Filed by NYSE Group, Inc.

Pursuant to Rule 425 under the Securities Act of 1933, as amended,

and deemed filed pursuant to Rule 14a-12 of the

Securities Exchange Act of 1934, as amended

 

Subject Companies:

New York Stock Exchange, Inc.

Archipelago Holdings, Inc.

(Commission File No. 001-32274)

 

Date: August 15, 2005

 

On August 15, 2005, the New York Stock Exchange, Inc. (“NYSE”) issued the following press release:

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NYSE Announces Second-Quarter 2005 Financial Results

Net Income Increased 161.7% Over Year-Ago Quarter

 

NEW YORK, August 15, 2005 – The New York Stock Exchange (NYSE) today reported net income of $13.0 million for the quarter ended June 30, 2005, compared to $5.0 million in the year-ago quarter and $26.0 million for the first quarter of 2005. These results reflect the restatement of NYSE’s financial earnings dating back to 2002 that were announced in the NYSE Group’s draft S-4 Registration Statement filed with the SEC on July 21, 2005.

 

Year-Over-Year Financial Highlights

 

Revenues, less SEC activity remittance, for second-quarter 2005 were $276.3 million, up $4.3 million or 1.6% versus the second-quarter of 2004. Listing fee revenue was $85.5 million, an increase of $3.6 million or 4.4%, regulatory fees increased $3.4 million or 11.7% to $32.2 million and market information fees rose $4.2 million or 10.0% to $46.3 million. Regulatory fees increased as NYSE Member Firms reported higher Gross Focus Revenues for the period. Market information fees increased due to growth in NYSE’s proprietary data products, professional subscribers and non-recurring revenues from previously uncollected charges. Declines in data-processing fees of $5.7 million or 10.7% were the result of decreased third-party usage of services provided by SIAC.¹ Investment and other income was $13.8 million, an increase of $1.0 million versus the year-ago quarter. The increase in investment and other income was the result of a portfolio restructuring in December 2004 combined with a higher interest rate environment. These increases were somewhat reduced by non-recurring insurance claims received during second-quarter 2004.

 

Expenses were $254.7 million, down 5.0% from second-quarter 2004. The decreases were led by reduced spending in general and administrative expenses, down $4.5 million or 20%. In addition, professional services decreased by $5.4 million or 13.2% due to reduced legal expenses as compared to second quarter 2004. Depreciation and amortization expenses increased by $4.2 million, a 19.2% increase, to $26.4 million due to the acceleration of certain useful lives following a fourth-quarter 2004 review of depreciation policies.

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1	SIAC operates on a cost-recovery model driven by its customers’ demands. Under this model, any increases or decreases in SIAC’s expenses result in a corresponding change in its revenue.

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Quarter-Over-Quarter Financial Highlights

 

Compared to the first quarter of 2005, second quarter revenues, less SEC activity remittance, decreased 4.2% or $12.2 million. Regulatory fees increased by $3.1 million or 10.8%, data processing fees increased $2.8 million or 6.3% and market information fees in the second quarter of 2005 were up by $2.1 million or 4.8%. Declines in investments and other income of $17.9 million or 56.4%, were largely due to the collection of a $19.0 million regulatory fine and other non-recurring revenues during the first quarter of 2005.

 

Expenses increased by $10.1 million or 4.1% quarter over quarter. Professional services and general and administrative costs were the main drivers of the increase. Professional services increased by $7.6 million or 27.1% due to continuing initiatives across the organization, including those related to regulation and trading systems, as well as additional legal expenses incurred in the quarter. General and administrative expenses increased by $2.9 million or 19.1% during the second quarter 2005 as compared to the first quarter.

 

Income Taxes

 

The effective income tax rate for the second quarter of 2005 was 34.3%, down from 42.8% for first-quarter 2005. The reduction in our effective tax rate for the second quarter is due to the increased impact of the tax-exempt interest on NYSE’s income before taxes. For the second quarter of 2004, the NYSE had a tax benefit of $1.2 million, a result of the receipt of non-taxable insurance recoveries.

 

Capital

 

As of June 30, 2005, total members’ equity was $802.9 million and equity per member having distributive rights equaled $588,000.

 

About the NYSE

 

The New York Stock Exchange is the world’s leading equities market and home to 2,780 companies whose total global market capitalization is $19.9 trillion, including $6.9 trillion for 449 non-U.S. companies from 47 countries. Buyers and sellers meet directly in a fair, open and orderly market to realize the best possible price through the interplay of supply and demand. On an average day, 1.60 billion shares, valued at $55.0 billion, are traded on the NYSE. The NYSE provided the most competitive quotes in its listed stocks creating the National Best Bid and Offer more than 89% of the time. For more information please visit http://www.nyse.com.

 

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		Three Month Period Ended									Six Month Period Ended
Operating Data		June 30, 2005			March 31, 2005			June 30, 2004			June 30, 2005			June 30, 2004
Company Listings
NYSE Listed Companies (1)		2,780			2,774			2,742			2,780			2,742
No. of New Listings (2)		36			37			30			73			63
NYSE Share (%) of Domestic Qualified New Listings Proceeds (IPOs) (3)		94.3			95.8			100.0			95.2			98.9
NYSE Share (%) of International Qualified New Listings Proceeds (IPOs) (4)		100.0			100.0			100.0			100.0			91.8
Trading Activity: NYSE-Listed Common Stocks and Warrants (5)
Consolidated Average Daily Volume (millions of shares) (6)		1,918.7			1,985.8			1,759.0			1,951.5			1,847.6
% change from the same period in the prior year or quarter		9.1	%		2.6	%		-2.1	%		5.6	%		6.1	%
NYSE Listed Average Daily Volume (millions of shares) (6)		1,494.7			1,566.0			1,407.2			1,529.5			1,448.0
% change from the same period in the prior year or quarter		6.2	%		5.2	%		-0.4	%		5.6	%		4.3	%
NYSE Share of Trading - Full Day (%) (7)		77.9	%		78.9	%		80.0	%		78.4	%		78.4	%
NYSE Share of Trading - Trading Hours (%) (8)		79.9	%		80.9	%		82.3	%		80.4	%		80.5	%
Trading Activity : Other (9)
NYSE ETF Average Daily Volume (millions of shares) (10)		5.1			5.0			8.3			5.1			8.4
Average Daily Volume in Crossing Sessions, Preferred Stocks and other issues (11)		64.7			53.1			46.0			59.1			41.2
Market Information
Tape A Share of Trades (%) (12)		89.0			89.6			91.6			89.3			90.4
Professional Subscribers		423,447			411,086			406,256			423,447			406,256
Regulatory Fees
Gross FOCUS Revenues ($ billions) (13)		47.0			37.8			36.2			84.8			69.9
Data Processing
% SIAC Revenues from Non-NYSE Customers		40.8			41.8			44.4			41.3			44.5

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(1)	Number of listed companies as of period end.

(2)	Includes initial public offerings and transfers from other markets.

(3)	Proceeds raised by NYSE-listed domestic IPOs/Total proceeds raised by qualified domestic IPOs.

(4)	Proceeds raised by NYSE-listed international IPOs/Total proceeds raised by qualified international IPOs. The initial capital-raising event in the United States involving a listing of a non-U.S. issuer is deemed an IPO for international purposes.

(5)

This trading activity includes only trades executed in NYSE-listed common stocks and warrants, as defined by the NYSE, and it excludes any trading activity in NYSE’s preferred stocks, rights, structured products (including NYSE-listed exchange traded funds) and the NYSE’s four crossing sessions (which are periods during which trading takes place after the close of regular trading sessions).

(6)

Consolidated average daily volume includes the trading volume executed across all exchanges as reported to the consolidated tape between 4:00 am to 8:00 pm EST. NYSE-listed average daily volume includes the trading volume executed at the NYSE during the NYSE’s normal business hours of operation, or 9:30 am to 4:00 pm EST. Each of these figures is then divided by the appropriate number of trading days in the period.

(7)	In computing the NYSE’s full day share of trading, the numerator is the NYSE average daily volume executed during normal NYSE business hours (currently 9:30 am to 4:00 pm EST) and the denominator is the consolidated average daily volume executed full day or between 4:00 am to 8:00 pm EST.

(8)	The NYSE’s trading hours share of trading is calculated by taking the same NYSE numerator in (7) and dividing it by the amount of consolidated average daily volume executed during NYSE business hours.

(9)

This trading activity includes any volume executed at the NYSE that was not included in the NYSE’s previously calculated share of trading. It includes NYSE unlisted trading privilege trading in specific exchange-traded funds and in the NYSE’s crossing sessions, preferred stocks and other issues not previously included. (The unlisted trading privilege (“UTP”) is a right, provided by the Exchange Act, that permits securities listed on any national securities exchange and Nasdaq to be traded by other such exchanges.)

(10)	The NYSE first began trading exchange-traded funds on a UTP basis on 7/31/2001. The NYSE now trades 59 exchange-traded funds on a UTP basis, including the Standard & Poor’s Depositary Receipts® (SPY) and the Dow Industrials DIAMONDS® (DIA).

(11)	This is the amount of trading volume executed at the NYSE in NYSE-listed issues not currently included in our share of trading calculations. It includes preferred stocks, rights, structured products (including NYSE-listed exchange-traded funds) and the NYSE’s four crossing sessions.

(12)	Number of NYSE-listed shares traded on the NYSE trading floor / Total number of NYSE-listed shares traded.

(13)	Revenue reported by member broker-dealers on the “FOCUS” report, the regulatory requirement for member broker-dealers to report their financial condition. NYSE records revenue on a six-month lag; the data is provided on that basis.

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New York Stock Exchange, Inc.

Condensed Consolidated Statements of Income

(unaudited)

 

		Three months ended											% of Change From
(Amounts in Thousands)		June 30, 2005			March 31, 2005				June 30, 2004				March 31, 2005			June 30, 2004
					(Restated)				(Restated)
Revenues:
Activity assessment fees		$	141,773		$	92,940			$	93,034			52.5			52.4
Listing fees			85,465			85,995				81,855			(0.6	)		4.4
Data processing fees			47,745			44,900				53,477			6.3			(10.7	)
Market information fees			46,290			44,150				42,088			4.8			10.0
Trading fees			37,806			37,953				38,751			(0.4	)		(2.4	)
Regulatory fees			32,185			29,041				28,816			10.8			11.7
Facility and equipment fees			12,286			12,585				12,450			(2.4	)		(1.3	)
Membership fees			715			2,144				1,758			(66.7	)		(59.3	)
Investment and other income			13,844			31,758				12,829			(56.4	)		7.9
Total revenues		$	418,109		$	381,466			$	365,058			9.6			14.5
SEC activity remittance			141,773			92,940				93,034			52.5			52.4
Revenues, less SEC activity remittance		$	276,336		$	288,526			$	272,024			(4.2	)		1.6
Expenses:
Compensation			125,551			126,553				131,282			(0.8	)		(4.4	)
Systems and related support			31,895			31,742				34,342			0.5			(7.1	)
Professional services			35,663			28,050				41,064			27.1			(13.2	)
Depreciation and amortization			26,446			26,173				22,192			1.0			19.2
Occupancy			17,285			17,036				16,764			1.5			3.1
General and administrative			17,870			15,009				22,333			19.1			(20.0	)
Total expenses		$	254,710		$	244,563			$	267,977			4.1			(5.0	)
Income before taxes and minority interest			21,626			43,963				4,047			(50.8	)		434.4
Provision (benefit) for income taxes			7,415			18,809				(1,224	)		(60.6	)		(705.9	)
Minority interest in income (loss) of consolidated subsidiary			1,225			(865	)			308			(241.6	)		297.7
Net Income		$	12,986		$	26,019			$	4,963			(50.1	)		161.7

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*	NYSE revenues and expenses include the results of its two thirds- owned subsidiary, Securities Industry Automation Corp.

**	Certain prior period amounts have been reclassified to conform with current period presentation.

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New York Stock Exchange, Inc.

Condensed Consolidated Statements of Income

(unaudited)

 

		Six months ended
(Amounts in Thousands)		June 30, 2005			June 30, 2004			% of Change
					(Restated)
Revenues:
Activity assessment fees			234,713			224,604		4.5
Listing fees			171,460			165,015		3.9
Data processing fees			92,645			109,433		(15.3	)
Market information fees			90,440			82,803		9.2
Trading fees			75,759			79,723		(5.0	)
Regulatory fees			61,226			56,056		9.2
Facility and equipment fees			24,871			25,246		(1.5	)
Membership fees			2,859			4,342		(34.2	)
Investment and other income			45,602			20,340		—
Total revenues		$	799,575		$	767,562		4.2
SEC activity remittance			234,713			224,604		4.5
Revenues, less SEC activity remittance		$	564,862		$	542,958		4.0
Expenses:
Compensation			252,104			260,749		(3.3	)
Systems and related support			63,637			71,341		(10.8	)
Professional services			63,713			68,980		(7.6	)
Depreciation and amortization			52,619			44,167		19.1
Occupancy			34,321			32,991		4.0
General and administrative			32,879			36,631		(10.2	)
Total expenses		$	499,273		$	514,859		(3.0	)
Income before taxes and minority interest			65,589			28,099		133.4
Provision for income taxes			26,224			9,099		188.2
Minority interest in income of consolidated subsidiary			360			828		(56.5	)
Net Income		$	39,005		$	18,172		114.6

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*	NYSE revenues and expenses include the results of its two thirds- owned subsidiary, Securities Industry Automation Corp.

**	Certain prior period amounts have been reclassified to conform with current period presentation.

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New York Stock Exchange, Inc.

Condensed Consolidated Statements of Financial Condition

 

(Amounts in Thousands)		June 30, 2005				December 31, 2004
		(Unaudited)				(Restated)
Assets
Current Assets:
Cash and cash equivalents		$	43,625			$	15,456
Securities purchased under agreements to resell			47,074				55,209
Investment securities, at fair value			1,164,583				914,845
Accounts receivable, net			157,898				102,941
Taxes receivable			1,552				26,906
Deferred tax asset			66,936				83,039
Other assets			40,730				46,230
Total current assets			1,522,398				1,244,626
Property and equipment, at cost, less accumulated depreciation and amortization			342,890				343,424
Investments and affiliates, at cost			2,662				2,652
Non-current deferred tax asset			296,765				291,639
Other non-current assets			96,754				99,910
Total assets		$	2,261,469			$	1,982,251
Liabilities and equity of members:
Current liabilities:
Accounts payable		$	46,674			$	99,165
Accrued expenses			185,730				208,031
Deferred tax liability			8,310				11,264
Deferred revenue			220,545				85,955
SEC activity remittance payable			271,839				82,482
Total current liabilities			733,098				486,897
Liabilities due after one year:
Accrued employee benefits			315,942				311,831
Non- current deferred tax liability			7,537				17,413
Deferred revenue			332,634				335,509
Other long-term liabilities			36,024				29,927
Total liabilities			1,425,235				1,181,577
Minority interest			33,384				33,206
Commitments and contingencies
Member’s equity:
Equity of members			806,037				767,032
Accumulated other comprehensive income/(loss)			(3,187	)			436
Total equity of 1,366 members			802,850				767,468
Total liabilities and members’ equity		$	2,261,469			$	1,982,251
Equity per member having distributive rights		$	588			$	562

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Important Acquisition Information with Respect to the Merger

 

In connection with the proposed merger of the New York Stock Exchange, Inc. (“NYSE”) and Archipelago Holdings, Inc. (“Archipelago”), NYSE Group, Inc. filed a registration statement on Form S-4 with the Securities and Exchange Commission (“SEC”) on July 21, 2005, containing a preliminary joint proxy statement/prospectus regarding the proposed transaction. The Registration Statement has not yet become effective. The parties will file other relevant documents concerning the proposed transaction with the SEC.

 

Such final documents, however, are not currently available. NYSE MEMBERS AND ARCHIPELAGO STOCKHOLDERS ARE URGED TO READ THE FINAL JOINT PROXY STATEMENT/ PROSPECTUS REGARDING THE PROPOSED TRANSACTION WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. NYSE members and Archipelago stockholders can obtain a free copy of the final joint proxy statement/ prospectus, as well as other filings containing information about the NYSE and Archipelago without charge, at the SEC’s website (http://www.sec.gov). Copies of the final joint proxy statement/ prospectus can also be obtained, without charge, once they are filed with the SEC, by directing a request to the Office of the Corporate Secretary, NYSE, 11 Wall Street, New York 10005, 212-656-2061 or to Archipelago, Attention: Investor Relations, at 100 S. Wacker Drive, Suite 1800, Chicago, Illinois 60606 or calling (888) 514-7284. The NYSE, Archipelago and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from Archipelago stockholders in respect of the proposed transaction. Information regarding Archipelago’s directors and executive officers is available in Archipelago’s proxy statement for its 2005 annual meeting of stockholders, dated March 31, 2005.

 

Additional information regarding the interests of such potential participants will be included in the joint proxy statement/prospectus and the other relevant documents filed with the SEC when they become available. This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

 

Forward-Looking Statements

 

Certain statements in this press release may contain forward-looking information regarding the NYSE and Archipelago and the combined company after the completion of the transactions that are intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, the benefits of the business combination transaction involving the NYSE and Archipelago, including future financial and operating results, the new company’s plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of NYSE’s and Archipelago’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements.

 

The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the ability to obtain governmental approvals of the transaction on the proposed terms and schedule; the failure of NYSE members or Archipelago shareholders to approve the transaction; the risk that the businesses will not be integrated successfully; the risk that the cost savings and any other synergies from the transaction may not be fully realized or may take longer to realize than expected; disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; competition and its effect on pricing, spending, third party relationships and revenues; social and political conditions such as war, political unrest or terrorism; general economic conditions and normal business uncertainty. Additional risks and factors are identified in Archipelago’s filings with the Securities Exchange Commission, including its Report on Form 10-K for the fiscal year ending December 31, 2004 which is available on Archipelago’s website at http://www.Archipelago.com, and the Registration Statement on Form S-4 filed by NYSE Group, Inc. with the SEC on July 21, 2005.

 

You should not place undue reliance on forward-looking statements, which speak only as of the date of this press release. Except for any obligation to disclose material information under the Federal securities laws, none of the NYSE, Archipelago or the combined company after the completion of the transactions undertake any obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this press release.

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The NYSE, Archipelago and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from Archipelago stockholders in respect of the proposed transaction. Information regarding Archipelago’s directors and executive officers is available in Archipelago’s proxy statement for its 2005 annual meeting of stockholders, dated March 31, 2005. Additional information regarding the interests of such potential participants will be included in the joint proxy statement/prospectus and the other relevant documents filed with the SEC when they become available.

 

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.