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IntercontinentalExchange Reports 2Q13 Adjusted Diluted EPS of $2.19, +12% yty; Record Adjusted Net Income Attributable to ICE of $161MM

Released : 06 August 2013

ATLANTA, Aug. 6, 2013 /PRNewswire/ -- IntercontinentalExchange (NYSE: ICE), a leading operator of global markets and clearing houses, today reported record financial results for the second quarter of 2013. Consolidated revenues were a record $372 million, an increase of 6% from the second quarter of 2012. Consolidated net income attributable to ICE was $153 million, up 7% from the second quarter of 2012, and diluted earnings per share (EPS) increased 7% over the second quarter to $2.09 on a GAAP basis.

For the second quarter ended June 30, 2013, certain items were included in ICE's operating results that are not indicative of its core business performance, including transaction costs related to ICE's proposed acquisition of NYSE Euronext. Excluding these items, second quarter 2013 adjusted net income attributable to ICE increased 12% over the prior second quarter to a record $161 million and adjusted diluted EPS rose 12% to $2.19. 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: "We delivered on our commitment to growth, achieving a record quarter while making continued progress on our acquisition of NYSE Euronext and seamlessly completing a significant clearing transition. We received approvals from shareholders of both companies and the European Commission and are working with regulators to finalize the transaction. Meanwhile, we remain focused on extending our risk management services and delivering on the needs of our customers around the globe."

ICE SVP and CFO Scott A. Hill added: "Our clearing business continues to expand into new asset classes. Following the successful transfer of NYSE Liffe's clearing services, we now clear energy, emissions, agricultural, credit, interest rate and equity derivatives at ICE Clear Europe. We are also seeing significant growth in buy-side volumes for credit default swaps following the start of the U.S. clearing mandate. To date, we have cleared $1.8 trillion in buy-side gross notional value for CDS. Combined with our demonstrated investment discipline, our diverse businesses, strong balance sheet and cash flows provide a strong foundation for continued growth."

Second Quarter 2013 Results

Second quarter 2013 consolidated revenues increased 6% from the prior second quarter to $372 million and consolidated transaction and clearing revenues increased 4% to $319 million.

Futures average daily volume (ADV) was 3.5 million contracts, up 3% compared to the second quarter of 2012. Revenues from ICE's credit default swap (CDS) trade execution, processing and clearing business were $40 million, up 11% from the second quarter of 2012, and included $22 million in CDS clearing revenues.

Consolidated market data revenues increased 8% to $40 million in the second quarter of 2013 compared to the prior second quarter. Consolidated other revenues were $13 million in the second quarter of 2013.

Consolidated operating expenses were up 8% from the prior second quarter to $147 million, and consolidated operating income rose 4% to $225 million. Operating margin was 60%, and the effective tax rate for the quarter was 27%.

First Half 2013 Results

Consolidated revenues in the first half of 2013 grew 1% to $724 million. Futures ADV in the first half of the year was 3.6 million contracts down 1% from the first six months of 2012, with futures transaction and clearing revenue of $619 million, down 2% from the prior year's first half.

Consolidated market data revenues increased 10% to $81 million and consolidated operating margin was 59% for the first half of 2013.

Cash flows from operations were $382 million in the first half of 2013, up 4% year-over-year. Capital expenditures during the first half of 2013 were $32 million and capitalized software development costs totaled $18 million.

Unrestricted cash and short term investments were $1.5 billion as of June 30, 2013, and outstanding debt was $803 million.

Guidance

    --  ICE expects 2013 adjusted consolidated expenses to increase in the range
        of 2% to 3% compared to 2012 adjusted consolidated expenses, versus
        prior guidance of an increase in the range of 3% to 5%.
    --  ICE expects depreciation and amortization expense for 2013 in the range
        of $130 million to $135 million, versus prior guidance of $135 million
        to $140 million for the year.
    --  ICE expects interest expense for the second half of 2013 to be in the
        range of $10 million to $11 million per quarter, versus prior guidance
        of $9 million to $10 million per quarter.
    --  ICE expects acquisition expense for the third quarter of 2013 in the
        range of $5 million to $7 million related to the NYSE Euronext
        transaction, which will be excluded from non-GAAP results.
    --  For the third quarter of 2013, ICE expects to record $38.5 million in
        capital expenditures relating to its purchase of an office building to
        serve as its Atlanta headquarters. ICE continues to anticipate $60
        million to $70 million in technology capital expenditures and
        capitalized software for 2013, in addition to $20 million to $30 million
        in real estate expenditures primarily related to New York office
        consolidation.
    --  ICE's diluted share count for the third quarter of 2013 is expected to
        be in the range of 73.0 million to 74.0 million weighted average shares
        outstanding.

Earnings Conference Call Information

ICE will hold a conference call today, August 6, at 8:30 a.m. ET to review its second quarter 2013 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 from the United States, or 708-290-1370 from outside of the United States. Telephone participants should call 10 minutes prior to the start of the call. The call will be archived on the company's website for replay.

Historical futures volume, rate per contract and open interest data can be found at: http://ir.theice.com/supplemental.cfm

Volume, for the current and prior-year periods, has been adjusted to include OTC swap contracts that were transitioned to energy futures contracts on October 15, 2012.

 

IntercontinentalExchange, Inc. and Subsidiaries

Consolidated Statements of Income

(In thousands, except per share amounts)

(Unaudited)



                                      Six Months Ended      Three Months Ended
                                      June 30,              June 30,

                                      2013       2012       2013       2012

Revenues:

Transaction and clearing fees, net    $ 618,583$ 628,880$ 318,868$ 306,808

Market data fees                      81,033     73,557     40,135     37,171

Other                                 23,890     13,970     12,606     7,234



Total revenues                        723,506    716,407    371,609    351,213



Operating expenses:

Compensation and benefits             132,846    132,776    66,632     64,700

Technology and communications         23,197     23,462     12,417     11,760

Professional services                 15,587     17,928     8,115      8,526

Rent and occupancy                    17,567     9,377      9,305      4,915

Acquisition-related transaction costs 26,314     7,709      8,414      4,246

Selling, general and administrative   17,991     20,466     8,966      9,542

Depreciation and amortization         65,234     64,091     33,068     32,108



Total operating expenses              298,736    275,809    146,917    135,797



Operating income                      424,770    440,598    224,692    215,416



Other income (expense):

Interest and investment income        1,422      682        695        442

Interest expense                      (19,849 )  (19,667 )  (9,929 )   (9,599 )

Other income, net                     1,647      26         1,716      305



Total other expense, net              (16,780 )  (18,959 )  (7,518 )   (8,852 )



Income before income taxes            407,990    421,639    217,174    206,564

Income tax expense                    112,948    126,562    59,313     61,266



Net income                            $ 295,042$ 295,077$ 157,861$ 145,298



Net income attributable to            (6,277 )   (4,055 )   (4,538 )   (2,141 )
noncontrolling interest



Net income attributable to            $ 288,765$ 291,022$ 153,323$ 143,157IntercontinentalExchange, Inc



Earnings per share attributable to
IntercontinentalExchange, Inc. common
shareholders:

Basic                                 $ 3.97$ 4.00$ 2.11$ 1.97



Diluted                               $ 3.94$ 3.97$ 2.09$ 1.95



Weighted average common shares
outstanding:

Basic                                 72,746     72,698     72,812     72,755



Diluted                               73,291     73,303     73,405     73,343





 

IntercontinentalExchange, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited)



                                                     June 30,      December 31,
                                                     2013          2012

ASSETS

Current assets:

Cash and cash equivalents                            $ 1,457,048$ 1,612,195

Short-term investments                               36,529        —

Short-term restricted cash and investments           138,297       86,823



Customer accounts receivable                         185,784       127,260

Margin deposits and guaranty funds                   35,328,089    31,882,493

Prepaid expenses and other current assets            39,459        41,316



Total current assets                                 37,185,206    33,750,087



Property and equipment, net                          164,901       143,392



Other noncurrent assets:

Goodwill                                             1,932,929     1,937,977

Other intangible assets, net                         804,188       798,960

Long-term restricted cash                            160,751       162,867

Long-term investments                                329,547       391,345

Other noncurrent assets                              36,205        30,214



Total other noncurrent assets                        3,263,620     3,321,363



Total assets                                         $ 40,613,727$ 37,214,842



LIABILITIES AND EQUITY

Current liabilities:

Accounts payable and accrued liabilities             $ 108,948$ 70,206

Accrued salaries and benefits                        36,266        55,008

Current portion of licensing agreement               19,248        19,249

Current portion of long-term debt                    48,824        163,000

Income taxes payable                                 51,007        29,284

Margin deposits and guaranty funds                   35,328,089    31,882,493

Other current liabilities                            52,416        26,457



Total current liabilities                            35,644,798    32,245,697



Noncurrent liabilities:

Noncurrent deferred tax liability, net               205,406       216,141

Long-term debt                                       753,971       969,500

Noncurrent portion of licensing agreement            56,098        63,739

Other noncurrent liabilities                         59,410        43,207



Total noncurrent liabilities                         1,074,885     1,292,587



Total liabilities                                    36,719,683    33,538,284



Redeemable noncontrolling interest                   15,169        —





EQUITY

IntercontinentalExchange, Inc. shareholders' equity:



Common stock                                         804           799

Treasury stock, at cost                              (737,846 )    (716,815 )

Additional paid-in capital                           1,945,281     1,903,312

Retained earnings                                    2,797,437     2,508,672

Accumulated other comprehensive loss                 (158,448 )    (52,591 )



Total IntercontinentalExchange, Inc. shareholders'   3,847,228     3,643,377
equity

Noncontrolling interest in consolidated subsidiaries 31,647        33,181



Total equity                                         3,878,875     3,676,558



Total liabilities and equity                         $ 40,613,727$ 37,214,842

 

Non-GAAP Financial Measures
We use 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, or 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. We strongly recommend that investors review the GAAP financial measures included in this press release and in our Quarterly Report on Form 10-Q, including our consolidated financial statements and the notes thereto.

Adjusted net income attributable to ICE for the six and three months ended June 30, 2013 presented below is calculated by adding net income attributable to ICE, the adjustments described below, which are not reflective of our core business performance, and the related income tax effect. We are including all of the acquisition-related transaction costs incurred relating to our current acquisition of NYSE Euronext as a non-GAAP adjustment given the size of the deal. We are also including the banker success fee relating to the ICE Endex acquisition and the duplicate rent expenses and lease termination costs in New York City, as we are consolidating multiple existing locations into a combined location, as non-GAAP adjustments. The tax effects of these items are calculated by applying specific legal entity and jurisdictional marginal tax rates. 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 for the period presented below (in thousands, except per share amounts):

 




                                            Six Months Ended  Three Months Ended
                                            June 30, 2013     June 30, 2013

Net income attributable to ICE              $ 288,765$ 153,323

Add: NYSE Euronext transaction costs and
banker fee relating to ICE                  25,442            8,352

Endex acquisition

Add: Duplicate rent expenses and lease      7,262             3,913
termination costs

Less: Income tax benefit effect related to  (11,802)          (4,743)
the items above



Adjusted net income attributable to ICE     $ 309,667$ 160,845



Earnings per share attributable to ICE
common shareholders:

Basic                                       $ 3.97$ 2.11



Diluted                                     $ 3.94$ 2.09



Adjusted earnings per share attributable to
ICE common shareholders:

Adjusted basic                              $ 4.26$ 2.21



Adjusted diluted                            $ 4.23$ 2.19



Weighted average common shares outstanding:

Basic                                       72,746            72,812



Diluted                                     73,291            73,405





 

About IntercontinentalExchange
IntercontinentalExchange (NYSE: ICE) is a leading operator of regulated exchanges and clearing houses serving the risk management needs of global markets for agricultural, credit, currency, emissions, energy and equity index products. www.theice.com 

The following are trademarks of IntercontinentalExchange, Inc. and/or its affiliated companies: IntercontinentalExchange, ICE, ICE and block design, ICE Futures Europe, ICE Clear Europe, ICE Clear Canada, ICE Clear US, ICE Clear Credit, ICE Futures U.S., and ICE OTC. 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

CAUTIONARY STATEMENT REGARDING 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; volatility in commodity prices and price volatility of financial contracts such as equity indexes and foreign exchange; our ability to complete the acquisition of NYSE Euronext and to do so in a timely manner, realize the anticipated benefits within the expected time frame, and efficiently integrate NYSE Euronext's operations; 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 ensuring that the technology we utilize is not vulnerable to security risks; 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 for the foreseeable future; our ability to develop new products and services on a timely and cost-effective basis; leveraging our risk management capabilities; 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; and identification of trends and how they will impact our business. 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, 2012, as filed with the SEC on February 6, 2013, and the risk factors in the joint proxy statement/prospectus of IntercontinentalExchange Group, Inc., as filed with the SEC on April 30, 2013. These filings are also available in the Investors & Media section of our website. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We caution you not to place undue reliance on these forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of an unanticipated event. New factors emerge from time to time, and it is not possible for management to predict all factors that may affect our business and prospects. Further, management cannot assess the impact of each factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

ICE-CORP

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SOURCE IntercontinentalExchange