IntercontinentalExchange Reports Record 2012 Earnings And Revenues

06/02/2013

IntercontinentalExchange (NYSE: ICE), a leading operator of global markets and clearing houses, today reported financial results for fourth quarter and full year 2012. Consolidated net income attributable to ICE for the quarter grew 2% to $129 million on consolidated revenues of $323 million, down 1% compared to the prior fourth quarter. Diluted earnings per share (EPS) in the quarter increased 2% to $1.76.

For the fourth quarters ended December 31, 2012 and 2011, certain items were included in ICE's operating results that are not indicative of our core business performance, including transaction costs related to ICE's proposed acquisition of NYSE Euronext. Excluding these items, fourth quarter 2012 adjusted net income attributable to ICE increased 5% to $135 million and adjusted diluted EPS grew 5% to $1.84. 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.

For the year ended December 31, 2012, ICE reported a 3% increase over 2011 in consolidated revenues to $1.36 billion, the ninth consecutive year of record revenues. Consolidated 2012 net income attributable to ICE rose 8% to a record $552 million, and diluted EPS increased 9% to $7.52 for the year. Consolidated cash flow from operations grew 3% to a record $733 million in 2012.

ICE Chairman and CEO Jeffrey C. Sprecher said: "We made tremendous strides operationally and strategically in 2012, again delivering on industry requirements amid continued regulatory change, including helping to bring greater regulatory certainty to our customers and markets. At the same time, we delivered record financial results and growth on top of growth, while investing to position our company for the many opportunities ahead. I want to thank and recognize our team for their continued leadership in serving our customers and driving results for our shareholders."

Scott Hill, ICE SVP and CFO said: "As the needs of our customers evolve, they increasingly rely upon our markets to manage risk and comply with regulatory requirements. We are expanding our services to meet their needs while also investing prudently for best in class growth and returns. As we look to 2013, we continue our strong commitment to growth and innovation."

Fourth Quarter 2012 Results

Fourth quarter 2012 consolidated revenues were $323 million, a 1% decline from the prior fourth quarter. Transaction and clearing fee revenues totaled $277 million in the fourth quarter of 2012, down 4% compared to the same period of 2011. Average daily volume (ADV) in ICE's futures business was 3.1 million contracts, down 1% from the fourth quarter of 2011(1). Revenues from ICE's credit default swap (CDS) trade execution, processing and clearing business were $36 million in the quarter, down 14% from the fourth quarter of 2011, and included $19 million in CDS clearing revenues.

Consolidated market data revenues increased 14% from the fourth quarter of 2011 to $37 million, and consolidated other revenues were $9 million.

Consolidated operating expenses were $131 million in the fourth quarter, down 1% from the prior fourth quarter. Consolidated operating income was slightly down from the fourth quarter of 2011 at $192 million. Operating margin was 59%, and the effective tax rate for the quarter was 28%.

Full-Year 2012 Results

For the year ended December 31, 2012, consolidated revenues increased 3% to $1.36 billion. Consolidated transaction and clearing fee revenues totaled $1.19 billion in 2012, up 1% year-over-year. Futures volume and ADV for the year grew 10% to 847 million contracts and 3.4 million contracts, respectively (1). ICE Futures Europe established its fifteenth consecutive annual volume record. ICE Futures Canada also established a new volume record. ICE Brent crude futures volume reached a record in 2012 and became the world's largest crude oil futures contract in terms of ADV.

Revenues from ICE's CDS execution and clearing businesses totaled $144 million, comprised of $78 million from Creditex and $66 million from global CDS clearing. Through February 1, 2013, ICE's CDS clearing houses have cleared $37 trillion in gross notional value, including more than $10 trillion cleared during 2012.

Consolidated market data revenues increased 17% to a record $147 million in 2012.

Consolidated operating expenses were flat at $536 million in 2012. Consolidated operating income grew 4% to $827 million. Operating margin rose to 61% for 2012 from 60% in 2011. 2012 diluted EPS increased 9% over 2011 to $7.52.

The effective tax rates for 2012 and 2011 were 29% and 31%, respectively.

Consolidated cash flow from operations grew 3% to $733 million. Capital expenditures were $32 million in 2012, and capitalized software development costs were $35 million.

Unrestricted cash and cash equivalents were $1.61 billion as of December 31, 2012. At the end of 2012, ICE had $1.13 billion in outstanding debt.

Expense Guidance and Additional Information

  • ICE expects 2013 adjusted consolidated expenses to increase in the range of 3% to 5% from 2012 adjusted consolidated expenses.
  • ICE expects acquisition-related transaction costs for 1Q13 in the range of $10 million to $12 million, primarily relating to the NYSE Euronext transaction, which will be excluded from non-GAAP results.
  • ICE expects 2013 operational capital expenditures and capitalized software development costs to be in the range of $60 million to $70 million.
  • In addition, ICE expects to make $20 million to $30 million in capital expenditures related to real estate costs due to consolidating multiple locations in New York. ICE expects duplicate rent expenses and lease termination costs in the range of $4 million to $5 million in both 1Q13 and 2Q13, which will be excluded from non-GAAP results.
  • ICE expects depreciation and amortization expense for 2013 in the range of $135 million to $140 million.
  • ICE expects quarterly interest expense for 2013 to be in the range of $9 million to $10 million.
  • ICE's consolidated tax rate is expected to be in the range of 27% to 30% for 2013.
  • ICE's diluted share count for the first quarter of 2013 is expected to be in the range of 72.6 million to 73.8 million weighted average shares outstanding, and the diluted share count for fiscal year 2013 is expected to be in the range of 72.8 million to 74.0 million weighted average shares outstanding.

Earnings Conference Call Information

ICE will hold a conference call today, February 6, at 8:30 a.m. ET to review its full year and fourth quarter 2012 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 begin_of_the_skype_highlighting 708-290-1370 FREE end_of_the_skype_highlighting from outside 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 and OTC commission data can be found at: http://ir.theice.com/supplemental.cfm

(1) 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.

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. ICE serves customers in more than 70 countries. 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

Consolidated Statements of Income

(In thousands, except per share amounts)

 
 

Year Ended December 31,

Three Months Ended

December 31,

 

2012

2011

2012

2011

Revenues:

   

(Unaudited)

Transaction and clearing fees, net

$1,185,195

$1,176,367

$277,138

$287,307

Market data fees

146,789

124,956

37,285

32,625

Other

30,981

26,168

8,948

7,283

Total revenues

1,362,965

1,327,491

323,371

327,215

         

Operating expenses:

       

Compensation and benefits

251,152

250,601

56,556

62,650

Technology and communication

45,764

47,875

11,229

11,989

Professional services

33,145

34,831

7,404

9,861

Rent and occupancy

19,329

19,066

4,785

5,138

Acquisition-related transaction costs

19,359

15,624

9,365

864

Selling, general and administrative

36,699

34,180

8,119

8,716

Depreciation and amortization

130,502

132,252

33,547

33,189

Total operating expenses

535,950

534,429

131,005

132,407

Operating income

827,015

793,062

192,366

194,808

Other income (expense):

       

Interest and investment income

1,626

2,489

612

270

Interest expense

(38,902)

(34,533)

(9,790)

(10,910)

Other income (expense), net

(47)

(1,009)

206

(190)

Total other expense, net

(37,323)

(33,053)

(8,972)

(10,830)

Income before income taxes

789,692

760,009

183,394

183,978

Income tax expense

227,955

238,268

50,841

53,711

Net income

$ 561,737

$ 521,741

$132,553

$130,267

Net income attributable to noncontrolling

interest

(10,161)

(12,068)

(3,081)

(3,494)

Net income attributable to IntercontinentalExchange, Inc.

$ 551,576

$ 509,673

$129,472

$126,773

         

Earnings per share attributable to IntercontinentalExchange, Inc. common

shareholders:

       

Basic

$7.59

$6.97

$1.78

$1.75

Diluted

$7.52

$6.90

$1.76

$1.73

Weighted average common shares

outstanding:

       

Basic

72,712

73,145

72,662

72,582

Diluted

73,366

73,895

73,449

73,414

           

 

Consolidated Balance Sheets

(In thousands)

 
 

December 31,

 

2012

2011

ASSETS

   

Current assets:

   

Cash and cash equivalents

$ 1,612,195

$ 822,949

Short-term restricted cash

86,823

52,982

Customer accounts receivable, net

127,260

136,331

Margin deposits and guaranty funds

31,882,493

31,555,831

Prepaid expenses and other current assets

41,316

37,298

     

Total current assets

33,750,087

32,605,391

     

Property and equipment, net

143,392

130,962

     

Other noncurrent assets:

   

Goodwill

1,937,977

1,902,984

Other intangible assets, net

798,960

854,374

Long-term restricted cash

162,867

164,496

Long-term investments

391,345

451,136

Other noncurrent assets

30,214

38,521

     

Total other noncurrent assets

3,321,363

3,411,511

     

Total assets

$ 37,214,842

$ 36,147,864

     

 

LIABILITIES AND EQUITY

Current liabilities:

   

Accounts payable and accrued liabilities

$ 70,206

$ 65,964

Accrued salaries and benefits

55,008

58,248

Current portion of licensing agreement

19,249

19,249

Current portion of long-term debt

163,000

50,000

Income taxes payable

29,284

22,614

Margin deposits and guaranty funds

31,882,493

31,555,831

Other current liabilities

26,457

28,408

     

Total current liabilities

32,245,697

31,800,314

     

Noncurrent liabilities:

   

Noncurrent deferred tax liability, net

216,141

235,889

Long-term debt

969,500

837,500

Noncurrent portion of licensing agreement

63,739

80,084

Other noncurrent liabilities

43,207

31,736

     

Total noncurrent liabilities

1,292,587

1,185,209

     

Total liabilities

33,538,284

32,985,523

     
     

EQUITY

   

IntercontinentalExchange, Inc. shareholders' equity:

   

Common stock

799

792

Treasury stock, at cost

(716,815)

(644,291)

Additional paid-in capital

1,903,312

1,829,181

Retained earnings

2,508,672

1,957,096

Accumulated other comprehensive loss

(52,591)

(21,253)

     

Total IntercontinentalExchange, Inc. shareholders' equity

3,643,377

3,121,525

Noncontrolling interest in consolidated subsidiaries

33,181

40,816

     

Total equity

3,676,558

3,162,341

     

Total liabilities and equity

$ 37,214,842

$ 36,147,864

     
           
 

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, 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. 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 reflective of our core business performance. These financial measures are not in accordance with, or an alternative to, GAAP financial measures 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 Annual Report on Form 10-K, including our consolidated financial statements and the notes thereto.

Adjusted net income attributable to ICE for the periods presented below is calculated by adding net income attributable to ICE, the adjustments described below, and the related income tax effect. The adjustments to net income attributable to ICE, including the transaction costs ICE has incurred in connection with the proposed acquisition of NYSE Euronext, are not reflective of our core business performance. For the year and three months ended December 31, 2011, we included all acquisition-related transaction costs as non-GAAP adjustments. We now include acquisition-related transaction costs as part of our core business expenses, except for those that are directly related to the announcement, closing, financing or termination of a transaction. However, we are including all of the acquisition-related transaction costs relating to our current acquisition of NYSE Euronext as non-GAAP adjustments given the size of the deal. 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 periods presented below:

         
 

Year Ended

Year Ended

Three Months

Three Months

 

December 31,

December 31,

Ended

Ended

 

2012

2011

December 31, 2012

December 31, 2011

 

(In thousands, except per share amounts)

         

Net income attributable to ICE

$551,576

$509,673

$ 129,472

$ 126,773

Add: Costs expensed related to the Credit

Facilities

 

 

2,634

 

 

2,634

Add: NYSE Euronext transaction costs and banker

fees related to other transactions

9,174

4,250

9,174

Less: Income tax benefit effect related to the items above

(3,497)

(919)

(3,497)

(919)

Adjusted net income attributable to ICE

$557,253

$515,638

$ 135,149

$ 128,488

Earnings per share attributable to ICE common

shareholders:

       

Basic

$ 7.59

$ 6.97

$ 1.78

$ 1.75

Diluted

$ 7.52

$ 6.90

$ 1.76

$ 1.73

Adjusted earnings per share attributable to ICE

common shareholders:

       

Adjusted basic

$ 7.66

$ 7.05

$ 1.86

$ 1.77

Adjusted diluted

$ 7.60

$ 6.98

$ 1.84

$ 1.75

Weighted average common shares

       

outstanding:

       

Basic

72,712

73,145

72,662

72,582

Diluted

73,366

73,895

73,449

73,414

                       
 

ICE-CORP

SOURCE IntercontinentalExchange

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