commodities sold, were $24.3 million in the second quarter ended February 28, 2007, compared to $18.6 million in the prior year quarter, an increase of 30%. Segment income increased 22% to $3.4 million for the second quarter, compared to $2.8 million in the prior year quarter.
The Financial Services segment reported revenues, net of cost of commodities sold, of $3.4 million in the second quarter ended February 28, 2007, compared to $1.5 million in the prior year quarter, an increase of 122%. Segment income increased to $419 thousand for the second quarter, compared to $3 thousand in the prior year quarter.
The Grain Merchandising segment reported revenues, net of cost of commodities sold, of $6.0 million in the second quarter ended February 28, 2007, compared to $4.8 million in the prior year quarter, an increase of 27%. Segment income increased 20% to $340 thousand for the second quarter, compared to $284 thousand in the prior year quarter.
Business Outlook
Commenting on the company's year-to-date results and overall expectations, Anderson said, ``Our team has been working diligently toward achieving our strategic initiatives over the past several years and has effectively increased both our operating efficiencies and volumes. I believe our revenue and earnings growth thus far in 2007 are attributable to those efforts as well as a favorable operating environment. Looking ahead, our recently successful IPO has put us in a stronger position to take advantage of new commodity markets here in the U.S. and to leverage our expertise in growing segments around the world. Above all, we are confident that our longtime commitment to providing value to our customers will ensure our long-term success and drive shareholder value.''
Conference Call & Web Cast
A conference call will be held today, Friday, April 13, 2007 at 11:00 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 fcstone.com. Participants can also access the call by dialing 800-218-8862 (within the United States and Canada), or 303-262-2139 (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, April 20, 2007. 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: 11088260.
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 7,500 customers and in the 12 months ended February 28, 2007, executed 52.2 million derivative contracts in the exchange-traded and over-the-counter markets. In addition to renewable fuels, the FCStone Group companies work in all the major commodity areas including agriculture, energy, foods, forestry, 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 Six Months Ended,
February 28, February 28,
-------------------- --------------------
2006 2007 2006 2007
-------- -------- -------- --------
Revenues:
Commissions and
clearing fees $ 23,783 $ 33,353 $ 46,840 $ 66,256
Service, consulting
and brokerage fees 8,444 9,314 15,428 18,409
Interest 4,972 10,729 9,244 19,127
Other 686 954 1,166 1,446
Sales of commodities 230,976 349,098 546,192 797,886
-------- -------- -------- --------
Total revenues 268,861 403,448 618,870 903,124
-------- -------- -------- --------
Costs and expenses:
Cost of commodities
sold 226,583 343,350 537,286 785,678
Employee
compensation and
broker commissions 9,983 11,364 19,649 23,155
Pit brokerage and
clearing fees 10,877 14,678 21,009 29,542
Introducing broker
commissions 4,776 9,007 9,202 16,376
Employee benefits
and payroll taxes 2,483 2,722 4,684 5,369
Interest 1,566 4,251 2,734 6,490
Depreciation 398 443 790 879
Bad debt expense 150 120 405 1,540
Other expenses 5,489 6,366 11,184 12,498
-------- -------- -------- --------
Total costs and
expenses 262,305 392,301 606,943 881,527
-------- -------- -------- --------
Income before income
tax expense and
minority interest 6,556 11,147 11,927 21,597
Minority interest 60 102 8 438
-------- -------- -------- --------
Income after minority
interest and before
income tax expense 6,496 11,045 11,919 21,159
Income tax expense 2,560 4,125 4,600 7,925
-------- -------- -------- --------
Net income $ 3,936 $ 6,920 $ 7,319 $ 13,234
======== ======== ======== ========
Basic and diluted
shares outstanding 14,487 14,533 14,487 14,533
Basic and diluted
earnings per share $ 0.27 $ 0.48 $ 0.51 $ 0.91
=====================================================================
FCSTONE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in thousands, except share amounts)
August 31, February 28,
2006 2007
---------- ----------
(Unaudited)
ASSETS
Cash and cash equivalents
Unrestricted $ 59,726 $ 50,992
Restricted 4,010 1,517
Segregated 14,221 11,815
Commodity accounts receivable
Commodity exchanges and clearing
organizations - customer segregated,
including United States treasury
bills and notes 604,536 637,636
Proprietary commodity accounts 20,133 72,119
Customer regulated accounts in
deficit secured by U.S. treasury
bills and notes 29,166 77,658
---------- ----------
Total commodity deposits and
accounts receivable 653,835 787,413
---------- ----------
Marketable securities, at fair value -
customer segregated and other 149,609 214,734
Trade accounts receivable and advances
on grain 42,176 45,204
Open contracts receivable 37,424 202,809
Counterparty deposits and accounts
receivable 23,607 33,482
Notes receivable 14,971 94,759
Inventories - grain and fertilizer 26,628 37,355
Exchange memberships and stock, at cost 6,587 7,739
Furniture, equipment, software, and
improvements, net 7,386 7,561
Deferred income taxes 4,697 4,672
Investments in affiliates and other
organizations 5,537 5,404
Other assets 6,793 28,543
---------- ----------
Total assets $1,057,207 $1,533,999
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Checks written in excess of bank
balance $ 6,436 $ 5,570
Commodity and customer regulated
accounts payable 726,920 929,448
Trade accounts payable and advances 128,349 117,627
Open contracts payable 41,301 163,173
Accrued expenses 26,876 24,354
Notes payable 48,169 199,331
Subordinated debt 7,000 15,000
Obligations under capital lease 3,575 3,300
---------- ----------
Total liabilities 988,626 1,457,803
---------- ----------
Minority interest 3,607 4,045
Redeemable common stock held by
employee stock ownership plan (ESOP) 6,079 33,563
Stockholders' equity:
Common stock, no par value, authorized
20,000,000 and 40,000,000 at
August 31, 2006 and February 28, 2007,
respectively; issued and outstanding
14,537,208 shares at August 31, 2006
and 14,533,131 at February 28, 2007,
respectively 21,747 21,747
Additional paid-in capital 120 120
Accumulated other comprehensive loss (1,955) (1,955)
Retained earnings 45,062 52,239
---------- ----------
64,974 72,151
Less maximum cash obligation
related to ESOP shares (6,079) (33,563)
---------- ----------
Total stockholders' equity 58,895 38,588
---------- ----------
Commitments and contingencies
Total liabilities and stockholders'
equity $1,057,207 $1,533,999
========== ==========
FCSTONE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
February 28,
-------------------------
2006 2007
---------- ----------
Cash flows from operating activities:
Net income $ 7,319 $ 13,234
Depreciation 790 879
Amortization of discount on note
receivable -- (28)
Gain on conversion of exchange
membership to common stock -- (100)
Equity in earnings of affiliates,
net of distributions 60 133
Minority interest, net of
distributions (3) 438
Change in commodity accounts
receivable/payable, marketable
securities and customer segregated
funds, net 13,015 6,231
Change in open contracts
receivable/payable, net (39,332) (43,513)
Increase in trade accounts receivable
and advances on grain (6,610) (3,028)
Decrease (increase) in counterparty
deposits and accounts receivable 12,169 (9,875)
Increase in inventory - grain and
fertilizer (18,480) (10,727)
Increase in other assets (6,497) (21,725)
Increase (decrease) in trade accounts
payable and advances 28,410 (10,722)
Increase (decrease) in accrued expenses 1,995 (2,522)
---------- ----------
Net cash used in operating activities (7,164) (81,325)
---------- ----------
Cash flows from investing activities:
Purchase of furniture, equipment,
and improvements (642) (1,054)
Issuance of notes receivable, net (14,034) (79,760)
Purchase of exchange memberships and
stock (369) (1,430)
Proceeds from conversion of exchange
membership to common stock -- 378
---------- ----------
Net cash used in investing
activities (15,045) (81,866)
---------- ----------
Cash flows from financing activities:
Decrease in checks written in excess
of bank balance (4,880) (866)
Proceeds from notes payable, net 51,524 151,162
Proceeds from issuance of redeemable
common stock held by ESOP 14 --
Dividends paid (2,898) (6,057)
Payments under capital lease (275) (275)
Monies deposited in escrow (39) (33)
Monies released from escrow -- 2,526
Proceeds from subordinated debt 500 8,000
Payments on subordinated debt (2,500) --
---------- ----------
Net cash provided by financing
activities 41,446 154,457
---------- ----------
Net increase (decrease) in cash and
cash equivalents - unrestricted 19,237 (8,734)
Cash and cash equivalents -
unrestricted - beginning of period 25,045 59,726
---------- ----------
Cash and cash equivalents -
unrestricted - end of period $ 44,282 $ 50,992
========== ==========
Supplemental disclosures of cash flow
information:
Interest paid $ 2,238 $ 5,473
Income taxes paid $ 5,084 $ 8,594
========== ==========
Noncash financing activities:
Increase in maximum cash obligation
related to ESOP shares $ 1,368 $ 27,484
========== ==========
Non-GAAP Financial Measures
The following table reconciles revenues, net of cost of commodities
sold, with our total revenues.
Three Months Ended Six Months Ended
February 28, February 28,
-------------------- --------------------
2006 2007 2006 2007
-------- -------- -------- --------
($ in thousands)
Revenues:
Commissions and
clearing fees $ 23,783 $ 33,353 $ 46,840 $ 66,256
Service, consulting
and brokerage fees 8,444 9,314 15,428 18,409
Interest 4,972 10,729 9,244 19,127
Other 686 954 1,166 1,446
Sales of commodities 230,976 349,098 546,192 797,886
-------- -------- -------- --------
Total revenues 268,861 403,448 618,870 903,124
Less: Cost of
commodities sold 226,583 343,350 537,286 785,678
-------- -------- -------- --------
Revenues, net of cost
of commodities sold $ 42,278 $ 60,098 $ 81,584 $117,446
======== ======== ======== ========
The following table reconciles EBITDA with our net income.
Three Months Ended Six Months Ended
February 28, February 28,
-------------------- --------------------
2006 2007 2006 2007
-------- -------- -------- --------
($ in thousands)
Net income: $ 3,936 $ 6,920 $ 7,319 $ 13,234
Plus: interest
expense 1,566 4,251 2,734 6,490
Plus: depreciation
and amortization 398 443 790 879
Plus income tax
expense 2,560 4,125 4,600 7,925
-------- -------- -------- --------
EBITDA $ 8,460 $ 15,739 $ 15,443 $ 28,528
======== ======== ======== ========
Commodity and Risk Management Services Segment:
The following table provides the financial performance for this
segment.
Three Months Ended Six Months Ended
February 28, February 28,
-------------------- --------------------
2006 2007 2006 2007
-------- -------- -------- --------
($ in thousands)
Sales of commodities $ 1,811 $ -- $ 4,655 $ 2,542
Cost of commodities
sold 1,804 -- 4,572 2,460
-------- -------- -------- --------
Gross profit on
commodities sold 7 -- 83 82
Commissions and
clearing fees 7,768 13,021 15,936 25,939
Service, consulting
and brokerage fees 8,599 9,458 15,730 18,675
Interest 1,676 4,742 3,343 8,388
Other revenues 38 51 65 106
-------- -------- -------- --------
Revenues, net of cost
of commodities sold 18,088 27,272 35,157 53,190
Other costs and
expenses:
Expenses (excluding
interest expense) 12,815 18,051 25,445 36,276
Interest expense 20 68 37 197
-------- -------- -------- --------
Total costs and
expenses (excluding
cost of commodities
sold) 12,835 18,119 25,482 36,473
-------- -------- -------- --------
Segment income before
minority interest
and income taxes $ 5,253 $ 9,153 $ 9,675 $ 16,717
======== ======== ======== ========
Clearing and Execution Segment:
The following table provides the financial performance for this
segment.
Three Months Ended Six Months Ended
February 28, February 28,
-------------------- --------------------
2006 2007 2006 2007
-------- -------- -------- --------
($ in thousands)
Sales of commodities $ -- $ -- $ -- $ --
Cost of commodities
sold -- -- -- --
-------- -------- -------- --------
Gross profit on
commodities sold -- -- -- --
Commissions and
clearing fees 16,129 20,509 31,154 40,699
Service, consulting
and brokerage fees -- -- -- --
Interest 2,501 3,654 4,726 7,485
Other revenues -- 100 -- 100
-------- -------- -------- --------
Revenues, net of cost
of commodities sold 18,630 24,263 35,880 48,284
Other costs and
expenses:
Expenses (excluding
interest expense) 15,735 20,506 30,524 40,780
Interest expense 73 326 154 464
-------- -------- -------- --------
Total costs and
expenses (excluding
cost of commodities
sold) 15,808 20,832 30,678 41,244
-------- -------- -------- --------
Segment income before
minority interest
and income taxes $ 2,822 $ 3,431 $ 5,202 $ 7,040
======== ======== ======== ========
Exchange contract
trading volume
(millions) 10.5 12.3 21.1 24.8
Financial Services Segment:
The following table provides the financial performance for this
segment.
Three Months Ended Six Months Ended
February 28, February 28,
-------------------- --------------------
2006 2007 2006 2007
-------- -------- -------- --------
($ in thousands)
Sales of commodities $ 6,353 $ 9,599 $ 9,916 $ 16,157
Cost of commodities
sold 6,322 9,539 9,870 16,069
-------- -------- -------- --------
Gross profit on
commodities sold 31 60 46 88
Commissions and
clearing fees -- -- -- --
Service, consulting
and brokerage fees -- -- -- --
Interest 1,122 2,971 1,787 4,158
Other revenues 377 360 700 682
-------- -------- -------- --------
Revenues, net of cost
of commodities sold 1,530 3,391 2,533 4,928
Other costs and
expenses:
Expenses (excluding
interest expense) 581 546 1,125 1,079
Interest expense 946 2,426 1,509 3,402
-------- -------- -------- --------
Total costs and
expenses (excluding
cost of commodities
sold) 1,527 2,972 2,634 4,481
-------- -------- -------- --------
Segment income (loss)
before minority
interest and income
taxes $ 3 $ 419 $ (101) $ 447
======== ======== ======== ========
Grain Merchandising Segment:
The following table provides the financial performance for this
segment.
Three Months Ended Six Months Ended
February 28, February 28,
-------------------- --------------------
2006 2007 2006 2007
-------- -------- -------- --------
($ in thousands)
Sales of commodities $222,813 $339,499 $531,621 $779,187
Cost of commodities
sold 218,583 333,950 523,125 767,462
-------- -------- -------- --------
Gross profit on
commodities sold 4,230 5,549 8,496 11,725
Commissions and
clearing fees -- -- -- --
Service, consulting
and brokerage fees -- -- -- --
Interest 212 29 233 64
Other revenues 327 467 458 612
-------- -------- -------- --------
Revenues, net of cost
of commodities sold 4,769 6,045 9,187 12,401
Other costs and
expenses:
Expenses (excluding
interest expense) 3,465 3,765 7,108 7,795
Interest expense 1,020 1,940 1,797 3,146
-------- -------- -------- --------
Total costs and
expenses (excluding
cost of commodities
sold) 4,485 5,705 8,905 10,941
-------- -------- -------- --------
Segment income before
minority interest
and income taxes $ 284 $ 340 $ 282 $ 1,460
======== ======== ======== ========
Grain bushels sold
(millions) 57.9 50.2 124.6 128.7 |
