Attached files
| file | filename |
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| 8-K - 8-K - Cboe Global Markets, Inc. | form8-kjune302013.htm |
Exhibit 99.1
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News Release | |
CBOE HOLDINGS, INC. REPORTS ALL-TIME RECORD QUARTERLY RESULTS FOR SECOND QUARTER 2013
Second Quarter Financial Highlights
-- Record Quarterly Results
-- Operating Revenue Increases 14 Percent to $150.8 Million
-- GAAP Net Income Allocated to Common Stockholders Increases 20 Percent to $45.5 Million; Diluted EPS of $0.52
-- Adjusted Net Income Allocated to Common Stockholders Up 24 Percent to $47.0 Million1; Adjusted Diluted EPS of $0.541
-- GAAP Operating Margin Expands by 20 Basis Points to 50.0 Percent; Adjusted Operating Margin Up 140 Basis Points to 51.2 Percent1
CHICAGO, August 2, 2013 - CBOE Holdings, Inc. (NASDAQ: CBOE) today reported second quarter 2013 net income allocated to common stockholders of $45.5 million, or $0.52 per diluted share, compared with $37.9 million, or $0.44 per diluted share in the second quarter of 2012. On an adjusted basis, net income allocated to common stockholders was $47.0 million, or $0.54 per share, compared with $37.9 million, or $0.44 per diluted share, in the same period last year. Operating revenues of $150.8 million for the second quarter increased 14 percent compared with $132.6 million in the second quarter of 2012.
"We are pleased to report another strong quarter at CBOE Holdings, with new all-time highs for operating revenue and earnings per share. Our strong results were driven by increased trading overall and our successful efforts to expand trading in our higher-margin proprietary products. Trading volume in VIX Index futures, which carry our highest fee per contract, reached a new quarterly record for the sixth consecutive quarter, while trading in VIX options and our S&P 500 options complex also continued to show strong growth.” said Edward T. Tilly, CBOE Holdings CEO. "We will remain focused on product development, extending our global customer reach and maintaining prudent fiscal management to deliver value to stockholders."
"Strong growth in revenue and earnings this year, combined with our solid balance sheet and strong cash flow, gives us the flexibility to invest in growth initiatives while returning value to stockholders," stated Alan J. Dean, CBOE Holdings Executive Vice President and Chief Financial Officer. "Our Board's recent move to increase our quarterly dividend by 20 percent demonstrates our focus on the prudent management of our cash flow and our commitment to return excess capital to our stockholders."
(1) A full reconciliation of our non-GAAP results to our GAAP results for the 2013 and 2012 reporting periods is included in the attached tables. See "Non-GAAP Information” in the accompanying financial tables.
Key Statistics and Financial Highlights
The table below highlights CBOE Holdings' operating results on a GAAP basis and an adjusted basis for the comparative quarters and six-month periods ended June 30, 2013 and 2012. Financial results presented on an adjusted basis provide supplemental information to facilitate period-over-period comparisons by adjusting for certain items that management believes are not indicative of the company's core operating performance.
(in millions, except per share, revenue per contract and trading days) | 2Q 2013 | 2Q 2012 | Y/Y Change | YTD 2013 | YTD 2012 | Y/Y Change | ||||||||||
Key Statistics: | ||||||||||||||||
Total Trading Days | 64 | 63 | 124 | 125 | ||||||||||||
Average Daily Volume (options and futures) | 4.96 | 4.80 | 3 | % | 4.67 | 4.84 | (4 | %) | ||||||||
Total Trading Volume (options and futures) | 317.4 | 302.7 | 5 | % | 579.3 | 605.3 | (4 | %) | ||||||||
Average Revenue Per Contract | $ | 0.334 | $ | 0.314 | 6 | % | $ | 0.354 | $ | 0.297 | 19 | % | ||||
GAAP Financial Highlights: | ||||||||||||||||
Total Operating Revenues | $ | 150.8 | $ | 132.6 | 14 | % | $ | 293.5 | $ | 253.9 | 16 | % | ||||
Total Operating Expenses | 75.4 | 66.5 | 13 | % | 148.7 | 130.4 | 14 | % | ||||||||
Operating Income | 75.4 | 66.1 | 14 | % | 144.8 | 123.5 | 17 | % | ||||||||
Operating Margin % | 50.0 | % | 49.8 | % | 20 | bps | 49.3 | % | 48.6 | % | 70 | bps | ||||
Net Income | $ | 46.2 | $ | 38.5 | 20 | % | $ | 88.5 | $ | 71.9 | 23 | % | ||||
Net Income Allocated to Common Stockholders | $ | 45.5 | $ | 37.9 | 20 | % | $ | 87.3 | $ | 70.8 | 23 | % | ||||
Diluted EPS | $ | 0.52 | $ | 0.44 | 18 | % | $ | 1.00 | $ | 0.81 | 23 | % | ||||
Weighted Average Shares Outstanding | 87,341 | 87,153 | — | 87,307 | 87,649 | — | ||||||||||
Adjusted Financial Highlights (1) | ||||||||||||||||
Total Operating Expenses | $ | 73.6 | $ | 66.5 | 11 | % | $ | 143.7 | $ | 130.3 | 10 | % | ||||
Operating Income | 77.2 | 66.1 | 17 | % | 149.8 | 123.7 | 21 | % | ||||||||
Operating Margin % | 51.2 | % | 49.8 | % | 140 bps | 51.0 | % | 48.7 | % | 230 | bps | |||||
Net Income | $ | 47.7 | $ | 38.5 | 24 | % | $ | 92.1 | $ | 72.0 | 28 | % | ||||
Net Income Allocated to Common Stockholders | $ | 47.0 | $ | 37.9 | 24 | % | $ | 90.8 | $ | 70.9 | 28 | % | ||||
Diluted EPS | $ | 0.54 | $ | 0.44 | 23 | % | $ | 1.04 | $ | 0.81 | 28 | % | ||||
(1) A full reconciliation of our non-GAAP results to our GAAP results for the 2013 and 2012 reporting periods is included in the attached tables. See "Non-GAAP Information” in the accompanying financial tables.
Revenues
Operating revenue was $150.8 million in the second quarter of 2013, up $18.2 million, or 14 percent, from $132.6 million in the second quarter of 2012. The increase represents higher revenue of $11.2 million in transaction fees, $6.4 million in regulatory fees and $1.4 million in exchange services and other fees, offset somewhat by a decrease of $1.1 million in access fees.
Transaction fees increased 12 percent for the quarter due to a 5 percent increase in trading volume and a 6 percent increase in the average revenue per contract (RPC) compared with the second quarter of 2012. Total trading volume in the second quarter was 317.4 million contracts, or 4.96 million contracts per day, compared with volume of 302.7 million contracts, or 4.80 million contracts per day, in last year's second quarter. RPC increased to $0.334 compared with $0.314 in the second quarter of 2012.
The increase in RPC primarily resulted from a shift in the mix of trading volume, with contracts carrying the highest rate per contract, index options and futures contracts, accounting for 34.7 percent of trading volume during the quarter compared with 28.0 percent in the second quarter of 2012.
The average revenue per contract represents total transaction fee revenue divided by total reported trading volume for Chicago Board Options Exchange (CBOE), C2 Options Exchange (C2) and CBOE Futures Exchange (CFE).
Adjusted Operating Expenses
Adjusted operating expenses were $73.6 million for the quarter, up $7.1 million or 11 percent, compared with $66.5 million in the second quarter of 2012. For the second quarter of 2013, adjusted operating expenses exclude $0.8 million of accelerated stock-based compensation expense and $1.0 million of additional expense for the final resolution of an SEC investigation. There were no adjustments in the second quarter of 2012.
The company's core operating expenses, which include total operating expenses less volume-based expenses, depreciation and amortization, accelerated stock-based compensation expense and unusual or one-time expenses, were $49.6 million for the second quarter of 2013, up $4.6 million or 10 percent, compared with last year's second quarter. The increase primarily represents higher expenses for employee costs. Employee costs were up primarily due to increases in stock-based compensation, incentive compensation and salaries.
Volume-based expenses, which include royalty fees and trading volume incentives, were $15.4 million in the second quarter of 2013, representing an increase of $2.2 million or 17 percent, compared with the same period last year. This increase reflects higher royalty fees of $2.5 million, offset somewhat by a decrease in trading volume incentives of $0.3 million. The higher royalty fees are directly related to the growth in trading volume in licensed index products, as well as a fee increase realized on March 8th, in conjunction with CBOE extending its licensing agreement with S&P Dow Jones Indices. The decline in trading volume incentives primarily resulted from lower trading volume in multiply-listed options and modifications to the incentive program criteria.
Adjusted Operating Margin
The company's adjusted operating margin for the second quarter of 2013 increased 140 basis points to 51.2 percent compared with 49.8 percent for the same quarter last year, representing the Company's second highest adjusted operating margin ever.
Effective Tax Rate
The company reported an effective tax rate of 38.4 percent for the quarter versus 41.4 percent in last year's second quarter. The decrease in the effective rate for the second quarter of 2013 compared to 2012 is the result of the recognition of discrete items and the benefit of a lower apportionment in Illinois.
Second Quarter 2013 Operational Highlights and Recent Developments
• | For a sixth consecutive quarter, CFE and VIX futures experienced record-setting quarterly trading volume. |
• | On August 1, the company reported that average daily volume (ADV) for total options in July 2013 was 4.33 million contracts, a 16 percent decrease from June 2013 ADV of 5.17 million contracts and a 4 percent increase from July 2012 ADV of 4.15 million contracts. In addition, CFE reported ADV of 134,796 contracts in July 2013, up 48 percent compared with 91,384 contracts per day during July 2012 and a 36 percent decrease from 211,022 contracts per day in June 2013. |
• | On July 29, CFE announced that the first phase of its previously announced plans to expand VIX futures trading hours will begin in late September, with the second phase to begin in the weeks that follow. |
• | On July 1, CBOE began disseminating values for a new volatility index benchmark — the CBOE EFA ETF Volatility Index (VXEFA). The VXEFA Index, the newest addition to CBOE's suite of volatility benchmarks, expands investors' ability to track market volatility of major geographic regions outside of the United States. |
• | On June 20, trading volume in CBOE's S&P 500® Index options (SPXSM) contracts established a new daily record of 2,282,029 contracts traded, surpassing the previous daily volume record of 2,187,004 contracts set on May 20, 2010. |
• | On May 31, the company announced its plan to host the second annual CBOE Risk Management Conference (RMC) Europe, from Monday, September 30 through Wednesday, October 2, 2013, in Sintra, Portugal. |
• | On May 23, CBOE and CME Group (CME) announced that, as part of an agreement between the exchanges, CBOE will disseminate values for a new volatility benchmark index using futures options data on CME Group's |
10-year U.S. Treasury note contract. The CBOE/CBOT 10-year U.S. Treasury Note Volatility Index (ticker symbol VXTYNSM) is the first volatility index of its kind, based on U.S. government debt, to be calculated and disseminated by CBOE.
• | On May 13, CBOE announced that the Supreme Court of the United States denied the International Securities Exchange's (ISE) petition to review the Illinois Appellate Court's decision that permanently restrained and enjoined ISE from listing or providing an exchange market for the trading of S&P 500 Index and Dow Jones Industrial Average options and enjoined OCC from issuing, clearing or settling the exercise of such ISE options. |
• | On April 8, CBOE launched its new "CBOE Options Hub" (www.cboeoptionshub.com), a comprehensive website designed to be the "hub" of CBOE's industry-leading social media program and the definitive online source for up-to-the-minute news and views from the options community. |
2013 Fiscal Year Financial Guidance
The company reaffirmed the following 2013 financial guidance provided in its February 8, 2013 earnings press release:
• | Core operating expenses are expected to be in the range of $189.0 million to $194.0 million. Continuing stock-based compensation expense included in core expenses is expected to be approximately $18.0 million for the full year. |
• | Depreciation and amortization expense is expected to be in the range of $37.0 million to $39.0 million. |
• | Capital expenditures are expected to be in the range of $35.0 million to $40.0 million. |
• | Adjusted effective tax rate for the full-year 2013 is expected to be in the range of 39.5 to 40.0 percent. |
Return of Capital to Stockholders
As announced on July 30, 2013, CBOE Holdings' Board of Directors increased the company's quarterly cash dividend by 20 percent, to $0.18 per share from $0.15 per share. The dividend increase is effective with the third quarter dividend, which is payable September 20, 2013, to stockholders of record on August 30, 2013.
During the second quarter of 2013, the company did not repurchase any shares of its common stock under the share repurchase program. At June 30, 2013, the company had approximately $103.3 million of availability remaining under its existing share repurchase authorizations.
Earnings Conference Call
Executives of CBOE Holdings will host a conference call to review its second quarter financial results today, August 2, 2013, at 8:30 a.m. ET/7:30 a.m. CT. The conference call and any accompanying slides will be publicly available via live webcast from the Investor Relations section of the company's website at www.cboe.com under Events & Presentations. Participants may also listen via telephone by dialing (877) 372-0876 from the United States or Canada, or (253) 237-1167 for international callers. Telephone participants should place calls 10 minutes prior to the start of the call. The webcast will be archived on the company's website for replay. A telephone replay of the earnings call also will be available from approximately 11:00 a.m. CT, August 2, 2013, through 11:00 p.m. CT, August 9, 2013, by calling (855) 859-2056 within the U.S. and Canada, or (404) 537-3406 for international callers, using replay code 98414575.
About CBOE Holdings
CBOE Holdings, Inc. (NASDAQ: CBOE) is the holding company for Chicago Board Options Exchange (CBOE), CBOE Futures Exchange (CFE) and other subsidiaries. CBOE, the largest U.S. options exchange and creator of listed options, continues to set the bar for options and volatility trading through product innovation, trading technology and investor education. CBOE Holdings offers equity, index and ETP options, including proprietary products, such as S&P 500 options (SPX), the most active U.S. index option, and options and futures on the CBOE Volatility Index (the VIX Index). Other products engineered by CBOE include equity options, security index options, LEAPS options, FLEX options, and benchmark products such as the CBOE S&P 500 BuyWrite Index (BXM). CBOE Holdings is home to the world-renowned Options Institute and www.cboe.com, the go-to place for options and volatility trading resources.
Forward-Looking Statements
This press release may contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those statements that reflect our expectations, assumptions or projections about the future and involve a number of risks and uncertainties. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause actual results to differ materially from that expressed or implied by the forward-looking statements, including: the loss of our right to exclusively list certain index option products; increasing price competition in our industry; compliance with legal and regulatory obligations and obligations under agreements with regulatory agencies; our ability to operate our business, monitor and maintain our systems or program them so that they operate correctly, including in response to increases in trading volume and order transaction traffic; decreases in the amount of trading volumes or a shift in the mix of products traded on our exchanges; legislative or regulatory changes; increasing competition by foreign and domestic entities; economic, political and market conditions; our ability to operate our business without violating the intellectual property rights of others and the costs associated with protecting our intellectual property rights; our ability to maintain access fee revenues; our ability to protect our systems and communication networks from security risks, including cyber-attacks; our ability to attract and retain skilled management and other personnel; our ability to maintain our growth effectively; our dependence on third party service providers; and the ability of our compliance and risk management methods to effectively monitor and manage our risks.
More detailed information about factors that may affect our performance may be found in our filings with the SEC, including in our Annual Report on Form 10-K for the year ended December 31, 2012 and other filings made from time to time with the SEC.
The condensed consolidated statements of income, balance sheets and statements of cash flows are unaudited and subject to reclassification.
CBOE Media Contacts: | Analyst Contact: | |||||
Gail Osten | Gary Compton | Debbie Koopman | ||||
(312) 786-7123 | (312) 786-7612 | (312) 786-7136 | ||||
osten@cboe.com | comptong@cboe.com | koopman@cboe.com | ||||
CBOE-F
Trademarks:
CBOE®, Chicago Board Options Exchange®, CFE®, FLEX®, LEAPS®, CBOE Volatility Index® and VIX® are registered trademarks and BuyWriteSM, BXMSM, CBOE Futures ExchangeSM, Execute SuccessSM, SPXSM, VXTYNSM and The Options InstituteSM are service marks of Chicago Board Options Exchange, Incorporated (CBOE). C2SM and C2 Options ExchangeSM are service marks of C2 Options Exchange, Incorporated (C2). Standard & Poor's®, S&P® and S&P 500® are registered trademarks of Standard & Poor's Financial Services LLC and have been licensed for use by CBOE, C2 and CFE. All other trademarks and service marks are the property of their respective owners.
CBOE Holdings, Inc.
Selected Quarterly Operating Statistics
Average Daily Volume by Product (in thousands)
2Q 2013 | 1Q 2013 | 4Q 2012 | 3Q 2012 | 2Q 2012 | ||||||
PRODUCT: | ||||||||||
Equities | 1,595 | 1,604 | 1,617 | 1,964 | 2,007 | |||||
Indexes | 1,543 | 1,501 | 1,294 | 1,150 | 1,252 | |||||
Exchange-traded products | 1,641 | 1,107 | 1,091 | 1,124 | 1,451 | |||||
Total Options Average Daily Volume | 4,779 | 4,212 | 4,002 | 4,238 | 4,710 | |||||
Futures | 180 | 154 | 123 | 99 | 93 | |||||
Total Average Daily Volume | 4,959 | 4,366 | 4,125 | 4,337 | 4,803 | |||||
Mix of Trading Volume by Product
2Q 2013 | 1Q 2013 | 4Q 2012 | 3Q 2012 | 2Q 2012 | ||||||
PRODUCT: | ||||||||||
Equities | 32.2 | % | 36.7 | % | 39.2 | % | 45.3 | % | 41.8 | % |
Indexes | 31.1 | % | 34.4 | % | 31.4 | % | 26.5 | % | 26.1 | % |
Exchange-traded products | 33.1 | % | 25.4 | % | 26.4 | % | 25.9 | % | 30.2 | % |
Futures | 3.6 | % | 3.5 | % | 3.0 | % | 2.3 | % | 1.9 | % |
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
Average Revenue Per Contract by Product
2Q 2013 | 1Q 2013 | 4Q 2012 | 3Q 2012 | 2Q 2012 | |
Trading Days | 64 | 60 | 62 | 63 | 63 |
PRODUCT: | |||||
Equities | $0.090 | $0.140 | $0.134 | $0.118 | $0.123 |
Indexes | 0.675 | 0.671 | 0.670 | 0.682 | 0.677 |
Exchange-traded products | 0.119 | 0.155 | 0.186 | 0.177 | 0.180 |
Total Options Average Revenue Per Contract | 0.289 | 0.333 | 0.322 | 0.287 | 0.288 |
Futures | 1.544 | 1.618 | 1.442 | 1.606 | 1.607 |
Total Average Revenue Per Contract | $0.334 | $0.378 | $0.355 | $0.317 | $0.314 |
Transaction Fees by Product (in thousands)
2Q 2013 | 1Q 2013 | 4Q 2012 | 3Q 2012 | 2Q 2012 | |||||||||||
PRODUCT: | |||||||||||||||
Equities | $ | 9,213 | $ | 13,509 | $ | 13,472 | $ | 14,645 | $ | 15,617 | |||||
Indexes | 66,654 | 60,379 | 53,764 | 49,385 | 53,383 | ||||||||||
Exchange-traded products | 12,458 | 10,296 | 12,552 | 12,561 | 16,430 | ||||||||||
Total Options Transaction Fees | $ | 88,325 | $ | 84,184 | $ | 79,788 | $ | 76,591 | $ | 85,430 | |||||
Futures | 17,769 | 14,961 | 11,017 | 10,030 | 9,456 | ||||||||||
Total Transaction Fees | $ | 106,094 | $ | 99,145 | $ | 90,805 | $ | 86,621 | $ | 94,886 | |||||
Non-GAAP Information
In addition to disclosing results determined in accordance with GAAP, CBOE Holdings has disclosed certain non-GAAP measures of operating performance. These measures are not in accordance with, or a substitute for, GAAP, and may be different from or inconsistent with non-GAAP financial measures used by other companies. The non-GAAP measures provided in this press release include core operating expenses, adjusted operating expenses, adjusted operating income, adjusted operating margin, adjusted net income, adjusted net income allocated to common stockholders and adjusted diluted earnings per share.
Management believes that the non-GAAP financial measures presented in this press release, including adjusted net income and core operating expenses, provide useful and comparative information to assess trends in our core operations and a means to evaluate period-to-period comparisons. Non-GAAP financial measures disclosed by management, including adjusted diluted EPS, are provided as additional information to investors in order to provide them with an alternative method for assessing our financial condition and operating results.
The table below shows core operating expenses, which is the company's operating expenses after excluding (i) volume-based expenses, (ii) depreciation and amortization expense, (iii) accelerated stock-based compensation expense and (iv) other unusual or one-time expenses.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(in thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Total Operating Expenses | $ | 75,414 | $ | 66,480 | $ | 148,689 | $ | 130,456 | ||||||||
Less: | ||||||||||||||||
Depreciation and amortization | 8,622 | 8,320 | 16,904 | 16,640 | ||||||||||||
Accelerated stock-based compensation expense | 816 | — | 3,996 | 194 | ||||||||||||
Additional expense related to SEC investigation (in Other expenses) | 1,000 | — | 1,000 | — | ||||||||||||
Volume-based expenses: | ||||||||||||||||
Royalty fees | 14,518 | 12,001 | 27,687 | 23,192 | ||||||||||||
Trading volume incentives | 908 | 1,176 | 1,921 | 3,825 | ||||||||||||
Core Operating Expenses (non-GAAP): | $ | 49,550 | $ | 44,983 | $ | 97,181 | $ | 86,605 | ||||||||
Less: Continuing stock-based compensation expense | 5,394 | 3,027 | 8,953 | 5,772 | ||||||||||||
Core Operating Expenses Excluding Continuing Stock-Based Compensation (non-GAAP) | $ | 44,156 | $ | 41,956 | $ | 88,228 | $ | 80,833 | ||||||||
Detail of Core Operating Expenses (non-GAAP) | ||||||||||||||||
Employee costs | $ | 30,421 | $ | 25,300 | $ | 58,078 | $ | 50,396 | ||||||||
Data processing | 4,545 | 4,927 | 9,061 | 9,826 | ||||||||||||
Outside services | 9,633 | 9,265 | 20,668 | 16,435 | ||||||||||||
Travel and promotional expenses | 2,594 | 3,303 | 4,658 | 5,469 | ||||||||||||
Facilities costs | 1,247 | 1,226 | 2,500 | 2,529 | ||||||||||||
Other expenses | 1,110 | 962 | 2,216 | 1,950 | ||||||||||||
Total | $ | 49,550 | $ | 44,983 | $ | 97,181 | $ | 86,605 | ||||||||
The table below shows the reconciliation of each financial measure from GAAP to non-GAAP. The non-GAAP financial measures exclude the impact of those items detailed in the footnotes below and are referred to as adjusted financial measures. There were no non-GAAP financial measures in the second quarter of 2012.
(in thousands, except per share amounts) | Three months ended June 30, 2013 | |||||||||||||
Items Impacting Results | ||||||||||||||
Reported (GAAP) | Operating Expenses 1 | Operating Expenses 2 | After Considering Items (non-GAAP) | |||||||||||
Total Operating Revenues | $ | 150,772 | $ | 150,772 | ||||||||||
Total Operating Expenses | 75,414 | (816 | ) | (1,000 | ) | 73,598 | ||||||||
Operating Income | 75,358 | 816 | 1,000 | 77,174 | ||||||||||
Operating Margin | 50.0 | % | 51.2 | % | ||||||||||
Total Other Income/(Expense) | (473 | ) | (473 | ) | ||||||||||
Income Before Income Taxes | 74,885 | 816 | 1,000 | 76,701 | ||||||||||
Income Tax Provision | 28,724 | 313 | — | 29,037 | ||||||||||
Effective Income Tax Rate | 38.4 | % | 37.9 | % | ||||||||||
Net Income | $ | 46,161 | $ | 503 | $ | 1,000 | $ | 47,664 | ||||||
Net Income Allocated to Participating Securities | (684 | ) | (7 | ) | (15 | ) | (706 | ) | ||||||
Net Income Allocated to Common Stockholders | $ | 45,477 | $ | 496 | $ | 985 | $ | 46,958 | ||||||
Diluted Net Income per Share Allocated to Common Stockholders | $ | 0.52 | $ | 0.01 | $ | 0.01 | $ | 0.54 | ||||||
(in thousands, except per share amounts) | Six months ended June 30, 2013 | Six months ended June 30, 2012 | ||||||||||||||||||||||||
Items Impacting Results | Items Impacting Results | |||||||||||||||||||||||||
Reported (GAAP) | Operating Expenses¹ | Operating Expenses2 | Other Income/(Expense) 3 | After Considering Items (non-GAAP) | Reported (GAAP) | Operating Expenses 1 | After Considering Items (non-GAAP) | |||||||||||||||||||
Total Operating Revenues | $ | 293,477 | $ | 293,477 | $ | 253,941 | $ | 253,941 | ||||||||||||||||||
Total Operating Expenses | 148,689 | (3,996 | ) | (1,000 | ) | 143,693 | 130,456 | (194 | ) | 130,262 | ||||||||||||||||
Operating Income | 144,788 | 3,996 | 1,000 | 149,784 | 123,485 | 194 | 123,679 | |||||||||||||||||||
Operating Margin | 49.3 | % | 51.0 | % | 48.6 | % | 48.7 | % | ||||||||||||||||||
Total Other Income/(Expense) | (1,195 | ) | 245 | (950 | ) | (866 | ) | (866 | ) | |||||||||||||||||
Income Before Income Taxes | 143,593 | 3,996 | 1,000 | 245 | 148,834 | 122,619 | 194 | 122,813 | ||||||||||||||||||
Income Tax Provision | 55,060 | 1,533 | — | 92 | 56,685 | 50,706 | 80 | 50,786 | ||||||||||||||||||
Effective Income Tax Rate | 38.3 | % | 38.1 | % | 41.4 | % | 41.4 | % | ||||||||||||||||||
Net Income | $ | 88,533 | $ | 2,463 | $ | 1,000 | $ | 153 | $ | 92,149 | $ | 71,913 | $ | 114 | $ | 72,027 | ||||||||||
Net Income Allocated to Participating Securities | (1,268 | ) | (35 | ) | (14 | ) | (2 | ) | (1,319 | ) | (1,146 | ) | (2 | ) | (1,148 | ) | ||||||||||
Net Income Allocated to Common Stockholders | $ | 87,265 | $ | 2,428 | $ | 986 | $ | 151 | $ | 90,830 | $ | 70,767 | $ | 112 | $ | 70,879 | ||||||||||
Diluted Net Income per Share Allocated to Common Stockholders | $ | 1.00 | $ | 0.03 | $ | 0.01 | $ | — | $ | 1.04 | $ | 0.81 | $ | — | $ | 0.81 | ||||||||||
NOTES: Amounts may not foot due to rounding.
1) | In the second quarter of 2013, the company accelerated the recognition of stock-based compensation expense to recognize the remaining value of stock grants awarded to employees in its regulatory division who will no longer receive stock-based compensation. In the first quarter of 2013, the company accelerated the recognition of stock-based compensation expense to recognize the full value of stock grants awarded to certain executives due to provisions in their employment arrangements. In the first quarter of 2012, the company accelerated the recognition of stock-based compensation expense to recognize the remaining fair value of stock grants awarded to two board members who left the Board. |
2) | In the second quarter of 2013, the company recognized additional expense for the final resolution of an SEC investigation. |
3) | In the first quarter of 2013, the company recorded an impairment for an investment in affiliate. |
CBOE Holdings, Inc. and Subsidiaries | |||||||||||||||||
Condensed Consolidated Statements of Income (Unaudited) | |||||||||||||||||
Three and Six Months Ended June 30, 2013 and 2012 | |||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
(in thousands, except per share amounts) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Operating Revenues: | |||||||||||||||||
Transaction fees | $ | 106,094 | $ | 94,885 | $ | 205,239 | $ | 179,719 | |||||||||
Access fees | 15,026 | 16,162 | 30,680 | 32,142 | |||||||||||||
Exchange services and other fees | 9,315 | 7,851 | 18,403 | 15,300 | |||||||||||||
Market data fees | 5,729 | 6,376 | 11,266 | 12,749 | |||||||||||||
Regulatory fees | 10,439 | 4,080 | 20,139 | 8,776 | |||||||||||||
Other revenue | 4,169 | 3,195 | 7,750 | 5,255 | |||||||||||||
Total Operating Revenues | 150,772 | 132,549 | 293,477 | 253,941 | |||||||||||||
Operating Expenses: | |||||||||||||||||
Employee costs | 31,237 | 25,300 | 62,074 | 50,590 | |||||||||||||
Depreciation and amortization | 8,622 | 8,320 | 16,904 | 16,640 | |||||||||||||
Data processing | 4,545 | 4,927 | 9,061 | 9,826 | |||||||||||||
Outside services | 9,633 | 9,265 | 20,668 | 16,435 | |||||||||||||
Royalty fees | 14,518 | 12,001 | 27,687 | 23,192 | |||||||||||||
Trading volume incentives | 908 | 1,176 | 1,921 | 3,825 | |||||||||||||
Travel and promotional expenses | 2,594 | 3,303 | 4,658 | 5,469 | |||||||||||||
Facilities costs | 1,247 | 1,226 | 2,500 | 2,529 | |||||||||||||
Other expenses | 2,110 | 962 | 3,216 | 1,950 | |||||||||||||
Total Operating Expenses | 75,414 | 66,480 | 148,689 | 130,456 | |||||||||||||
Operating Income | 75,358 | 66,069 | 144,788 | 123,485 | |||||||||||||
Other Income / (Expense): | |||||||||||||||||
Investment income | 18 | 26 | 22 | 48 | |||||||||||||
Net loss from investment in affiliates | (491 | ) | (437 | ) | (1,217 | ) | (914 | ) | |||||||||
Total Other Expense | (473 | ) | (411 | ) | (1,195 | ) | (866 | ) | |||||||||
Income Before Income Taxes | 74,885 | 65,658 | 143,593 | 122,619 | |||||||||||||
Income tax provision | 28,724 | 27,162 | 55,060 | 50,706 | |||||||||||||
Net Income | 46,161 | 38,496 | 88,533 | 71,913 | |||||||||||||
Net income allocated to participating securities | (684 | ) | (593 | ) | (1,268 | ) | (1,146 | ) | |||||||||
Net Income Allocated to Common Stockholders | $ | 45,477 | $ | 37,903 | $ | 87,265 | $ | 70,767 | |||||||||
Net Income Per Share Allocated to Common Stockholders | |||||||||||||||||
Basic | $ | 0.52 | $ | 0.44 | $ | 1.00 | $ | 0.81 | |||||||||
Diluted | 0.52 | 0.44 | 1.00 | 0.81 | |||||||||||||
Weighted average shares used in computing income per share: | |||||||||||||||||
Basic | 87,341 | 87,153 | 87,307 | 87,649 | |||||||||||||
Diluted | 87,341 | 87,153 | 87,307 | 87,649 | |||||||||||||
CBOE Holdings, Inc. and Subsidiaries | |||||||
Condensed Consolidated Balance Sheets (Unaudited) | |||||||
June 30, 2013 and December 31, 2012 | |||||||
(in thousands, except share amounts) | June 30, 2013 | December 31, 2012 | |||||
Assets | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 207,766 | $ | 135,597 | |||
Accounts receivable—net allowances of $332 and $340 | 55,733 | 45,666 | |||||
Marketing fee receivable | 8,938 | 5,216 | |||||
Income taxes receivable | 15,440 | 11,717 | |||||
Other prepaid expenses | 8,234 | 4,146 | |||||
Other current assets | 565 | 567 | |||||
Total Current Assets | 296,676 | 202,909 | |||||
Investments in Affiliates | 14,174 | 14,270 | |||||
Land | 4,914 | 4,914 | |||||
Property and Equipment: | |||||||
Construction in progress | 1,233 | 89 | |||||
Building | 62,442 | 62,442 | |||||
Furniture and equipment | 268,198 | 263,155 | |||||
Less accumulated depreciation and amortization | (260,592 | ) | (251,642 | ) | |||
Total Property and Equipment—Net | 71,281 | 74,044 | |||||
Other Assets: | |||||||
Software development work in progress | 7,474 | 4,370 | |||||
Data processing software and other assets (less accumulated amortization of $140,446 and $133,862) | 35,343 | 38,351 | |||||
Total Other Assets—Net | 42,817 | 42,721 | |||||
Total | $ | 429,862 | $ | 338,858 | |||
Liabilities and Stockholders' Equity | |||||||
Current Liabilities: | |||||||
Accounts payable and accrued expenses | $ | 44,112 | $ | 45,148 | |||
Marketing fee payable | 9,458 | 5,808 | |||||
Deferred revenue | 16,641 | 1,084 | |||||
Post-retirement medical benefits | 60 | 110 | |||||
Total Current Liabilities | 70,271 | 52,150 | |||||
Long-term Liabilities: | |||||||
Post-retirement medical benefits | 2,195 | 1,794 | |||||
Income taxes liability | 24,227 | 20,857 | |||||
Other long-term liabilities | 3,900 | 3,946 | |||||
Deferred income taxes | 19,363 | 20,989 | |||||
Total Long-term Liabilities | 49,685 | 47,586 | |||||
Total Liabilities | 119,956 | 99,736 | |||||
Commitments and Contingencies | |||||||
Stockholders' Equity | |||||||
Preferred stock, $0.01 par value: 20,000,000 shares authorized, no shares issued and outstanding at June 30, 2013 or December 31, 2012 | — | — | |||||
Unrestricted common stock, $0.01 par value: 325,000,000 shares authorized; 91,842,773 issued and 87,700,964 outstanding at June 30, 2013; 91,270,274 issued and 87,271,683 outstanding at December 31, 2012 | 918 | 913 | |||||
Additional paid-in-capital | 82,962 | 67,812 | |||||
Retained Earnings | 337,420 | 275,491 | |||||
Treasury Stock, at cost: 4,141,809 shares at June 30, 2013 | (110,310 | ) | (104,201 | ) | |||
Accumulated other comprehensive loss | (1,084 | ) | (893 | ) | |||
Total Stockholders' Equity | 309,906 | 239,122 | |||||
Total | $ | 429,862 | $ | 338,858 | |||
CBOE Holdings, Inc. and Subsidiaries | |||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) | |||||||
Six months ended June 30, 2013 and 2012 | |||||||
Six Months Ended June 30, | |||||||
(in thousands) | 2013 | 2012 | |||||
Cash Flows from Operating Activities: | |||||||
Net Income | $ | 88,533 | $ | 71,913 | |||
Adjustments to reconcile net income to | |||||||
net cash flows from operating activities: | |||||||
Depreciation and amortization | 16,904 | 16,640 | |||||
Other amortization | 58 | 44 | |||||
Provision for deferred income taxes | (1,506 | ) | (1,661 | ) | |||
Stock-based compensation | 12,949 | 5,966 | |||||
Loss on investment in affiliates | 972 | 914 | |||||
Impairment of investment in affiliates and other assets | 245 | — | |||||
Net change in assets and liabilities | (1,295 | ) | (7,082 | ) | |||
Net Cash Flows provided by Operating Activities | 116,860 | 86,734 | |||||
Cash Flows from Investing Activities: | |||||||
Capital and other asset expenditures | (13,072 | ) | (19,492 | ) | |||
Investment in affiliates | (1,120 | ) | (822 | ) | |||
Other | 8 | — | |||||
Net Cash Flows used in Investing Activities | (14,184 | ) | (20,314 | ) | |||
Cash Flows from Financing Activities: | |||||||
Payment of quarterly dividends | (26,604 | ) | (21,348 | ) | |||
Purchase of unrestricted stock from employees | (6,109 | ) | (3,127 | ) | |||
Excess tax benefit from stock-based compensation | 2,206 | — | |||||
Purchase of unrestricted stock under repurchase program | — | (49,744 | ) | ||||
Net Cash Flows used in Financing Activities | (30,507 | ) | (74,219 | ) | |||
Net Increase (Decrease) in Cash and Cash Equivalents | 72,169 | (7,799 | ) | ||||
Cash and Cash Equivalents at Beginning of Period | $ | 135,597 | $ | 134,936 | |||
Cash and Cash Equivalents at End of Period | $ | 207,766 | $ | 127,137 | |||
Supplemental Disclosure of Cash Flow Information | |||||||
Cash paid for income taxes | $ | 54,730 | $ | 52,473 | |||
Non-cash activities: | |||||||
Unpaid liability to acquire equipment and software | $ | 1,929 | $ | 2,451 | |||