IntercontinentalExchange Reports 12% Increase in Second Quarter Adjusted Diluted EPS of $1.69; GAAP Diluted EPS of $1.64; Revenues up 10% to $325 Million

ATLANTA, Aug. 3, 2011 /PRNewswire/ -- IntercontinentalExchange, Inc. (NYSE: ICE), a leading operator of regulated global exchanges, clearing houses and over-the-counter (OTC) markets, today reported financial results for the second quarter of 2011. Consolidated revenues increased 10% to $325 million. Consolidated net income attributable to ICE was $121 million, up 19% versus the second quarter of 2010. Diluted earnings per share (EPS) increased 21% to $1.64.

Second quarter 2011 adjusted consolidated net income attributable to ICE, which excludes acquisition-related transaction costs during the quarter, grew 11% to $125 million and adjusted diluted EPS increased 12% to $1.69. 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: "ICE's second quarter results in an uncertain economic and regulatory environment demonstrate our strong position in global energy, agricultural and financial markets. Our continued progress in clearing, new product development and technology has produced a diverse and innovative business model that effectively serves the ongoing risk-management needs of our customers around the world."

ICE SVP and CFO Scott Hill added: "We continue to deliver consistently strong financial results, extending our multi-year track record of double-digit top- and bottom-line growth. ICE remains focused on delivering consistent growth and long-term customer and shareholder value by executing our strategic plan, investing prudently and managing expense in a disciplined manner."

Second Quarter 2011 Results

Second quarter 2011 consolidated revenues increased 10% from the second quarter of 2010 to $325 million. Consolidated transaction and clearing revenues increased 9% to $289 million. The increase in transaction and clearing revenue was driven primarily by record trading volume in ICE's Brent crude and Gasoil futures and options contracts, as well as solid OTC energy volumes.

Transaction and clearing revenues in ICE's futures segment grew 15% to $149 million in the second quarter. Average daily volume (ADV) in ICE's futures segment was 1.5 million contracts, up 5% from the prior-year second quarter.

Transaction and clearing revenues in ICE's global OTC segment grew 3% to $140 million in the second quarter of 2011. Average daily commissions (ADC) for ICE's OTC energy business increased 7% to $1.5 million. Revenues from ICE's credit default swap (CDS) trade execution and clearing business totaled $41 million in the second quarter of 2011, including $17 million from CDS clearing.

Consolidated market data revenues were a record $31 million in the second quarter of 2011, up 13% from the prior second quarter. Consolidated other revenues were $6 million.

Consolidated operating expenses were $134 million in the quarter, an increase of 14% from the second quarter of 2010. This increase was primarily attributable to an increase in amortization expenses relating to the addition of intangible assets associated with the acquisition of Climate Exchange plc in the third quarter of 2010, and transaction costs associated with the proposed acquisition of NYSE Euronext during the quarter.

Consolidated operating income increased 7% to $191 million in the quarter. Operating margin was 59% in the second quarter of 2011.  

The effective tax rate for the second quarter of 2011 was 32% compared to 34% for the prior second quarter.

First Half 2011 Results

Consolidated revenues in the first half of 2011 grew 14% to $659 million. First half futures volumes increased 15% to 191 million contracts, driving futures transaction and clearing revenue growth to $306 million, up 21% from the first half of 2010. ADV in the first half of the year was 1.5 million contracts, up 14% from the first six months of 2010.

Global OTC segment transaction and clearing revenues were $281 million in the first half of the year, up 7% from the first half of 2010. ADC in ICE's OTC energy markets were $1.6 million in the first half of 2011, up 13% from the same period of 2010. Consolidated market data revenues increased 11% to $60 million and consolidated operating margin was 60% for the first half of 2011.

Cash flows from operations totaled $321 million in the first half of 2011, up 24% year-over-year. Capital expenditures during the first half of 2011 were $14 million and capitalized software development costs totaled $16 million.

Unrestricted cash and investments were $757 million as of June 30, 2011. At the end of the second quarter, ICE had $457 million in outstanding debt.

Financial Guidance and Additional Information

  • ICE expects CDS clearing revenues in the range of $35 million to $37 million in the second half of 2011.
  • Including capitalized software, ICE expects capital expenditures in the range of $25 million to $28 million in the second half of 2011.
  • ICE expects transaction costs related to the Cetip investment in the range of $5 million to $8 million for the three months ending September 30, 2011.
  • ICE's diluted share count for the third quarter of 2011 is expected to be in the range of 73.8 million to 74.8 million weighted average shares outstanding, and the diluted share count for fiscal year 2011 in the range of 74.0 million to 75.0 million weighted average shares outstanding. ICE's remaining capacity in its share repurchase program is $185 million.

Earnings Conference Call Information

ICE will hold a conference call today, August 3, at 8:30 a.m. ET to review its second 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 from the United States, or 708-290-1370 from outside the United States. Telephone participants should dial in 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 that is expected to be filed on or around 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)









Six Months Ended

June 30,

Three Months Ended

June 30,


2011

2010

2011

2010

Revenues:





Transaction and clearing fees, net

$  587,550

$  515,922

$288,540

$264,860

Market data fees

60,119

54,039

30,699

27,186

Other

11,829

7,814

5,979

4,109

Total revenues

659,498

577,775

325,218

296,155

Operating expenses:

Compensation and benefits

123,814

117,110

62,176

58,870

Professional services

16,227

16,578

8,422

8,029

Acquisition-related transaction costs

9,314

2,043

5,877

1,498

Selling, general and administrative

49,699

43,806

25,028

21,549

Depreciation and amortization

65,968

56,128

32,837

27,914

Total operating expenses

265,022

235,665

134,340

117,860

Operating income

394,476

342,110

190,878

178,295

Other income (expense):





Interest and investment income

1,834

1,066

846

340

Interest expense

(16,577)

(14,612)

(8,371)

(7,502)

Other expense, net

(561)

(16,013)

(285)

(15,317)

Total other expense, net

(15,304)

(29,559)

(7,810)

(22,479)

Income before income taxes

379,172

312,551

183,068

155,816

Income tax expense

124,646

106,506

58,696

53,289

Net income

$  254,526

$  206,045

$  124,372

$  102,527

Net income attributable to noncontrolling interest

(4,257)

(3,194)

(3,007)

(839)

Net income attributable to IntercontinentalExchange, Inc.

$  250,269

$  202,851

$  121,365

$  101,688






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





Basic

$3.41

$2.75

$1.65

$1.37

Diluted

$3.37

$2.72

$1.64

$1.36

Weighted average common shares outstanding:





Basic

73,435

73,818

73,437

73,960

Diluted

74,169

74,645

74,138

74,763



















IntercontinentalExchange, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited)


June 30,
2011  

Dec. 31,
2010  

ASSETS



Current assets:



Cash and cash equivalents

$  756,674

$  621,792

Short-term restricted cash

70,720

75,113

Short-term investments

1,999

Customer accounts receivable

165,758

114,456

Margin deposits and guaranty funds

26,890,055

22,712,281

Prepaid expenses and other current assets

48,347

50,137




Total current assets

27,931,554

23,575,778




Property and equipment, net

99,458

94,503




Other noncurrent assets:



Goodwill

1,938,854

1,916,055

Other intangible assets, net

899,717

890,818

Long-term restricted cash

146,495

144,174

Other noncurrent assets

24,795

20,931




Total other noncurrent assets

3,009,861

2,971,978




Total assets

$  31,040,873

$  26,642,259




LIABILITIES AND EQUITY



Current liabilities:



Accounts payable and accrued liabilities

$  82,086

$  65,162

Accrued salaries and benefits

38,436

53,769

Current portion of licensing agreement

22,668

18,268

Current portion of long-term debt

267,250

252,750

Income taxes payable

26,767

6,307

Margin deposits and guaranty funds

26,890,055

22,712,281

Other current liabilities

45,773

18,847




Total current liabilities

27,373,035

23,127,384




Noncurrent liabilities:



Noncurrent deferred tax liability, net

265,217

268,249

Long-term debt

190,000

325,750

Noncurrent portion of licensing agreement

84,622

60,325

Other noncurrent liabilities

41,469

43,786




Total noncurrent liabilities

581,308

698,110




Total liabilities

27,954,343

23,825,494




EQUITY



IntercontinentalExchange, Inc. shareholders' equity:



Common stock

789

785

Treasury stock, at cost

(489,145)

(453,822)

Additional paid-in capital

1,781,789

1,745,424

Retained earnings

1,697,692

1,447,423

Accumulated other comprehensive income

58,078

37,740




Total IntercontinentalExchange, Inc. shareholders' equity

3,049,203

2,777,550

Noncontrolling interest in consolidated subsidiaries

37,327

39,215




Total equity

3,086,530

2,816,765




Total liabilities and equity

$  31,040,873

$  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 part of our core business. 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 June 30, 2011, including our consolidated financial statements and the notes thereto.

During the six months and three months ended June 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 that we incurred during the six and three months ended June 30, 2011 and transaction costs relating to the acquisition of CLE that we incurred during the six and three months ended June 30, 2010. During the six and three months ended June 30, 2010, we incurred a $14.3 million loss on a currency hedge that was purchased at the time of the CLE transaction announcement. 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 acquisition-related transaction costs and the loss on the hedge related to the CLE acquisition, which costs are not part of our core business, 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):



Six Months Ended


Three Months Ended


June 30,


June 30,


2011


2010


2011


2010

Net income attributable to ICE

$250,269


$202,851


$121,365


$101,688

Add: Acquisition-related transaction costs

9,314


2,043


5,877


1,498

Add: Loss on hedge related to CLE acquisition…


14,278



14,278

Less: Income tax benefit effect related to the items above

(3,458)


(4,570)


(2,157)


(4,417)

    Adjusted net income attributable to ICE

$256,125


$214,602


$125,085


$113,047

Earnings per share attributable to ICE common shareholders








  Basic

$3.41


$2.75


$1.65


$1.37

  Diluted

$3.37


$2.72


$1.64


$1.36

Adjusted earnings per share attributable to ICE common shareholders:








  Adjusted basic

$3.49


$2.91


$1.70


$1.53

  Adjusted diluted

$3.45


$2.87


$1.69


$1.51

Weighted average common shares outstanding:








  Basic

73,435


73,818


73,437


73,960

  Diluted

74,169


74,645


74,138


74,763




ICE-CORP

SOURCE IntercontinentalExchange, Inc.



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