ATLANTA, May 5/PRNewswire-FirstCall/ --IntercontinentalExchange(R), Inc. (NYSE: ICE), a leading operator of regulated global exchanges and over-the-counter (OTC) markets, today reported that consolidated revenues in the first quarter rose to a record $232 million, a 12% increase over first quarter 2008 revenues of $207 million. Consolidated net income for the first quarter of 2009 was $72 million, a 22% decrease compared to $92 million for the prior first quarter. Adjusted to exclude $13 million in pre-tax charges related to ICE's acquisition of The Clearing Corporation (TCC) and other restructuring charges, non-GAAP, or adjusted, net income for the quarter was $80 million, a decrease of 13% compared to the first quarter of 2008. Diluted earnings per share (EPS) in the first quarter were $0.98. Adjusted to exclude the acquisition and other restructuring charges, diluted EPS for the quarter were $1.09, down 16% compared to the prior year's first quarter.
Volume in ICE's futures segment, comprising ICE Futures Europe(R), ICE Futures U.S.(R) and ICE Futures Canada(R), reached a record 63 million contracts in the first quarter of 2009, a modest increase over the same period in 2008. In the first three months of 2009, average daily volume (ADV) for ICE Futures Europe was 638,055 contracts; ADV for ICE Futures U.S. and ICE Futures Canada was 360,909 contracts. Average daily commissions (ADC) for ICE's OTC energy markets during the first quarter of 2009 were $1.1 million, a decline of 16% from the same period in 2008. Creditex Group Inc., ICE's wholly-owned credit derivatives subsidiary, had brokerage revenues of $36 million in the first quarter of 2009, which are also reflected in ICE's OTC segment.
Said ICE Chairman and CEO Jeffrey C. Sprecher: "ICE continues to dedicate significant resources to risk management services and execute on our strategic objectives globally, while remaining focused on our customers' needs amid uncertainty in the broader financial markets. Despite the challenging environment, ICE has delivered the leading clearing solution to the credit derivatives market, as well as record OTC and ICE Futures Europe revenues. In addition to our robust futures markets, we are bringing leadership to the OTC markets with unparalleled capabilities in execution, processing and clearing."
"Our consistently solid cash performance enables us to invest in growth opportunities that position us well for the eventual recovery of the financial markets. ICE has a solid track record of prudent investment and delivering on acquisition synergies, and we've maintained this focus during the pronounced economic downturn over the past year, all while producing industry-leading growth. The strong participation in our new credit facilities demonstrates confidence in our strategies and business model, and we believe it supports our ability to continue to act opportunistically," said ICE CFO Scott Hill.
First Quarter 2009 Results
ICE's first quarter 2009 consolidated revenues increased 12% to $232 million compared to $207 million in the first quarter of 2008. Consolidated transaction and clearing revenues increased 15% to $203 million in the first quarter of 2009, from $177 million during the same period in 2008. The increase in transaction and clearing revenue was driven primarily by new products, strong trading volume in ICE's futures segment, the launch of ICE Clear Europe in November 2008, an increase of participants in ICE's markets and the Creditex acquisition. Total volume for ICE Futures Europe represented the highest quarterly contract volume in exchange history.
Transaction and clearing revenues in ICE's consolidated futures segment totaled $98 million in the first quarter of 2009, an increase of 1% over $97 million in the same period in 2008. First quarter 2009 volume for all ICE futures exchanges was 63 million contracts, in-line with first quarter 2008 volume. ICE Futures Europe quarterly volume was 40 million contracts, and ADV was 638,055 contracts, up 4% over the first quarter of 2008. The average rate per contract (RPC) for ICE Futures Europe in the first quarter of 2009 was $1.57. ICE Futures U.S. and ICE Futures Canada recorded first quarter volume of 22 million contracts and 1 million contracts, respectively. ADV for ICE Futures U.S. was 345,984 contracts in the first quarter of 2009, down 7% compared to the first quarter of 2008. RPC for ICE Futures U.S. agricultural futures and options contracts was $2.34, and the RPC for financial contracts averaged $0.78 in the first quarter of 2009. ADV for ICE Futures Canada was 14,925 contracts during the first quarter compared to 18,190 in the year-ago period.
First quarter 2009 transaction and clearing revenues in ICE's global OTC segment increased 32% to $105 million, compared to $80 million for the comparable period in 2008. In ICE's OTC energy markets, ADC were $1.1 million, a decline of 16% from $1.3 million in the same period of 2008. Cleared contracts accounted for 96% of OTC energy contract volume during the first quarter of 2009. In ICE's credit derivative markets, first quarter revenues were $38 million, down 31% versus the same period in 2008 on a pro- forma basis. ICE did not own Creditex in the first quarter of 2008.
Consolidated market data revenues increased 6% during the first quarter of 2009 to $26 million compared to $25 million in the same period in 2008. Consolidated other revenues were $2 million during the first quarter of 2009, compared to $5 million in the prior first quarter. The reduction in consolidated other revenue is due primarily to interest payments made to ICE Clear Europe member clearing firms.
Consolidated operating expenses increased $55 million to $118 million for the first quarter of 2009 versus operating expenses of $63 million in the same period in 2008. The increase was primarily driven by $31 million of expenses relating to Creditex's business following ICE's acquisition during the third quarter of 2008, as well as investment in growth initiatives. Amortization expenses on acquired intangibles were $16 million for the first quarter of 2009 compared to $3 million in the same period of 2008, and included $6 million related to the Creditex acquisition and $6 million related to ICE's exclusive Russell Index license.
Consolidated operating expenses also include pre-tax charges of $13 million related to ICE's acquisition of TCC and other restructuring charges incurred during the first quarter of 2009. Consistent with new accounting standard SFAS No. 141( R ), which requires transaction costs to be expensed, ICE recognized transaction costs related to the acquisition of TCC of $6 million, as well as start-up expenses related to the launch of its credit default swap clearing house, ICE Trust(TM), of $1 million during the first quarter of 2009. The revenues and operating expenses associated with TCC and ICE Trust were not material to ICE's first quarter 2009 financial results. In addition to the TCC and ICE Trust charges, ICE incurred costs of $3 million during the first quarter related to headcount reductions of 7%, as well as a charge of $3 million related to the lease termination and asset write-offs for certain office space vacated by ICE Futures U.S.
First quarter 2009 consolidated operating income was $114 million, a decrease of 21% compared to the first quarter of 2008, and operating margin was 49%. Adjusting for the TCC acquisition and other charges noted above, consolidated operating margin was 55% for the first quarter of 2009, compared to 70% for the same period in 2008.
The effective tax rate for the first quarter of 2009 was 33.8% compared to 35.2% for the prior first quarter. The decrease in the tax rate was primarily due to a higher proportion of taxable income earned outside of the United States, which is taxed at lower rates.
First quarter 2009 consolidated cash flow from operations was $68 million. Capital expenditures were $4 million, and capitalized software development costs totaled $4 million in the first quarter of 2009.
Unrestricted cash and short-term investments were $233 million as of March 31, 2009. At the end of the quarter, ICE had $370 million in outstanding debt.
Guidance and Additional Information
-- ICE had 803 employees as of March 31, 2009. For the full year, headcount
is expected to be roughly flat from current levels, excluding any
personnel additions relating to merger and acquisition activity in the
remainder of 2009.
-- ICE's consolidated tax rate is expected to be in the range of 34%
to 36% for 2009.
-- ICE's diluted share count for the second quarter of 2009 is
expected to be in the range of 73.6 million to 74.2 million weighted
average shares outstanding, and the diluted share count for fiscal year
2009 to be in the range of 73.5 million to 74.5 million weighted average
shares outstanding. ICE's remaining capacity in its share
repurchase program is approximately $200 million.
-- For the period of April through December 2009, ICE expects to earn
aggregate revenues in the range of $20 million to $30 million from ICE
Trust and TCC. Specifically, second quarter revenues are expected to be
approximately $7 million to $9 million. Operating expenses are expected
to be in the range of $6 million to $8 million per quarter. The 50/50
profit sharing arrangement in place between ICE Trust and the former TCC
shareholders does not fully commence until April 2010. Prior to this
date, ICE will retain 86% of ICE Trust profits.
Earnings Conference Call Information
ICE will hold a conference call today, May 5, at 8:30 a.m. ET to review its first quarter 2009 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 (888) 596-2611 if calling from the United States, or (913) 312-1472 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. A telephone replay of the earnings call will also be available at (888) 203-1112 for callers within the United States and at (719) 457-0820 for callers outside of the United States. The passcode for the replay is 4800034.
Historical futures volume and OTC commission data can be found at:
IntercontinentalExchange(R) (NYSE: ICE) operates leading regulated exchanges, trading platforms and clearing houses serving the global markets for agricultural, credit, currency, emissions, energy and equity index markets. ICE Futures Europe(R) trades half of the world's crude and refined oil futures. ICE Futures U.S.(R) and ICE Futures Canada(R) list agricultural, currency and Russell Index markets. ICE offers trade execution and processing for the credit derivatives markets through Creditex and clearing through ICE Trust(TM). A component of the Russell 1000(R) and S&P 500 indexes, ICE(R) serves customers in more than 50 countries and is headquartered in Atlanta, with offices in New York, London, Chicago, Winnipeg, Calgary, Houston and Singapore. www.theice.com
IntercontinentalExchange is a registered trademark of IntercontinentalExchange, Inc., registered in the United States and the European Union.
ICE, ICE & block design, ICE Clear Europe, and ICE Clear U.S. are registered trademarks andmarque deposes of IntercontinentalExchange, Inc., registered in the United States, the European Union, Canada and Singapore.
ICE Futures Canada, ICE Futures Europe and ICE Futures U.S. are registered trademarks of IntercontinentalExchange, Inc., in the United States, the European Union and Singapore.
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; increasing competition and consolidation in our industry; conditions in global financial markets; our ability to develop new products and services and pursue strategic acquisitions and alliances on a timely, cost-effective basis; our ability to minimize the risks associated with operating multiple clearing houses in multiple jurisdictions; changes in domestic and foreign regulations or government policy; technological developments, including clearing developments; the success of our initiative to clear CDS transactions; the accuracy of our cost estimates and expectations; 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 2010; our ability to increase the connectivity to our marketplace; maintaining existing market participants and attracting new ones; 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; our ability to gain access to comparable products and services if our key technology contracts were terminated; and the risk that acquired businesses will not be integrated successfully or the revenue opportunities, cost savings and other anticipated synergies from mergers may not be fully realized or may take longer to realize than expected. 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 Annual Report on Form 10-K for the year ended December 31, 2008, as filed with the SEC on February 11, 2009. 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
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended
Transaction and clearing fees, net $203,478 $177,432
Market data fees 26,114 24,720
Other 1,961 5,062
Total revenues 231,553 207,214
Compensation and benefits 54,706 30,679
Professional services 12,839 6,972
Selling, general and administrative 22,906 14,337
Depreciation and amortization 27,303 10,946
Total operating expenses 117,754 62,934
Operating income 113,799 144,280
Other income (expense):
Interest and investment income 610 2,919
Interest expense (5,254) (5,134)
Other income (expense), net (79) 354
Total other expense, net (4,723) (1,861)
Income before income taxes 109,076 142,419
Income tax expense 36,854 50,129
Net income $72,222 $92,290
Earnings per common share:
Basic $0.99 $1.31
Diluted $0.98 $1.29
Weighted average common shares outstanding:
Basic 72,671 70,361
Diluted 73,606 71,348
INTERCONTINENTALEXCHANGE, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
Cash and cash equivalents $229,596 $283,522
Short-term restricted cash 77,827 30,724
Short-term investments 3,086 3,419
Customer accounts receivable, net 110,647 81,248
Margin deposits and guaranty funds 12,691,205 12,117,820
Prepaid expenses and other current
assets 25,524 35,855
Total current assets 13,137,885 12,552,588
Property and equipment, net 86,905 88,952
Other noncurrent assets:
Goodwill 1,497,921 1,434,816
Other intangible assets, net 731,786 728,855
Long-term restricted cash 129,152 105,740
Cost method investments 29,161 32,724
Other noncurrent assets 12,096 15,906
Total other noncurrent assets 2,400,116 2,318,041
Total assets $15,624,906 $14,959,581
Liabilities and Equity
Accounts payable and accrued
liabilities $46,239 $49,663
Accrued salaries and benefits 17,105 41,096
Current portion of licensing agreement 13,268 12,686
Current portion of long-term debt 90,000 46,875
Income taxes payable 33,308 17,708
Margin deposits and guaranty funds 12,691,205 12,117,820
Other current liabilities 20,091 25,794
Total current liabilities 12,911,216 12,311,642
Noncurrent deferred tax liability, net 192,763 194,301
Long-term debt 280,000 332,500
Noncurrent portion of licensing
agreement 80,843 82,989
Other noncurrent liabilities 33,982 24,901
Total noncurrent liabilities 587,588 634,691
Total liabilities 13,498,804 12,946,333
Redeemable stock put 0 1,068
Common stock 768 765
Treasury stock, at cost (345,264) (355,520)
Additional paid-in capital 1,611,610 1,608,344
Retained earnings 805,359 732,752
Accumulated other comprehensive income 18,030 19,890
Total shareholders' equity of
IntercontinentalExchange, Inc. and
Subsidiaries 2,090,503 2,006,231
Noncontrolling interest 35,599 5,949
Total equity 2,126,102 2,012,180
Total liabilities and equity $15,624,906 $14,959,581
Non-GAAP Financial Measures and Reconciliation ICE provides adjusted net income and adjusted earnings per common share as additional information regarding its operating results. ICE uses these non-GAAP measures internally to evaluate its performance and in making financial and operational decisions. ICE believes that the presentation of these measures provides investors with greater transparency and supplemental data relating to our financial condition and results of operations. In addition, ICE believes the presentation of these measures is useful for period-to-period comparison of results because the non-recurring charges described below do not reflect historical operating performance. These measures are not in accordance with, or an alternative to, U.S. generally accepted accounting principles or 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. ICE strongly recommends that investors review the GAAP financial measures included in the Quarterly Report on Form 10-Q, including the consolidated financial statements and the notes thereto.
Adjusted net income for the three months ended March 31, 2009 below is calculated by adding net income and transaction costs incurred for the TCC acquisition, employee termination costs, costs incurred to vacate office space and start up costs relating to the formation of ICE Trust, all presented net of tax. ICE believes these items are non-recurring and unusual in nature and are not representative of its future operating performance since these charges were not consistent with its historical operating performance. Adjusted earnings per common share are calculated as adjusted net income divided by the weighted average common shares outstanding. The following table reconciles the net income to adjusted net income for the three months ended March 31, 2009 and calculates adjusted earnings per common share.
March 31, 2009
Net income $72,222
Add: Transaction costs incurred for the TCC acquisition 5,609
Add: Employee termination costs 2,902
Add: Costs incurred to vacate office space 2,980
Add: Start-up costs relating to the formation of ICE
Less: Income tax benefit for non recurring expenses (5,071)
Adjusted net income $80,012
Earnings per common share on net income:
Adjusted earnings per common share on adjusted net
Adjusted basic $1.10
Adjusted diluted $1.09
Weighted average common shares outstanding:
SOURCE IntercontinentalExchange, Inc.