IntercontinentalExchange (NYSE: ICE), a leading operator of regulated global exchanges, clearing houses and over-the-counter (OTC) markets, today reported financial results for the second quarter of 2010.
Consolidated revenues were a record $296 million, an increase of 18% from $250 million in the second quarter of 2009. Consolidated net income attributable to ICE was a record $102 million, up 41% from second quarter 2009 net income of $72 million. Diluted earnings per share (EPS) increased 40% to $1.36 compared to $0.97 in last year's second quarter.
Second quarter 2010 adjusted consolidated net income attributable to ICE, excluding items relating to the acquisition of Climate Exchange, increased 35% to $113 million from an adjusted $83 million in the second quarter of 2009. Adjusted diluted EPS in the second quarter of 2010 were $1.51, up 34% from adjusted diluted EPS of $1.13 in the prior second quarter. 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: "These results are enabled by the focus our team brings to executing on long-term opportunities, while achieving sustained, industry-leading growth. We are delivering on key initiatives that position our clearing, execution and processing business as a part of the solution for addressing financial reform and the evolving needs of derivatives markets globally, while working closely with customers and regulators to ensure the markets are preserved and strengthened."
ICE SVP and CFO Scott Hill added: "ICE's diverse, global business model and exposure to growth in emerging markets positions us well for continued growth. Our disciplined approach to investment and solid execution helped us deliver our seventh consecutive quarter of record revenues, along with improved operating margins. As a result, we achieved record profit levels for our shareholders and expanded our services for customers."
Second Quarter 2010 Results
Consolidated revenues in the second quarter of 2010 grew 18% to $296 million, compared to $250 million in the second quarter of 2009. Consolidated transaction and clearing revenues increased 19% to $265 million in the second quarter of 2010, from $223 million during the same period in 2009. The increase in transaction and clearing revenue was driven primarily by record trading volume in ICE's Brent and WTI crude futures contracts, record OTC energy volumes and an increase in CDS clearing revenues.
Second quarter 2010 transaction and clearing revenues in ICE's consolidated futures segment were a record $130 million, an increase of 23% from $106 million in the same period in 2009. Consolidated average daily volume (ADV) in ICE's futures segment was 1,392,397 contracts, up 36% from the second quarter of 2009 and was driven by double-digit increases at each of ICE's futures exchanges in the second quarter of 2010.
Revenues in ICE's global OTC segment grew 15% to $135 million in the second quarter of 2010, compared to $117 million in the prior second quarter. Average daily commissions (ADC) for ICE's OTC energy business increased 26% to $1.4 million, compared to $1.1 million in the same period of 2009. Cleared contracts accounted for 97% of OTC energy contract volume during the second quarter of 2010. In ICE's credit derivative markets, second quarter transaction, processing and clearing revenues were $43 million, down 3% compared to $45 million in the same period of 2009, as a result of a decline in CDS execution revenues.
Consolidated market data revenues were a record $27 million, up 7% from $25 million in the same second quarter of 2009. Consolidated other revenues were $4 million during the second quarter of 2010, compared to $2 million in the year-ago quarter.
Consolidated operating expenses increased 2% to $118 million for the second quarter of 2010 compared to $115 million in the same period of 2009. This increase was primarily attributable to $3 million of additional compensation and benefits expenses associated with headcount increases and non-cash compensation accruals as a result of the company's above-target performance year-to-date in 2010.
Second quarter 2010 consolidated operating income increased 32% to $178 million compared to $135 million in the prior second quarter. Operating margin rose to 60%, compared to 54% in the second quarter of 2009, and up from 58% in the first quarter of 2010.
The effective tax rate for the second quarter of 2010 was 34% compared to 39% for the prior second quarter, which was impacted by the charge relating to the impairment of ICE's investment in India's National Commodity and Derivatives Exchange (NCDEX).
First Half 2010 Results
ICE's first half 2010 consolidated revenues grew 20% to $578 million compared to $482 million in the first half of 2009. First half futures volumes increased 31% to 166 million contracts, driving consolidated futures transaction and clearing revenue growth of 24% over the same period in 2009. ADV in the first half of the year 1,341,591 contracts, up 32% compared to the prior first half.
ICE's consolidated global OTC transaction and clearing revenues were $264 million in the first half of the year, an increase of 18% from $223 million in the first half of 2009. ADC in ICE's OTC energy markets increased 27% to $1.4 million in the first half of the year, compared to the same period of 2009. Consolidated market data revenues were $54 million in the first half of 2010, compared to $52 million in the first half of 2009. Adjusted consolidated net income attributable to ICE was $215 million in the first half of 2010, up 32% over the prior first half.
Cash flows from operations during the first half of 2010 totaled $259 million, compared to $183 million in the first six months of 2009. Capital expenditures during the first half of 2010 were $12 million and capitalized software development costs totaled $12 million.
Unrestricted cash and investments were $335 million as of June 30, 2010. At the end of the quarter, ICE had $480 million in outstanding debt.
Financial Guidance and Additional Information
• ICE had 866 employees as of June 30, 2010. Headcount is expected to increase in the range of 8% to 10% for the balance of the year, excluding any personnel additions relating to merger and acquisition activity, and inclusive of ICE's Climate Exchange acquisition.
• ICE expects to record a charge in the range of $4 million to $5 million in the third quarter of 2010 associated with staff reductions following the acquisition of Climate Exchange. These charges will be excluded from adjusted earnings.
• ICE anticipates an immaterial impact to earnings in the back half of 2010 relating to the integration of Climate Exchange, excluding the staff reduction charge. For 2011, ICE projects synergies in the range of $13 million to $14 million, or roughly 60% savings versus 1H 2010 run-rate operating expenses for Climate Exchange, and expects an immaterial impact to earnings.
• ICE expects depreciation and amortization in the second half of 2010 in the range of $64 million to $68 million, which includes $9 million to $12 million related to the amortization of Climate Exchange intangible assets.
• Following the closing of the Climate Exchange acquisition, ICE expects interest expense for the balance of 2010 to be in the range of $7 million to $8 million per quarter.
• As previously stated, ICE expects to recognize transaction costs relating to the Climate Exchange acquisition in the range of $6 million to $7 million in the third quarter of 2010, which will be reflected in "acquisition-related transaction costs", and will be excluded from adjusted earnings.
• ICE's diluted share count for the third quarter of 2010 is expected to be in the range of 74.5 million to 75.1 million weighted average shares outstanding, and the diluted share count for fiscal year 2010 in the range of 74.4 million to 75.4 million weighted average shares outstanding. ICE's remaining capacity in its share repurchase program is $300 million.
• Pro forma financial information relating to Climate Exchange is available on ICE's investor relations website.
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