UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): February 5, 2018

 

INTERCONTINENTAL EXCHANGE, INC.

(Exact Name of Registrant as Specified in Charter)

 

Delaware 001-36198 46-2286804
(State or other jurisdiction of incorporation)

(Commission

File No.)

(I.R.S. Employer Identification Number)

 

5660 New Northside Drive, Third Floor, Atlanta, Georgia 30328

(Address of Principal Executive Offices) (Zip Code)

 

Registrant’s telephone number, including area code: (770) 857-4700

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

  

 

 

 

 

 

Item 2.02   Results of Operations and Financial Condition.

 

                On February 7, 2018, Intercontinental Exchange, Inc. (“ICE”) issued a press release announcing its financial results for the fiscal quarter and year ended December 31, 2017.  A copy of the press release announcing such financial results is attached as Exhibit 99.1 to this Current Report on Form 8-K.

 

                The information contained herein, including the attached press release, is furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934 except as may be expressly set forth by specific reference in such filing.

 

                ICE makes references to non-GAAP financial information in the attached press release.  A description of the non-GAAP financial information and a reconciliation of the non-GAAP financial information to the comparable GAAP financial measures are contained in the attached press release and ICE’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

 

Item 5.02   Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

Effective February 8, 2018, Dean Mathison will cease to serve as the Chief Accounting Officer, Corporate Controller and principal accounting officer of ICE.  Mr. Mathison is in the process of winding down his employment with ICE and will continue to work at ICE as Senior Vice President, Accounting until April 30, 2018 to facilitate an orderly transition of his responsibilities.

 

Effective February 8, 2018, James Namkung, age 42, will serve as ICE’s Chief Accounting Officer, Corporate Controller and principal accounting officer.  Mr. Namkung has served as ICE’s Vice President, Assistant Controller since 2014 and previously served as ICE’s Assistant Controller from 2006 to 2014 and Accounting Director from 2001 to 2006. Mr. Namkung is a graduate of the University of Tennessee.

 

Mr. Namkung does not have a direct or indirect material interest in any transaction with ICE that requires disclosure pursuant to Item 404(a) of Regulation S-K and there is no arrangement or understanding between Mr. Namkung and any other person pursuant to which Mr. Namkung was selected to serve as ICE’s Chief Accounting Officer, Corporate Controller and principal accounting officer. Mr. Namkung is not related to any member of the Board of Directors or executive officers of ICE. Mr. Namkung’s employment agreement is not being amended in connection with this change and he will continue to participate in the same compensation and benefits plans as he did prior to becoming Chief Accounting Officer, Corporate Controller and principal accounting officer. Mr. Namkung is party to ICE’s standard form employment agreement, the form of which was filed as Exhibit 10.6 to ICE’s Current Report on Form 8-K filed on February 24, 2012, and is incorporated herein by reference.

 

The change in Chief Accounting Officer, Corporate Controller and principal accounting officer was not a result of any disagreement on any matter relating to ICE’s accounting practices, operations or policies.

 

Item 9.01   Financial Statements and Exhibits.

 

                (d)  Exhibits

 

                 99.1      Press Release dated February 7, 2018.

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.

 

  INTERCONTINENTAL EXCHANGE, INC.
   
  /s/ Andrew J. Surdykowski
  Andrew J. Surdykowski
  Senior Vice President, Associate General Counsel

 

Date: February 7, 2018

 

 

 

 

Exhibit 99.1

 

 

Intercontinental Exchange Reports Fourth Quarter 2017 GAAP Diluted EPS of $2.08 on Revenues of $1.1 Billion; Fourth Quarter 2017 Adjusted Diluted EPS of $0.73

 

Record full year 2017 revenues less transaction-based expenses of $4.6 billion, +3% y/y

 

Full year 2017 GAAP diluted EPS of $4.23, +78% y/y; Adj. diluted EPS of $2.95, +6% y/y

 

Announces first quarter 2018 dividend of $0.24/share; an increase of 20% y/y
     
  Repurchased $103 million in shares during January

 

 

ATLANTA & NEW YORK, February 7, 2018 - Intercontinental Exchange (NYSE: ICE), the leading global network of exchanges and clearing houses and provider of global data and listing services, today reported financial results for the fourth quarter and full year of 2017. For the quarter ended December 31, 2017, consolidated net income attributable to ICE was $1.2 billion on $1.1 billion of consolidated revenues less transaction-based expenses. This included $764 million of a deferred tax benefit related to U.S. tax reform. Fourth quarter GAAP diluted earnings per share (EPS) were $2.08. On an adjusted basis, consolidated net income attributable to ICE was $433 million in the fourth quarter, and diluted EPS were $0.73.

 

For the full year of 2017 consolidated net income attributable to ICE was $2.5 billion on $4.6 billion of consolidated revenues less transaction-based expenses. Full year 2017 GAAP diluted EPS were $4.23. On an adjusted basis, consolidated net income attributable to ICE was $1.8 billion for the full year of 2017, and diluted EPS were $2.95. Please refer to the reconciliation of non-GAAP financial measures included in this press release for more information on adjusted operating expenses, adjusted net income and adjusted diluted EPS.

 

"We are pleased to deliver our twelfth consecutive year of record revenue," said ICE Chairman and CEO Jeffrey C. Sprecher. "We achieved this by executing on our strategy to deliver best-in-class trading, clearing, listings and information services while continuing to expand our range of content and distribution solutions to meet the evolving needs of the market. As we look to 2018 and beyond, we are focused on innovation and growth to serve our customers and build shareholder value.”

 

Scott A. Hill, ICE CFO, added: “In addition to investing in growth, we returned more capital to shareholders in 2017 than any year in our history enabled by another year of record revenue, disciplined expense management and strong cash flow. We remain committed to creating long-term value for our shareholders through operational execution and strategic investments to build on our track record of growth."

 

 

Fourth Quarter 2017 GAAP Results

Fourth quarter 2017 consolidated revenues, less transaction-based expenses, were $1.1 billion. Trading and clearing segment revenues, less transaction-based expenses, were $517 million in the fourth quarter 2017. Data and listings segment revenues were $627 million in the fourth quarter of 2017, including data services revenues of $525 million and listings revenues of $102 million. Fourth quarter data services revenues were reduced by $4 million due to the sale of Trayport on December 14, 2017.

 

 

 

 

 

 

 

 

Consolidated operating expenses were $552 million for the fourth quarter of 2017. On an adjusted basis, consolidated operating expenses were $479 million. Consolidated operating income for the fourth quarter was $592 million and operating margin was 52%. The effective tax rate for the fourth quarter was (84)% driven by a $764 million deferred tax benefit related to U.S. tax reform.

 

 

Full Year 2017 GAAP Results

Full year 2017 consolidated revenues, less transaction-based expenses, were $4.6 billion. Trading and clearing segment revenues, less transaction-based expenses, were $2.1 billion, in 2017. Data and listings segment revenues were $2.5 billion in 2017, including data services revenues of $2.1 billion and listings revenues of $417 million.

 

Consolidated operating expenses were $2.3 billion for 2017. On an adjusted basis, consolidated operating expenses were $1.9 billion. Consolidated operating income for 2017 was $2.4 billion and operating margin was 51%. The effective tax rate for 2017 was (1)% driven by a $764 million deferred tax benefit related to U.S. tax reform.

 

Consolidated cash flows from operations were $2.1 billion for the full year of 2017. Operational capital expenditures in 2017 were $179 million and capitalized software development costs totaled $137 million.

 

Unrestricted cash was $535 million and outstanding debt was $6.1 billion as of December 31, 2017.

 

Financial Guidance

Based on ICE's outlook for continued solid top-line growth and ongoing integration and expense synergies, ICE provided the following guidance for 2018.

 

  GAAP Non-GAAP
2018 Operating Expenses $2.26 - $2.31 billion $2.00 - $2.05 billion (1)
1Q18 Operating Expenses $565 - $575 million $495 - $505 million (1)
1Q18 Interest Expense $52 million
2018 Expense Synergies $30 million
2018 Capital Expenditures $300 - $330 million for operational, non- operational capital expenditures and capitalized development
2018 Effective Tax Rate 22% - 25%
1Q18 Weighted Average Shares Outstanding 582 - 592 million shares reflected for January 2018 share repurchases

 

 

(1) 2018 and 1Q18 Non-GAAP operating expenses exclude amortization of acquisition-related intangibles.

 

 

 

 

 

 

Earnings Conference Call Information

 

ICE will hold a conference call today, February 7, at 8:30 a.m. ET to review its fourth quarter and full year 2017 financial results. A live audio webcast of the earnings call will be available on the company's website at www.theice.com in the investor relations section. Participants may also listen via telephone by dialing 888-317-6003 from the United States, 866-284-3684 from Canada or 412-317-6061 from outside of the United States and Canada. Telephone participants are required to provide the participant entry number 9294662 and are recommended to call 10 minutes prior to the start of the call . The call will be archived on the company's website for replay.

 

The conference call for the first quarter 2018 earnings has been scheduled for May 3, 2018 at 8:30 a.m. ET. Please refer to the Investor Relations website at www.ir.theice.com for additional information.

 

Historical futures, options and cash ADV, rate per contract, open interest data and CDS cleared information can be found at: http://ir.theice.com/investors-and-media/supplemental-volume-info/default.aspx

 

 

 

 

 

 

 

 

 

Consolidated Statements of Income

(In millions, except per share amounts)

 

  Year Ended December 31 Three Months Ended
 December 31,
Revenues: 2017 2016 2017 2016
Transaction and clearing, net $ 3,131   $ 3,384   $ 758   $ 818  
Data services 2,084   1,978   525   515  
Listings 417   419   102   105  
Other revenues 202   177   54   46  
Total revenues 5,834   5,958   1,439   1,484  
Transaction-based expenses:        
Section 31 fees 372   389   97   99  
Cash liquidity payments, routing and clearing 833   1,070   198   247  
Total revenues, less transaction-based expenses 4,629   4,499   1,144   1,138  
Operating expenses:        
Compensation and benefits 937   945   227   237  
Professional services 121   137   27   36  
Acquisition-related transaction and integration costs 36   80   9   19  
Technology and communication 397   374   103   97  
Rent and occupancy 69   70   17   18  
Selling, general and administrative 155   116   38   33  
Depreciation and amortization 535   610   131   140  
Total operating expenses 2,250   2,332   552   580  
Operating income 2,379   2,167   592   558  
Other income (expense):        
Interest expense (187 ) (178 ) (50 ) (44 )
Other income, net 325   40   127   16  
Other income (expense), net 138   (138 ) 77   (28 )
Income before income tax expense (benefit) 2,517   2,029   669   530  
Income tax expense (benefit) (25 ) 580   (562 ) 171  
Net income 2,542   1,449   1,231   359  
Net income attributable to non-controlling interest (28 ) (27 ) (6 ) (7 )
Net income attributable to Intercontinental Exchange, Inc. $ 2,514   $ 1,422   $ 1,225   $ 352  
         
Earnings per share attributable to Intercontinental Exchange, Inc. common shareholders:        
Basic $ 4.27   $ 2.39   $ 2.10   $ 0.59  
Diluted $ 4.23   $ 2.37   $ 2.08   $ 0.59  
Weighted average common shares outstanding:        
Basic 589   595   584   595  
Diluted 594   599   589   600  
Dividend per share $ 0.80   $ 0.68   $ 0.20   $ 0.17  

 

 

 

 

 

 

 

Consolidated Balance Sheets

(In millions)

 

  As of As of
  December 31, 2017 December 31, 2016
Assets:    
Current assets:    
Cash and cash equivalents $ 535   $ 407  
Short-term restricted cash and cash equivalents 769   679  
Short-term investments 16   23  
Customer accounts receivable, net 903   777  
Margin deposits, guaranty funds and delivery contracts receivable 51,222   55,150  
Prepaid expenses and other current assets 117   97  
Total current assets 53,562   57,133  
Property and equipment, net 1,246   1,129  
Other non-current assets:    
Goodwill 12,216   12,291  
Other intangible assets, net 10,269   10,420  
Long-term restricted cash and cash equivalents 264   264  
Long-term investments   432  
Other non-current assets 707   334  
Total other non-current assets 23,456   23,741  
Total assets $ 78,264   $ 82,003  
     
Liabilities and Equity:    
Current liabilities:    
Accounts payable and accrued liabilities $ 462   $ 388  
Section 31 fees payable 128   131  
Accrued salaries and benefits 227   230  
Deferred revenue 121   114  
Short-term debt 1,833   2,493  
Margin deposits, guaranty funds and delivery contracts payable 51,222   55,150  
Other current liabilities 178   111  
Total current liabilities 54,171   58,617  
Non-current liabilities:    
Non-current deferred tax liability, net 2,283   2,958  
Long-term debt 4,267   3,871  
Accrued employee benefits 243   430  
Other non-current liabilities 348   337  
Total non-current liabilities 7,141   7,596  
Total liabilities 61,312   66,213  
Redeemable non-controlling interest   36  
Equity:    
Intercontinental Exchange, Inc. shareholders’ equity:    
Common stock 6   6  
Treasury stock, at cost (1,076 ) (40 )
Additional paid-in capital 11,392   11,306  
Retained earnings 6,825   4,789  
Accumulated other comprehensive loss (223 ) (344 )
Total Intercontinental Exchange, Inc. shareholders’ equity 16,924   15,717  
Non-controlling interest in consolidated subsidiaries 28   37  
Total equity 16,952   15,754  
Total liabilities and equity $ 78,264   $ 82,003  

 

 

 

 

 

 

 

Non-GAAP Financial Measures and Reconciliation
We use non-GAAP measures internally to evaluate our performance and in making financial and operational decisions. When viewed in conjunction with our GAAP results and the accompanying reconciliation, we believe that our presentation of these measures provides investors with greater transparency and a greater understanding of factors affecting our financial condition and results of operations than GAAP measures alone. In addition, we believe the presentation of these measures is useful to investors for period-to-period comparison of results because the items described below as adjustments to GAAP are not reflective of our core business performance. These financial measures are not in accordance with, or an alternative to, GAAP financial measures and may be different from non-GAAP measures used by other companies. We use these adjusted results because we believe 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 core operating performance. We strongly recommend that investors review the GAAP financial measures included in our Annual Report on Form 10-K, including our consolidated financial statements and the notes thereto.

 

Adjusted operating expenses, adjusted net income attributable to ICE common shareholders and adjusted diluted earnings per share for the periods presented below are calculated by adding or subtracting the adjustments described below, which are not reflective of our cash operations and core business performance, and their related income tax effect and other tax adjustments (in millions, except for per share amounts):

 

         
  Year Ended December 31, 2017 Year Ended December 31, 2016 Three Months Ended December 31, 2017 Three Months Ended December 31, 2016
Operating Expenses 2,250   2,332   552   580  
Less: Interactive Data and NYSE transaction and integration costs and acquisition related success fees 31   46   8   15  
Less: Impairment on divestiture of NYSE Governance Services 6        
Less: Accruals relating to ongoing investigations and inquiries 14        
Less: Employee severance costs related to Creditex U.K. brokerage operations   4      
Less: Creditex customer relationship intangible asset impairment   33      
Less: Amortization of acquisition-related intangibles 261 302   65   72  
Adjusted operating expenses $ 1,938   $ 1,947   $ 479   $ 493  

 

 

 

 

 

 

         
  Year Ended December 31, 2017 Year Ended December 31, 2016 Three Months Ended December 31, 2017 Three Months Ended December 31, 2016
Net income attributable to ICE $ 2,514   $ 1,422   $ 1,225   $ 352  
Add: Interactive Data and NYSE transaction and integration costs 31   46   8   15  
Add: Impairment on divestiture of NYSE Governance Services 6        
Add: Accruals relating to ongoing investigations and inquiries 14        
Add: Employee severance costs related to Creditex U.K. brokerage operations   4      
Add: Creditex customer relationship intangible asset impairment   33      
Add: Amortization of acquisition-related intangibles 261   302   65   72  
Less: Gain on divestiture of Trayport, net (110 )   (110 )  
Less: Cetip investment gain, net (167 )      
Less: Income tax effect for the items above (43 ) (143 ) 11   (32 )
Less: Tax adjustments on U.S. tax reform (764 )   (764 )  
Less: Deferred tax adjustments on acquisition-related intangibles 10   (22 ) (2 ) (2 )
Add: Other tax adjustments   23     23  
Adjusted net income attributable to ICE $ 1,752   $ 1,665   $ 433   $ 428  
         
Diluted earnings per share attributable to ICE $ 4.23   $ 2.37   $ 2.08   $ 0.59  
       
Adjusted diluted earnings per share attributable to ICE $ 2.95   $ 2.78   $ 0.73   $ 0.71  
         

 

 

 

 

 

 

About Intercontinental Exchange

 

Intercontinental Exchange (NYSE: ICE) is a Fortune 500 and Fortune Future 50 company formed in the year 2000 to modernize markets. ICE serves customers by operating the exchanges, clearing houses and information services they rely upon to invest, trade and manage risk across global financial and commodity markets. A leader in market data, ICE Data Services serves the information and connectivity needs across virtually all asset classes. As the parent company of the New York Stock Exchange, the company raises more capital than any other exchange in the world, driving economic growth and transforming markets.

 

 

 

Trademarks of ICE and/or its affiliates include Intercontinental Exchange, ICE, ICE block design, NYSE and New York Stock Exchange. Information regarding additional trademarks and intellectual property rights of Intercontinental Exchange, Inc. and/or its affiliates is located at http://www.intercontinentalexchange.com/terms-of-use. Key Information Documents for certain products covered by the EU Packaged Retail and Insurance-based Investment Products Regulation can be accessed on the relevant exchange website under the heading “Key information Documents (KIDS)”.

 

 

 

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 -- Statements in this press release regarding ICE's business that are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of additional 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, 2017, as filed with the SEC on February 7, 2018. We caution you not to place undue reliance on these forward looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of an unanticipated event. New factors emerge from time to time, and it is not possible for management to predict all factors that may affect our business and prospects. Further, management cannot assess the impact of each factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

 

SOURCE: Intercontinental Exchange

 

ICE-CORP

 

ICE Investor Relations Contact:

Warren Gardiner

+1 770 835 0114

warren.gardiner@theice.com

 

investors@theice.com

 

ICE Media Contact:

Kelly Loeffler

+1 770 857 4726

kelly.loeffler@theice.com

 

media@theice.com