.jpg)
IntercontinentalExchange Group (NYSE: ICE), the leading global network of exchanges and clearing houses, today reported financial results for fourth quarter and full year 2013. For the fourth quarter ended December 31, 2013, consolidated net loss attributable to ICE was $176 million on consolidated revenues, less transaction-based expenses, of $612 million. On a GAAP basis, diluted loss per share was $1.83. ICE completed its acquisition of NYSE Euronext during the quarter on November 13, 2013 and fourth quarter results include approximately seven weeks of combined results.
Certain items were included in ICE's operating results that are not indicative of our business performance for the fourth quarter of 2013. Excluding the non-core items mentioned below, net of tax, fourth quarter 2013 adjusted net income attributable to ICE was $192 million and adjusted diluted earnings per share (EPS) were $2.00. Adjusted figures exclude:
- Acquisition-related transaction and integration costs of $131 million, relating to the NYSE Euronext acquisition.
- A $190 million impairment expense primarily due to the impact of the devaluation of the Brazilian reais on ICE’s investment in Cetip which was made in July 2011.
- A $51 million pre-payment expense associated with $400 million in senior notes repaid.
- A $4 million net tax impact related to the aforementioned items and certain foreign tax law changes.
Please refer to the reconciliation of non-GAAP financial measures included in this press release for more information on adjusted net income attributable to ICE and adjusted diluted EPS.
ICE Chairman and CEO Jeffrey C. Sprecher said: “We began the year with the objectives of providing more products and services to our customers, driving growth and returns for our shareholders, and successfully completing key strategic transactions. We achieved these goals while producing record financial results. We expanded from six to nine asset classes and completed our acquisitions of ICE Endex and NYSE Euronext. With our recent acquisition of the Singapore Mercantile Exchange, we are expanding our trading and clearing operations into Asia. The New York Stock Exchange again led in 2013 in IPOs and capital raising, which contributed to economic growth and innovation in global markets. Our network of exchanges and clearing houses positions us to continue to develop leading solutions for trading, risk management and capital markets.”
Scott Hill, ICE CFO said: “Our performance was driven by continued strong demand for hedging in our global oil futures and agricultural futures complexes. We successfully began clearing interest rate futures, expanded our CDS clearing business and introduced dozens of new products. And we developed more solutions for our customers to comply with financial reform, including ICE Trade Vault Europe and ICE Swap Trade. As we look ahead, we are confident in our ability to achieve 70% of our $500 million synergies relating to the NYSE Euronext acquisition on a run-rate basis as we exit 2014. We are also focused on making progress on our debt reduction target while returning capital to shareholders and continuing to invest in growth in a disciplined manner. We are on track with our integration initiatives, including the transition of the Liffe contracts to our exchanges, the IPO of Euronext and the divestiture of certain NYSE technologies businesses.”
Fourth Quarter 2013 Results
Fourth quarter 2013 consolidated revenues, less transaction-based expenses, were $612 million, which included transaction and clearing fee revenues of $503 million.
Consolidated market data revenues for the fourth quarter of 2013 were $91 million and listings revenues were $35 million. Consolidated other revenues were $104 million, which following the NYSE Euronext acquisition, includes, among others, technology services revenues, trading license fees, regulatory fees and listed company service fees.
Consolidated operating expenses were $449 million for the fourth quarter, including $131 million in acquisition-related transaction and integration costs associated with the NYSE Euronext acquisition. Consolidated operating income for the fourth quarter of 2013 was $163 million.
Full-Year 2013 Results
For the year ended December 31, 2013, consolidated revenues, less transaction-based expenses, increased 23% to $1.67 billion. Consolidated transaction and clearing fee revenues totaled $1.40 billion in 2013, up 18% year-over-year.
Consolidated market data revenues increased 45% to a record $212 million in 2013.
Consolidated 2013 net income attributable to ICE was $254 million, and diluted EPS were $3.21 for the year. Adjusted net income attributable to ICE grew 16% to $646 million, and adjusted diluted EPS grew 8% to $8.17 for the year. Please refer to the reconciliation of non-GAAP financial measures included in this press release.
Consolidated operating expenses were $884 million in 2013, including $162 million in acquisition-related transaction and integration costs associated with the NYSE Euronext acquisition and $7 million in duplicate rent expenses and lease transaction costs. Consolidated operating income declined 4% over 2012 to $790 million, with an operating margin of 47%.
The effective tax rates for 2013 and 2012 were 46% and 29%, respectively. The 2013 GAAP effective tax rate includes a 19% income tax rate impact relating to the non-tax deductible impairment loss on our investment in Cetip, non-tax deductible transactions costs relating to the NYSE Euronext acquisition and certain foreign tax law changes.
Consolidated cash flow from operations was flat at $735 million. Capital expenditures and capitalized software were $110 million dollars in 2013, excluding $71 million for real estate expenditures and the purchase of the new Atlanta corporate offices.
Unrestricted cash and cash equivalents were $961 million as of December 31, 2013. At the end of 2013, ICE had $5.1 billion in outstanding debt.
Expense Guidance and Additional Information
- ICE declared a quarterly cash dividend of $0.65 per share for the first quarter of 2014 with a record date of March 17, 2014 and a payment date of March 31, 2014. The anticipated ex-dividend date will be March 13, 2014.
- ICE expects to achieve 70% of its targeted $500 million in expense synergies on a run-rate basis exiting 2014.
- ICE expects to report certain NYSE Technologies businesses which it intends to dispose of or divest as discontinued operations starting in the first quarter of 2014. All subsequent guidance excludes these discontinued operations and includes Euronext.
- ICE expects first quarter 2014 adjusted consolidated expenses of approximately $470 million to $480 million.
- ICE expects 2014 operational capital expenditures and capitalized software development costs to be in the range of $180 million to $200 million, and an additional $50 million to $60 million in capital expenditures related to real estate.
- ICE expects depreciation and amortization expense for the first quarter of 2014 in the range of $75 million to $80 million and for the full year 2014 in the range of $320 million to $350 million.
- ICE expects quarterly interest expense for the first quarter of 2014 to be approximately $29 million. For the remainder of the year, ICE expects interest expense to be in the range of $26 million to $27 million per quarter.
- ICE's consolidated tax rate is expected to be in the range of 27% to 30% for 2014.
- ICE's diluted share count for first quarter 2014 is expected to be in the range of 115 million to 117 million weighted average shares outstanding and for 2014, diluted share count is expected to be in the range of 114 million to 118 million weighted average shares outstanding.
Earnings Conference Call Information
ICE will hold a conference call today, February 11, at 8:30 a.m. ET to review its full year and fourth quarter 2013 financial results. A live audio webcast of the earnings call will be available on the company's website www.theice.com in the investor relations section. Participants may also listen via telephone by dialing 888-317-6003 from the United States, 866-284-3684 from Canada or 412-317-6061 from outside of the United States and Canada. Telephone participants are required to provide the participant entry number 6896082 and 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, options and cash ADV, rate per contract and open interest data in our new reporting format can be found at: http://ir.theice.com/supplemental.cfm
|
Consolidated Statements of Income (In millions, except per share amounts) |
||||||||||||||||
|
|
Year Ended December 31, |
Three Months Ended |
||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Revenues: | (Unaudited) | |||||||||||||||
| Transaction and clearing fees, net | $ | 1,402 | $ | 1,185 | $ | 503 | $ | 277 | ||||||||
| Market data fees | 212 | 147 | 91 | 38 | ||||||||||||
| Listing fees | 35 | - | 35 | - | ||||||||||||
| Other revenues | 146 | 31 | 104 | 9 | ||||||||||||
| Total revenues | 1,795 | 1,363 | 733 | 324 | ||||||||||||
| Transaction-based expenses: | ||||||||||||||||
| Section 31 fees | 33 | - | 33 | - | ||||||||||||
| Cash liquidity payments, routing and clearing | 88 | - | 88 | - | ||||||||||||
| Total revenues, less transaction-based expenses | 1,674 | 1,363 | 612 | 324 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Compensation and benefits | 331 | 251 | 138 | 56 | ||||||||||||
| Technology and communication | 69 | 46 | 33 | 11 | ||||||||||||
| Professional services | 60 | 33 | 37 | 8 | ||||||||||||
| Rent and occupancy | 43 | 19 | 20 | 5 | ||||||||||||
| Acquisition-related transaction and integration costs | 165 | 19 | 133 | 9 | ||||||||||||
| Selling, general and administrative | 55 | 37 | 27 | 8 | ||||||||||||
| Depreciation and amortization | 161 | 131 | 61 | 34 | ||||||||||||
| Total operating expenses | 884 | 536 | 449 | 131 | ||||||||||||
| Operating income | 790 | 827 | 163 | 193 | ||||||||||||
| Other expense: | ||||||||||||||||
| Interest and investment income | 3 | 2 | 1 | 1 | ||||||||||||
| Interest expense | (56 | ) | (39 | ) | (27 | ) | (10 | ) | ||||||||
| Other expense, net | (237 | ) | - | (238 | ) | - | ||||||||||
| Total other expense, net | (290 | ) | (37 | ) | (264 | ) | (9 | ) | ||||||||
| Income (loss) before income taxes | 500 | 790 | (101 | ) | 184 | |||||||||||
| Income tax expense | 230 | 228 | 69 | 51 | ||||||||||||
| Net income (loss) | $ | 270 | $ | 562 | $ | (170 | ) | $ | 133 | |||||||
| Net income attributable to noncontrolling interest | (16 | ) | (10 | ) | (6 | ) | (3 | ) | ||||||||
| Net income (loss) attributable to ICE | $ | 254 | $ | 552 | $ | (176 | ) | $ | 130 | |||||||
| Earnings (loss) per share attributable to ICE common shareholders: | ||||||||||||||||
| Basic | $ | 3.24 | $ | 7.59 | $ | (1.85 | ) | $ | 1.78 | |||||||
| Diluted | $ | 3.21 | $ | 7.52 | $ | (1.83 | ) | $ | 1.76 | |||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic | 78 | 73 | 95 | 73 | ||||||||||||
| Diluted | 79 | 73 | 96 | 73 | ||||||||||||
| Dividends per share | $ | 0.65 | $ | - | $ | 0.65 | $ | - | ||||||||
|
Consolidated Balance Sheets (In millions) |
||||||||
| December 31, | ||||||||
| 2013 | 2012 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
|
Cash and cash equivalents |
$ |
961 |
$ |
1,612 |
||||
| Short-term investments | 74 | - | ||||||
| Short-term restricted cash and investments | 277 | 87 | ||||||
| Customer accounts receivable, net | 482 | 127 | ||||||
| Margin deposits and guaranty funds | 42,216 | 31,883 | ||||||
| Prepaid expenses and other current assets | 249 | 41 | ||||||
| Total current assets | 44,259 | 33,750 | ||||||
| Property and equipment, net | 891 | 144 | ||||||
| Other noncurrent assets: | ||||||||
| Goodwill | 9,501 | 1,938 | ||||||
| Other intangible assets, net | 9,404 | 799 | ||||||
| Long-term restricted cash | 161 | 163 | ||||||
| Long-term investments | 324 | 391 | ||||||
| Other noncurrent assets | 278 | 30 | ||||||
| Total other noncurrent assets | 19,668 | 3,321 | ||||||
| Total assets | $ | 64,818 | $ | 37,215 | ||||
|
LIABILITIES AND EQUITY |
||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 343 | $ | 70 | ||||
| Accrued salaries and benefits | 301 | 55 | ||||||
| Short-term debt | 1,135 | 163 | ||||||
| Margin deposits and guaranty funds | 42,216 | 31,883 | ||||||
| Other current liabilities | 262 | 75 | ||||||
| Total current liabilities | 44,257 | 32,246 | ||||||
| Noncurrent liabilities: | ||||||||
| Noncurrent deferred tax liability, net | 2,771 | 216 | ||||||
| Long-term debt | 3,923 | 969 | ||||||
| Accrued employee benefits | 412 | - | ||||||
| Other noncurrent liabilities | 518 | 107 | ||||||
| Total noncurrent liabilities | 7,624 | 1,292 | ||||||
| Total liabilities | 51,881 | 33,538 | ||||||
| Redeemable non-controlling interest | 322 | - | ||||||
| EQUITY | ||||||||
| ICE shareholders’ equity: | ||||||||
| Common stock | 1 | 1 | ||||||
| Treasury stock, at cost | (53 | ) | (717 | ) | ||||
| Additional paid-in capital | 9,794 | 1,903 | ||||||
| Retained earnings | 2,482 | 2,509 | ||||||
| Accumulated other comprehensive income (loss) | 359 | (52 | ) | |||||
| Total ICE shareholders’ equity | 12,583 | 3,644 | ||||||
| Non-controlling interest in consolidated subsidiaries | 32 | 33 | ||||||
| Total equity | 12,615 | 3,677 | ||||||
| Total liabilities and equity | $ | 64,818 | $ | 37,215 | ||||
Non-GAAP Financial Measures and Reconciliation
We use non-GAAP measures internally to evaluate our performance and in making financial and operational decisions. When viewed in conjunction with our U.S. generally accepted accounting principles, or GAAP, results and the accompanying reconciliation, we believe that our presentation of these measures provides investors with greater transparency and supplemental data relating to our financial condition and results of operations. We strongly recommend that investors review the U.S. GAAP financial measures included in this press release and 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 are calculated by adding net income attributable to ICE, the adjustments described below, which are not reflective of our core business performance, and the related income tax effect. The following table reconciles net income attributable to ICE to adjusted net income attributable to ICE and calculates adjusted earnings per share attributable to ICE common shareholders for the period presented below:
| Year Ended | Year Ended | Three Months | Three Months | |||||||||||||
| December 31, | December 31, | Ended | Ended | |||||||||||||
| 2013 | 2012 |
December 31, |
December 31, |
|||||||||||||
| (In millions, except per share amounts) | ||||||||||||||||
| Net income (loss) attributable to ICE | $ | 254 | $ | 552 | $ | (176 | ) | $ | 130 | |||||||
| Add: Cetip impairment loss | 190 | - | 190 | - | ||||||||||||
| Add: NYSE Euronext transaction and integration costs and banker fees related to other transactions |
162 |
9 |
131 |
9 |
||||||||||||
| Add: Duplicate rent expenses and lease termination costs | 7 | - | - | - | ||||||||||||
| Add: Early payoff of outstanding debt | 51 | - | 51 | - | ||||||||||||
| Less: Income tax effect related to the items above and impact of certain foreign tax law changes | (18 | ) | (4 | ) | (4 | ) | (4 | ) | ||||||||
| Adjusted net income attributable to ICE. | $ | 646 | $ | 557 | $ | 192 | $ | 135 | ||||||||
| Earnings (loss) per share attributable to ICE common shareholders: | ||||||||||||||||
| Basic | $ | 3.24 | $ | 7.59 | $ | (1.85 | ) | $ | 1.78 | |||||||
| Diluted | $ | 3.21 | $ | 7.52 | $ | (1.83 | ) | $ | 1.76 | |||||||
| Adjusted earnings per share attributable to ICE common shareholders: | ||||||||||||||||
| Adjusted basic | $ | 8.24 | $ | 7.66 | $ | 2.02 | $ | 1.86 | ||||||||
| Adjusted diluted | $ | 8.17 | $ | 7.60 | $ | 2.00 | $ | 1.84 | ||||||||
| Weighted average common shares | ||||||||||||||||
| outstanding: | ||||||||||||||||
| Basic | 78 | 73 | 95 | 73 | ||||||||||||
| Diluted | 79 | 73 | 96 | 73 | ||||||||||||
