IntercontinentalExchange Reports Record Full-Year 2008 Revenues, Net Income and Operating Cash Flow; Record Fourth Quarter 2008 Revenues
Posted on: Tuesday, 10 February 2009, 06:30 CST
ATLANTA, Feb. 10 /PRNewswire-FirstCall/ -- IntercontinentalExchange(R),
Inc. (NYSE: ICE), a leading operator of regulated global exchanges and
over-the-counter (OTC) markets, reported that consolidated revenues in the
fourth quarter rose to a record $207 million, a 30% increase over fourth
quarter 2007 revenues of $159 million. Consolidated net income for the fourth
quarter of 2008 was $49 million, a 24% decrease compared to $65 million for
the prior fourth quarter. Adjusted to exclude the $16 million pre-tax, or $11
million after-tax, impairment charge related to ICE's(R) investment in the
National Commodity and Derivatives Exchange (NCDEX) of India, non-GAAP net
income for the quarter was $60 million, a decrease of 7% compared to the
fourth quarter of 2007. Diluted GAAP earnings per share (EPS) in the fourth
quarter were $0.67. Adjusted to exclude the NCDEX impairment charge, non-GAAP
diluted EPS for the quarter were $0.82, down 9% compared to the prior year's
fourth quarter.
For the year ended December 31, 2008, ICE achieved record revenues for the
fifth consecutive year, reporting a 42% rise in consolidated revenues to $813
million compared with $574 million in the prior year. Consolidated GAAP net
income increased 25% to a record $301 million in 2008 from $241 million in
2007, and diluted EPS for 2008 increased 23% to $4.17. Adjusted to exclude the
NCDEX impairment charge, non-GAAP net income for 2008 was $312 million and
non-GAAP diluted EPS were $4.33, up 30% and 28% over 2007, respectively.
Consolidated cash flow from operations grew 30% to a record $375 million in
2008.
Volume in ICE's consolidated futures segment, comprising ICE Futures
Europe(R), ICE Futures U.S.(R) and ICE Futures Canada(R), reached a record 237
million contracts in 2008, an increase of 21% over 2007. In 2008, average
daily volume (ADV) for ICE Futures Europe was 590,541; ADV for ICE Futures
U.S. and ICE Futures Canada was 331,317 contracts. Average daily commissions
(ADC) for ICE's OTC energy markets during 2008 increased to a record $1.1
million, a 32% increase over 2007. Creditex(R) Group Inc., ICE's wholly-owned
credit derivatives subsidiary, had brokerage revenues of $52 million, which
are also reflected in ICE's OTC segment for the period of September 2008
through December 2008. ICE completed its acquisition of Creditex on August 29,
2008.
"We excelled in a challenging year by responding to the needs of
customers, expanding the markets we serve and executing on our strategic and
financial objectives," said ICE Chairman and CEO, Jeffrey C. Sprecher. "As we
enter 2009, we again have a range of initiatives, market opportunities and
plans for growth based on the strong global risk management infrastructure ICE
has established. Extending further into the OTC markets by developing CDS
clearing is just one initiative designed to leverage our infrastructure. While
we anticipate another challenging year in the global markets, we believe we
are well positioned to meet our customers' risk management needs amid
volatility and change."
"Our long-standing disciplined approach to managing our financial
performance has served us well, particularly given the global economic climate
of the past 12 months," said ICE CFO Scott Hill. "We have an excellent
balance sheet, including low leverage and strong cash flow, as well as a
business model that is diversified across futures and OTC markets, geographies
and customer types. Our focus on smart growth and disciplined investment has
allowed us to produce excellent results for our shareholders while weathering
uncertainty in the broader markets."
Fourth Quarter 2008 Results
ICE's fourth quarter 2008 consolidated revenues increased 30% to $207
million compared to $159 million in the fourth quarter of 2007. Consolidated
transaction and clearing revenues increased 34% to $178 million in the fourth
quarter of 2008, from $133 million during the same period in 2007. The
increase in transaction and clearing revenue was driven primarily by new
products, strong trading volume in ICE's futures and global OTC segments, the
launch of ICE Clear Europe in November 2008, an increase of participants in
ICE's markets and the Creditex acquisition.
Transaction and clearing revenues in ICE's consolidated futures segment
totaled $86 million in the fourth quarter of 2008, an increase of 18% over $72
million in the same period in 2007. Fourth quarter 2008 volume for all ICE
futures exchanges increased to 60 million contracts, which is a 22% increase
compared to the fourth quarter of 2007. ICE Futures Europe recorded quarterly
volume of 37 million contracts. ADV for ICE's European futures business was
569,140 contracts, an increase of 3% over the fourth quarter of 2007. The
average rate per contract (RPC) for ICE Futures Europe in the fourth quarter
was $1.42. ICE Futures U.S. and ICE Futures Canada recorded fourth quarter
volume of 23 million contracts and 0.7 million contracts, respectively. ADV
for ICE Futures U.S. was 350,395 contracts in the fourth quarter of 2008, a
74% increase compared to the fourth quarter of 2007. Total volume for ICE
Futures U.S. represented the highest quarter in exchange history, due in part
to the successful transition of the Russell Index futures complex in
September. RPC for ICE Futures U.S. agricultural futures and options contracts
was $2.25, and the RPC for financial contracts averaged $0.78 for the fourth
quarter of 2008. ADV for ICE Futures Canada was 11,625 contracts during the
quarter compared to 17,347 in the year-ago period.
Fourth quarter 2008 transaction and clearing revenues in ICE's global OTC
segment increased 54% to $92 million, compared to $60 million in the same
period in 2007. In ICE's OTC energy markets, ADC were $872,440, a decline of
4% from $912,967 in the same period of 2007. Cleared contracts accounted for
95% of OTC energy contract volume during the fourth quarter of 2008. In ICE's
credit derivative markets, fourth quarter revenues were $36 million, roughly
flat versus the same period in 2007 on a pro-forma basis. ICE did not own
Creditex in 2007.
Consolidated market data revenues increased 16% during the fourth quarter
of 2008 to a record $27 million compared to $23 million in the same period in
2007. Consolidated other revenues were $2 million during the fourth quarter of
2008.
Consolidated operating expenses increased $47 million to $110 million for
the fourth quarter of 2008 versus $63 million in the same period in 2007. The
increase was primarily driven by $33 million of expenses relating to
Creditex's business following ICE's acquisition during the third quarter of
2008 and continued investment in growth initiatives. Amortization expenses on
acquired intangibles were $16 million for the fourth quarter of 2008 compared
to $3 million in the same period of 2007, and included $6 million related to
the Creditex acquisition and $6 million related to ICE's exclusive Russell
license. Depreciation expense, primarily related to technology investments,
was $9 million in the fourth quarter of 2008, an increase of 30% over the
fourth quarter of 2007.
Fourth quarter 2008 consolidated operating income was $97 million, an
increase of 1% compared to the fourth quarter of 2007. Consolidated operating
margin was 47% for the fourth quarter of 2008, compared to 61% for the same
period in 2007.
ICE has taken a pre-tax, non-cash impairment charge of $16 million related
to its 8% equity ownership in NCDEX, a derivatives exchange located in Mumbai,
India. ICE acquired its stake for $37 million in 2006. In response to
political pressure regarding high commodity prices, the Indian government
suspended trading in several key agricultural contracts traded on NCDEX during
2007, and that ban remains in place. The Indian government also announced a
law that may require foreign entities, including ICE, to divest holdings above
an imposed limit of 5% total ownership in Indian commodities exchanges. This
may result in ICE reducing its stake in NCDEX from 8% to the 5% threshold by
June 30, 2009. Considering these factors and current valuations in the global
exchange sector, management determined that its cost method investment in
NCDEX is impaired under U.S. GAAP standards. ICE continues to work closely
with NCDEX as a key strategic partner, which provides access to an important
emerging market.
The effective tax rate for the fourth quarter of 2008 was 39.8% compared
to 32.7% for the fourth quarter of 2007. The increase in the tax rate was
primarily the result of the tax effect of the NCDEX impairment charge and an
increase in the percentage of income taxable in the U.S. at higher statutory
rates, such as in New York State.
Full-Year 2008 Results
For the year ended December 31, 2008, consolidated revenues increased 42%
to $813 million compared to $574 million in 2007. Consolidated transaction and
clearing revenues increased 41% to $693 million in 2008 from $490 million in
2007. The increase in transaction and clearing revenues was driven primarily
by new products, strong trading volume in ICE's futures and global OTC
segments, an increase of participants in ICE's markets and the Creditex
acquisition.
Transaction and clearing revenues in ICE's consolidated futures segment
totaled $352 million in 2008, an increase of 26% over $279 million in 2007. In
2008 volume for all ICE futures exchanges totaled 237 million contracts, a 21%
increase over 2007. ICE Futures Europe achieved record volume of 153 million
contracts during 2008. ADV for ICE's European futures business was 590,541
contracts, an increase of 10% compared to 2007. ICE Futures U.S. and ICE
Futures Canada recorded 2008 volume of 81 million contracts and 3 million
contracts, respectively. Total volume for ICE Futures U.S. in 2008 represented
the highest 12-month period in exchange history. ADV for ICE Futures U.S. was
318,085 contracts in 2008, a 48% increase over 2007. ADV for ICE Futures
Canada was 13,232 contracts during the year, a 5% decrease compared to 2007.
Transaction and clearing revenues in ICE's global OTC segment increased
61% to $342 million in 2008 compared to $212 million in 2007. ADC for ICE's
OTC energy business increased 32% to $1.1 million in 2008 compared to $845,572
in 2007. Cleared contracts accounted for 91% of OTC energy contract volume
during 2008. Creditex contributed $52 million in brokerage revenues from
September 2008 through December 2008, representing a 10% increase over
Creditex's results during the same period in 2007, on a pro-forma basis. ICE
did not own Creditex in 2007.
Consolidated market data revenues increased 46% in 2008 to a record $103
million compared to $70 million in 2007. Consolidated other revenues were $17
million for the year, up from $14 million in the same period in 2007.
Consolidated operating expenses during 2008 were $320 million, an increase
of 45% compared to $221 million in 2007. The increase was driven by $47
million of expenses relating to Creditex's business following ICE's
acquisition and continued investment in growth initiatives. Spending
associated with the development of ICE Clear Europe(R) was $8 million in 2008,
compared to $4 million in 2007. Depreciation related primarily to technology
investments was $31 million in 2008, an increase of 37%. Amortization expenses
on acquired intangibles, including $8 million related to the Creditex
acquisition and $7 million related to ICE's exclusive Russell license, were
$30 million in 2008 compared to $10 million in 2007. Non-cash compensation for
the year, excluding Creditex, increased to $32 million, compared to $24
million for 2007.
Consolidated operating income for the full year was $494 million in 2008,
an increase of 40% compared to $354 million in operating income in 2007.
Operating margin was 61% for the year ended December 31, 2008, compared to 62%
for the same period in 2007.
The effective tax rate for 2008 was 36.4% compared to 32.9% in 2007.
Consolidated cash flow from operations was $375 million in 2008, up 30%
from $288 million in 2007. Capital expenditures for 2008 were $30 million,
compared to $31 million in 2007. Capital expenditures primarily related to ICE
Futures Europe's new London headquarters and hardware purchases to enhance
ICE's electronic trading and clearing technology and related infrastructure.
Capitalized software development costs totaled $18 million for the full year,
compared to $12 million in 2007.
Unrestricted cash and investments were $290 million as of December 31,
2008. At the end of the year, ICE had $379 million in outstanding debt.
Guidance and Additional Information
-- Expense synergies from the Creditex acquisition are expected to be in
the range of $8 million to $10 million on an annualized basis beginning in
2009.
-- ICE had 795 employees at the end of 2008. ICE expects headcount to
decline between 5% and 7% during the first quarter of 2009. ICE expects to
incur a charge of $2 million to $3 million associated with the headcount
reductions primarily in the first quarter. For the full year, headcount is
expected to be flat to down 5% from current levels, excluding any personnel
additions relating to merger and acquisition activity in 2009.
-- ICE expects non-cash compensation expense in the range of $42 million
to $46 million for 2009, assuming the achievement of certain Board-approved
financial objectives.
-- ICE expects 2009 capital expenditures in the range of $30 million to
$34 million driven by continued investments in trading and clearing technology
and data centers.
-- ICE expects depreciation and amortization for 2009 in the range of $108
million to $114 million, including approximately $26 million related to the
amortization of payments for the exclusive Russell Index license and $24
million for the amortization of intangibles associated with the Creditex
acquisition.
-- ICE's consolidated tax rate is expected to be in the range of 34% to
36% for 2009.
-- ICE's diluted share count for the first quarter of 2009 is expected to
be in the range of 73.8 million to 74.4 million weighted average shares
outstanding, and the diluted share count for fiscal year 2009 to be in the
range of 73.5 million to 74.5 million weighted average shares outstanding.
ICE's remaining capacity in its share repurchase program is approximately $200
million.
-- As previously announced, ICE is working with nine major dealers to
develop and launch a central counterparty clearing house for credit default
swaps. In addition, ICE has announced plans to acquire The Clearing
Corporation (TCC) as part of this initiative. Regulatory approvals are pending
and are expected to be received during the first quarter. ICE will provide
further details on the timing and financial impacts of CDS clearing upon
closure of the TCC transaction and receipt of regulatory approvals.
Earnings Conference Call Information
ICE will hold a conference call today, February 10, at 8:30 a.m. ET to
review its fourth quarter and fiscal year 2008 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 (888) 737-3705 if calling from the United States, or
(913) 312-6672 if dialing from outside of the United States. For participants
on the telephone, please place your call ten minutes prior to the start of the
call.
The call will be archived on the company's website for replay. A telephone
replay of the earnings call will also be available at (888) 203-1112 for
callers within the United States and at (719) 457-0820 for callers outside of
the United States. The passcode for the replay is 6904442.
Historical futures volume and OTC commission data can be found at:
http://ir.theice.com/supplemental.cfm
About IntercontinentalExchange
IntercontinentalExchange(R) (NYSE: ICE) operates regulated global futures
exchanges and over-the-counter (OTC) markets for agricultural, energy, equity
index and currency contracts, as well as credit derivatives. ICE(R) offers
these markets to participants around the world through its technology
infrastructure and trading platform, together with clearing, market data and
risk management services. ICE Futures Europe(R) is ICE's regulated energy
futures exchange. ICE's regulated North American exchanges, ICE Futures
U.S.(R) and ICE Futures Canada(R), offer markets for agricultural and
financial contracts. Creditex, a market leader in trade execution and
processing for credit derivatives, is also a wholly-owned subsidiary of ICE. A
member of the Russell 1000(R) and S&P 500 indices, ICE is headquartered in
Atlanta, with offices in New York, London, Chicago, Winnipeg, Calgary, Houston
and Singapore. www.theice.com.
IntercontinentalExchange is a registered trademark of
IntercontinentalExchange, Inc., registered in the United States and the
European Union.
ICE, ICE & block design, ICE Clear Europe, and ICE Clear U.S. are
registered trademarks and marque deposes of IntercontinentalExchange, Inc.,
registered in the United States, the European Union, Canada and Singapore.
ICE Futures Canada, ICE Futures Europe and ICE Futures U.S. are registered
trademarks of IntercontinentalExchange, Inc., in the United States, the
European Union and Singapore.
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; increasing competition and consolidation
in our industry; conditions in global financial markets; our ability to
develop new products and services and pursue strategic acquisitions and
alliances on a timely, cost-effective basis; our ability to minimize the risks
associated with operating multiple clearing houses in multiple jurisdictions;
changes in domestic and foreign regulations or government policy;
technological developments, including clearing developments; developing a
clearing initiative for the credit default swap market; the accuracy of our
cost estimates and expectations; adjustments to exchange fees or commission
rates; 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 2010; our ability to increase the connectivity to our marketplace;
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; our ability to
gain access to comparable products and services if our key technology
contracts were terminated; and the risk that acquired businesses will not be
integrated successfully or the revenue opportunities, cost savings and other
anticipated synergies from mergers may not be fully realized or may take
longer to realize than expected. 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 Annual Report on Form 10-K for the year ended December 31, 2007, as
filed with the SEC on February 13, 2008, and ICE's Quarterly Reports on Form
10-Q for the quarters ended June 30, 2008 and September 30, 2008, as filed
with the SEC on August 4, 2008 and October 30, 2008, respectively, and ICE's
Annual Report on Form 10-K for the year ended December 31, 2008, to be filed
with the SEC. 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 Financial Statements
INTERCONTINENTALEXCHANGE, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Year Ended Three Months Ended
December 31, December 31,
2008 2007 2008 2007
Revenues:
Transaction and clearing
fees, net $693,229 $490,358 $178,159 $132,555
Market data fees 102,944 70,396 26,960 23,306
Other 16,905 13,539 2,141 3,435
Total revenues 813,078 574,293 207,260 159,296
Operating expenses:
Compensation and benefits 159,792 101,397 57,004 34,913
Professional services 29,705 23,047 6,716 4,820
Patent royalty - 1,705 - -
CBOT merger-related
transaction costs - 11,121 - 33
Selling, general and
administrative 67,800 50,759 20,157 13,457
Depreciation and amortization 62,247 32,701 26,056 9,546
Total operating expenses 319,544 220,730 109,933 62,769
Operating income 493,534 353,563 97,327 96,527
Other income (expense):
Interest and investment
income 11,536 11,865 2,394 3,049
Interest expense (19,573) (18,641) (5,958) (5,500)
Other income (expense), net (12,001) 11,647 (12,607) 2,013
Total other income
(expense), net (20,038) 4,871 (16,171) (438)
Income before income taxes 473,496 358,434 81,156 96,089
Income tax expense 172,524 117,822 32,301 31,437
Net income $300,972 $240,612 $48,855 $64,652
Earnings per common share:
Basic $4.23 $3.49 $0.68 $0.93
Diluted $4.17 $3.39 $0.67 $0.90
Weighted average common
shares outstanding:
Basic 71,184 68,985 72,280 69,735
Diluted 72,164 70,980 73,465 71,565
INTERCONTINENTALEXCHANGE, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
December 31,
2008 2007
Assets
Current assets:
Cash and cash equivalents $283,522 $119,597
Short-term restricted cash 30,724 19,624
Short-term investments 3,419 140,955
Customer accounts receivable, net 81,248 52,018
Margin deposits and guaranty funds 12,117,820 792,052
Prepaid expenses and other current assets 35,855 17,848
Total current assets 12,552,588 1,142,094
Property and equipment, net 88,952 63,524
Other noncurrent assets:
Goodwill 1,434,816 1,009,687
Other intangible assets, net 728,855 537,722
Long-term restricted cash 105,740 3,000
Cost method investments 32,724 38,778
Other noncurrent assets 15,906 1,540
Total other noncurrent assets 2,318,041 1,590,727
Total assets $14,959,581 $2,796,345
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $49,663 $27,811
Accrued salaries and benefits 41,096 23,878
Current portion of licensing agreement 12,686 10,572
Current portion of long-term debt 46,875 37,500
Income taxes payable 17,708 11,687
Margin deposits and guaranty funds 12,117,820 792,052
Current portion of unearned government grant 8,737 1,748
Other current liabilities 17,057 5,713
Total current liabilities 12,311,642 910,961
Noncurrent liabilities:
Noncurrent deferred tax liability, net 194,301 108,739
Long-term debt 332,500 184,375
Noncurrent portion of licensing agreement 82,989 89,645
Long-term unearned government grant - 8,737
Other noncurrent liabilities 24,901 17,032
Total noncurrent liabilities 634,691 408,528
Total liabilities 12,946,333 1,319,489
Minority interest 5,949 -
Redeemable stock put 1,068 -
Shareholders' Equity
Common stock 765 710
Treasury stock, at cost (355,520) (30,188)
Additional paid-in capital 1,608,344 1,043,971
Retained earnings 732,752 431,708
Accumulated other comprehensive income 19,890 30,655
Total shareholders' equity 2,006,231 1,476,856
Total liabilities and shareholders' equity $14,959,581 $2,796,345
Non-GAAP Financial Measures and Reconciliation
ICE provides adjusted net income and adjusted earnings per common share as
additional information regarding its operating results. ICE uses these non-
GAAP measures internally to evaluate its performance and in making financial
and operational decisions. ICE believes that the presentation of these
measures provides investors with greater transparency and supplemental data
relating to our financial condition and results of operations. In addition,
ICE believes the presentation of these measures is useful for period-to-period
comparison of results because the NCDEX cost method impairment charge
described below does not reflect historical operating performance. These
measures are not in accordance with, or an alternative to, U.S. generally
accepted accounting principles or 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. ICE strongly recommends that
investors review the GAAP financial measures included in the Annual Report on
Form 10-K, including the consolidated financial statements and the notes
thereto.
Adjusted net income for the 2008 periods below is calculated by adding net
income and the NCDEX impairment charge, presented net of tax. ICE does not
believe this item is representative of its future operating performance since
the charge was not consistent with its historical operations. ICE believes
that the NCDEX impairment charge is an unusual expense and is not
representative of historical operating performance. Adjusted earnings per
common share are calculated as adjusted net income divided by the weighted
average common shares outstanding. These calculations exclude the NCDEX
impairment charge. The following table reconciles the 2008 net income to
adjusted net income and calculates adjusted earnings per common share.
Year Ended Three Months Ended
December 31, December 31,
2008 2008
(In thousands, except per share amounts)
Net income $300,972 $48,855
Add: NCDEX impairment charge 15,700 15,700
Less: Income tax benefit of NCDEX
impairment charge (4,477) (4,477)
Adjusted net income $312,195 $60,078
Earnings per common share on net income:
Basic $4.23 $0.68
Diluted $4.17 $0.67
Adjusted earnings per common share on
adjusted net income:
Adjusted basic $4.39 $0.83
Adjusted diluted $4.33 $0.82
Weighted average common shares
outstanding:
Basic 71,184 72,280
Diluted 72,164 73,465
SOURCE IntercontinentalExchange, Inc.
Source: PR Newswire
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