001-34774 | 20-5446972 | |
(Commission File Number) | (IRS Employer Identification No.) |
CBOE HOLDINGS, INC. | ||
(Registrant) | ||
By: | /s/ Alan J. Dean | |
Alan J. Dean | ||
Executive Vice President and Chief Financial Officer | ||
Dated: May 6, 2014 |
Exhibit Number | Description | |
99.1 | Press Release, dated May 6, 2014. |
News Release |
(in millions, except per share, revenue per contract and trading days) | 1Q 2014 | 1Q 2013 | Y/Y Change | |||||
Key Statistics: | ||||||||
Total Trading Days | 61 | 60 | ||||||
Average Daily Volume (options and futures) | 5.62 | 4.37 | 29 | % | ||||
Total Trading Volume (options and futures) | 342.8 | 262.0 | 31 | % | ||||
Average Revenue Per Contract | $ | 0.329 | $ | 0.378 | (13 | %) | ||
GAAP Financial Highlights: | ||||||||
Total Operating Revenues | $ | 157.9 | $ | 142.7 | 11 | % | ||
Total Operating Expenses | 75.9 | 73.3 | 4 | % | ||||
Operating Income | 82.0 | 69.4 | 18 | % | ||||
Operating Margin % | 52.0 | % | 48.7 | % | 330 | bps | ||
Net Income | $ | 49.0 | $ | 42.4 | 16 | % | ||
Net Income Allocated to Common Stockholders | $ | 48.5 | $ | 41.8 | 16 | % | ||
Diluted EPS | $ | 0.56 | $ | 0.48 | 17 | % | ||
Weighted Average Shares Outstanding | 86.5 | 87.3 | (1 | %) | ||||
Adjusted Financial Highlights (1) | ||||||||
Total Operating Expenses | $ | 73.3 | $ | 70.1 | 5 | % | ||
Operating Income | 84.6 | 72.6 | 17 | % | ||||
Operating Margin % | 53.6 | % | 50.9 | % | 270 bps | |||
Net Income | $ | 50.5 | $ | 44.5 | 13 | % | ||
Net Income Allocated to Common Stockholders | $ | 50.0 | $ | 43.9 | 14 | % | ||
Diluted EPS | $ | 0.58 | $ | 0.50 | 16 | % |
• | On May 1, the company reported that average daily volume (ADV) for total options in April 2014 was 4.93 million contracts, a 1 percent decrease from March 2014 ADV of 4.95 million contracts and a 10 percent increase from April 2013 ADV of 4.48 million contracts. In addition, CFE reported ADV of 178,438 contracts in April 2014, a 4 percent decrease compared with 184,938 contracts per day during April 2013 and a 3 percent decrease from 183,863 contracts per day in March 2014. |
• | On April 10, trading of CBOE Short-Term Volatility IndexSM (VXSTSM Index or "Short-Term VIX Index") options with weekly expirations launched, totaling 3,134 contracts for first-day trading volume. Futures on the Short-Term VIX Index launched February 13, 2014. |
• | On March 18, at its 30th Annual Risk Management Conference, the company announced that it plans to extend trading hours for CBOE Volatility Index® (VIX® Index) futures to nearly 24 hours a day, five days a week, beginning June 22, 2014, pending regulatory review. |
• | On March 12, the company announced plans to invest in Tradelegs, the developer of advanced decision-support software that institutional investors can employ to optimize investment performance. |
• | Core operating expenses are expected to be in the range of $191.0 million to $196.0 million. Continuing stock-based compensation expense included in core expenses is expected to be approximately $13.0 million for the full year. |
• | Capital expenditures are expected to be in the range of $47.0 million to $50.0 million. |
• | Depreciation and amortization expense is expected to be in the range of $38.0 million to $40.0 million. |
• | Adjusted effective tax rate for the full-year 2014 is expected to be in the range of 38.5 percent to 39.5 percent. The most significant differences in the adjusted effective rate and the statutory rate are state income taxes and discrete items relating to the current period. Significant changes in trading volume, expenses, state and local tax rates and other items, including ongoing state and federal tax audits, could materially impact this expectation. |
CBOE Media Contacts: | Analyst Contact: | |||||
Gail Osten | Gary Compton | Debbie Koopman | ||||
(312) 786-7123 | (312) 786-7612 | (312) 786-7136 | ||||
osten@cboe.com | comptong@cboe.com | koopman@cboe.com |
1Q 2014 | 4Q 2013 | 3Q 2013 | 2Q 2013 | 1Q 2013 | ||||||
PRODUCT: | ||||||||||
Equities | 2,165 | 1,912 | 1,767 | 1,595 | 1,604 | |||||
Indexes | 1,749 | 1,494 | 1,378 | 1,543 | 1,501 | |||||
Exchange-traded products | 1,503 | 1,328 | 1,322 | 1,641 | 1,107 | |||||
Total Options Average Daily Volume | 5,417 | 4,734 | 4,467 | 4,779 | 4,212 | |||||
Futures | 203 | 156 | 148 | 180 | 154 | |||||
Total Average Daily Volume | 5,620 | 4,890 | 4,615 | 4,959 | 4,366 |
1Q 2014 | 4Q 2013 | 3Q 2013 | 2Q 2013 | 1Q 2013 | ||||||
PRODUCT: | ||||||||||
Equities | 38.5 | % | 39.1 | % | 38.3 | % | 32.2 | % | 36.7 | % |
Indexes | 31.1 | % | 30.6 | % | 29.9 | % | 31.1 | % | 34.4 | % |
Exchange-traded products | 26.8 | % | 27.1 | % | 28.6 | % | 33.1 | % | 25.4 | % |
Futures | 3.6 | % | 3.2 | % | 3.2 | % | 3.6 | % | 3.5 | % |
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
1Q 2014 | 4Q 2013 | 3Q 2013 | 2Q 2013 | 1Q 2013 | |
Trading Days | 61 | 64 | 64 | 64 | 60 |
PRODUCT: | |||||
Equities | $0.081 | $0.075 | $0.077 | $0.090 | $0.140 |
Indexes | 0.669 | 0.666 | 0.669 | 0.675 | 0.671 |
Exchange-traded products | 0.117 | 0.125 | 0.123 | 0.119 | 0.155 |
Total Options Average Revenue Per Contract | 0.281 | 0.275 | 0.273 | 0.289 | 0.333 |
Futures | 1.617 | 1.566 | 1.559 | 1.544 | 1.618 |
Total Average Revenue Per Contract | $0.329 | $0.316 | $0.315 | $0.334 | $0.378 |
1Q 2014 | 4Q 2013 | 3Q 2013 | 2Q 2013 | 1Q 2013 | |||||||||||
PRODUCT: | |||||||||||||||
Equities | $ | 10,696 | $ | 9,162 | $ | 8,741 | $ | 9,213 | $ | 13,509 | |||||
Indexes | 71,320 | 63,667 | 59,047 | 66,654 | 60,379 | ||||||||||
Exchange-traded products | 10,741 | 10,592 | 10,401 | 12,458 | 10,296 | ||||||||||
Total Options Transaction Fees | $ | 92,757 | $ | 83,421 | $ | 78,189 | $ | 88,325 | $ | 84,184 | |||||
Futures | 20,033 | 15,605 | 14,765 | 17,769 | 14,961 | ||||||||||
Total Transaction Fees | $ | 112,790 | $ | 99,026 | $ | 92,954 | $ | 106,094 | $ | 99,145 |
Three Months Ended March 31, | |||||||||
(in thousands) | 2014 | 2013 | |||||||
Total Operating Expenses | $ | 75,847 | $ | 73,275 | |||||
Less: | |||||||||
Depreciation and amortization | 8,604 | 8,282 | |||||||
Accelerated stock-based compensation expense | 2,530 | 3,180 | |||||||
Volume-based expenses: | |||||||||
Royalty fees | 15,902 | 13,169 | |||||||
Trading volume incentives | 1,126 | 1,013 | |||||||
Core Operating Expenses (non-GAAP): | $ | 47,685 | $ | 47,631 | |||||
Less: Continuing stock-based compensation expense | 4,383 | 3,559 | |||||||
Core Operating Expenses Excluding Continuing Stock-Based Compensation (non-GAAP) | $ | 43,302 | $ | 44,072 | |||||
Detail of Core Operating Expenses (non-GAAP) | |||||||||
Employee costs | $ | 30,844 | $ | 27,657 | |||||
Data processing | 4,721 | 4,516 | |||||||
Outside services | 7,378 | 11,035 | |||||||
Travel and promotional expenses | 1,987 | 2,064 | |||||||
Facilities costs | 1,313 | 1,253 | |||||||
Other expenses | 1,442 | 1,106 | |||||||
Total | $ | 47,685 | $ | 47,631 |
(in thousands, except per share amounts) | Three months ended March 31, 2014 | Three months ended March 31, 2013 | ||||||||||||||||||||||
Items Impacting Results | Items Impacting Results | |||||||||||||||||||||||
Reported (GAAP) | Operating Expenses 1 | After Considering Items (non-GAAP) | Reported (GAAP) | Operating Expense1 | Other Expense2 | After Considering Items (non-GAAP) | ||||||||||||||||||
Total Operating Revenues | $ | 157,885 | $ | 157,885 | $ | 142,705 | $ | 142,705 | ||||||||||||||||
Total Operating Expenses | 75,847 | (2,530 | ) | 73,317 | 73,275 | (3,180 | ) | 70,095 | ||||||||||||||||
Operating Income | 82,038 | 2,530 | 84,568 | 69,430 | 3,180 | 72,610 | ||||||||||||||||||
Operating Margin | 52.0 | % | 53.6 | % | 48.7 | % | 50.9 | % | ||||||||||||||||
Total Other Income/(Expense) | (495 | ) | (495 | ) | (721 | ) | 245 | (476 | ) | |||||||||||||||
Income Before Income Taxes | 81,543 | 2,530 | 84,073 | 68,709 | 3,180 | 245 | 72,134 | |||||||||||||||||
Income Tax Provision | 32,519 | 1,009 | 33,528 | 26,336 | 1,219 | 92 | 27,647 | |||||||||||||||||
Effective Income Tax Rate | 39.9 | % | 39.9 | % | 38.3 | % | 38.3 | % | ||||||||||||||||
Net Income | $ | 49,024 | $ | 1,521 | $ | 50,545 | $ | 42,373 | $ | 1,961 | $ | 153 | $ | 44,487 | ||||||||||
Net Income Allocated to Participating Securities | (496 | ) | (15 | ) | (511 | ) | (584 | ) | (27 | ) | (2 | ) | (613 | ) | ||||||||||
Net Income Allocated to Common Stockholders | $ | 48,528 | $ | 1,506 | $ | 50,034 | $ | 41,789 | $ | 1,934 | $ | 151 | $ | 43,874 | ||||||||||
Diluted Net Income per Share Allocated to Common Stockholders | $ | 0.56 | $ | 0.02 | $ | 0.58 | $ | 0.48 | $ | 0.02 | $ | — | $ | 0.50 | ||||||||||
1) | In the first quarters of 2014 and 2013, the company accelerated the vesting of certain stock awards. |
2) | In the first quarter of 2013, the company recorded an impairment for an investment in affiliate. |
CBOE Holdings, Inc. and Subsidiaries | |||||||||
Condensed Consolidated Statements of Income (Unaudited) | |||||||||
Three Months Ended March 31, 2014 and 2013 | |||||||||
Three Months Ended March 31, | |||||||||
(in thousands, except per share amounts) | 2014 | 2013 | |||||||
Operating Revenues: | |||||||||
Transaction fees | $ | 112,790 | $ | 99,145 | |||||
Access fees | 15,232 | 15,654 | |||||||
Exchange services and other fees | 9,492 | 9,088 | |||||||
Market data fees | 7,158 | 5,537 | |||||||
Regulatory fees | 9,857 | 9,700 | |||||||
Other revenue | 3,356 | 3,581 | |||||||
Total Operating Revenues | 157,885 | 142,705 | |||||||
Operating Expenses: | |||||||||
Employee costs | 33,374 | 30,837 | |||||||
Depreciation and amortization | 8,604 | 8,282 | |||||||
Data processing | 4,721 | 4,516 | |||||||
Outside services | 7,378 | 11,035 | |||||||
Royalty fees | 15,902 | 13,169 | |||||||
Trading volume incentives | 1,126 | 1,013 | |||||||
Travel and promotional expenses | 1,987 | 2,064 | |||||||
Facilities costs | 1,313 | 1,253 | |||||||
Other expenses | 1,442 | 1,106 | |||||||
Total Operating Expenses | 75,847 | 73,275 | |||||||
Operating Income | 82,038 | 69,430 | |||||||
Other Income / (Expense): | |||||||||
Investment income | 14 | 4 | |||||||
Net loss from investment in affiliates | (509 | ) | (725 | ) | |||||
Total Other Expense | (495 | ) | (721 | ) | |||||
Income Before Income Taxes | 81,543 | 68,709 | |||||||
Income tax provision | 32,519 | 26,336 | |||||||
Net Income | 49,024 | 42,373 | |||||||
Net income allocated to participating securities | (496 | ) | (584 | ) | |||||
Net Income Allocated to Common Stockholders | $ | 48,528 | $ | 41,789 | |||||
Net Income Per Share Allocated to Common Stockholders | |||||||||
Basic | $ | 0.56 | $ | 0.48 | |||||
Diluted | 0.56 | 0.48 | |||||||
Weighted average shares used in computing income per share: | |||||||||
Basic | 86,453 | 87,272 | |||||||
Diluted | 86,453 | 87,272 |
CBOE Holdings, Inc. and Subsidiaries | |||||||
Condensed Consolidated Balance Sheets (Unaudited) | |||||||
March 31, 2014 and December 31, 2013 | |||||||
(in thousands, except share amounts) | March 31, 2014 | December 31, 2013 | |||||
Assets | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 199,065 | $ | 221,341 | |||
Accounts receivable—net allowances of $279 and $266 | 57,856 | 49,888 | |||||
Marketing fee receivable | 10,176 | 8,869 | |||||
Income taxes receivable | 732 | 22,039 | |||||
Other prepaid expenses | 7,271 | 4,007 | |||||
Other current assets | 922 | 2,717 | |||||
Total Current Assets | 276,022 | 308,861 | |||||
Investments in Affiliates | 14,571 | 14,581 | |||||
Land | 4,914 | 4,914 | |||||
Property and Equipment: | |||||||
Construction in progress | 2,231 | 23 | |||||
Building | 65,491 | 65,448 | |||||
Furniture and equipment | 275,416 | 271,437 | |||||
Less accumulated depreciation and amortization | (273,958 | ) | (269,614 | ) | |||
Total Property and Equipment—Net | 69,180 | 67,294 | |||||
Other Assets: | |||||||
Software development work in progress | 10,754 | 7,853 | |||||
Data processing software and other assets (less accumulated amortization—2014, $150,778; 2013, $147,322) | 37,403 | 38,086 | |||||
Total Other Assets—Net | 48,157 | 45,939 | |||||
Total | $ | 412,844 | $ | 441,589 | |||
Liabilities and Stockholders' Equity | |||||||
Current Liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 41,403 | $ | 52,958 | |||
Dividend payable | — | 43,831 | |||||
Marketing fee payable | 10,743 | 9,442 | |||||
Deferred revenue | 14,167 | 1,100 | |||||
Post-retirement medical benefits | 80 | 127 | |||||
Income taxes payable | 8,064 | — | |||||
Total Current Liabilities | 74,457 | 107,458 | |||||
Long-term Liabilities: | |||||||
Post-retirement medical benefits | 1,654 | 2,110 | |||||
Income taxes liability | 32,249 | 29,903 | |||||
Other long-term liabilities | 3,833 | 3,856 | |||||
Deferred income taxes | 13,971 | 13,745 | |||||
Total Long-term Liabilities | 51,707 | 49,614 | |||||
Total Liabilities | 126,164 | 157,072 | |||||
Commitments and Contingencies | |||||||
Stockholders' Equity | |||||||
Preferred stock, $0.01 par value: 20,000,000 shares authorized, no shares issued and outstanding at March 31, 2014 or December 31, 2013 | — | — | |||||
Unrestricted common stock, $0.01 par value: 325,000,000 shares authorized; 92,008,024 issued and 86,194,095 outstanding at March 31, 2014; 91,845,492 issued and 86,770,737 outstanding at December 31, 2013 | 920 | 919 | |||||
Additional paid-in-capital | 98,662 | 90,985 | |||||
Retained Earnings | 382,587 | 349,290 | |||||
Treasury stock at cost – 5,813,929 shares at March 31, 2014 and 5,074,755 shares at December 31, 2013 | (194,754 | ) | (155,627 | ) | |||
Accumulated other comprehensive loss | (735 | ) | (1,050 | ) | |||
Total Stockholders' Equity | 286,680 | 284,517 | |||||
Total | $ | 412,844 | $ | 441,589 |
CBOE Holdings, Inc. and Subsidiaries | |||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) | |||||||
Three months ended March 31, 2014 and 2013 | |||||||
Three Months Ended March 31, | |||||||
(in thousands) | 2014 | 2013 | |||||
Cash Flows from Operating Activities: | |||||||
Net Income | $ | 49,024 | $ | 42,373 | |||
Adjustments to reconcile net income to | |||||||
net cash flows from operating activities: | |||||||
Depreciation and amortization | 8,604 | 8,282 | |||||
Other amortization | 18 | 29 | |||||
Provision for deferred income taxes | 25 | (515 | ) | ||||
Stock-based compensation | 6,913 | 6,739 | |||||
Loss on disposition of property | 253 | 1 | |||||
Loss on investment in affiliates | 509 | 480 | |||||
Impairment of investment in affiliates and other assets | — | 245 | |||||
Net change in assets and liabilities | 22,970 | 37,663 | |||||
Net Cash Flows provided by Operating Activities | 88,316 | 95,297 | |||||
Cash Flows from Investing Activities: | |||||||
Capital and other asset expenditures | (12,172 | ) | (6,440 | ) | |||
Investment in affiliates | (500 | ) | (676 | ) | |||
Other | — | 8 | |||||
Net Cash Flows used in Investing Activities | (12,672 | ) | (7,108 | ) | |||
Cash Flows from Financing Activities: | |||||||
Payment of quarterly dividends | (15,727 | ) | (13,297 | ) | |||
Payment of special dividend | (43,831 | ) | — | ||||
Purchase of unrestricted stock from employees | (1,990 | ) | (3 | ) | |||
Excess tax benefit from stock-based compensation | 765 | — | |||||
Purchase of unrestricted stock under repurchase program | (37,137 | ) | — | ||||
Net Cash Flows used in Financing Activities | (97,920 | ) | (13,300 | ) | |||
Net Increase (Decrease) in Cash and Cash Equivalents | (22,276 | ) | 74,889 | ||||
Cash and Cash Equivalents at Beginning of Period | 221,341 | 135,597 | |||||
Cash and Cash Equivalents at End of Period | $ | 199,065 | $ | 210,486 | |||
Supplemental Disclosure of Cash Flow Information | |||||||
Cash paid for income taxes | $ | 10 | $ | 1,910 | |||
Non-cash activities: | |||||||
Unpaid liability to acquire equipment and software | $ | 3,835 | $ | 907 |
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