IntercontinentalExchange(R), Inc. (NYSE: ICE), a leading operator of regulated global exchanges and over-the-counter (OTC) markets, today reported that consolidated revenues in the first quarter rose to a record $232 million, a 12% increase over first quarter 2008 revenues of $207 million. Consolidated net income for the first quarter of 2009 was $72 million, a 22% decrease compared to $92 million for the prior first quarter. Adjusted to exclude $13 million in pre-tax charges related to ICE's acquisition of The Clearing Corporation (TCC) and other restructuring charges, non-GAAP, or adjusted, net income for the quarter was $80 million, a decrease of 13% compared to the first quarter of 2008. Diluted earnings per share (EPS) in the first quarter were $0.98. Adjusted to exclude the acquisition and other restructuring charges, diluted EPS for the quarter were $1.09, down 16% compared to the prior year's first quarter.
Volume in ICE's futures segment, comprising ICE Futures Europe(R), ICE Futures U.S.(R) and ICE Futures Canada(R), reached a record 63 million contracts in the first quarter of 2009, a modest increase over the same period in 2008. In the first three months of 2009, average daily volume (ADV) for ICE Futures Europe was 638,055 contracts; ADV for ICE Futures U.S. and ICE Futures Canada was 360,909 contracts. Average daily commissions (ADC) for ICE's OTC energy markets during the first quarter of 2009 were $1.1 million, a decline of 16% from the same period in 2008. Creditex Group Inc., ICE's wholly-owned credit derivatives subsidiary, had brokerage revenues of $36 million in the first quarter of 2009, which are also reflected in ICE's OTC segment.
Said ICE Chairman and CEO Jeffrey C. Sprecher: "ICE continues to dedicate significant resources to risk management services and execute on our strategic objectives globally, while remaining focused on our customers' needs amid uncertainty in the broader financial markets. Despite the challenging environment, ICE has delivered the leading clearing solution to the credit derivatives market, as well as record OTC and ICE Futures Europe revenues. In addition to our robust futures markets, we are bringing leadership to the OTC markets with unparalleled capabilities in execution, processing and clearing."
"Our consistently solid cash performance enables us to invest in growth opportunities that position us well for the eventual recovery of the financial markets. ICE has a solid track record of prudent investment and delivering on acquisition synergies, and we've maintained this focus during the pronounced economic downturn over the past year, all while producing industry-leading growth. The strong participation in our new credit facilities demonstrates confidence in our strategies and business model, and we believe it supports our ability to continue to act opportunistically," said ICE CFO Scott Hill.
First Quarter 2009 Results
ICE's first quarter 2009 consolidated revenues increased 12% to $232 million compared to $207 million in the first quarter of 2008. Consolidated transaction and clearing revenues increased 15% to $203 million in the first quarter of 2009, from $177 million during the same period in 2008. The increase in transaction and clearing revenue was driven primarily by new products, strong trading volume in ICE's futures segment, the launch of ICE Clear Europe in November 2008, an increase of participants in ICE's markets and the Creditex acquisition. Total volume for ICE Futures Europe represented the highest quarterly contract volume in exchange history.
Transaction and clearing revenues in ICE's consolidated futures segment totaled $98 million in the first quarter of 2009, an increase of 1% over $97 million in the same period in 2008. First quarter 2009 volume for all ICE futures exchanges was 63 million contracts, in-line with first quarter 2008 volume. ICE Futures Europe quarterly volume was 40 million contracts, and ADV was 638,055 contracts, up 4% over the first quarter of 2008. The average rate per contract (RPC) for ICE Futures Europe in the first quarter of 2009 was $1.57. ICE Futures U.S. and ICE Futures Canada recorded first quarter volume of 22 million contracts and 1 million contracts, respectively. ADV for ICE Futures U.S. was 345,984 contracts in the first quarter of 2009, down 7% compared to the first quarter of 2008. RPC for ICE Futures U.S. agricultural futures and options contracts was $2.34, and the RPC for financial contracts averaged $0.78 in the first quarter of 2009. ADV for ICE Futures Canada was 14,925 contracts during the first quarter compared to 18,190 in the year-ago period.
First quarter 2009 transaction and clearing revenues in ICE's global OTC segment increased 32% to $105 million, compared to $80 million for the comparable period in 2008. In ICE's OTC energy markets, ADC were $1.1 million, a decline of 16% from $1.3 million in the same period of 2008. Cleared contracts accounted for 96% of OTC energy contract volume during the first quarter of 2009. In ICE's credit derivative markets, first quarter revenues were $38 million, down 31% versus the same period in 2008 on a pro- forma basis. ICE did not own Creditex in the first quarter of 2008.
Consolidated market data revenues increased 6% during the first quarter of 2009 to $26 million compared to $25 million in the same period in 2008. Consolidated other revenues were $2 million during the first quarter of 2009, compared to $5 million in the prior first quarter. The reduction in consolidated other revenue is due primarily to interest payments made to ICE Clear Europe member clearing firms.
Consolidated operating expenses increased $55 million to $118 million for the first quarter of 2009 versus operating expenses of $63 million in the same period in 2008. The increase was primarily driven by $31 million of expenses relating to Creditex's business following ICE's acquisition during the third quarter of 2008, as well as investment in growth initiatives. Amortization expenses on acquired intangibles were $16 million for the first quarter of 2009 compared to $3 million in the same period of 2008, and included $6 million related to the Creditex acquisition and $6 million related to ICE's exclusive Russell Index license.
Consolidated operating expenses also include pre-tax charges of $13 million related to ICE's acquisition of TCC and other restructuring charges incurred during the first quarter of 2009. Consistent with new accounting standard SFAS No. 141( R ), which requires transaction costs to be expensed, ICE recognized transaction costs related to the acquisition of TCC of $6 million, as well as start-up expenses related to the launch of its credit default swap clearing house, ICE Trust(TM), of $1 million during the first quarter of 2009. The revenues and operating expenses associated with TCC and ICE Trust were not material to ICE's first quarter 2009 financial results. In addition to the TCC and ICE Trust charges, ICE incurred costs of $3 million during the first quarter related to headcount reductions of 7%, as well as a charge of $3 million related to the lease termination and asset write-offs for certain office space vacated by ICE Futures U.S.
First quarter 2009 consolidated operating income was $114 million, a decrease of 21% compared to the first quarter of 2008, and operating margin was 49%. Adjusting for the TCC acquisition and other charges noted above, consolidated operating margin was 55% for the first quarter of 2009, compared to 70% for the same period in 2008.
The effective tax rate for the first quarter of 2009 was 33.8% compared to 35.2% for the prior first quarter. The decrease in the tax rate was primarily due to a higher proportion of taxable income earned outside of the United States, which is taxed at lower rates.
First quarter 2009 consolidated cash flow from operations was $68 million. Capital expenditures were $4 million, and capitalized software development costs totaled $4 million in the first quarter of 2009.
Unrestricted cash and short-term investments were $233 million as of March 31, 2009. At the end of the quarter, ICE had $370 million in outstanding debt.
Guidance and Additional Information
- ICE had 803 employees as of March 31, 2009. For the full year, headcount is expected to be roughly flat from current levels, excluding any personnel additions relating to merger and acquisition activity in the remainder of 2009.
- ICE's consolidated tax rate is expected to be in the range of 34% to 36% for 2009.
- ICE's diluted share count for the second quarter of 2009 is expected to be in the range of 73.6 million to 74.2 million weighted average shares outstanding, and the diluted share count for fiscal year 2009 to be in the range of 73.5 million to 74.5 million weighted average shares outstanding. ICE's remaining capacity in its share repurchase program is approximately $200 million.
- For the period of April through December 2009, ICE expects to earn aggregate revenues in the range of $20 million to $30 million from ICE Trust and TCC. Specifically, second quarter revenues are expected to be approximately $7 million to $9 million. Operating expenses are expected to be in the range of $6 million to $8 million per quarter. The 50/50 profit sharing arrangement in place between ICE Trust and the former TCC shareholders does not fully commence until April 2010. Prior to this date, ICE will retain 86% of ICE Trust profits.
Earnings Conference Call Information
ICE will hold a conference call today, May 5, at 8:30 a.m. ET to review its first quarter 2009 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) 596-2611 if calling from the United States, or (913) 312-1472 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 4800034.
Historical futures volume and OTC commission data can be found at: