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IntercontinentalExchange (NYSE: ICE) reported record quarterly consolidated net income
for the fourth quarter 2006 of $49.0 million, more than tripling its year-on-year
quarterly earnings compared to $14.9 million in net income in the fourth quarter of 2005.
Consolidated revenues in the quarter increased 131% to a record $95.3 million, from $41.3
million in the fourth quarter of 2005. Diluted earnings per share in the fourth quarter of
2006 were $0.81.
For the year ended December 31, 2006, ICE reported a 101% rise in
consolidated revenues to a record $313.8 million compared with $155.9 million in the prior
year. Consolidated net income increased 255% to a record $143.3 million from $40.4 million
in 2005. ICE Futures, ICE’s U.K.-regulated futures business segment, recorded its
ninth consecutive record volume year and produced an average daily volume (ADV) increase
of 125% over 2005. Average daily commissions in 2006 increased 89% in ICE’s
over-the-counter (OTC) business segment over last year. Diluted earnings per share for the
year ended December 31, 2006 were $2.40.
“We believe the strong foundation we built in
our first year as a public company, while doubling our revenues and more than tripling our
net income, will serve our expansion plans in the new year,” said ICE Chairman and
CEO Jeffrey C. Sprecher. “By capitalizing on the proliferation of electronic trading
in the global commodity markets and the opportunities for trading and risk management it
creates, we are leveraging our robust technology and broad distribution to meet the needs
of the trading community.”
Sprecher added, “Already this year, by completing our
acquisition of the New York Board of Trade and successfully launching the soft commodity
contracts on the ICE platform, we are executing on the strategic opportunities before us.
These include clearing opportunities, new products and partnerships, technology
enhancements and other initiatives to leverage the strengths of our global business and
commodities trading platform.”
Fourth-Quarter Results
In the fourth quarter of
2006, ICE’s consolidated revenues rose to $95.3 million, an increase of 131% over
$41.3 million of revenues in the fourth quarter of 2005. Consolidated transaction fee
revenues increased 129% to $82.8 million in the fourth quarter of 2006, from $36.2 million
in the fourth quarter of 2005. Growth in transaction revenue was driven primarily by the
strength in trading volume in both the futures and OTC business segments during the
quarter, and by new participants in ICE’s markets.
Transaction fee revenues at ICE
Futures totaled $37.7 million in the fourth quarter, an increase of 148% over $15.2
million in the same period in 2005. For the fourth quarter of 2006, ADV for ICE Futures
rose 145% to 440,557 contracts, compared to 180,171 contracts in the fourth quarter of
2005. The increased adoption of electronic trading in the global energy futures markets
and the introduction and solid performance of the ICE WTI Crude futures contract
contributed to the strong growth in futures volume.
Fourth quarter transaction fee
revenues in the OTC business segment increased 115% to $45.1 million, compared to $21.0
million in the same period in 2005. OTC transaction fee revenues from cleared products
increased 133% to $37.5 million in the fourth quarter of 2006, compared to $16.1 million
in the fourth quarter of 2005. Contract volume in ICE’s cleared OTC markets rose 130%
to 32.7 million contracts in the fourth quarter, compared to 14.2 million contracts in the
same period of 2005. OTC average daily commissions in the fourth quarter of 2006 increased
114% to $712,191, compared to $332,045 in the same period the prior year. In ICE’s
OTC business segment, average daily commissions reflect daily trading activity in
ICE’s OTC markets.
Consolidated market data fee revenues in the market data business
segment increased 143% during the fourth quarter of 2006 to $9.6 million compared to $4.0
million in the same period in 2005.
Consolidated other revenues increased 158% during the
fourth quarter to $2.8 million from $1.1 million in the same period in 2005. This increase
was due primarily to the inception of a program to charge certain system fees, totaling
$1.5 million. ICE invoiced the fees related to the full year of 2006 during the fourth
quarter. Going forward, ICE will invoice these fees on a quarterly basis.
Consolidated
operating expenses for the fourth quarter of 2006 were $31.1 million, an increase of 53%
compared to $20.4 million in the same period of 2005. The primary driver for the increase
was a 374% rise in patent royalty expenses relating to the Wagner patent as a result of
the strong growth in futures volume. The patent royalty expense, which is tied to the
trading volume of electronic futures contracts, totaled $2.7 million in the fourth quarter
compared to $0.6 million in the same period in 2005. The Wagner patent expires on February
20, 2007, at which time no further payments will be required. ICE also recorded a 406%
increase in non-cash compensation expenses following the adoption of SFAS No. 123(R) on
January 1, 2006. The non-cash compensation expense was $2.2 million during the fourth
quarter of 2006, compared to $0.4 million in the same period in 2005.
Fourth quarter 2006
consolidated operating income was $64.2 million, up 207% compared to $20.9 million in the
same period in 2005. This produced an operating margin of 67% for the fourth quarter of
2006, compared to an operating margin of 51% for the same period in 2005.
The effective
tax rate for the fourth quarter of 2006 was 27.3%, as compared to 31.9% for the fourth
quarter of 2005. ICE reduced its income tax expense in the fourth quarter of 2006 as a
result of its decision to reinvest undistributed overseas earnings of approximately $50
million. This plan resulted in a reduction of consolidated income tax expense of
approximately $4.8 million.
Consolidated net income in the fourth quarter of 2006 was $49.0
million, up 230% compared to $14.9 million in the same period in 2005.
Full-Year
Results
For the year ended December 31, 2006, consolidated revenues increased 101% to
$313.8 million compared to $155.9 million in 2005. Consolidated transaction fee revenues
grew 100% to $273.6 million, from $137.0 million in 2005. Futures transaction fee revenues
rose 116% in 2006, to $123.4 million, from $57.2 million in 2005, and OTC transaction fee
revenues increased 88%, to $150.2 million, from $79.8 million in 2005.
Volume at ICE
Futures for 2006 set a record for a ninth consecutive year, reaching 92.7 million
contracts, up 121% over volume of 42.1 million contracts in 2005. ADV in the futures
business segment for 2006 was 373,248 contracts, compared to 166,225 contracts in 2005.
In
2006, average daily commissions in the OTC business segment were $589,281, an 89% increase
over $311,579 in the prior year. ICE introduced more than 50 new cleared OTC contracts
throughout 2006, bringing the total number of cleared OTC products available on the ICE
platform to over 80 contracts.
Consolidated market data revenues increased 134% to $34.2
million in 2006, from $14.6 million in 2005. In the first quarter of 2006, ICE implemented
a fee increase that contributed to the higher consolidated market data revenues.
Consolidated
other revenues increased 40% to $5.9 million in 2006, from $4.2 million in 2005, primarily
due to trade registration system fees.
Consolidated operating expenses in 2006 were $109.2
million, an increase of 10%, compared to $99.7 million in 2005 operating expenses. The
increase is attributable primarily to a rise in non-cash compensation following the
adoption of SFAS No. 123(R) and an increase in the compensation and benefits expenses due
to higher discretionary bonus payments in 2006 and a higher employee headcount. At the end
of 2006, ICE had 226 employees compared to 203 employees at the end of 2005. The increase
in operating expense was also driven by a $7.5 million rise in fees paid under the
licensing of the Wagner patent. The 2005 operating expenses included $4.8 million for
costs associated with the April closing of the ICE Futures open-outcry trading floor and
$15.0 million in legal settlement costs, which partially off-set the increase in operating
expenses in 2006.
For fiscal 2006, consolidated net income grew 255% to $143.3 million in
2006, compared to $40.4 million in the prior year.
Consolidated cash flows from operations
were $145.9 million in 2006, up 193% from $49.8 million in 2005. Capital expenditures in
2006 totaled $12.4 million compared to $8.6 million in 2005. The increase in 2006 capital
expenditures primarily related to hardware purchases to continue the development and
expansion of the electronic platform. Capitalized software development costs totaled $7.4
million in 2006, up from $5.1 million in 2005. Unrestricted cash and investments were
$281.6 million as of December 31, 2006. ICE used approximately $165 million of its
unrestricted cash to pay merger expenses and a portion of the merger consideration for the
acquisition of NYBOT on January 12, 2007.
Business Update
- Last week, ICE announced January 2007 monthly volume. ADV in the ICE Futures segment
totaled 574,170 contracts, an increase of 154% over January 2006. Average daily
commissions in its OTC segment were $918,288 in January, an increase of 137% over January
2006.
- ICE completed the acquisition of NYBOT on January 12, 2007, and it is now a wholly-owned
subsidiary of ICE. Following the merger, ICE plans to report NYBOT as a new and separate
business segment in the company’s consolidated financial statements.
- Historical NYBOT quarterly income statements are expected to be available at the end of
February and will be posted on the ICE website in the Investor Relations section.
- ICE is working to finalize an integration plan with NYBOT and plans to discuss the
program on ICE’s first quarter 2007 earnings call.
- The company’s 2006 Form 10-K will be filed with the SEC in late February.
- ICE expects non-cash compensation expenses for fiscal 2007 to be in the range of $20
million to $23 million.
- The company expects the first quarter of 2007 Wagner patent expense, which expires on
February 20, to be in the range of $1.3 million to $1.7 million.
- ICE expects a fiscal 2007 consolidated tax rate in the range of 36% to 38%.
- ICE expects the diluted share count for the first quarter of 2007 to be in the range of
69.7 million to 70.2 million shares, and the diluted share count for fiscal year 2007 to
be in the range of 70.5 million to 71.3 million shares.
- Capital expenditure expectations for fiscal year 2007, including those for NYBOT, are in
the range of $25 million to $30 million.
- In August 2006, ICE Futures entered into an agreement with a third party to sell its
former disaster recovery site in London for approximately $13.2 million. The sale is
expected to be completed in February 2007, and ICE expects to recognize a net gain on
disposal of an asset of approximately $9.5 million as other income in the first quarter
financials.
- ICE expects to increase its headcount level of 226 at the end of 2006 by approximately
10% to 15% in 2007, excluding NYBOT.
- In connection with the closing of the merger with NYBOT on January 12, 2007, ICE entered
into a Credit Agreement with Wachovia Bank, National Association, as administrative agent,
Bank of America, N.A., as syndication agent, and the lenders named therein. The Credit
Agreement provides for a term loan facility in the aggregate principal amount of $250
million and a revolving credit facility in the aggregate principal amount of $250 million.
In connection with the merger, ICE used the proceeds of the $250 million term loan
facility to finance a portion of the cash component of the merger consideration. Loans
under credit facilities will, at the option of ICE, bear interest on the principal amount
outstanding at either (i) LIBOR plus an applicable margin rate or (ii) a “base
rate” plus an applicable margin rate. The “base rate” will be equal to the
higher of (i) Wachovia Bank’s prime rate or (ii) the Federal Funds rate plus 0.5%.
The applicable margin rate will be based on ICE’s total leverage ratio. Interest on
each loan is payable quarterly. For the borrowings under the term loan facility, ICE will
begin making payments on June 30, 2007, and quarterly thereafter until January 12, 2012.
In connection with its entry into the Credit Agreement, ICE terminated its existing $50
million credit facility with Wachovia Bank, under which no borrowings were outstanding.
Earnings Conference Call Information
ICE will hold a conference call today, February
7, at 8:30 AM ET to review its fourth quarter and fiscal year-end financial results. The
call will be broadcast live over the Internet via the Investor Resources page of
ICE’s website at www.theice.com. A slideshow will be available on the website in
conjunction with the earnings call. The call will be temporarily archived on the website.
Participants may also listen via telephone by dialing (800) 819-9193 if calling from the
U.S., or (913) 981-4911 if calling from outside of the U.S. The passcode for callers is
9401498. For participants on the telephone, please place your call ten minutes prior to
the start of the call.
Historical futures volume and OTC commission data can be found at: www.theice.com/marketdata/recordsAndVolumes/volumes2007.jsp
Safe
Harbor Statement under the Private Securities Litigation Reform Act of 1995
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; our ability to keep pace
with rapid technological developments; our plans not to adjust commission rates and our
belief that we will attract trading without entering into order flow agreements; the
accuracy of our expectations of various costs; the synergies and benefits from the merger
with NYBOT; our belief that cash flows will be sufficient to fund our working capital
needs and capital expenditures, at least through the end of 2008; our ability to increase
the connectivity to our marketplace, expand our market data business, develop new products
and services, and pursue strategic acquisitions and alliances, all on a timely,
cost-effective basis; our ability to maintain existing market participants and attract new
ones; our ability to protect our intellectual property rights and our ability to operate
our business without violating the intellectual property rights of others; the impact of
any changes in domestic and foreign regulations or government policy, including any
changes or reviews of previously issued regulations and policies; potential adverse
litigation results; our belief that our electronic trade confirmation service could
attract new market participants; and our belief in our electronic platform and disaster
recovery system technologies. For a discussion of certain risks and uncertainties that
could cause actual results to differ from those contained in the forward-looking
statements, see ICE’s Securities and Exchange Commission filings, including, but not
limited to, the risk factors in ICE's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2006 and ICE’s Registration Statement on Form S-4 (File No. 333-138312), as
filed with the Securities and Exchange Commission on November 16, 2006.These filings are
also available in the Investor Resources section of our website. All forward-looking
statements in this press release are based on information known to us on the date hereof,
and we undertake no obligation to publicly update any forward-looking statements.
Consolidated
Unaudited Financial Statements
INTERCONTINENTALEXCHANGE, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED
UNAUDITED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
| Years Ended December 31, | Three Months Ended December 31, | |||
| 2006 | 2005 | 2006 | 2005 | |
| Revenues: | ||||
| Transaction fees, net ....................................... | $273,629 | $136,976 | $82,799 | $36,196 |
| Market data fees.............................................. | 34,236 | 14,642 | 9,647 | 3,972 |
| Other ............................................................. | 5,934 | 4,247 | 2,818 | 1,094 |
| Total revenues ................................................... | 313,799 | 155,865 | 95,264 | 41,262 |
| Operating expenses: | ||||
| Compensation and benefits .............................. | 49,750 | 35,753 | 14,214 | 9,938 |
| Professional services ........................................ | 11,395 | 10,124 | 2,671 | 1,950 |
| Patent royalty .................................................. | 9,039 | 1,491 | 2,676 | 565 |
| Selling, general and administrative .................... | 25,266 | 17,395 | 7,629 | 4,246 |
| Floor closure costs ............................................ | - | 4,814 | - | - |
| Settlement expense ......................................... | - | 15,000 | - | - |
| Depreciation and amortization ........................... | 13,714 | 15,083 | 3,890 | 3,655 |
| Total operating expenses .................................. | 109,164 | 99,660 | 31,080 | 20,354 |
| Operating income ............................................. | 204,635 | 56,205 | 64,184 | 20,908 |
| Other income (expense): .................................. | ||||
| Interest income .............................................. | 8,565 | 3,090 | 3,182 | 998 |
| Interest expense ............................................ | (231) | (613) | (56) | (126) |
| Other income (expense), net ............................ | (426) | 1,313 | 90 | 39 |
| Total other income (expense), net ....................... | 7,908 | 3,790 | 3,216 | 911 |
| Income before income taxes ............................... | 212,543 | 59,995 | 67,400 | 21,819 |
| Income tax expense .......................................... | 69,275 | 19,585 | 18,408 | 6,959 |
| Net income | $143,268 | $40,410 | $48,992 | $14,860 |
| Redemption adjustments to redeemable stock put ......................................................... | - | (61,319) | - | (40,660) |
| Net income (loss) available to common shareholders .................................................... | $143,268 | $(20,909) | $48,992 | $(25,800) |
| Earnings (loss) per common share: | ||||
| Basic .............................................................. | $ 2.54 | $ (0.39) | $ 0.85 | $ (0.48) |
| Diluted ........................................................... | $ 2.40 | $ (0.39) | $ 0.81 | $ (0.48) |
| Weighted average common shares outstanding: | ||||
| Basic .............................................................. | 56,474 | 53,218 | 57,668 | 54,206 |
| Diluted ........................................................... | 59,599 | 53,218 | 60,371 | 54,206 |
INTERCONTINENTALEXCHANGE, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED
UNAUDITED BALANCE SHEETS
(IN THOUSANDS)
| December 31, | ||
| 2006 | 2005 | |
| ASSETS | ||
| Current assets: | ||
| Cash and cash equivalents .......................................................... | $ 204,257 | $ 20,002 |
| Restricted cash ........................................................................... | 16,193 | 12,578 |
| Short-term investments ............................................................... | 77,354 | 111,181 |
| Customer accounts receivable: | ||
| Trade, net of allowance for doubtful accounts ................................ | 31,673 | 13,000 |
| Related-parties ......................................................................... | 448 | 1,773 |
| Asset held for sale ....................................................................... | 3,698 | - |
| Prepaid expenses and other current assets .................................... | 7,294 | 5,481 |
| Total current assets .................................................................... | 340,917 | 164,015 |
| Property and equipment, net ........................................................ | 26,280 | 20,348 |
| Other noncurrent assets: | ||
| Goodwill .................................................................................... | 79,575 | 73,967 |
| Other intangible assets, net ........................................................ | 1,551 | 2,087 |
| Long-term investments .............................................................. | - | 2,296 |
| Cost method investments ........................................................... | 38,738 | 1,674 |
| Noncurrent deferred tax asset, net ............................................... | 127 | - |
| Other noncurrent assets .............................................................. | 6,023 | 1,383 |
| Total other noncurrent assets ....................................................... | 126,014 | 81,407 |
| Total assets ............................................................................... | $ 493,211 | $ 265,770 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| Current liabilities: | ||
| Accounts payable ......................................................................... | $ 1,406 | $ 1,697 |
| Accrued salaries and benefits ........................................................ | 18,135 | 8,916 |
| Accrued liabilities ......................................................................... | 11,822 | 5,396 |
| Income taxes payable .................................................................. | 2,991 | 8,512 |
| Current deferred tax liability, net ................................................... | 908 | 676 |
| Deferred revenue ......................................................................... | 2,637 | 1,197 |
| Total current liabilities .................................................................. | 37,899 | 26,394 |
| Noncurrent liabilities: | ||
| Noncurrent deferred tax liability, net .............................................. | - | 5,450 |
| Other noncurrent liabilities ............................................................ | 844 | 1,303 |
| Total noncurrent liabilities ............................................................. | 844 | 6,753 |
| Total liabilities ............................................................................. | 38,743 | 33,147 |
| SHAREHOLDERS' EQUITY: | ||
| Common stock ............................................................................ | 596 | 184 |
| Class A common stock, Series 1 .................................................... | - | 29 |
| Class A common stock, Series 2 ................................................... | - | 358 |
| Treasury stock, at cost ................................................................. | (9,748) | (5,541) |
| Additional paid-in capital .............................................................. | 245,030 | 177,602 |
| Deferred stock compensation ........................................................ | - | (6,899) |
| Retained earnings ....................................................................... | 191,179 | 47,911 |
| Accumulated other comprehensive income ..................................... | 27,411 | 18,979 |
| Total shareholders' equity ............................................................. | 454,468 | 232,623 |
| Total liabilities and shareholders' equity ......................................... | $ 493,211 | $ 265,770 |
About IntercontinentalExchange
IntercontinentalExchange® (NYSE: ICE) operates the
leading global, electronic marketplace for trading both futures and OTC energy contracts
and the leading soft commodity exchange. ICE’s markets offer access to a range of
contracts based on crude oil and refined products, natural gas, power and emissions, as
well as soft commodities including cocoa, coffee, cotton, ethanol, orange juice, wood pulp
and sugar, in addition to currency and index futures and options. ICE® conducts its
energy futures markets through its U.K. regulated London-based subsidiary, ICE Futures,
Europe’s leading energy exchange. ICE Futures offers liquid markets in the
world’s leading oil benchmarks, Brent Crude futures and West Texas Intermediate (WTI)
Crude futures, trading nearly half of the world’s global crude futures by volume of
commodity traded. ICE conducts its soft commodity futures and options markets through its
U.S. regulated subsidiary, the New York Board of Trade®. For more than a century, the
NYBOT® has provided global markets for food, fiber and financial products. ICE was added
to the Russell 1000® Index on June 30, 2006. Headquartered in Atlanta, ICE also has
offices in Calgary, Chicago, Houston, London, New York and Singapore. For more
information, please visit www.theice.com and www.nybot.com.
