CBOE Holdings, Inc. (NASDAQ: CBOE), today reported operating revenues of $112.6 million and net income of $24.9 million, or $0.27 per diluted share, for the second quarter ended June 30, 2010. These results compare to operating revenues of $109.0 million and net income of $28.1 million, or $0.31 per diluted share, for the second quarter of 2009. Comparisons of current quarter financial results were impacted by the following items:
- the recognition of $4.7 million in access fee revenue in the second quarter of 2009 that related to fees assessed and deferred in the first quarter of 2009,
- second-quarter 2010 expense of $1.7 million related to the index options litigation,
- a $0.4 million increase in severance expense in the second-quarter 2010 and
- the recognition of $0.6 million for stock-based compensation for the second-quarter 2010.
For the six months ended June 30, 2010, the company reported total operating revenues of $213.7 million and net income of $47.6 million, or $0.52 per diluted share. For the comparable period last year, the company reported total operating revenues of $207.1 million and net income of $52.4 million, or $0.58 per diluted share.
“This past quarter was an historic one for CBOE, as we completed our conversion from a membership organization to a stockholder-owned company. While the CBOE has operated its business on a for-profit basis since 2006, we are now pleased to report for the first time as a publicly-traded company,” said William J. Brodsky, CBOE Holdings Chairman and Chief Executive Officer. “We expect this transformation will strengthen the company’s competitive position. Future growth opportunities include initiatives such as our anticipated launch of C2, an alternative all-electronic exchange, and continued emphasis on new product innovation.”
“I’m pleased with our second quarter results. While our overall performance was impacted by certain items, fundamentally, it was a solid quarter,” commented Alan J. Dean, CBOE Holdings Executive Vice President and Chief Financial Officer. “Looking ahead, we will continue to focus on maintaining tight control over expenses and are optimistic about our ability to leverage our cost structure and the scale inherent in our business model.”
The table below highlights CBOE Holdings’ operating results for the comparative quarters and six-month periods ended June 30, 2010 and 2009.
Key Statistics and Financial Highlights:
|
($s in millions, except per share and fee per contract) |
2Q 2010 |
2Q 2009 |
Y/Y |
YTD 2010 |
YTD 2009 |
Y/Y |
|
|
||||||
|
Key Statistics: |
|
|
|
|
|
|
|
Average Daily Volume |
5.31 |
4.71 |
13% |
4.94 |
4.60 |
7% |
|
Total Trading Volume |
334.4 |
297.0 |
13% |
612.4 |
570.3 |
7% |
|
Average Transaction Fee Per Contract |
$0.281 |
$0.273 |
3% |
$ 0.290 |
$0.282 |
3% |
|
Financial Highlights: |
|
|
|
|
|
|
|
Total Operating Revenues |
$112.6 |
$109.0 |
3% |
$213.7 |
$207.1 |
3% |
|
Total Operating Expenses |
70.8 |
61.4 |
15% |
133.1 |
119.2 |
12% |
|
Operating Income |
41.8 |
47.6 |
-12% |
80.6 |
$ 87.9 |
-8% |
|
Operating Margin % |
37.1% |
43.7% |
-6.6 pts |
37.7% |
42.4% |
-4.7 pts |
|
Net Income |
$ 24.9 |
$ 28.1 |
-11% |
$ 47.6 |
$ 52.4 |
-9% |
|
Diluted EPS |
$ 0.27 |
$ 0.31 |
-13% |
$ 0.52 |
$ 0.58 |
-10% |
Revenue growth for the second quarter was primarily driven by a $13.0 million increase in transaction fees, partially offset by lower access fee revenue. For the quarter, transaction fees increased 16 percent compared with the same period last year, reflecting a 13 percent lift in trading volume and a three percent increase in the average transaction fee per contract. Trading volume for the second quarter was 334.4 million contracts, or 5.31 million contracts per day, versus 297.0 million contracts, or 4.71 million contracts per day, in the second quarter of 2009. The average transaction fee per contract was $0.281 for the quarter compared with $0.273 in the second quarter of 2009. The increase in the average transaction fee per contract primarily resulted from a shift in the volume mix, with index options accounting for a higher percentage of contracts traded, representing 23.8 percent of total options contracts traded in the second quarter of 2010 versus 17.7 percent in the prior-year period. The average transaction fee per contract represents total transaction fee revenue divided by total reported trading volume for the Chicago Board Options Exchange (CBOE) and the CBOE Futures Exchange (CFE).
The decrease in access fee revenue was primarily due to the recognition of $4.7 million of access fee revenue in the second quarter of 2009 that related to fees assessed and deferred in the first quarter of 2009. These fees had been deferred pending the final resolution of CBOE’s exercise right litigation. Access fee revenue was also negatively impacted by lower lease rates this year versus the second quarter of 2009, as well as a decline in the number of temporary members and interim trading permit users. On July 1, 2010, CBOE began charging monthly fees to trading permit holders under its new trading access program, and these fees are expected to contribute to operating earnings beginning in the third quarter of 2010.
Total operating expenses for the second quarter were $70.8 million, up $9.4 million, or 15 percent, over the second quarter of 2009. This increase was primarily due to higher expenses related to employee costs, outside services, royalty fees and other expenses. Core cash operating expenses (representing total operating expenses less depreciation and amortization and volume-based expenses) accounted for $4.7 million of the expense increase. Volume-based expenses, which include royalty fees and trading volume incentives, and are directly influenced by trading volume, increased $4.3 million in the second quarter of 2010 compared with last year’s second quarter.
The increase in employee costs was primarily due to the recognition of stock-based compensation of $0.6 million, resulting from restricted stock grants awarded to employees on June 15, 2010. In addition, severance expense was up $0.4 million due to staff reductions that occurred in the second quarter of 2010. The rise in outside services was mainly due to a $1.7 million payment CBOE will make to Standard & Poor’s (S&P) as reimbursement for costs related to the S&P 500 Index litigation. The growth in royalty fees is directly related to higher trading volume in CBOE’s licensed index products. Total index options experienced a 51 percent increase in trading volume over the second quarter. Other expenses increased primarily as a result of higher costs related to Illinois franchise tax, directors and officers insurance and an isolated incident caused by a software bug.
In the second quarter, the operating margin declined to 37.1 percent from 43.7 percent in the same period last year.
CBOE Holdings Second Quarter 2010 Operational Highlights and Recent Developments:
- On June 14, CBOE Holdings priced its initial public offering of 11.7 million shares of unrestricted common stock at a price of $29 per share. The unrestricted common stock began trading on NASDAQ on June 15 under the symbol "CBOE." Also, following the IPO, the underwriters exercised their option to purchase an additional 1,755,000 shares of unrestricted common stock.
- CBOE began trading several new products during the second quarter, including:
-- Quarterly options on SPDR Gold Trust (GLD) on April 9
-- Options on two volatility-related Exchange Traded Notes (ETNs) – the iPath S&P 500 VIX Short-Term Futures Index ETN (VXX) and the iPath S&P 500 VIX Mid-Term Futures Index ETN (VXZ) on May 28
-- In June, CBOE expanded its Weekly options offerings to include individual equities, ETFs (SPY, QQQQ, DIA and IWM) and a new index (DJX)
- On June 18, CBOE successfully initiated its new trading access program, experiencing strong demand for trading permits. Under this new program, all physical and electronic access to CBOE’s trading facilities is made available through trading permits in exchange for a monthly fee. CBOE began charging monthly access fees to trading permit holders on July 1, and expects access fees to represent a significant contribution to our operating revenues in future quarters.
- On July 8, the Circuit Court of Cook County ruled in favor of CBOE, CME Group Index Services, LLC (CGIS) and The McGraw-Hill Companies, Inc. regarding the index options litigation brought against the International Securities Exchange, LLC (ISE) and The Options Clearing Corporation (OCC). The ruling prohibits ISE from listing or offering a market for trading in options on either the S&P 500(R) Index (SPX) or the Dow Jones Industrial Average(SM) (DJX), as to which CBOE holds an exclusive license. In addition, the ruling forbids OCC, which clears trading for all U.S. options exchanges, from clearing SPX and DJX options unless they are traded pursuant to CBOE's exclusive license. On July 28, 2010, ISE filed an appeal of the court’s ruling with the Illinois Appellate Court.
- In July, CBOE began connectivity efforts for C2, its new all‐electronic exchange planned for launch in the fourth quarter of 2010. In addition, in mid‐August, C2 will post and begin accepting trading permit applications.
- On August 2, CBOE reported that average daily volume (ADV) in July was 3.9 million contracts, a six-percent decline from June 2010 ADV of 4.1 million contracts and down 11 percent from July 2009 ADV of 4.3 million contracts.
Outlook
Given current market conditions and what is known today, CBOE Holdings currently expects the following for the:
|
|
Fiscal Year 2010 |
Third Quarter 2010 |
|
|
¹Core cash operating expenses (equals total operating expenses less volume-based expenses and depreciation and amortization) |
Expected to increase approximately 3 to 5 percent, excluding unusual items |
|
|
|
²Depreciation and amortization |
$30.5 to $30.9 million |
$7.3 to $7.6 million |
|
|
³Non-cash stock compensation (included in employee costs) |
$8.2 to $8.6 million |
$3.8 to $4.0 million |
|
¹Expense guidance excludes non-cash stock compensation expense included in employee costs. Volume-based expenses include royalty fees and trading volume incentives.
²Includes incremental depreciation expense expected in the fourth quarter of 2010 as a result of the launch of C2.
³Full-year estimate includes $0.6 million of expense recognized in second quarter 2010.
Dividend
On August 4, 2010, CBOE Holdings, Inc. announced that its Board of Directors declared a quarterly cash dividend of $0.10 per share. The dividend is payable September 24, 2010, to shareholders of record at the close of business on September 3, 2010.
Earnings Conference Call
Executives of CBOE Holdings will host a conference call to review its second quarter financial results today, August 5, 2010, at 8:30 a.m. EDT / 7:30 a.m. CDT. The conference call and any accompanying slides will be publicly available via live webcast from the Investor Relations section of the company’s website at www.cboe.com under Events & Presentations. Participants may also listen via telephone by dialing (866) 314-5232 from the United States or Canada, or (617) 213-8052 for international callers. Telephone participants should place calls ten 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 noon EDT, August 5, through midnight, August 19, by calling (800) 642-1687 within the U.S. and Canada, or (706) 645-9291 for international callers, using replay code 83665012.
About CBOE Holdings
CBOE Holdings, Inc. is the holding company for Chicago Board Options Exchange (CBOE) and other subsidiaries. CBOE, the largest U.S. options exchange and creator of listed options, continues to set the bar for options trading through product innovation, trading technology and investor education. CBOE offers equity, index and ETF options, including proprietary products, such as S&P 500 options (SPX), the most active U.S. index option, and options on the CBOE Volatility Index (VIX). 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’s Hybrid Trading System incorporates electronic and open-outcry trading and is powered by CBOEdirect, a proprietary, state-of-the-art electronic platform that also supports the CBOE Futures Exchange (CFE), CBOE Stock Exchange (CBSX) and OneChicago. CBOE is home to the world-renowned Options Institute and www.cboe.com, named “Best of the Web” for options information and education. CBOE is regulated by the Securities and Exchange Commission (SEC), with all trades cleared by the AAA-rated Options Clearing Corporation (OCC).
Forward-Looking Statements
This press release contains statements which may be considered forward-looking statements within the meaning of the Securities Exchange Act of 1934, including, without limitation, statements regarding operating strategies, future plans and financial results. Forward-looking statements may be accompanied by words such as "anticipate", "believe", "could", "estimate", "expect", "forecast", "intend", "may", "possible", "predict", "project" or similar words, phrases or expressions. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statements made herein. Among the factors that might affect our performance are: legislative or regulatory changes affecting the options markets, including a possible cap of transaction fees; changes in law or government policy, including changes relating to the recently enacted or proposed legislation relating to the current economic crisis; changes to the tax treatment for options trading, including the possible imposition of a transaction tax on options transactions; increasing competition by foreign and domestic entities, including increased competition from new entrants into our markets and consolidation of existing entities; our ability to continue introducing competitive new products and services on a timely, cost-effective basis, including through our electronic trading capabilities, and our ability to maintain the competitiveness of our existing products and services; our ability to adjust our fixed costs and expenses if our revenues decline; our ability to maintain existing customers, develop strategic relationships and attract new customers; our ability to keep pace with rapid technological developments, including our ability to complete the development and implementation of the enhanced functionality required by our customers; our ability to accommodate increases in trading volume and order transaction traffic without failure or degradation of performance of our systems; our ability to maintain our growth effectively; the costs associated with protecting our intellectual property rights and our ability to operate our business without violating the intellectual property rights of others; our ability to preserve and maintain our exclusive licenses; our ability to generate revenue from our market data that may be reduced or eliminated by the growth of electronic trading or declines in subscriptions; changes in our rate per contract due to shifts in the mix of the products traded, the trading venue and the mix of customers; the ability of our compliance and risk management methods to effectively monitor and manage our risks; changes in price levels and volatility in the derivatives markets and in the equity markets in general; economic, political and market conditions, including the recent volatility of the capital and credit markets and the impact of current economic conditions on the trading activity of our current and potential customers; our ability to continue to generate funds to allow us to continue to invest in our business; industry and customer consolidation; decreases in trading activity; and the unfavorable resolution of material legal proceedings.
The Company does not undertake any obligation to update the information contained herein, which speaks only as of the date of this press release. More detailed information about factors that may affect our performance may be found in our filings with the Securities and Exchange Commission, including our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 under the heading "Forward-Looking Statements" and/or "Risk Factors". Such discussions regarding risk factors and forward-looking statements are incorporated herein by reference.
The condensed consolidated statements of income, balance sheets and statements of cash flows are unaudited and subject to reclassification.
CBOE Media Contacts:
Gail Osten
(312) 786-7123
Gary Compton
(312) 786-7612
Analyst Contact:
Debbie Koopman
(312) 786-7136
Trademarks
CBOE®, Chicago Board Options Exchange®, CBOEdirect®, CBOE Volatility Index®, VIX®, FLEX®, Hybrid®, LEAPS®, CBSX® and CBOE Stock Exchange® are registered trademarks of Chicago Board Options Exchange, Incorporated (CBOE). SPXSM, BXMSM, The Options InstituteSM and WeeklysSM are service marks of CBOE. CFE® is a registered trademark and CBOE Futures ExchangeSM is a service mark of CBOE Futures Exchange, LLC. All other trademarks and servicemarks are the property of their respective owners.
CBOE-F
CBOE Holdings, Inc.
Selected Quarterly Operating Statistics
Average Daily Volume by Product (in thousands)
|
|
2Q 2010 |
1Q 2010 |
4Q 2009 |
3Q 2009 |
2Q 2009 |
|
PRODUCT: |
|
|
|
|
|
|
Equities |
2,579 |
2,396 |
2,299 |
2,562 |
2,777 |
|
Indexes |
1,262 |
1,109 |
965 |
856 |
834 |
|
Exchange-traded funds |
1,451 |
1,040 |
1,078 |
1,065 |
1,101 |
|
Total Options Average |
5,292 |
4,545 |
4,342 |
4,483 |
4,712 |
|
Futures |
18 |
10 |
8 |
5 |
3 |
|
Total Average Daily Volume |
5,310 |
4,555 |
4,350 |
4,488 |
4,715 |
Average Transaction Fee Per Contract by Product
|
|
2Q 2010 |
1Q 2010 |
4Q 2009 |
3Q 2009 |
2Q 2009 |
|
Trading Days |
63 |
61 |
64 |
64 |
63 |
|
PRODUCT: |
|
|
|
|
|
|
Equities |
$0.162 |
$0.184 |
$0.172 |
$0.171 |
$0.188 |
|
Indexes |
0.580 |
0.597 |
0.563 |
0.574 |
0.565 |
|
Exchange-traded funds |
0.217 |
0.236 |
0.233 |
0.237 |
0.263 |
|
Total Options Average Transaction Fee |
0.277 |
0.297 |
0.274 |
0.264 |
$0.272 |
|
Futures |
1.717 |
1.952 |
2.186 |
1.938 |
1.738 |
|
Total Average Transaction Fee Per Contract |
$0.281 |
$0.300 |
$0.278 |
$0.266 |
$0.273 |
Transaction Fees by Product (in thousands)
|
|
2Q 2010 |
1Q 2010 |
4Q 2009 |
3Q 2009 |
2Q 2009 |
|
PRODUCT: |
|
|
|
|
|
|
Equities |
$26,342 |
$26,855 |
$25,287 |
$28,034 |
$32,861 |
|
Indexes |
46,105 |
40,379 |
34,771 |
31,431 |
29,681 |
|
Exchange-traded funds |
19,850 |
14,954 |
16,087 |
16,155 |
18,228 |
|
Total Options Fees |
$92,297 |
$82,188 |
$76,145 |
$75,620 |
$80,770 |
|
Futures |
1,786 |
1,223 |
1,123 |
661 |
298 |
|
Total Transaction Fees |
$94,083 |
$83,411 |
$77,268 |
$76,281 |
$81,068 |
| CBOE Holdings, Incorporated and Subsidiaries | ||||||
| Condensed Consolidated Balance Sheets | ||||||
| June 30, 2010 and December 31, 2009 | ||||||
| June 30, | December 31, | |||||
| (in thousands, except par value and share information) | 2010 | 2009 | ||||
| (unaudited) | ||||||
| Assets | ||||||
| Current Assets: | ||||||
| Cash and cash equivalents | $ 324,066 | $ 383,730 | ||||
| Accounts receivable - net of allowances of $89 and $87 | 33,901 | 30,437 | ||||
| Marketing fee receivable | 7,500 | 8,971 | ||||
| Income taxes receivable | 5,238 | 1,583 | ||||
| Prepaid medical benefits | 113 | 2,085 | ||||
| Other prepaid expenses | 7,101 | 3,719 | ||||
| Settlement receivable | - | 2,086 | ||||
| Other current assets | 563 | 452 | ||||
| Total Current Assets | 378,482 | 433,063 | ||||
| Investments in Affiliates | 14,538 | 3,090 | ||||
| Land | 4,914 | 4,914 | ||||
| Property and Equipment: | ||||||
| Construction in progress | 21,016 | 20,704 | ||||
| Building | 60,917 | 60,837 | ||||
| Furniture and equipment | 217,114 | 213,375 | ||||
| Less accumulated depreciation and amortization | (212,401) | (203,665) | ||||
| Total Property and Equipment—Net | 86,646 | 91,251 | ||||
| Other Assets: | ||||||
| Software development work in progress | 9,393 | 6,952 | ||||
| Data processing software and other assets (less | ||||||
| accumulated amortization - 2010 - $101,365; 2009 - $95,530) | 29,693 | 32,678 | ||||
| Total Other Assets—Net | 39,086 | 39,630 | ||||
| Total | $ 523,666 | $ 571,948 | ||||
| Liabilities and Stockholders'/Members' Equity | ||||||
| Current Liabilities: | ||||||
| Accounts payable and accrued expenses | $ 46,318 | $ 42,958 | ||||
| Marketing fee payable | 8,120 | 9,786 | ||||
| Deferred revenue | 23,430 | 207 | ||||
| Post-retirement medical benefits | 48 | 96 | ||||
| Settlement payable | - | 305,688 | ||||
| Total Current Liabilities | 77,916 | 358,735 | ||||
| Long-term Liabilities: | ||||||
| Post-retirement medical benefits | 1,487 | 1,444 | ||||
| Income taxes payable | 3,596 | 2,815 | ||||
| Other long-term liabilities | 196 | 244 | ||||
| Deferred income taxes | 16,126 | 20,576 | ||||
| Total Long-term Liabilities | 21,405 | 25,079 | ||||
| Total Liabilities | 99,321 | 383,814 | ||||
| Commitments and Contingencies | ||||||
| Stockholders'/Members' Equity | ||||||
| Memberships | - | 19,574 | ||||
| Preferred Stock, $0.01 par value: 20,000,000 shares authorized, | - | - | ||||
| 0 shares issued and outstanding at June 30, 2010 | ||||||
| Unrestricted Common Stock, $0.01 par value: 325,000,000 shares authorized, | 134 | - | ||||
| 13,455,000 shares issued and outstanding at June 30, 2010 | ||||||
| Class A-1 Common Stock, $0.01 par value: 45,366,690 shares authorized, | 443 | - | ||||
| 44,323,803 shares issued and outstanding at June 30, 2010 | ||||||
| Class A-2 Common Stock, $0.01 par value: 45,366,690 shares authorized, | 443 | - | ||||
| 44,323,803 shares issued and outstanding at June 30, 2010 | ||||||
| Additional paid-in-capital | 323,185 | 2,592 | ||||
| Retained earnings | 100,918 | 166,769 | ||||
| Accumulated other comprehensive loss | (778) | (801) | ||||
| Total Stockholders'/Members’ Equity | 424,345 | 188,134 | ||||
| Total | $ 523,666 | $ 571,948 | ||||
| CBOE Holdings, Incorporated and Subsidiaries | |||||||||
| Condensed Consolidated Statements of Income | |||||||||
| Three and Six Months Ended June 30, 2010 and 2009 | |||||||||
| Three months ended June 30, | Six months ended June 30, | ||||||||
| (in thousands, except per share amounts) | 2010 | 2009 | 2010 | 2009 | |||||
| (unaudited) | |||||||||
| Operating Revenues: | |||||||||
| Transaction fees | $ 94,082 | $ 81,068 | $ 177,493 | $ 160,958 | |||||
| Access fees | 2,298 | 10,367 | 4,502 | 12,620 | |||||
| Exchange services and other fees | 4,482 | 5,784 | 8,843 | 11,858 | |||||
| Market data fees | 5,627 | 5,211 | 11,375 | 10,485 | |||||
| Regulatory fees | 4,192 | 4,945 | 8,021 | 7,832 | |||||
| Other revenue | 1,937 | 1,610 | 3,465 | 3,298 | |||||
| Total Operating Revenues | 112,618 | 108,985 | 213,699 | 207,051 | |||||
| Operating Expenses: | |||||||||
| Employee costs | 22,640 | 20,939 | 45,777 | 41,213 | |||||
| Depreciation and amortization | 7,301 | 6,885 | 14,602 | 13,769 | |||||
| Data processing | 5,155 | 5,734 | 10,237 | 10,251 | |||||
| Outside services | 10,041 | 7,501 | 18,164 | 14,085 | |||||
| Royalty fees | 11,519 | 7,810 | 22,417 | 15,781 | |||||
| Trading volume incentives | 7,339 | 6,798 | 11,035 | 12,502 | |||||
| Travel and promotional expenses | 3,209 | 3,147 | 5,195 | 5,423 | |||||
| Facilities costs | 1,315 | 1,572 | 2,699 | 2,949 | |||||
| Other expenses | 2,273 | 1,017 | 3,018 | 3,176 | |||||
| Total Operating Expenses | 70,792 | 61,403 | 133,144 | 119,149 | |||||
| Operating Income | 41,826 | 47,582 | 80,555 | 87,902 | |||||
| Other Income / (Expense): | |||||||||
| Investment income | 135 | 380 | 235 | 892 | |||||
| Net loss from investment in affiliates | (169) | (251) | (374) | (477) | |||||
| Interest and other borrowing costs | (224) | (218) | (446) | (435) | |||||
| Total Other Income / (Expense) | (258) | (89) | (585) | (20) | |||||
| Income Before Income Taxes | 41,568 | 47,493 | 79,970 | 87,882 | |||||
| Total Income Tax Provision | 16,678 | 19,384 | 32,404 | 35,495 | |||||
| Net Income | $ 24,890 | $ 28,109 | $ 47,566 | $ 52,387 | |||||
| Net income per share | |||||||||
| Basic | $ 0.27 | $ 0.31 | $ 0.52 | $ 0.58 | |||||
| Diluted | 0.27 | 0.31 | 0.52 | 0.58 | |||||
| Weighted average shares used in computing income per share: | |||||||||
| Basic | 92,233 | 90,733 | 91,487 | 90,733 | |||||
| Diluted | 92,598 | 90,733 | 91,671 | 90,733 | |||||
| CBOE Holdings, Incorporated and Subsidiaries | |||||||
| Condensed Consolidated Statements of Cash Flows | |||||||
| Six Months Ended June 30, 2010 and 2009 | |||||||
| Six months ended June 30, | |||||||
| (in thousands) | 2010 | 2009 | |||||
| (unaudited) | |||||||
| Cash Flows from Operating Activities: | |||||||
| Net Income | $ 47,566 | $ 52,387 | |||||
| Adjustments to reconcile net income to | |||||||
| net cash flows from operating activities: | |||||||
| Depreciation and amortization | 14,602 | 13,769 | |||||
| Other amortization | 34 | 182 | |||||
| Provision for deferred income taxes | (4,462) | (1,971) | |||||
| Stock-based compensation | 636 | - | |||||
| Loss on disposition of property | 139 | - | |||||
| Equity in loss of affiliates | 374 | 477 | |||||
| Changes in assets and liabilities: | |||||||
| Accounts receivable | (3,464) | (3,032) | |||||
| Marketing fee receivable | 1,471 | (2,484) | |||||
| Income taxes receivable | (3,655) | 9,331 | |||||
| Prepaid expenses | (1,410) | (90) | |||||
| Other receivable | 2,086 | - | |||||
| Other current assets | (111) | 93 | |||||
| Accounts payable and accrued expenses | 4,544 | (16,560) | |||||
| Marketing fee payable | (1,666) | 2,234 | |||||
| Deferred revenue | 23,175 | 20,743 | |||||
| Post-retirement benefit obligation | (5) | 34 | |||||
| Income taxes payable | 781 | 3,260 | |||||
| Settlement with appellants | (3,000) | - | |||||
| Access fees subject to fee-based payment | (2,688) | - | |||||
| Net Cash Flows provided by Operating Activities | 74,947 | 78,373 | |||||
| Cash Flows from Investing Activities: | |||||||
| Restricted funds - temporary access fees | - | (516) | |||||
| Capital and other assets expenditures | (10,772) | (20,752) | |||||
| Investment in Signal Trading Systems, LLC | (11,822) | - | |||||
| Sale of NSX certificates of proprietary membership | - | 1,500 | |||||
| Net Cash Flows used in Investing Activities | (22,594) | (19,768) | |||||
| Cash Flows from Financing Activities: | |||||||
| Payments for debt issuance costs | (3) | (99) | |||||
| Exercise right privilege payable | (300,000) | - | |||||
| Net proceeds from issuance of unrestricted common stock | 301,403 | - | |||||
| Payment of special dividend | (113,417) | - | |||||
| Net Cash Flows used in Financing Activities | (112,017) | (99) | |||||
| Net Increase (Decrease) in Cash and Cash Equivalents | (59,664) | 58,506 | |||||
| Cash and Cash Equivalents at Beginning of Period | 383,730 | 281,423 | |||||
| Cash and Cash Equivalents at End of Period | $ 324,066 | $ 339,929 | |||||
| Supplemental Disclosure of Cash Flow Information | |||||||
| Cash paid for income taxes | $ 41,228 | $ 24,575 | |||||
| Non-cash activities: | |||||||
| Change in post-retirement benefit obligation | $ (34) | $ (159) | |||||
| Unpaid liability to acquire equipment and software | $ 1,131 | $ 3,030 | |||||
Supplemental Information:
Net income and Earnings Per Share Impact of Certain Items Affecting Financial Results:
Revenue Items:
- The recognition of $4.7 million in access fee revenue in the second quarter of 2009 that related to fees assessed and deferred in the first quarter of 2009
- This item increased second-quarter 2009 revenue by $4.7 million pre-tax, net income by $2.8 million and diluted earnings per share by $0.03.
Expense Items:
- Second-quarter 2010 expenses of $1.7 million related to the index options litigation,
- a $0.4 million increase in severance expense and
- $0.6 million for stock-based compensation.
- These expense items totaled $2.7 million pre-tax and reduced second-quarter 2010 net income by $1.6 million and diluted earnings per share by $0.02.
