Attached files
| file | filename |
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| 8-K - 8-K - Cboe Global Markets, Inc. | form8-ksept302013.htm |
Exhibit 99.1
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News Release | |
CBOE HOLDINGS, INC. REPORTS STRONG RESULTS FOR THIRD QUARTER 2013
Third Quarter 2013 Financial Highlights
-- Operating Revenue Increases 7 Percent to $136.7 Million
-- GAAP Net Income Allocated to Common Stockholders of $41.0 Million, Compared With $45.2 Million; Diluted EPS of $0.47, Compared With $0.52
-- Adjusted Net Income Allocated to Common Stockholders Up 9 Percent to $41.0 Million1; Adjusted Diluted EPS of $0.47, Up 9 Percent
-- Operating Margin of 50.0 Percent, Up 260 Basis Points
CHICAGO, November 1, 2013 - CBOE Holdings, Inc. (NASDAQ: CBOE) today reported third quarter 2013 net income allocated to common stockholders of $41.0 million, or $0.47 per diluted share, compared with $45.2 million, or $0.52 per diluted share, in the third quarter of 2012. On an adjusted basis, net income allocated to common stockholders was $41.0 million, or $0.47 per diluted share, compared with $37.7 million, or $0.43 per diluted share, in the same period last year. Operating revenue for the quarter was $136.7 million, up 7 percent compared with $128.3 million in the third quarter of 2012.
Financial results presented on an adjusted basis for the third quarter of 2012 exclude the recognition of a tax benefit relating to prior years of $7.7 million, or $0.09 per diluted share.
“CBOE Holdings delivered a strong third quarter, primarily driven by trading volume increases in our SPX options complex and VIX Index options and futures. CBOE’s average daily options volume for the quarter rose five percent over a year ago despite flat trading volume for the U.S. options industry as a whole,” said Edward T. Tilly, CBOE Holdings Chief Executive Officer. “We continue to see exciting growth opportunities for our company as we add new services and products that create value for both our customers and stockholders, such as our recently announced plans to launch options and futures on the new CBOE Short-term Volatility Index (VXST).”
"Our solid financial results this quarter reflect our operational discipline and focus on investing for future growth," stated Alan J. Dean, CBOE Holdings Executive Vice President and Chief Financial Officer. "Year-to-date, we have returned over $62 million to stockholders through dividends and share repurchases. Our ability to return capital to our stockholders reflects the confidence we have in our business, its opportunities for growth and its ability to generate meaningful free cash flow."
(1) A full reconciliation of our non-GAAP results to our GAAP results for the 2013 and 2012 reporting periods is included in the attached tables. See "Non-GAAP Information” in the accompanying financial tables.
Key Statistics and Financial Highlights
The table below highlights CBOE Holdings' operating results on a GAAP basis and an adjusted basis for the comparative quarters and nine-month periods ended September 30, 2013 and 2012. Financial results presented on an adjusted basis provide supplemental information to facilitate period-over-period comparisons by adjusting for certain items that management believes are not indicative of the company's core operating performance.
(in millions, except per share, revenue per contract and trading days) | 3Q 2013 | 3Q 2012 | Y/Y Change | YTD 2013 | YTD 2012 | Y/Y Change | ||||||||||
Key Statistics: | ||||||||||||||||
Total Trading Days | 64 | 63 | 188 | 188 | ||||||||||||
Average Daily Volume (options and futures) | 4.62 | 4.34 | 6 | % | 4.65 | 4.67 | — | |||||||||
Total Trading Volume (options and futures) | 295.4 | 273.3 | 8 | % | 874.7 | 878.6 | — | |||||||||
Average Revenue Per Contract | $ | 0.315 | $ | 0.317 | (1 | %) | $ | 0.341 | $ | 0.303 | 13 | % | ||||
GAAP Financial Highlights: | ||||||||||||||||
Total Operating Revenues | $ | 136.7 | $ | 128.3 | 7 | % | $ | 430.2 | $ | 382.3 | 13 | % | ||||
Total Operating Expenses | 68.3 | 67.5 | 1 | % | 217.0 | 197.9 | 10 | % | ||||||||
Operating Income | 68.4 | 60.8 | 13 | % | 213.2 | 184.4 | 16 | % | ||||||||
Operating Margin % | 50.0 | % | 47.4 | % | 260 | bps | 49.6 | % | 48.2 | % | 140 | bps | ||||
Net Income | $ | 41.4 | $ | 45.8 | (10 | %) | $ | 129.9 | $ | 117.7 | 10 | % | ||||
Net Income Allocated to Common Stockholders | $ | 41.0 | $ | 45.2 | (9 | %) | $ | 128.2 | $ | 116.0 | 11 | % | ||||
Diluted EPS | $ | 0.47 | $ | 0.52 | (10 | %) | $ | 1.47 | $ | 1.33 | 11 | % | ||||
Weighted Average Shares Outstanding | 87.6 | 87.3 | — | 87.4 | 87.5 | — | ||||||||||
Adjusted Financial Highlights (1) | ||||||||||||||||
Total Operating Expenses | $ | 68.3 | $ | 67.5 | 1 | % | $ | 212.0 | $ | 197.7 | 7 | % | ||||
Operating Income | 68.4 | 60.9 | 12 | % | 218.2 | 184.5 | 18 | % | ||||||||
Operating Margin % | 50.0 | % | 47.4 | % | 260 bps | 50.7 | % | 48.3 | % | 240 | bps | |||||
Net Income | $ | 41.4 | $ | 38.1 | 9 | % | $ | 133.5 | $ | 110.1 | 21 | % | ||||
Net Income Allocated to Common Stockholders | $ | 41.0 | $ | 37.7 | 9 | % | $ | 131.8 | $ | 108.5 | 21 | % | ||||
Diluted EPS | $ | 0.47 | $ | 0.43 | 9 | % | $ | 1.51 | $ | 1.24 | 22 | % | ||||
(1) A full reconciliation of our non-GAAP results to our GAAP results for the 2013 and 2012 reporting periods is included in the attached tables. See "Non-GAAP Information” in the accompanying financial tables.
Revenues
Operating revenue was $136.7 million in the third quarter of 2013, up $8.4 million, or 7 percent, from $128.3 million in the third quarter of 2012. The increase represents higher revenue of $6.4 million in transaction fees, $3.2 million in regulatory fees and $1.4 million in exchange services and other fees, offset somewhat by a decrease of $2.2 million in other revenue.
Transaction fees increased 7 percent for the quarter due to an 8 percent increase in trading volume, offset somewhat by a 1 percent decline in the average revenue per contract (RPC) compared with the third quarter of 2012. Total trading volume in the third quarter was 295.4 million contracts, or 4.62 million contracts per day, compared with volume of 273.3 million contracts, or 4.34 million contracts per day, in last year's third quarter. RPC was $0.315 compared with $0.317 in the third quarter of 2012.
The decrease in RPC primarily resulted from higher volume-based incentives for certain multiply-listed options (options on equities and exchange-traded products), under our VIP program. The impact of the RPC decline in multiply-listed options was significantly offset by a shift in the mix of trading volume towards index options and futures contracts, which generate the highest RPC. Index options and futures contracts accounted for 33.1 percent of trading volume during the quarter compared with 28.8 percent in the third quarter of 2012.
The average revenue per contract represents total transaction fee revenue divided by total reported trading volume for Chicago Board Options Exchange (CBOE), C2 Options Exchange (C2) and CBOE Futures Exchange (CFE).
Operating Expenses
Total operating expenses were $68.3 million for the quarter, up $0.8 million or 1 percent, compared with $67.5 million in the third quarter of 2012.
The company's core operating expenses, which include total operating expenses less volume-based expenses, depreciation and amortization, accelerated stock-based compensation expense and unusual or one-time expenses, were $44.8 million for the third quarter of 2013, down $1.3 million or 3 percent, compared with last year's third quarter. The decrease was primarily due to lower expenses for outside services, resulting from a decline in legal expenses.
Volume-based expenses, which include royalty fees and trading volume incentives, were $15.1 million in the third quarter of 2013, representing an increase of $2.3 million or 18 percent, compared with the same period last year. This increase reflects higher royalty fees of $2.5 million, offset somewhat by a decrease in trading volume incentives of $0.2 million. The higher royalty fees are directly related to the growth in trading volume in licensed index products, as well as certain fee adjustments implemented this year.
Operating Margin
The company's operating margin for the third quarter of 2013 increased 260 basis points to 50.0 percent compared with 47.4 percent for the same quarter last year.
Effective Tax Rate
The company reported an effective tax rate of 39.1 percent for the quarter versus 24.4 percent in last year's third quarter. The effective tax rate for the third quarter of 2012 benefited from the recognition of significant discrete items relating to 2012 and prior years. Discrete items recognized in the third quarter of 2012 relating to prior years totaled $7.7 million, or $0.09 per share. Excluding the discrete items relating to prior years, the effective tax rate for the third quarter of 2012 was 37.1 percent.
The company noted that it now expects its adjusted effective tax rate for the full-year 2013 to be in a range of 39.0 to 39.5 percent. The most significant differences in the effective rate and the statutory rate are state income taxes and discrete items relating to the current period.
Third Quarter 2013 Operational Highlights and Recent Developments
• | CFE plans to start trading CBOE Russell 2000 Volatility Index futures (VU) on Monday, November 18, 2013, with options trading on the CBOE Russell 2000 Volatility Index (RVX) in the weeks that follow. |
• | CBOE plans to list a Mini-SPX Index option (XSP) contract with a new PM-settlement feature beginning on Tuesday, November 5, 2013. |
• | On October 28, CFE completed the first phase of its extended trading hours initiative, adding an additional 45-minute extended trading hours period from 3:30 p.m. to 4:15 p.m. (Chicago time) Monday through Thursday. The launch date for the second phase of VIX futures extended trading hours will be Monday, November 4, 2013, which will add five hours to the trading day, extending VIX futures trading hours to 2:00 a.m. through 3:15 p.m. (Chicago time) Monday through Friday. |
• | On October 8, CBOE's VIX options established a new single-day volume record when nearly 1.8 million contracts traded. |
• | On October 1, CBOE began disseminating values for a new benchmark volatility index, the CBOE Short-Term Volatility Index (VXSTSM). Like the VIX® Index, the VXST Index reflects investors' consensus view of expected market volatility, but where the VIX Index has a 30-day horizon, the VXST Index looks out just nine days, making it particularly responsive to changes in short-term volatility. Plans call for CBOE and CFE to introduce VXST Weeklys options and futures - with launch dates yet to be determined and pending regulatory approval. |
• | On September 30 through October 2, CBOE hosted its second Risk Management Conference Europe near Lisbon, Portugal with about 150 in attendance, including institutional money managers and traders. During |
the conference, 31 speakers covering 14 sessions discussed options products, latest strategies and trends, with a focus on SPX options and VIX options and futures.
• | On July 1, CBOE began disseminating values for the CBOE EFA ETF Volatility Index (VXEFA), which expands investors' ability to track market volatility of major geographic regions outside of the United States. The index measures the volatility of the iShares MSCI EAFE Index Fund (EFA), an exchange traded product (ETP) that offers exposure to developed-market stocks in Europe, Australia, Asia and the Far East. |
2013 Fiscal Year Financial Guidance
Based on its year-to-date financial results, the company updated its 2013 fiscal year financial guidance as follows:
• | Capital expenditures are now expected to be in the range of $33.0 million to $36.0 million for the year, compared with the previous guidance range of $35.0 million to $40.0 million. |
• | Depreciation and amortization expense is now expected to be in the range of $34.0 million to $36.0 million for the year, down from the previous guidance range of $37.0 million to $39.0 million, due to lower than expected capital spending. |
• | Adjusted effective tax rate for the full-year 2013 is expected to be in the range of 39.0 percent to 39.5 percent, down from the previous guidance range of 39.5 percent to 40.0 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. |
The company reaffirmed the following 2013 financial guidance last provided in its August 2, 2013 earnings press release:
• | Core operating expenses are expected to be in the range of $189.0 million to $194.0 million. Continuing stock-based compensation expense included in core expenses is expected to be approximately $18.0 million for the full year. |
Return of Capital to Stockholders
As announced on October 24, 2013, CBOE Holdings' Board of Directors declared a fourth-quarter dividend of $0.18 per share, payable December 20, 2013, to stockholders of record on November 29, 2013.
During the third quarter of 2013 and through September 30, 2013, the company repurchased 306,300 shares of its common stock under its share repurchase program at an average price of $45.63 per share, for a total of $14.0 million. At September 30, 2013, the company had approximately $89.3 million of availability remaining under its existing share repurchase authorizations.
Earnings Conference Call
Executives of CBOE Holdings will host a conference call to review its third quarter financial results today, November 1, 2013, at 8:30 a.m. ET/7:30 a.m. CT. The conference call and any accompanying slides will be publicly available via live webcast from the Investor Relations section of the company's website at www.cboe.com under Events & Presentations. Participants may also listen via telephone by dialing (877) 372-0876 from the United States or Canada, or (253) 237-1167 for international callers. Telephone participants should place calls 10 minutes prior to the start of the call. The webcast will be archived on the company's website for replay. A telephone replay of the earnings call also will be available from approximately 11:00 a.m. CT, November 1, 2013, through 11:00 p.m. CT, November 8, 2013, by calling (855) 859-2056 within the U.S. and Canada, or (404) 537-3406 for international callers, using replay code 70236852.
About CBOE Holdings
CBOE Holdings, Inc. (NASDAQ: CBOE) is the holding company for Chicago Board Options Exchange (CBOE), CBOE Futures Exchange (CFE) and other subsidiaries. CBOE, the largest U.S. options exchange and creator of listed options, continues to set the bar for options and volatility trading through product innovation, trading technology and investor education. CBOE Holdings offers equity, index and ETP options, including proprietary products, such as S&P 500 options (SPX), the most active U.S. index option, and options and futures on the CBOE Volatility Index (the VIX Index). Other products engineered by CBOE include equity options, security index options, LEAPS options, FLEX
options, and benchmark products such as the CBOE S&P 500 BuyWrite Index (BXM). CBOE Holdings is home to the world-renowned Options Institute and www.cboe.com, the go-to place for options and volatility trading resources.
Forward-Looking Statements
This press release may contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those statements that reflect our expectations, assumptions or projections about the future and involve a number of risks and uncertainties. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause actual results to differ materially from that expressed or implied by the forward-looking statements, including: the loss of our right to exclusively list certain index option products; increasing price competition in our industry; compliance with legal and regulatory obligations and obligations under agreements with regulatory agencies; our ability to operate our business, monitor and maintain our systems or program them so that they operate correctly, including in response to increases in trading volume and order transaction traffic; decreases in the amount of trading volumes or a shift in the mix of products traded on our exchanges; legislative or regulatory changes; increasing competition by foreign and domestic entities; economic, political and market conditions; our ability to operate our business without violating the intellectual property rights of others and the costs associated with protecting our intellectual property rights; our ability to maintain access fee revenues; our ability to protect our systems and communication networks from security risks, including cyber-attacks; our ability to attract and retain skilled management and other personnel; our ability to maintain our growth effectively; our dependence on third party service providers; and the ability of our compliance and risk management methods to effectively monitor and manage our risks.
More detailed information about factors that may affect our performance may be found in our filings with the SEC, including in our Annual Report on Form 10-K for the year ended December 31, 2012 and other filings made from time to time with the SEC.
The condensed consolidated statements of income, balance sheets and statements of cash flows are unaudited and subject to reclassification.
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 | ||||
CBOE-F
Trademarks:
CBOE®, Chicago Board Options Exchange®, CFE®, FLEX®, LEAPS®, CBOE Volatility Index® and VIX® are registered trademarks and BuyWriteSM, BXMSM, CBOE Futures ExchangeSM, CBOE Short-Term Volatility IndexSM, Execute SuccessSM, RVXSM, SPXSM, The Options InstituteSM, XSPSM, VUSM and WeeklysSM are service marks of Chicago Board Options Exchange, Incorporated (CBOE). C2SM and C2 Options ExchangeSM are service marks of C2 Options Exchange, Incorporated (C2). Standard & Poor's®, S&P® and S&P 500® are registered trademarks of Standard & Poor's Financial Services LLC and have been licensed for use by CBOE, C2 and CFE. Russell 2000® is a registered trademark of Russell Investments, used under license. .All other trademarks and service marks are the property of their respective owners.
CBOE Holdings, Inc.
Selected Quarterly Operating Statistics
Average Daily Volume by Product (in thousands)
3Q 2013 | 2Q 2013 | 1Q 2013 | 4Q 2012 | 3Q 2012 | ||||||
PRODUCT: | ||||||||||
Equities | 1,767 | 1,595 | 1,604 | 1,617 | 1,964 | |||||
Indexes | 1,378 | 1,543 | 1,501 | 1,294 | 1,150 | |||||
Exchange-traded products | 1,322 | 1,641 | 1,107 | 1,091 | 1,124 | |||||
Total Options Average Daily Volume | 4,467 | 4,779 | 4,212 | 4,002 | 4,238 | |||||
Futures | 148 | 180 | 154 | 123 | 99 | |||||
Total Average Daily Volume | 4,615 | 4,959 | 4,366 | 4,125 | 4,337 | |||||
Mix of Trading Volume by Product
3Q 2013 | 2Q 2013 | 1Q 2013 | 4Q 2012 | 3Q 2012 | ||||||
PRODUCT: | ||||||||||
Equities | 38.3 | % | 32.2 | % | 36.7 | % | 39.2 | % | 45.3 | % |
Indexes | 29.9 | % | 31.1 | % | 34.4 | % | 31.4 | % | 26.5 | % |
Exchange-traded products | 28.6 | % | 33.1 | % | 25.4 | % | 26.4 | % | 25.9 | % |
Futures | 3.2 | % | 3.6 | % | 3.5 | % | 3.0 | % | 2.3 | % |
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
Average Revenue Per Contract by Product
3Q 2013 | 2Q 2013 | 1Q 2013 | 4Q 2012 | 3Q 2012 | |
Trading Days | 64 | 64 | 60 | 62 | 63 |
PRODUCT: | |||||
Equities | $0.077 | $0.090 | $0.140 | $0.134 | $0.118 |
Indexes | 0.669 | 0.675 | 0.671 | 0.670 | 0.682 |
Exchange-traded products | 0.123 | 0.119 | 0.155 | 0.186 | 0.177 |
Total Options Average Revenue Per Contract | 0.273 | 0.289 | 0.333 | 0.322 | 0.287 |
Futures | 1.559 | 1.544 | 1.618 | 1.442 | 1.606 |
Total Average Revenue Per Contract | $0.315 | $0.334 | $0.378 | $0.355 | $0.317 |
Transaction Fees by Product (in thousands)
3Q 2013 | 2Q 2013 | 1Q 2013 | 4Q 2012 | 3Q 2012 | |||||||||||
PRODUCT: | |||||||||||||||
Equities | $ | 8,741 | $ | 9,213 | $ | 13,509 | $ | 13,472 | $ | 14,645 | |||||
Indexes | 59,047 | 66,654 | 60,379 | 53,764 | 49,385 | ||||||||||
Exchange-traded products | 10,401 | 12,458 | 10,296 | 12,552 | 12,561 | ||||||||||
Total Options Transaction Fees | $ | 78,189 | $ | 88,325 | $ | 84,184 | $ | 79,788 | $ | 76,591 | |||||
Futures | 14,765 | 17,769 | 14,961 | 11,017 | 10,030 | ||||||||||
Total Transaction Fees | $ | 92,954 | $ | 106,094 | $ | 99,145 | $ | 90,805 | $ | 86,621 | |||||
Non-GAAP Information
In addition to disclosing results determined in accordance with GAAP, CBOE Holdings has disclosed certain non-GAAP measures of operating performance. These measures are not in accordance with, or a substitute for, GAAP, and may be different from or inconsistent with non-GAAP financial measures used by other companies. The non-GAAP measures provided in this press release include core operating expenses, adjusted operating expenses, adjusted operating income, adjusted operating margin, adjusted net income, adjusted net income allocated to common stockholders and adjusted diluted earnings per share.
Management believes that the non-GAAP financial measures presented in this press release, including adjusted net income and core operating expenses, provide useful and comparative information to assess trends in our core operations and a means to evaluate period-to-period comparisons. Non-GAAP financial measures disclosed by management, including adjusted diluted EPS, are provided as additional information to investors in order to provide them with an alternative method for assessing our financial condition and operating results.
The table below shows core operating expenses, which is the company's operating expenses after excluding (i) volume-based expenses, (ii) depreciation and amortization expense, (iii) accelerated stock-based compensation expense and (iv) other unusual or one-time expenses.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(in thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
Total Operating Expenses | $ | 68,316 | $ | 67,458 | $ | 217,005 | $ | 197,915 | ||||||||
Less: | ||||||||||||||||
Depreciation and amortization | 8,476 | 8,634 | 25,380 | 25,274 | ||||||||||||
Accelerated stock-based compensation expense | — | — | 3,996 | 194 | ||||||||||||
Additional expense related to SEC investigation (in Other expenses) | — | — | 1,000 | — | ||||||||||||
Volume-based expenses: | ||||||||||||||||
Royalty fees | 13,844 | 11,304 | 41,531 | 34,496 | ||||||||||||
Trading volume incentives | 1,207 | 1,423 | 3,128 | 5,248 | ||||||||||||
Core Operating Expenses (non-GAAP): | $ | 44,789 | $ | 46,097 | $ | 141,970 | $ | 132,703 | ||||||||
Less: Continuing stock-based compensation expense | 3,918 | 3,082 | 12,871 | 8,854 | ||||||||||||
Core Operating Expenses Excluding Continuing Stock-Based Compensation (non-GAAP) | $ | 40,871 | $ | 43,015 | $ | 129,099 | $ | 123,849 | ||||||||
Detail of Core Operating Expenses (non-GAAP) | ||||||||||||||||
Employee costs | $ | 27,951 | $ | 27,166 | $ | 86,029 | $ | 77,562 | ||||||||
Data processing | 4,552 | 5,070 | 13,613 | 14,896 | ||||||||||||
Outside services | 7,938 | 9,075 | 28,606 | 25,510 | ||||||||||||
Travel and promotional expenses | 1,894 | 2,548 | 6,552 | 8,018 | ||||||||||||
Facilities costs | 1,308 | 1,268 | 3,808 | 3,797 | ||||||||||||
Other expenses | 1,146 | 970 | 3,362 | 2,920 | ||||||||||||
Total | $ | 44,789 | $ | 46,097 | $ | 141,970 | $ | 132,703 | ||||||||
The table below shows the reconciliation of each financial measure from GAAP to non-GAAP. The non-GAAP financial measures exclude the impact of those items detailed in the footnotes below and are referred to as adjusted financial measures. There were no non-GAAP financial measures in the third quarter of 2013.
(in thousands, except per share amounts) | Three months ended September 30, 2012 | |||||||||
Items Impacting Results | ||||||||||
Reported (GAAP) | Income tax adjustments1 | After Considering Items (non-GAAP) | ||||||||
Total Operating Revenues | $ | 128,319 | $ | 128,319 | ||||||
Total Operating Expenses | 67,458 | 67,458 | ||||||||
Operating Income | 60,861 | 60,861 | ||||||||
Operating Margin | 47.4 | % | 47.4 | % | ||||||
Total Other Income/(Expense) | (327 | ) | (327 | ) | ||||||
Income Before Income Taxes | 60,534 | 60,534 | ||||||||
Income Tax Provision | 14,776 | 7,654 | 22,430 | |||||||
Effective Income Tax Rate | 24.4 | % | 37.1 | % | ||||||
Net Income | $ | 45,758 | $ | (7,654 | ) | $ | 38,104 | |||
Net Income Allocated to Participating Securities | (515 | ) | 86 | (429 | ) | |||||
Net Income Allocated to Common Stockholders | $ | 45,243 | $ | (7,568 | ) | $ | 37,675 | |||
Diluted Net Income per Share Allocated to Common Stockholders | $ | 0.52 | $ | (0.09 | ) | $ | 0.43 | |||
(in thousands, except per share amounts) | Nine months ended September 30, 2013 | Nine months ended September 30, 2012 | |||||||||||||||||||||||||||
Items Impacting Results | Items Impacting Results | ||||||||||||||||||||||||||||
Reported (GAAP) | Operating Expenses2 | Operating Expenses3 | Other Income/(Expense)4 | After Considering Items (non-GAAP) | Reported (GAAP) | Income tax adjustments1 | Operating Expenses2 | After Considering Items (non-GAAP) | |||||||||||||||||||||
Total Operating Revenues | $ | 430,220 | $ | 430,220 | $ | 382,261 | $ | 382,261 | |||||||||||||||||||||
Total Operating Expenses | 217,005 | (3,996 | ) | (1,000 | ) | 212,009 | 197,915 | (194 | ) | 197,721 | |||||||||||||||||||
Operating Income | 213,215 | 3,996 | 1,000 | 218,211 | 184,346 | 194 | 184,540 | ||||||||||||||||||||||
Operating Margin | 49.6 | % | 50.7 | % | 48.2 | % | 48.3 | % | |||||||||||||||||||||
Total Other Income/(Expense) | (1,712 | ) | 245 | (1,467 | ) | (1,193 | ) | (1,193 | ) | ||||||||||||||||||||
Income Before Income Taxes | 211,503 | 3,996 | 1,000 | 245 | 216,744 | 183,153 | 194 | 183,347 | |||||||||||||||||||||
Income Tax Provision | 81,614 | 1,533 | — | 92 | 83,239 | 65,482 | 7,654 | 80 | 73,216 | ||||||||||||||||||||
Effective Income Tax Rate | 38.6 | % | 38.4 | % | 35.8 | % | 39.9 | % | |||||||||||||||||||||
Net Income | $ | 129,889 | $ | 2,463 | $ | 1,000 | $ | 153 | $ | 133,505 | $ | 117,671 | $ | (7,654 | ) | $ | 114 | $ | 110,131 | ||||||||||
Net Income Allocated to Participating Securities | (1,669 | ) | (35 | ) | (14 | ) | (2 | ) | (1,720 | ) | (1,690 | ) | 110 | (2 | ) | (1,582 | ) | ||||||||||||
Net Income Allocated to Common Stockholders | $ | 128,220 | $ | 2,428 | $ | 986 | $ | 151 | $ | 131,785 | $ | 115,981 | $ | (7,544 | ) | $ | 112 | $ | 108,549 | ||||||||||
Diluted Net Income per Share Allocated to Common Stockholders | $ | 1.47 | $ | 0.03 | $ | 0.01 | $ | — | $ | 1.51 | $ | 1.33 | $ | (0.09 | ) | $ | — | $ | 1.24 | ||||||||||
NOTES: Amounts may not foot due to rounding.
1) | In the third quarter of 2012, the company recorded tax benefits relating to significant discrete items. |
2) | In the first and second quarters of 2013 and the first quarter of 2012, the company accelerated the vesting of certain stock awards. |
3) | In the second quarter of 2013, the company recognized additional expense for the final resolution of an SEC investigation. |
4) | 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 and Nine Months Ended September 30, 2013 and 2012 | |||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
(in thousands, except per share amounts) | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Operating Revenues: | |||||||||||||||||
Transaction fees | $ | 92,954 | $ | 86,621 | $ | 298,193 | $ | 266,341 | |||||||||
Access fees | 15,029 | 15,965 | 45,709 | 48,107 | |||||||||||||
Exchange services and other fees | 9,213 | 7,771 | 27,616 | 23,072 | |||||||||||||
Market data fees | 6,658 | 6,101 | 17,924 | 18,850 | |||||||||||||
Regulatory fees | 8,937 | 5,711 | 29,076 | 14,487 | |||||||||||||
Other revenue | 3,952 | 6,150 | 11,702 | 11,404 | |||||||||||||
Total Operating Revenues | 136,743 | 128,319 | 430,220 | 382,261 | |||||||||||||
Operating Expenses: | |||||||||||||||||
Employee costs | 27,951 | 27,166 | 90,025 | 77,756 | |||||||||||||
Depreciation and amortization | 8,476 | 8,634 | 25,380 | 25,274 | |||||||||||||
Data processing | 4,552 | 5,070 | 13,613 | 14,896 | |||||||||||||
Outside services | 7,938 | 9,075 | 28,606 | 25,510 | |||||||||||||
Royalty fees | 13,844 | 11,304 | 41,531 | 34,496 | |||||||||||||
Trading volume incentives | 1,207 | 1,423 | 3,128 | 5,248 | |||||||||||||
Travel and promotional expenses | 1,894 | 2,548 | 6,552 | 8,018 | |||||||||||||
Facilities costs | 1,308 | 1,268 | 3,808 | 3,797 | |||||||||||||
Other expenses | 1,146 | 970 | 4,362 | 2,920 | |||||||||||||
Total Operating Expenses | 68,316 | 67,458 | 217,005 | 197,915 | |||||||||||||
Operating Income | 68,427 | 60,861 | 213,215 | 184,346 | |||||||||||||
Other Income / (Expense): | |||||||||||||||||
Investment income | 21 | 41 | 42 | 89 | |||||||||||||
Net loss from investment in affiliates | (538 | ) | (368 | ) | (1,754 | ) | (1,282 | ) | |||||||||
Total Other Expense | (517 | ) | (327 | ) | (1,712 | ) | (1,193 | ) | |||||||||
Income Before Income Taxes | 67,910 | 60,534 | 211,503 | 183,153 | |||||||||||||
Income tax provision | 26,554 | 14,776 | 81,614 | 65,482 | |||||||||||||
Net Income | 41,356 | 45,758 | 129,889 | 117,671 | |||||||||||||
Net income allocated to participating securities | (401 | ) | (515 | ) | (1,669 | ) | (1,690 | ) | |||||||||
Net Income Allocated to Common Stockholders | $ | 40,955 | $ | 45,243 | $ | 128,220 | $ | 115,981 | |||||||||
Net Income Per Share Allocated to Common Stockholders | |||||||||||||||||
Basic | $ | 0.47 | $ | 0.52 | $ | 1.47 | $ | 1.33 | |||||||||
Diluted | 0.47 | 0.52 | 1.47 | 1.33 | |||||||||||||
Weighted average shares used in computing income per share: | |||||||||||||||||
Basic | 87,647 | 87,272 | 87,421 | 87,523 | |||||||||||||
Diluted | 87,647 | 87,272 | 87,421 | 87,523 | |||||||||||||
CBOE Holdings, Inc. and Subsidiaries | |||||||
Condensed Consolidated Balance Sheets (Unaudited) | |||||||
September 30, 2013 and December 31, 2012 | |||||||
(in thousands, except share amounts) | September 30, 2013 | December 31, 2012 | |||||
Assets | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 226,378 | $ | 135,597 | |||
Accounts receivable—net allowances of $344 and $340 | 50,131 | 45,666 | |||||
Marketing fee receivable | 8,712 | 5,216 | |||||
Income taxes receivable | 16,440 | 11,717 | |||||
Other prepaid expenses | 6,609 | 4,146 | |||||
Other current assets | 659 | 567 | |||||
Total Current Assets | 308,929 | 202,909 | |||||
Investments in Affiliates | 14,034 | 14,270 | |||||
Land | 4,914 | 4,914 | |||||
Property and Equipment: | |||||||
Construction in progress | 1,713 | 89 | |||||
Building | 63,533 | 62,442 | |||||
Furniture and equipment | 269,384 | 263,155 | |||||
Less accumulated depreciation and amortization | (265,379 | ) | (251,642 | ) | |||
Total Property and Equipment—Net | 69,251 | 74,044 | |||||
Other Assets: | |||||||
Software development work in progress | 10,036 | 4,370 | |||||
Data processing software and other assets (less accumulated amortization of $143,782 and $133,862) | 33,986 | 38,351 | |||||
Total Other Assets—Net | 44,022 | 42,721 | |||||
Total | $ | 441,150 | $ | 338,858 | |||
Liabilities and Stockholders' Equity | |||||||
Current Liabilities: | |||||||
Accounts payable and accrued expenses | $ | 46,985 | $ | 45,148 | |||
Marketing fee payable | 9,251 | 5,808 | |||||
Deferred revenue | 9,131 | 1,084 | |||||
Post-retirement medical benefits | 30 | 110 | |||||
Total Current Liabilities | 65,397 | 52,150 | |||||
Long-term Liabilities: | |||||||
Post-retirement medical benefits | 2,216 | 1,794 | |||||
Income taxes liability | 27,788 | 20,857 | |||||
Other long-term liabilities | 3,878 | 3,946 | |||||
Deferred income taxes | 16,472 | 20,989 | |||||
Total Long-term Liabilities | 50,354 | 47,586 | |||||
Total Liabilities | 115,751 | 99,736 | |||||
Commitments and Contingencies | |||||||
Stockholders' Equity | |||||||
Preferred stock, $0.01 par value: 20,000,000 shares authorized, no shares issued and outstanding at September 30, 2013 or December 31, 2012 | — | — | |||||
Unrestricted common stock, $0.01 par value: 325,000,000 shares authorized; 91,845,492 issued and 87,396,837 outstanding at September 30, 2013; 91,270,274 issued and 87,271,683 outstanding at December 31, 2012 | 919 | 913 | |||||
Additional paid-in-capital | 87,029 | 67,812 | |||||
Retained Earnings | 362,831 | 275,491 | |||||
Treasury stock at cost – 4,448,655 shares at September 30, 2013 and 3,998,591 shares at December 31, 2012 | (124,314 | ) | (104,201 | ) | |||
Accumulated other comprehensive loss | (1,066 | ) | (893 | ) | |||
Total Stockholders' Equity | 325,399 | 239,122 | |||||
Total | $ | 441,150 | $ | 338,858 | |||
CBOE Holdings, Inc. and Subsidiaries | |||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) | |||||||
Nine months ended September 30, 2013 and 2012 | |||||||
Nine Months Ended September 30, | |||||||
(in thousands) | 2013 | 2012 | |||||
Cash Flows from Operating Activities: | |||||||
Net Income | $ | 129,889 | $ | 117,671 | |||
Adjustments to reconcile net income to | |||||||
net cash flows from operating activities: | |||||||
Depreciation and amortization | 25,380 | 25,274 | |||||
Other amortization | 86 | 66 | |||||
Provision for deferred income taxes | (4,407 | ) | 387 | ||||
Stock-based compensation | 16,867 | 9,048 | |||||
Loss on disposition of property | 3 | — | |||||
Loss on investment in affiliates | 1,509 | 1,282 | |||||
Impairment of investment in affiliates and other assets | 245 | — | |||||
Net change in assets and liabilities | 2,792 | (12,860 | ) | ||||
Net Cash Flows provided by Operating Activities | 172,364 | 140,868 | |||||
Cash Flows from Investing Activities: | |||||||
Capital and other asset expenditures | (19,767 | ) | (26,829 | ) | |||
Investment in affiliates | (1,518 | ) | (1,234 | ) | |||
Other | 8 | — | |||||
Net Cash Flows used in Investing Activities | (21,277 | ) | (28,063 | ) | |||
Cash Flows from Financing Activities: | |||||||
Payment of quarterly dividends | (42,549 | ) | (34,589 | ) | |||
Purchase of unrestricted stock from employees | (6,136 | ) | (3,127 | ) | |||
Excess tax benefit from stock-based compensation | 2,356 | — | |||||
Purchase of unrestricted stock under repurchase program | (13,977 | ) | (49,744 | ) | |||
Net Cash Flows used in Financing Activities | (60,306 | ) | (87,460 | ) | |||
Net Increase in Cash and Cash Equivalents | 90,781 | 25,345 | |||||
Cash and Cash Equivalents at Beginning of Period | 135,597 | 134,936 | |||||
Cash and Cash Equivalents at End of Period | $ | 226,378 | $ | 160,281 | |||
Supplemental Disclosure of Cash Flow Information | |||||||
Cash paid for income taxes | $ | 81,475 | $ | 69,423 | |||
Non-cash activities: | |||||||
Unpaid liability to acquire equipment and software | $ | 2,887 | $ | 923 | |||