CBOE Holdings, Inc. Reports All-Time Record Quarterly Results For Second Quarter 2013

02/08/2013

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 Million(1); Adjusted Diluted EPS of $0.54(1)
  • GAAP Operating Margin Expands by 20 Basis Points to 50.0 Percent; Adjusted Operating Margin Up 140 Basis Points to 51.2 Percent(1)

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'ssuite 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 atwww.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-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 toParticipating 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 EquipmentNet

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 AssetsNet

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

 

 

SOURCE CBOE Holdings, Inc.