Attached files
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| 8-K - FORM 8-K - INTERCONTINENTALEXCHANGE INC | t71844_8k.htm |
Exhibit 99.1
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EARNINGS RELEASE
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Investor and Media Contacts:
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Kelly Loeffler, VP, Investor Relations & Corp. Communications
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IntercontinentalExchange
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770-857-4726
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kelly.loeffler@theice.com
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Melanie Shale, Director of Investor & Public Relations
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IntercontinentalExchange
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770-857-2532
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melanie.shale@theice.com
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IntercontinentalExchange Reports $1.87 Adjusted Diluted EPS, up 32%; GAAP Diluted EPS of $1.80; Record Revenues and Net Income Attributable to ICE
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Record 3Q11 Revenues of $341 MM, Up 19%
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Record 3Q11 Net Income Attributable to ICE of $133 MM, Up 38%
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Record 3Q11 Operating Cash Flow of $220 MM, Up 84%
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ATLANTA, GA (November 2, 2011) -- IntercontinentalExchange (NYSE: ICE), a leading operator of regulated global exchanges, clearing houses and over-the-counter (OTC) markets, today reported financial results for the third quarter of 2011. Consolidated revenues increased 19% from the third quarter of 2010 to a record $341 million. Consolidated net income attributable to ICE grew 38% to a record $133 million. Diluted earnings per share (EPS) increased 40% to $1.80.
Third quarter 2011 adjusted consolidated net income attributable to ICE, excluding acquisition-related transaction costs that are not indicative of our core business performance, increased 30% to $138 million and adjusted diluted EPS grew 32% to $1.87. Please refer to the reconciliation of non-GAAP financial measures included in this press release for more information on adjusted net income attributable to ICE and adjusted diluted EPS.
Said ICE Chairman and CEO Jeffrey C. Sprecher: “By recognizing the demand for market transparency, clearing and automation well in advance of regulatory requirements, ICE continues to deliver strong results. With a global reach and an innovative and diverse suite of products and risk management solutions, ICE is committed to continuing to lead in creating value for our customers and shareholders.”
ICE SVP and CFO Scott Hill added: “This was another outstanding quarter for ICE, with record revenues, earnings and operating cash flow. Importantly, embedded within these strong results are on-going strategic investments that will enable us to continue to grow and outperform over the long term.”
Third Quarter 2011 Results
Third quarter 2011 consolidated revenues totaled $341 million, up 19% from the prior-year third quarter. Consolidated transaction and clearing revenues grew 18% to $302 million. The increase in transaction and clearing revenues was driven primarily by volume growth in the Brent, Gasoil, ECX emissions and Russell Index futures and options contracts, as well as growth in OTC North American natural gas, power and global oil volume.
Transaction and clearing revenues in ICE’s futures segment grew 24% to $155 million in the third quarter. Average daily volume (ADV) in ICE’s futures segment was 1.6 million contracts, an increase of 23% from the third quarter of 2010.
Transaction and clearing revenues in ICE’s global OTC segment increased 11% to a record $147 million in the third quarter of 2011. Average daily commissions (ADC) for ICE’s OTC energy business grew 14% to $1.55 million. Revenues from ICE’s credit default swap (CDS) trade execution, processing and clearing business was $46 million in the quarter, up 8% from the third quarter of 2010, and included $19 million in CDS clearing revenues.
Consolidated market data revenues were a record $32 million in the third quarter of 2011, an increase of 17% from the prior third quarter. Consolidated other revenues were $7 million.
Consolidated operating expenses totaled $137 million in the quarter, an increase of 1% from the third quarter of 2010. Consolidated operating income grew 35% to $204 million. Operating margin in the third quarter was 60%, and the effective tax rate for the quarter was 30%, compared to 32% for the prior third quarter.
First Nine Months of 2011 Results
Consolidated revenues in the first nine months of 2011 grew 16% to $1 billion. Futures volumes in the first three quarters grew 18% to 291 million contracts, driving futures transaction and clearing revenues to $461 million, up 22% year-over-year. ADV in the first nine months of 2011 was 1.5 million contracts, up 17% from the year-ago period.
Global OTC segment transaction and clearing revenues were $428 million in the first nine months of the year, an increase of 8% from the same period in 2010. ADC in ICE’s OTC energy business were $1.57 million, up 13% from the first nine months of 2010. Consolidated market data revenues increased 13% to $92 million and consolidated operating margin was 60% for the first nine months of 2011.
Cash flow from operations were $541 million in the first nine months of 2011, up 43% from the same period of 2010. Capital expenditures in the first nine months of 2011 were $19 million and capitalized software development costs totaled $23 million.
Unrestricted cash was $497 million as of September 30, 2011. As previously announced, ICE repurchased $103 million of its common stock at an average price of $109.95 in the third quarter of 2011 as part of its existing stock repurchase program. At the end of the quarter, ICE had $602 million in outstanding debt.
Financial Guidance and Additional Information
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ICE's diluted share count for the fourth quarter of 2011 is expected to be in the range of 73 million to 74 million weighted average shares outstanding, and the diluted share count for fiscal year 2011 in the range of 73.5 million to 74.5 million weighted average shares outstanding.
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Earnings Conference Call Information
ICE will hold a conference call today, November 2, at 8:30 a.m. ET to review its third quarter 2011 financial results. A live audio webcast of the earnings call will be available on the company's website at www.theice.com under About ICE/Investors & Media. Participants may also listen via telephone by dialing 877-674-6420 if calling from the United States, or 708-290-1370 if dialing from outside of the United States. For participants on the telephone, please place your call ten minutes prior to the start of the call. The call will be archived on the company's website for replay.
Historical futures volume and OTC commission data can be found at:
http://ir.theice.com/supplemental.cfm
About IntercontinentalExchange
IntercontinentalExchange (NYSE: ICE) is a leading operator of regulated futures exchanges and over-the-counter markets for agricultural, credit, currency, emissions, energy and equity index contracts. ICE Futures Europe hosts trade in half of the world’s crude and refined oil futures. ICE Futures U.S. and ICE Futures Canada list agricultural, currencies and Russell Index markets. ICE is also a leading operator of central clearing services for the futures and over-the-counter markets, with five regulated clearing houses across North America and Europe. ICE serves customers in more than 70 countries. www.theice.com
The following are trademarks of IntercontinentalExchange, Inc. and/or its affiliated companies: IntercontinentalExchange, IntercontinentalExchange & Design, ICE, ICE and block design, ICE Futures Canada, ICE Futures Europe, ICE Futures U.S., ICE Trust, ICE Clear Europe, ICE Clear U.S., ICE Clear Canada, The Clearing Corporation, U.S. Dollar Index, ICE Link and Creditex. All other trademarks are the property of their respective owners. For more information regarding registered trademarks owned by IntercontinentalExchange, Inc. and/or its affiliated companies, see https://www.theice.com/terms.jhtml.
Forward-Looking Statements
This press release may contain "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements regarding IntercontinentalExchange's business that are not historical facts are forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. These statements are not guarantees of future performance and actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statement. The factors that might affect our performance include, but are not limited to: our business environment and industry trends; conditions in global financial markets; domestic and international economic conditions, including the U.S. government’s negotiations to increase the U.S. debt ceiling; volatility in commodity prices; changes in laws and regulations; increasing competition and consolidation in our industry; our ability to identify and effectively pursue acquisitions and strategic alliances and successfully integrate the companies we acquire on a cost-effective basis; the success of our clearing houses and our ability to minimize the risks associated with operating multiple clearing houses in multiple jurisdictions; technological developments, including clearing developments; the accuracy of our cost estimates and expectations, including, without limitation, those set forth in this press release under "Financial Guidance and Additional Information"; our belief that cash flows will be sufficient to service our debt and fund our working capital needs and capital expenditures at least through the end of 2012; our ability to develop new products and services; protecting our intellectual property rights; not violating the intellectual property rights of others; potential adverse litigation results; our belief in our electronic platform and disaster recovery system technologies; identification of trends and how they will impact our business; and our ability to gain access to comparable products and services if our key technology contracts were terminated. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see ICE's Securities and Exchange Commission (SEC) filings, including, but not limited to, the risk factors in ICE's most recent Annual Report on Form 10-K for the year ended December 31, 2010, which was filed with the SEC on February 9, 2011, and ICE’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, which was filed with the SEC on August 3, 2011. These filings are also available in the Investors & Media section of our website. You should not place undue reliance on forward-looking statements, which speak only as of the date of this press release. Except for any obligations to disclose material information under the Federal securities laws, ICE undertakes no obligation to publicly update any forward-looking statements to reflect events or circumstances after the date of this press release.
Consolidated Unaudited Financial Statements
IntercontinentalExchange, Inc. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
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Nine Months Ended
September 30,
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Three Months Ended
September 30,
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2011
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2010
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2011
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2010
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Revenues:
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Transaction and clearing fees, net
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$ | 889,060 | $ | 772,024 | $ | 301,510 | $ | 256,102 | ||||||||
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Market data fees
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92,331 | 81,567 | 32,212 | 27,528 | ||||||||||||
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Other
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18,885 | 11,330 | 7,056 | 3,516 | ||||||||||||
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Total revenues
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1,000,276 | 864,921 | 340,778 | 287,146 | ||||||||||||
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Operating expenses:
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Compensation and benefits
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187,951 | 179,696 | 64,137 | 62,586 | ||||||||||||
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Professional services
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24,970 | 24,840 | 8,743 | 8,262 | ||||||||||||
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Acquisition-related transaction costs
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14,760 | 9,062 | 5,446 | 7,019 | ||||||||||||
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Selling, general and administrative
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75,007 | 69,788 | 25,308 | 25,982 | ||||||||||||
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Depreciation and amortization
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99,063 | 87,867 | 33,095 | 31,739 | ||||||||||||
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Total operating expenses
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401,751 | 371,253 | 136,729 | 135,588 | ||||||||||||
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Operating income
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598,525 | 493,668 | 204,049 | 151,558 | ||||||||||||
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Other income (expense):
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Interest and investment income
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2,742 | 1,544 | 908 | 478 | ||||||||||||
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Interest expense
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(24,821 | ) | (22,123 | ) | (8,244 | ) | (7,511 | ) | ||||||||
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Other income (expense), net
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(819 | ) | (13,297 | ) | (258 | ) | 2,716 | |||||||||
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Total other expense, net
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(22,898 | ) | (33,876 | ) | (7,594 | ) | (4,317 | ) | ||||||||
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Income before income taxes
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575,627 | 459,792 | 196,455 | 147,241 | ||||||||||||
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Income tax expense
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184,153 | 153,834 | 59,507 | 47,328 | ||||||||||||
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Net income
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$ | 391,474 | $ | 305,958 | $ | 136,948 | $ | 99,913 | ||||||||
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Net income attributable to noncontrolling interest
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(8,574 | ) | (6,792 | ) | (4,317 | ) | (3,598 | ) | ||||||||
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Net income attributable to
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IntercontinentalExchange, Inc.
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$ | 382,900 | $ | 299,166 | $ | 132,631 | $ | 96,315 | ||||||||
| Earnings per share attributable to | ||||||||||||||||
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IntercontinentalExchange, Inc. common
shareholders:
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Basic
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$ | 5.22 | $ | 4.06 | $ | 1.81 | $ | 1.31 | ||||||||
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Diluted
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$ | 5.17 | $ | 4.01 | $ | 1.80 | $ | 1.29 | ||||||||
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Weighted average common shares outstanding:
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Basic
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73,335 | 73,765 | 73,139 | 73,659 | ||||||||||||
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Diluted
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74,057 | 74,577 | 73,836 | 74,443 | ||||||||||||
Consolidated Balance Sheets
(In thousands)
(Unaudited)
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September 30,
2011
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December 31,
2010
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ASSETS
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Current assets:
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Cash and cash equivalents
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$ | 497,303 | $ | 621,792 | ||||
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Short-term restricted cash
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63,377 | 75,113 | ||||||
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Customer accounts receivable, net
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159,219 | 114,456 | ||||||
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Margin deposits and guaranty funds
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34,460,109 | 22,712,281 | ||||||
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Prepaid expenses and other current assets
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42,941 | 52,136 | ||||||
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Total current assets
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35,222,949 | 23,575,778 | ||||||
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Property and equipment, net
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99,114 | 94,503 | ||||||
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Other noncurrent assets:
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Goodwill
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1,901,880 | 1,916,055 | ||||||
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Other intangible assets, net
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872,398 | 890,818 | ||||||
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Long-term restricted cash
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145,680 | 144,174 | ||||||
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Long-term investments
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400,217 | — | ||||||
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Other noncurrent assets
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24,492 | 20,931 | ||||||
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Total other noncurrent assets
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3,344,667 | 2,971,978 | ||||||
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Total assets
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$ | 38,666,730 | $ | 26,642,259 | ||||
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LIABILITIES AND EQUITY
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Current liabilities:
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Accounts payable and accrued liabilities
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$ | 79,480 | $ | 65,162 | ||||
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Accrued salaries and benefits
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44,946 | 53,769 | ||||||
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Current portion of licensing agreement
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20,972 | 18,268 | ||||||
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Current portion of long-term debt
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231,500 | 252,750 | ||||||
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Income taxes payable
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49,481 | 6,307 | ||||||
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Margin deposits and guaranty funds
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34,460,109 | 22,712,281 | ||||||
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Other current liabilities
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42,212 | 18,847 | ||||||
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Total current liabilities
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34,928,700 | 23,127,384 | ||||||
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Noncurrent liabilities:
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Noncurrent deferred tax liability, net
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240,669 | 268,249 | ||||||
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Long-term debt
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370,000 | 325,750 | ||||||
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Noncurrent portion of licensing agreement
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83,595 | 60,325 | ||||||
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Other noncurrent liabilities
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32,634 | 43,786 | ||||||
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Total noncurrent liabilities
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726,898 | 698,110 | ||||||
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Total liabilities
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35,655,598 | 23,825,494 | ||||||
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EQUITY
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IntercontinentalExchange, Inc. shareholders’ equity:
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Common stock
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791 | 785 | ||||||
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Treasury stock, at cost
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(593,562 | ) | (453,822 | ) | ||||
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Additional paid-in capital
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1,810,929 | 1,745,424 | ||||||
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Retained earnings
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1,830,323 | 1,447,423 | ||||||
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Accumulated other comprehensive income (loss)
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(74,671 | ) | 37,740 | |||||
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Total IntercontinentalExchange, Inc. shareholders’ equity
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2,973,810 | 2,777,550 | ||||||
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Noncontrolling interest in consolidated subsidiaries
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37,322 | 39,215 | ||||||
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Total equity
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3,011,132 | 2,816,765 | ||||||
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Total liabilities and equity
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$ | 38,666,730 | $ | 26,642,259 | ||||
Non-GAAP Financial Measures and Reconciliation
Below we provide adjusted net income attributable to ICE and adjusted earnings per share attributable to ICE common shareholders as additional information regarding our operating results. We use these non-GAAP measures internally to evaluate our performance and in making financial and operational decisions. When viewed in conjunction with our U.S. generally accepted accounting principles (GAAP) results, and the accompanying reconciliation, we believe that our presentation of these measures provides investors with greater transparency and supplemental data relating to our financial condition and results of operations. In addition, we believe the presentation of these measures is useful to investors for period-to-period comparison of results because the items described below are not reflective of our core business performance. These measures are not in accordance with, or an alternative to, GAAP, and may be different from non-GAAP measures used by other companies. Investors should not rely on any single financial measure when evaluating our business. We strongly recommend that investors review the GAAP financial measures included in our Quarterly Report on Form 10-Q for the period ended September 30, 2011, including our consolidated financial statements and the notes thereto.
During the nine months and three months ended September 30, 2011 and 2010, we recognized acquisition-related transaction costs as we continued to explore acquisitions and other strategic opportunities to strengthen our competitive position and support our growth, including transaction costs relating to the potential acquisition of NYSE Euronext and the investment in Cetip that we incurred during the nine and three months ended September 30, 2011 and transaction costs relating to the acquisition of CLE that we incurred during the nine and three months ended September 30, 2010. During the nine and three months ended September 30, 2010, we incurred charges associated with our acquisition of CLE, including the currency hedge that was purchased at the time of the CLE transaction announcement, acquisition-related severance costs and a net gain on the sale of our existing CLE ownership. The tax effects of these items are calculated by applying specific legal entity and jurisdictional marginal tax rates. Adjusted net income attributable to ICE for the periods presented below is calculated by adding net income attributable to ICE, the adjustments described above, which costs are not reflective of our core business performance, and their related income tax effect.
The following table reconciles net income attributable to ICE to adjusted net income attributable to ICE and calculates adjusted earnings per share attributable to ICE common shareholders as follows for the following periods (in thousands, except per share amounts):
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Nine Months Ended
September 30,
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Three Months Ended
September 30,
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2011
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2010
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2011
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2010
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Net income attributable to ICE
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$ | 382,900 | $ | 299,166 | $ | 132,631 | $ | 96,315 | ||||||||
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Add: Acquisition-related transaction costs
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14,760 | 9,062 | 5,446 | 7,019 | ||||||||||||
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Add: Loss on hedge related to CLE acquisition
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— | 15,080 | — | 802 | ||||||||||||
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Add: Severance costs relating to acquisitions
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— | 5,716 | — | 5,196 | ||||||||||||
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Less: Net gain on existing 4.8% ownership of CLE
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— | (1,825 | ) | — | (1,825 | ) | ||||||||||
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Less: Income tax benefit effect related to the items
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above
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(3,528 | ) | (6,149 | ) | (70 | ) | (1,579 | ) | ||||||||
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Adjusted net income attributable to ICE
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$ | 394,132 | $ | 321,050 | $ | 138,007 | $ | 105,928 | ||||||||
| Earnings per share attributable to ICE common | ||||||||||||||||
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shareholders:
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Basic
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$ | 5.22 | $ | 4.06 | $ | 1.81 | $ | 1.31 | ||||||||
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Diluted
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$ | 5.17 | $ | 4.01 | $ | 1.80 | $ | 1.29 | ||||||||
| Adjusted earnings per share attributable to ICE | ||||||||||||||||
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common shareholders:
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Adjusted basic
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$ | 5.37 | $ | 4.35 | $ | 1.89 | $ | 1.44 | ||||||||
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Adjusted diluted
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$ | 5.32 | $ | 4.30 | $ | 1.87 | $ | 1.42 | ||||||||
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Weighted average common shares outstanding:
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Basic
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73,335 | 73,765 | 73,139 | 73,659 | ||||||||||||
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Diluted
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74,057 | 74,577 | 73,836 | 74,443 | ||||||||||||
ICE-CORP