EX-99.1 2 ex99-1.htm EXHIBIT 99.1 ex99-1.htm

Exhibit 99.1


EARNINGS RELEASE

Investor and Media Contacts:
Kelly Loeffler, VP, Investor Relations & Corp. Communications
IntercontinentalExchange
770-857-4726
kelly.loeffler@theice.com

Melanie Shale, Director of Investor & Public Relations
IntercontinentalExchange
770-857-2532
melanie.shale@theice.com


IntercontinentalExchange Reports Third Quarter Adjusted Diluted EPS of
$1.42, up 20%; GAAP Diluted EPS of $1.29; Revenues of
$287 Million, up 12%

ATLANTA, GA (November 1, 2010) -- IntercontinentalExchange (NYSE: ICE), a leading operator of regulated global exchanges, clearing houses and over-the-counter (OTC) markets, today reported financial results for the third quarter of 2010. Consolidated revenues were $287 million, an increase of 12% from $256 million in the third quarter of 2009. Consolidated net income attributable to ICE was $96 million, up 10% from net income of $87 million in last year’s third quarter. Diluted earnings per share (EPS) increased 9% to $1.29 compared to third quarter 2009 EPS of $1.18 per diluted share.

Adjusted consolidated net income attributable to ICE, which excludes items related to the acquisition of Climate Exchange, grew 21% in the third quarter of 2010 and adjusted diluted EPS increased 20% to $1.42. 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.

Said ICE Chairman and CEO Jeffrey C. Sprecher: “At a time of considerable change and economic uncertainty, ICE delivered another solid quarter of growth, with an increasing number of futures and OTC customers relying on our global trading and technology platform, processing and clearing infrastructure. We continue to focus on delivering industry leading solutions to satisfy new transparency and risk mitigation standards and meet the needs of our customers through innovation.”

ICE SVP and CFO Scott Hill added: “Strong global demand for commodities and an increasing need among emerging economies for hedging and risk management tools continue to drive very strong results for ICE. We believe these are long term secular trends, and that they will continue to provide a solid foundation for top- and bottom-line growth and investment in innovative new products and services to help our customers navigate regulatory change and market evolution.”

Third Quarter 2010 Results
Third quarter 2010 consolidated revenues grew 12% to $287 million, compared to $256 million in the third quarter of 2009. Consolidated transaction and clearing revenues increased 12% to $256 million in the third quarter of 2010, from $229 million in the same period in 2009. The increase in transaction and clearing revenues was driven primarily by increased volume in ICE Brent Crude and ICE Gas Oil futures contracts, OTC North American natural gas and global oil contracts, and an increase in credit default swap (CDS) clearing revenues.

 
 

 
Transaction and clearing revenues in ICE’s futures segment totaled $125 million in the third quarter of 2010, up 20% from $104 million in the prior third quarter. Consolidated average daily volume (ADV) in ICE’s futures exchanges was 1,274,803 contracts, an increase of 20% from the third quarter of 2009, and was driven by double-digit increases in ADV at each of ICE’s futures exchanges.

Transaction and clearing revenues in ICE’s global OTC segment grew 5% to $132 million in the third quarter, compared to $125 million in the same period of 2009. Average daily commissions (ADC) for ICE’s OTC energy business increased 9% to $1.4 million, compared to $1.3 million in the third quarter of 2009. Cleared contracts accounted for 97% of OTC energy contract volume during the third quarter of 2010. In ICE’s credit derivatives business, third quarter transaction, processing and clearing revenues were $42 million, compared to $43 million in the same period of 2009. Revenues at Creditex, our CDS trade execution business, totaled $25 million, and global CDS clearing revenues were $18 million.

Consolidated market data revenues were a record $28 million in the third quarter of 2010, an increase of 11% from $25 million in the year-ago quarter. Consolidated other revenues were $4 million, compared to $3 million in the third quarter of 2009.

Consolidated operating expenses were $136 million in the quarter, an increase of 17% from $116 million in the third quarter of 2009. The increase in operating expenses was primarily attributable to costs associated with the acquisition of Climate Exchange plc, including $7 million of acquisition expenses and $5 million in severance charges. Operating expenses also include $5 million in amortization of intangibles and $8 million in ongoing operational expenses associated with Climate Exchange during the third quarter of 2010. Operating expenses outside of merger and integration expenses declined compared to the prior year, including improved cost efficiencies at Creditex.

Consolidated operating income increased 8% to $152 million in the quarter, compared to $140 million in the third quarter of 2009. Operating margin was 53%.

The effective tax rate for the quarter was 32%, compared to 37% for the third quarter of 2009. The decrease in the effective tax rate was primarily due to favorable foreign tax rate differentials, legislative changes and tax credits during the current period.

First Nine Months of 2010 Results
Consolidated revenues in the first nine months of 2010 were $865 million, an increase of 17% compared to the year-ago period. Futures volumes in the first three quarters grew 27% to 248 million contracts, driving futures transaction and clearing revenues to $377 million, an increase of 23% compared to same period of 2009. ADV in the first nine months of 2010 was 1,318,788 contracts, up 28% from the year-ago period.

ICE’s global OTC transaction and clearing revenues were $395 million in the first nine months of the year, an increase of 14% from the same period in 2009, and were driven primarily by an increase in energy contract volume, as well as an increase in CDS clearing revenues. ADC in ICE’s OTC energy business were $1.4 million in the first nine months of the year, up 20% from the first nine months of 2009. Consolidated market data revenues increased 7% to $82 million and consolidated operating margins were 57% for the first nine months of 2010, compared to 53% in the comparable 2009 period.

 
 

 
Consolidated cash flows from operations totaled $379 million in the first three quarters of 2010, up 25%, compared to $303 million in the same period of 2009. Capital expenditures were $17 million and capitalized software development costs totaled $20 million in the first three quarters of 2010.

Unrestricted cash and investments were $541 million as of September 30, 2010. The company repurchased $90 million of its common stock during the third quarter of 2010 as part of its existing stock repurchase program. At the end of the quarter, ICE had $634 million in outstanding debt.

Financial Guidance and Additional Information
  
ICE had 947 employees as of September 30, 2010. Headcount is expected to increase in the range of 1% to 2% for the balance of 2010, excluding any personnel additions relating to merger and acquisition activity, and inclusive of the Climate Exchange acquisition.
  
Consistent with ICE’s full-year guidance for CDS clearing revenues, the company expects revenues in the range of $14 million to $16 million during the fourth quarter of 2010.
  
ICE expects depreciation and amortization in the fourth quarter of 2010 in the range of $32 million to $34 million, which includes $5 million related to the amortization of Climate Exchange intangible assets.
  
ICE expects its tax rate to be between 32-35% in the fourth quarter of 2010 and in fiscal year 2011.
  
ICE's diluted share count for the fourth quarter of 2010 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 2010 is expected to be in the range of 73.9 million to 74.9 million weighted average shares outstanding.
  
ICE’s remaining capacity in its authorized share repurchase program is $210 million.

Earnings Conference Call Information
ICE will hold a conference call today, November 1, at 8:30 a.m. ET to review its third quarter 2010 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 888-569-5033 if calling from the United States, or 719-457-2607 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 4972645. Beginning with ICE’s first quarter 2011 earnings call, the company will no longer offer telephone replays of its earnings calls. All earnings calls will continue to be available on the ICE website.

Historical futures volume and OTC commission data can be found at: http://ir.theice.com/supplemental.cfm

 
 

 

About IntercontinentalExchange
IntercontinentalExchange® (NYSE: ICE) is a leading operator of regulated futures exchanges and over-the-counter markets for agricultural, credit, currency, emissions, energy and equity index contracts. ICE Futures Europe® hosts trade in half of the world’s crude and refined oil futures. ICE Futures U.S.® and ICE Futures Canada® list agricultural, currencies and Russell Index markets. ICE® is also a leading operator of central clearing services for the futures and over-the-counter markets, with five regulated clearing houses across North America and Europe. ICE serves customers in more than 70 countries. www.theice.com  

The following are trademarks of IntercontinentalExchange, Inc. and/or its affiliated companies: IntercontinentalExchange, IntercontinentalExchange & Design, ICE, ICE and block design ICE Futures Europe, ICE Clear Europe, and European Climate Exchange (ECX). All other trademarks are the property of their respective owners. For more information regarding registered trademarks owned by IntercontinentalExchange, Inc. and/or its affiliated companies, see https://www.theice.com/terms.jhtml

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; conditions in global financial markets; domestic and international economic conditions; volatility in commodity prices; our ability to identify and effectively pursue acquisitions and strategic alliances and successfully integrate the companies we acquire on a cost-effective basis; changes in domestic and foreign laws, regulations or government policy; increasing competition and consolidation in our industry; our ability to minimize the risks associated with operating multiple clearing houses in multiple jurisdictions; the success of our initiative to clear credit default swaps transactions; the success of our global clearing strategy; technological developments, including clearing developments; the accuracy of our cost estimates and expectations, including, without limitation, those set forth in this press release under “Financial Guidance and Additional Information”; 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 2011; our ability to increase the connectivity to our marketplace; maintaining existing market participants and attracting new ones; our ability to develop new products and services; 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; identification of trends and how they will impact our business; and our ability to gain access to comparable products and services if our key technology contracts were terminated. 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, 2009, which was filed with the SEC on February 10, 2010. 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 Unaudited Financial Statements

Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
 
 
 
Nine Months Ended
September 30,
   
Three Months Ended
September 30,
 
 
 
2010
   
2009
   
2010
   
2009
 
Revenues:
                       
Transaction and clearing fees, net
  $ 772,024     $ 655,301     $ 256,102     $ 228,868  
Market data fees
    81,567       76,490       27,528       24,891  
Other
    11,330       6,443       3,516       2,505  
Total revenues
    864,921       738,234       287,146       256,264  
Operating expenses:
Compensation and benefits
    179,696       166,231       62,586       55,928  
Professional services
    24,840       25,908       8,262       9,866  
Acquisition-related transaction costs
    9,062       6,139       7,019       -  
Selling, general and administrative
    69,788       68,457       25,982       22,613  
Depreciation and amortization
    87,867       82,750       31,739       27,868  
Total operating expenses
    371,253       349,485       135,588       116,275  
Operating income
    493,668       388,749       151,558       139,989  
Other income (expense):
                               
Interest and investment income
    1,544       1,252       478       298  
Interest expense
    (22,123 )     (16,534 )     (7,511 )     (4,374 )
Other income (expense), net
    (13,297 )     (9,163 )     2,716       1,493  
Total other expense, net
    (33,876 )     (24,445 )     (4,317 )     (2,583 )
Income before income taxes
    459,792       364,304       147,241       137,406  
Income tax expense
    153,834       133,142       47,328       50,524  
Net income
  $ 305,958     $ 231,162     $ 99,913     $ 86,882  
Net (income) loss attributable to noncontrolling interest
    (6,792 )     572       (3,598 )     572  
Net income attributable to IntercontinentalExchange, Inc.
  $ 299,166     $ 231,734     $ 96,315     $ 87,454  
                                 
Earnings per share attributable to IntercontinentalExchange, Inc. common shareholders:
                               
Basic
  $ 4.06     $ 3.18     $ 1.31     $ 1.20  
Diluted
  $ 4.01     $ 3.13     $ 1.29     $ 1.18  
Weighted average common shares outstanding:
                               
Basic
    73,765       72,887       73,659       73,137  
Diluted
    74,577       73,949       74,443       74,204  
                                 
                                 
                                 
 
 
 

 
 
Consolidated Balance Sheets
(In thousands)
(Unaudited)
   
September 30,
   
December 31,
 
 
 
2010
   
2009
 
ASSETS
 
Current assets:
           
  Cash and cash equivalents
  $ 539,198     $ 552,465  
  Short-term restricted cash
    79,445       81,970  
  Short-term investments
    1,998       2,005  
  Customer accounts receivable
    134,507       109,068  
  Margin deposits and guaranty funds
    24,330,932       18,690,238  
  Income tax receivable
    31,925       874  
  Prepaid expenses and other current assets
    34,029       23,231  
Total current assets
    25,152,034       19,459,851  
Property and equipment, net
    95,341       91,735  
Other noncurrent assets:
               
  Goodwill
    1,896,565       1,465,831  
  Other intangible assets, net
    916,072       702,460  
  Long-term restricted cash
    135,219       123,823  
  Long-term investments
    -       23,492  
  Other noncurrent assets
    22,994       17,683  
Total other noncurrent assets
    2,970,850       2,333,289  
Total assets
  $ 28,218,225     $ 21,884,875  
   
LIABILITIES AND EQUITY
 
Current liabilities:
               
  Accounts payable and accrued liabilities
  $ 74,100     $ 57,288  
  Accrued salaries and benefits
    38,877       52,185  
  Current portion of licensing agreement
    17,443       15,223  
  Current portion of long-term debt
    242,500       99,000  
  Income taxes payable
    36,866       23,327  
  Margin deposits and guaranty funds
    24,330,932       18,690,238  
  Other current liabilities
    38,927       30,571  
Total current liabilities
    24,779,645       18,967,832  
Noncurrent liabilities:
               
  Noncurrent deferred tax liability, net
    236,951       181,102  
  Long-term debt
    391,500       208,500  
  Noncurrent portion of licensing agreement
    64,270       73,441  
  Other noncurrent liabilities
    24,702       20,353  
Total noncurrent liabilities
    717,423       483,396  
Total liabilities
    25,497,068       19,451,228  
                 
EQUITY
 
IntercontinentalExchange, Inc. shareholders’ equity:
               
  Common stock
    783       776  
  Treasury stock, at cost
    (448,735 )     (349,646 )
  Additional paid-in capital
    1,729,940       1,674,919  
  Retained earnings
    1,348,291       1,049,125  
  Accumulated other comprehensive income
    54,340       24,558  
Total IntercontinentalExchange, Inc. shareholders’ equity
    2,684,619       2,399,732  
  Noncontrolling interest in consolidated subsidiaries
    36,538       33,915  
  Total equity
    2,721,157       2,433,647  
  Total liabilities and equity
  $ 28,218,225     $ 21,884,875  
 
 
 

 
Non-GAAP Financial Measures and Reconciliation

ICE presents adjusted net income attributable to ICE and adjusted earnings per share attributable to ICE as additional information regarding its operating results. 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 ICE’s business. ICE strongly recommends that investors review the GAAP financial measures included in this press release and its Quarterly Report on Form 10-Q, for the quarter ended September 30, 2010, including ICE's consolidated financial statements and the notes thereto.

When viewed in conjunction with ICE's GAAP results and the accompanying reconciliation, ICE believes the presentation of these adjusted measures provide investors with greater transparency and a more complete understanding of factors affecting our business than GAAP measures alone. ICE management uses these measures to evaluate operating performance and management decisions made during the reporting period by excluding certain items that the company believes have less significance on, or do not impact, the day-to-day performance of the business.

Adjusted net income attributable to ICE for the periods presented below is calculated by adding net income attributable to ICE and various non-recurring, infrequent or other charges that are not routine operating expenses, and their related income tax effects. ICE does not believe these items are representative of its future operating performance because these charges were not consistent with historical and normal operating performance. The adjustments for the periods in 2010 related to the exclusion of charges associated with the acquisition of Climate Exchange, including the currency hedge implemented at the time of the transaction announcement, acquisition transaction costs and employee severance costs. The adjustments for the period in 2009 related to the exclusion of acquisition transaction costs, an impairment charge related to ICE’s investment in India’s NCDEX, and various other nonrecurring charges. The NCDEX impairment loss tax effect was additional tax expense of $1.8 million due to the rounding of a valuation allowance, related to the deferred tax benefit recorded in three months ended December 31, 2008, which was in excess of the tax benefit recorded in the nine months ended September 30, 2009. The remaining tax effects of these items were calculated by applying jurisdictional specific marginal tax rates.

ICE uses these non-GAAP measures internally to evaluate its performance and to make financial and operational decisions. ICE believes that its presentation of these measures provides investors with greater transparency and supplemental data relating to its 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 items described below do not reflect historical operating performance. ICE uses adjusted net income attributable to ICE and adjusted earnings per share because they more clearly highlight trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures, since these measures eliminate from our results specific financial items that have less bearing on our operating performance.

 
 

 
The following table reconciles our net income attributable to ICE to adjusted net income attributable to ICE and calculates adjusted earnings per common share attributable to ICE for the periods presented below.

 
 
 
Nine Months Ended
September 30, 2010
   
Nine Months Ended
 September 30, 2009
   
Three Months Ended 
September 30, 2010
 
   
(In thousands, except per share amounts)
 
Net income attributable to ICE
  $ 299,166     $ 231,734     $ 96,315  
Add: Hedge for CLE acquisition
    15,080             802  
Add: Acquisition-related transaction costs
    9,062       6,139       7,019  
Add: Severance costs relating to acquisitions
    5,716       2,902       5,196  
Add: NCDEX impairment charge
          9,276        
Add: Costs incurred to vacate office space
          2,980        
Less: Net gain on existing 4.8% ownership of CLE
    (1,825 )           (1,825 )
Less: Income tax expense effect related to the items above
    (6,149 )     (1,978 )     (1,579 )
Adjusted net income attributable to ICE
  $ 321,050     $ 251,053     $ 105,928  
Earnings per share attributable to ICE common shareholders:
                       
Basic
  $ 4.06     $ 3.18     $ 1.31  
Diluted
  $ 4.01     $ 3.13     $ 1.29  
Adjusted earnings per share attributable to ICE common shareholders:
                       
Adjusted basic
  $ 4.35     $ 3.44     $ 1.44  
Adjusted diluted
  $ 4.30     $ 3.39     $ 1.42  
Weighted average common shares outstanding:
                       
Basic
    73,765       72,887       73,659  
Diluted
    74,577       73,949       74,443