IntercontinentalExchange Reports 3Q13 Adjusted Diluted EPS of $1.97, +10% yty; Adjusted Net Income Attributable to ICE of $145MM Quarterly Revenues of $338MM, +5% yty in 3Q13

GAAP Diluted EPS of $1.92; GAAP Net Income Attributable to ICE of $141MM in 3Q13

ICE Board Declares 4Q13 Dividend of $75MM, Subject to Deal Completion

ATLANTA, Nov. 5, 2013 /PRNewswire/ -- IntercontinentalExchange, Inc. (NYSE: ICE), a leading operator of global markets and clearing houses, today reported financial results for the third quarter of 2013. Consolidated revenues were $338 million, an increase of 5% from the third quarter of 2012. Consolidated net income attributable to ICE was $141 million, up 8% from the third quarter of 2012, and diluted earnings per share (EPS) increased 7% over the third quarter to $1.92 on a GAAP basis.

For the third quarter ended September 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 acquisition of NYSE Euronext. Excluding these items, third quarter 2013 adjusted net income attributable to ICE increased 10% over the prior third quarter to $145 million and adjusted diluted EPS rose 10% to $1.97. 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.

"ICE delivered another solid quarter with significant operational and strategic initiatives that provide for continued long-term growth. The pending completion of our acquisition of NYSE Euronext will expand our reach to serving customers in important asset classes including interest rates and equities," said Jeffrey C. Sprecher, ICE Chairman and CEO. "We have a clear set of objectives for achieving synergies along with a range of opportunities across rapidly evolving global markets. We will maintain our focus on meeting our customers' needs and on disciplined growth and industry-leading returns for shareholders."

ICE SVP and CFO Scott A. Hill added: "Throughout 2013 we have demonstrated our ability to grow our business through responsive market solutions that serve our customers' risk management needs. In October, we successfully completed a $1.4 billion offering of senior notes to help finance the NYSE Euronext acquisition. Together with our disciplined approach to capital allocation and investment, we will first focus on reducing our debt levels and instituting an annual dividend, while ensuring we maintain the flexibility to consider further investments and share repurchases over time." 

Third Quarter 2013 Results

Third quarter 2013 consolidated revenues increased 5% from the prior third quarter to $338 million with consolidated transaction and clearing revenues of $280 million.

Futures average daily volume (ADV) was 3.1 million contracts, down 1% compared to the third quarter of 2012. Revenues from ICE's credit default swap (CDS) trade execution, processing and clearing business were $38 million, up 15% from the third quarter of 2012, and included $22 million in CDS clearing revenues.

Consolidated market data revenues increased 12% to $40 million in the third quarter of 2013 compared to the prior third quarter. Consolidated other revenues were $18 million in the third quarter of 2013.

Consolidated operating expenses were up 5% from the prior third quarter to $136 million, and consolidated operating income rose 4% to $202 million. Operating margin was 60%, and the effective tax rate for the quarter was 25%.

First Nine Months of 2013 Results

Consolidated revenues in the first nine months of 2013 grew 2% to $1.1 billion. Futures ADV in the nine months of the year was 3.4 million contracts down 1% from the first nine months of 2012, with consolidated transaction and clearing revenues of $898 million, down 1% from the prior year's first nine months.

Consolidated market data revenues increased 11% to $121 million and consolidated operating margin was 59% for the first nine months of 2013.

Cash flows from operations were $562 million in the nine months of 2013, down 2% year-over-year. Capital expenditures during the first nine months of 2013 were $76 million and capitalized software development costs totaled $28 million.

Unrestricted cash and short term investments were $1.6 billion as of September 30, 2013, and outstanding debt was $791 million.

Guidance

  • ICE expects 2013 adjusted consolidated expenses to increase in the range of 1% to 2% compared to 2012 adjusted consolidated expenses, versus prior guidance of an increase in the range of 2% to 3%.
  • ICE's diluted share count for the fourth quarter of 2013 is expected to be in the range of 73.2 million to 74.2 million weighted average shares outstanding.
  • The ICE Board of Directors declared a quarterly cash dividend of an aggregate $75 million for the fourth quarter of 2013, which is contingent on the closing of the NYSE Euronext acquisition, with a record date of December 16, 2013 and a payment date of December 31, 2013. The anticipated ex-dividend date will be December 12, 2013.

Earnings Conference Call Information

ICE will hold a conference call today, November 5, at 8:30 a.m. ET to review its third 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 prior-year periods, has been adjusted to include OTC swap contracts that were transitioned to energy futures contracts on October 15, 2012.

ICE Conference Call - Strategy & Financial Update

Following the closure of the NYSE Euronext transaction, ICE will host a conference call to discuss the Company's strategy and financials.


IntercontinentalExchange, Inc. and Subsidiaries

Consolidated Statements of Income

(In thousands, except per share amounts)

(Unaudited)










Nine Months Ended
September 30,


Three Months Ended
September 30,

2013


2012


2013


2012

Revenues:








Transaction and clearing fees, net

$            898,465


$        908,057


$            279,882


$            279,177

Market data fees

121,246


109,504


40,213


35,947

Other

41,666


22,033


17,776


8,063









Total revenues

1,061,377


1,039,594


337,871


323,187









Operating expenses:








Compensation and benefits

192,396


194,596


59,550


61,820

Technology and communications

36,124


34,535


12,927


11,073

Professional services

22,979


25,741


7,392


7,813

Rent and occupancy

22,721


14,544


5,154


5,167

Acquisition-related transaction costs

32,387


9,994


6,073


2,285

Selling, general and administrative

28,229


28,580


10,238


8,114

Depreciation and amortization

99,625


96,955


34,391


32,864









Total operating expenses

434,461


404,945


135,725


129,136









Operating income

626,916


634,649


202,146


194,051









Other income (expense):








Interest and investment income

2,122


1,014


700


332

Interest expense

(29,751)


(29,112)


(9,902)


(9,445)

Other income (expense), net

1,258


(253)


(389)


(279)









Total other expense, net

(26,371)


(28,351)


(9,591)


(9,392)









Income before income taxes

600,545


606,298


192,555


184,659

Income tax expense

160,459


177,114


47,511


50,552









Net income

$           440,086


$        429,184


$           145,044


$           134,107









Net income attributable to non-controlling interest

(10,006)


(7,080)


(3,729)


(3,025)









Net income attributable to IntercontinentalExchange, Inc

$           430,080


$        422,104


$           141,315


$           131,082









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








Basic

$                 5.91


$              5.80


$                  1.94


$                 1.80









Diluted

$                 5.86


$              5.76


$                  1.92


$                 1.79









Weighted average common shares outstanding:








Basic

72,787


72,729


72,867


72,789









Diluted

73,370


73,339


73,525


73,411

 

IntercontinentalExchange, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except per share amounts)

(Unaudited)






September 30,
2013


December 31,
2012

ASSETS




Current assets:




Cash and cash equivalents

$               1,537,266


$              1,612,195

Short-term investments

36,524


Short-term restricted cash and investments

161,645


86,823

Customer accounts receivable

175,826


127,260

Margin deposits and guaranty funds

43,440,692


31,882,493

Prepaid expenses and other current assets

37,654


41,316





Total current assets

45,389,607


33,750,087





Property and equipment, net

201,673


143,392





Other noncurrent assets:




Goodwill

1,961,606


1,937,977

Other intangible assets, net

803,915


798,960

Long-term restricted cash

160,751


162,867

Long-term investments

329,962


391,345

Other noncurrent assets

37,396


30,214





Total other noncurrent assets

3,293,630


3,321,363





Total assets

$              48,884,910


$            37,214,842





LIABILITIES AND EQUITY




Current liabilities:




Accounts payable and accrued liabilities

$                     94,530


$                   70,206

Accrued salaries and benefits

42,638


55,008

Current portion of licensing agreement

19,249


19,249

Current portion of long-term debt

448,824


163,000

Income taxes payable

61,294


29,284

Margin deposits and guaranty funds

43,440,692


31,882,493

Other current liabilities

38,582


26,457





Total current liabilities

44,145,809


32,245,697





Noncurrent liabilities:




Noncurrent deferred tax liability, net

192,398


216,141

Long-term debt

341,765


969,500

Noncurrent portion of licensing agreement

52,189


63,739

Other noncurrent liabilities

66,691


43,207





Total noncurrent liabilities

653,043


1,292,587





Total liabilities

44,798,852


33,538,284





Redeemable non-controlling interest

15,388






EQUITY




IntercontinentalExchange, Inc. shareholders' equity:




Common stock

804


799

Treasury stock, at cost

(740,365)


(716,815)

Additional paid-in capital

1,960,130


1,903,312

Retained earnings

2,938,752


2,508,672

Accumulated other comprehensive loss

(117,452)


(52,591)





Total IntercontinentalExchange, Inc. shareholders' equity

4,041,869


3,643,377

Non-controlling interest in consolidated subsidiaries

28,801


33,181





Total equity

4,070,670


3,676,558





Total liabilities and equity

$              48,884,910


$            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 nine and three months ended September 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 acquisition of NYSE Euronext as a non-GAAP adjustment given the size of the deal. We also include as non-GAAP adjustments 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 consolidated multiple existing locations into a combined location. 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):


Nine Months Ended
September 30, 2013


Three Months Ended
September 30, 2013

Net income attributable to ICE

$                    430,080


$                        141,315

Add: NYSE Euronext transaction costs 

and banker fee relating to ICE Endex acquisition              

 

30,794


 

5,353

Add: Duplicate rent expenses and lease termination costs  

7,262


Less: Income tax benefit effect related to the items above   

(13,843)


(2,041)





Adjusted net income attributable to ICE

$                    454,293


$                        144,627





Earnings per share attributable to ICE common shareholders:




Basic

$                          5.91


$                              1.94





Diluted

$                          5.86


$                              1.92





Adjusted earnings per share attributable to ICE common shareholders:




Adjusted basic

$                          6.24


$                              1.98





Adjusted diluted

$                          6.19


$                              1.97





Weighted average common shares outstanding:




Basic

72,787


72,867





Diluted

73,370


73,525

 

About IntercontinentalExchange Group

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; our ability to comply with regulatory requirements; the performance and reliability of our technology and third party service providers; 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

(Logo: http://photos.prnewswire.com/prnh/20090727/CL51999LOGO )

 

SOURCE IntercontinentalExchange, Inc.



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