WEST DES MOINES, Iowa, April 13, 2007 (PRIME NEWSWIRE) -- FCStone Group, Inc. (Nasdaq:FCSX), 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
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 http://www.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