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Delaware
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20-5446972
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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400 South LaSalle Street
Chicago, Illinois |
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60605
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
ý
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Accelerated filer
¨
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Non-accelerated filer
¨
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Smaller reporting company
¨
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(Do not check if a smaller reporting company)
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Class
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October 21, 2016
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Common Stock, par value $0.01
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81,285,307 shares
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Page
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•
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"CBOE Holdings," "we," "us," "our" or "the Company" refers to CBOE Holdings, Inc. and its subsidiaries.
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•
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"CBOE" refers to Chicago Board Options Exchange, Incorporated, a wholly-owned subsidiary of CBOE Holdings, Inc.
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•
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"C2" refers to C2 Options Exchange, Incorporated, a wholly-owned subsidiary of CBOE Holdings, Inc.
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•
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"CFE" refers to CBOE Futures Exchange, LLC, a wholly-owned subsidiary of CBOE Holdings, Inc.
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•
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"CFTC" refers to the U.S. Commodity Futures Trading Commission.
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•
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"Consent Order" refers to the consent order that CBOE and C2 entered into with the SEC on June 11, 2013.
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•
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"FASB" refers to the Financial Accounting Standards Board.
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•
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"GAAP" refers to Generally Accepted Accounting Principles in the United States.
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•
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"OCC" refers to The Options Clearing Corporation, which is the issuer and registered clearing agency for all U.S. exchange-listed options and is the designated clearing organization for futures traded on CFE.
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•
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"OPRA" refers to the Options Price Reporting Authority, which is a limited liability company of member exchanges, including CBOE and C2, and is authorized by the SEC to provide consolidated options information.
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•
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"Our exchanges" refers to CBOE, C2 and CFE.
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•
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"SEC" refers to the U.S. Securities and Exchange Commission.
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•
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"SPX" refers to our S&P 500 Index exchange-traded options products.
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•
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"VIX" refers to the CBOE Volatility Index methodology.
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•
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the loss of our right to exclusively list and trade certain index options and futures products;
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•
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economic, political and market conditions;
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•
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compliance with legal and regulatory obligations, including our obligations under the Consent Order;
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•
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increasing price competition in our industry;
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•
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decreases in trading volumes or a shift in the mix of products traded on our exchanges;
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•
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legislative or regulatory changes;
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•
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increasing competition by foreign and domestic entities;
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•
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our dependence on third party service providers;
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•
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our index providers' ability to perform under our agreements;
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•
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our ability to operate our business without violating the intellectual property rights of others and the costs associated with protecting our intellectual property rights;
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•
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our ability to accommodate trading volume and transaction traffic, including significant increases, without failure or degradation of performance of our systems;
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•
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our ability to protect our systems and communication networks from security risks, including cyber-attacks;
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•
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the accuracy of our estimates and expectations;
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•
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our ability to maintain access fee revenues;
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•
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our ability to meet our compliance obligations, including managing potential conflicts between our regulatory responsibilities and our for-profit status;
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•
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the ability of our compliance and risk management methods to effectively monitor and manage our risks;
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•
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our ability to attract and retain skilled management and other personnel;
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•
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our ability to manage our growth and strategic acquisitions or alliances effectively:
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•
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the satisfaction of the conditions precedent to the consummation of our proposed acquisition of Bats Global Markets, Inc. (“Bats”), including, without limitation, the receipt of stockholder and regulatory approvals (including clearance by antitrust authorities necessary to complete the proposed transaction) on the terms desired or anticipated;
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•
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unanticipated difficulties or expenditures relating to the proposed transaction, including, without limitation, difficulties that result in the failure to realize expected synergies, efficiencies and cost savings from the proposed transaction within the expected time period (if at all), whether in connection with integration, combining trading platforms, broadening distribution of product offerings or otherwise;
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•
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our ability to maintain an investment grade credit rating and obtain permanent financing for the proposed transaction on the anticipated terms and schedule;
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•
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risks relating to the value of our shares to be issued in the proposed transaction;
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•
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disruptions of our and Bats’ current plans, operations and relationships with market participants caused by the announcement and pendency of the proposed transaction;
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•
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potential difficulties in our and Bats’ ability to retain employees as a result of the announcement and pendency of the proposed transaction; and
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•
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legal proceedings that may be instituted against us and Bats following announcement of the proposed transaction.
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Three Months Ended September 30,
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Nine Months Ended September 30,
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||||||||||||
(in thousands, except per share amounts)
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2016
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2015
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2016
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2015
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(unaudited)
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||||||||||||||
Operating Revenues:
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Transaction fees
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$
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111,926
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$
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144,823
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$
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347,863
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$
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345,162
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Access fees
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13,019
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13,062
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39,447
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40,119
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Exchange services and other fees
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11,513
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10,978
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34,263
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30,443
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Market data fees
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8,222
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7,133
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24,363
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22,702
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Regulatory fees
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9,116
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8,204
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27,436
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25,332
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Other revenue
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2,411
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2,835
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8,494
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14,841
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||||
Total Operating Revenues
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156,207
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187,035
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481,866
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478,599
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Operating Expenses:
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Compensation and benefits
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28,344
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29,583
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83,980
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79,158
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Depreciation and amortization
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10,200
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12,394
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34,311
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34,071
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Technology support services
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5,608
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5,342
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16,944
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15,480
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Professional fees and outside services
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21,381
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12,619
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49,758
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37,163
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Royalty fees
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19,399
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21,840
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57,849
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52,744
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Order routing
|
536
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581
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557
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1,994
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Travel and promotional expenses
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2,610
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1,407
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7,616
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6,434
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Facilities costs
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1,322
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|
874
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4,268
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3,552
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||||
Other expenses
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1,157
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1,285
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3,485
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3,969
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||||
Total Operating Expenses
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90,557
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85,925
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258,768
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234,565
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||||
Operating Income
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65,650
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101,110
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223,098
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244,034
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Other Income/(Expense):
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Investment and other income
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1,557
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68
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7,921
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177
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||||
Net income from investments
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306
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289
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830
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165
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Interest and other borrowing costs
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(177
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)
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(16
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)
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(232
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)
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(16
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)
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||||
Total Other Income
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1,686
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|
341
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8,519
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|
|
326
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|
||||
Income Before Income Taxes
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67,336
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101,451
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231,617
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|
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244,360
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|
||||
Income tax provision
|
26,885
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33,935
|
|
|
91,059
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|
|
89,739
|
|
||||
Net Income
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40,451
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|
|
67,516
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|
|
140,558
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|
154,621
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|
||||
Net loss attributable to noncontrolling interests
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270
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|
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—
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|
|
792
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|
|
—
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||||
Net Income Excluding Noncontrolling Interests
|
40,721
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67,516
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|
|
141,350
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|
|
154,621
|
|
||||
Change in redemption value of noncontrolling interest
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(270
|
)
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—
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(792
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)
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—
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|
||||
Net income allocated to participating securities
|
(171
|
)
|
|
(297
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)
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(584
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)
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(676
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)
|
||||
Net Income Allocated to Common Stockholders
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$
|
40,280
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$
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67,219
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$
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139,974
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$
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153,945
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Net Income Per Share Allocated to Common Stockholders:
|
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||||||||
Basic
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$
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0.50
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$
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0.81
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|
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$
|
1.72
|
|
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$
|
1.85
|
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Diluted
|
0.50
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0.81
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|
|
1.72
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|
|
1.85
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|
||||
Weighted average shares used in computing income per share:
|
|
|
|
|
|
|
|
||||||||
Basic
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81,285
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|
|
82,755
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|
|
81,481
|
|
|
83,329
|
|
||||
Diluted
|
81,285
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|
|
82,755
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|
|
81,481
|
|
|
83,329
|
|
|
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Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(in thousands)
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|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
(unaudited)
|
||||||||||||||
Net Income
|
|
$
|
40,451
|
|
|
$
|
67,516
|
|
|
$
|
140,558
|
|
|
$
|
154,621
|
|
|
|
|
|
|
|
|
|
|
||||||||
Comprehensive Income (Loss) - net of tax:
|
|
|
|
|
|
|
|
|
||||||||
Post-retirement benefit obligation
|
|
9
|
|
|
14
|
|
|
49
|
|
|
(149
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Comprehensive Income
|
|
40,460
|
|
|
67,530
|
|
|
140,607
|
|
|
154,472
|
|
||||
Comprehensive loss attributable to noncontrolling interests
|
|
270
|
|
|
—
|
|
|
792
|
|
|
—
|
|
||||
Comprehensive Income Excluding Noncontrolling Interests
|
|
40,730
|
|
|
67,530
|
|
|
141,399
|
|
|
154,472
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Change in redemption value of noncontrolling interests
|
|
(270
|
)
|
|
—
|
|
|
(792
|
)
|
|
—
|
|
||||
Comprehensive income allocated to participating securities
|
|
(171
|
)
|
|
(297
|
)
|
|
(584
|
)
|
|
(676
|
)
|
||||
Comprehensive Income Allocated to Common Stockholders
|
|
$
|
40,289
|
|
|
$
|
67,233
|
|
|
$
|
140,023
|
|
|
$
|
153,796
|
|
(in thousands, except share amounts)
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
|
|
(unaudited)
|
|
|
||||
Assets
|
|
|
|
|
|
|
||
Current Assets:
|
|
|
|
|
|
|
||
Cash and cash equivalents
|
|
$
|
72,759
|
|
|
$
|
102,253
|
|
Accounts receivable—net allowances of 2016 - $128 and 2015 - $150
|
|
61,112
|
|
|
62,535
|
|
||
Marketing fee receivable
|
|
7,172
|
|
|
5,682
|
|
||
Income taxes receivable
|
|
52,190
|
|
|
27,901
|
|
||
Other prepaid expenses
|
|
8,495
|
|
|
5,122
|
|
||
Deferred financing costs
|
|
4,718
|
|
|
—
|
|
||
Other current assets
|
|
137
|
|
|
625
|
|
||
Total Current Assets
|
|
206,583
|
|
|
204,118
|
|
||
Investments
|
|
73,469
|
|
|
48,430
|
|
||
Land
|
|
4,914
|
|
|
4,914
|
|
||
Property and Equipment:
|
|
|
|
|
|
|||
Construction in progress
|
|
181
|
|
|
885
|
|
||
Building
|
|
76,300
|
|
|
70,531
|
|
||
Furniture and equipment
|
|
155,608
|
|
|
144,597
|
|
||
Less accumulated depreciation and amortization
|
|
(172,178
|
)
|
|
(155,653
|
)
|
||
Total Property and Equipment—Net
|
|
59,911
|
|
|
60,360
|
|
||
Goodwill
|
|
26,468
|
|
|
7,655
|
|
||
Other Assets:
|
|
|
|
|
|
|
||
Intangible assets (less accumulated amortization—2016 - $1,466 and 2015 - $182)
|
|
9,094
|
|
|
2,378
|
|
||
Software development work in progress
|
|
24,953
|
|
|
13,836
|
|
||
Data processing software and other assets (less accumulated amortization—2016 - $168,347 and 2015 - $164,152)
|
|
35,950
|
|
|
43,097
|
|
||
Total Other Assets—Net
|
|
69,997
|
|
|
59,311
|
|
||
Total
|
|
$
|
441,342
|
|
|
$
|
384,788
|
|
Liabilities, Redeemable Noncontrolling Interests and Stockholders’ Equity
|
|
|
|
|
|
|
||
Current Liabilities:
|
|
|
|
|
|
|
||
Accounts payable and accrued liabilities
|
|
$
|
66,421
|
|
|
$
|
60,104
|
|
Marketing fee payable
|
|
7,646
|
|
|
6,141
|
|
||
Deferred revenue and other liabilities
|
|
7,010
|
|
|
4,019
|
|
||
Post-retirement benefit obligation - current
|
|
27
|
|
|
100
|
|
||
Contingent consideration - current
|
|
—
|
|
|
2,000
|
|
||
Income tax payable
|
|
18
|
|
|
1,633
|
|
||
Total Current Liabilities
|
|
81,122
|
|
|
73,997
|
|
||
Long-term Liabilities:
|
|
|
|
|
|
|
||
Post-retirement benefit obligation - long-term
|
|
1,922
|
|
|
1,896
|
|
||
Contingent consideration - long-term
|
|
—
|
|
|
1,379
|
|
||
Income tax liability
|
|
47,667
|
|
|
39,679
|
|
||
Other long-term liabilities
|
|
2,713
|
|
|
2,883
|
|
||
Deferred income taxes
|
|
5,753
|
|
|
5,309
|
|
||
Total Long-term Liabilities
|
|
58,055
|
|
|
51,146
|
|
||
Commitments and Contingencies
|
|
|
|
|
|
|
||
Total Liabilities
|
|
139,177
|
|
|
125,143
|
|
||
|
|
|
|
|
||||
Redeemable Noncontrolling Interests
|
|
12,600
|
|
|
—
|
|
||
|
|
|
|
|
||||
Stockholders’ Equity:
|
|
|
|
|
|
|
||
Preferred stock, $0.01 par value: 20,000,000 shares authorized, no shares issued and outstanding at September 30, 2016 or December 31, 2015
|
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value: 325,000,000 shares authorized; 92,950,065 issued and 81,285,307 outstanding at September 30, 2016; 92,738,803 issued and 82,088,549 outstanding at December 31, 2015
|
|
929
|
|
|
927
|
|
||
Additional paid-in-capital
|
|
135,618
|
|
|
123,577
|
|
||
Retained earnings
|
|
686,042
|
|
|
603,597
|
|
||
Treasury stock at cost – 11,664,758 shares at September 30, 2016 and 10,650,254 shares at December 31, 2015
|
|
(532,249
|
)
|
|
(467,632
|
)
|
||
Accumulated other comprehensive loss
|
|
(775
|
)
|
|
(824
|
)
|
||
Total Stockholders’ Equity
|
|
289,565
|
|
|
259,645
|
|
||
Total
|
|
$
|
441,342
|
|
|
$
|
384,788
|
|
(in thousands)
|
|
Preferred
Stock |
|
Common
Stock |
|
Additional
Paid-In Capital |
|
Retained
Earnings |
|
Treasury
Stock |
|
Accumulated
Other Comprehensive Loss |
|
Total
Stockholders’ Equity |
|
Redeemable Noncontrolling Interests
|
||||||||||||||||
Balance—January 1, 2016
|
|
$
|
—
|
|
|
$
|
927
|
|
|
$
|
123,577
|
|
|
$
|
603,597
|
|
|
$
|
(467,632
|
)
|
|
$
|
(824
|
)
|
|
$
|
259,645
|
|
|
$
|
—
|
|
Cash dividends on common stock
|
|
|
|
|
|
|
|
(58,113
|
)
|
|
|
|
|
|
(58,113
|
)
|
|
|
||||||||||||||
Stock-based compensation
|
|
|
|
|
|
10,872
|
|
|
|
|
|
|
|
|
10,872
|
|
|
|
||||||||||||||
Excess tax benefits from stock-based compensation plan
|
|
|
|
|
|
1,171
|
|
|
|
|
|
|
|
|
1,171
|
|
|
|
||||||||||||||
Issuance of vested restricted stock granted to employees
|
|
|
|
2
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
—
|
|
|
|
|||||||||||||
Purchase of common stock
|
|
|
|
|
|
|
|
|
|
(64,617
|
)
|
|
|
|
(64,617
|
)
|
|
|
||||||||||||||
Net Income excluding noncontrolling interests
|
|
|
|
|
|
|
|
141,350
|
|
|
|
|
|
|
141,350
|
|
|
|
||||||||||||||
Increase due to acquiring majority of outstanding equity of Vest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,600
|
|
|||||||||||||||
Net loss attributable to redeemable noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(792
|
)
|
|||||||||||||||
Redemption value adjustment
|
|
|
|
|
|
|
|
(792
|
)
|
|
|
|
|
|
(792
|
)
|
|
792
|
|
|||||||||||||
Post-retirement benefit obligation adjustment—net of tax expense of $35
|
|
|
|
|
|
|
|
|
|
|
|
49
|
|
|
49
|
|
|
|
||||||||||||||
Balance—September 30, 2016
|
|
$
|
—
|
|
|
$
|
929
|
|
|
$
|
135,618
|
|
|
$
|
686,042
|
|
|
$
|
(532,249
|
)
|
|
$
|
(775
|
)
|
|
$
|
289,565
|
|
|
$
|
12,600
|
|
|
|
Nine Months Ended
|
||||||
(in thousands)
|
|
September 30, 2016
|
|
September 30, 2015
|
||||
|
|
(unaudited)
|
||||||
Cash Flows from Operating Activities:
|
|
|
|
|
||||
Net income
|
|
$
|
140,558
|
|
|
$
|
154,621
|
|
Adjustments to reconcile net income to net cash flows from operating activities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
34,311
|
|
|
34,071
|
|
||
Other amortization
|
|
57
|
|
|
59
|
|
||
Provision for deferred income taxes
|
|
409
|
|
|
(1,718
|
)
|
||
Gain on settlement of contingent consideration
|
|
(1,399
|
)
|
|
—
|
|
||
Stock-based compensation
|
|
10,872
|
|
|
8,987
|
|
||
Loss on disposition of property
|
|
9
|
|
|
617
|
|
||
Equity gain in investment
|
|
(830
|
)
|
|
(528
|
)
|
||
Impairment of investment and other assets
|
|
—
|
|
|
118
|
|
||
Change in assets and liabilities:
|
|
|
|
|
||||
Accounts receivable
|
|
1,423
|
|
|
(7,723
|
)
|
||
Marketing fee receivable
|
|
(1,490
|
)
|
|
3,942
|
|
||
Income taxes receivable
|
|
(24,289
|
)
|
|
2,122
|
|
||
Prepaid expenses
|
|
(3,348
|
)
|
|
(3,413
|
)
|
||
Other current assets
|
|
488
|
|
|
(16
|
)
|
||
Accounts payable and accrued expenses
|
|
6,679
|
|
|
3,812
|
|
||
Marketing fee payable
|
|
1,505
|
|
|
(4,026
|
)
|
||
Deferred revenue and other liabilities
|
|
2,821
|
|
|
4,395
|
|
||
Post-retirement benefit obligations
|
|
(19
|
)
|
|
(14
|
)
|
||
Income tax liability
|
|
7,988
|
|
|
(2,029
|
)
|
||
Income tax payable
|
|
(1,615
|
)
|
|
860
|
|
||
Net Cash Flows provided by Operating Activities
|
|
174,130
|
|
|
194,137
|
|
||
Cash Flows from Investing Activities:
|
|
|
|
|
||||
Capital and other assets expenditures
|
|
(36,433
|
)
|
|
(26,931
|
)
|
||
Acquisition of a majority interest in a business, net of cash received
|
|
(14,257
|
)
|
|
(2,960
|
)
|
||
Payment of contingent consideration from acquisition
|
|
(1,980
|
)
|
|
—
|
|
||
Investments
|
|
(24,209
|
)
|
|
(30,919
|
)
|
||
Other
|
|
(468
|
)
|
|
(1,827
|
)
|
||
Net Cash Flows used in Investing Activities
|
|
(77,347
|
)
|
|
(62,637
|
)
|
||
Cash Flows from Financing Activities:
|
|
|
|
|
||||
Payment of quarterly dividends
|
|
(58,113
|
)
|
|
(54,413
|
)
|
||
Deferred financing costs
|
|
(4,718
|
)
|
|
—
|
|
||
Excess tax benefit from stock-based compensation
|
|
1,171
|
|
|
1,285
|
|
||
Payment of outstanding debt in conjunction with acquisition of a business
|
|
—
|
|
|
(4,040
|
)
|
||
Purchase of common stock from employees
|
|
(4,119
|
)
|
|
(3,178
|
)
|
||
Purchase of common stock under announced program
|
|
(60,498
|
)
|
|
(97,403
|
)
|
||
Net Cash Flows used in Financing Activities
|
|
(126,277
|
)
|
|
(157,749
|
)
|
||
Net Decrease in Cash and Cash Equivalents
|
|
(29,494
|
)
|
|
(26,249
|
)
|
||
Cash and Cash Equivalents at Beginning of Period
|
|
102,253
|
|
|
147,927
|
|
||
Cash and Cash Equivalents at End of Period
|
|
$
|
72,759
|
|
|
$
|
121,678
|
|
Supplemental Disclosure of Cash Flow Information
|
|
|
|
|
||||
Cash paid for income taxes
|
|
$
|
105,891
|
|
|
$
|
89,140
|
|
(amounts in thousands)
|
|
|
||
Purchase Price
|
$
|
18,900
|
|
|
|
|
|
||
Fair Value of Assets Acquired:
|
|
|
||
Cash
|
$
|
4,700
|
|
|
Intangible assets
|
8,000
|
|
|
|
Goodwill
|
18,800
|
|
|
|
Total Assets Acquired
|
$
|
31,500
|
|
|
Redeemable noncontrolling interests
|
12,600
|
|
|
|
Net Assets Acquired
|
$
|
18,900
|
|
|
|
|
|
|
As of September 30, 2016
|
Estimated Useful Lives
|
||
Customer relationships
|
$
|
3,000
|
|
9 years
|
Trade names
|
1,000
|
|
7 years
|
|
Technology
|
4,000
|
|
5 years
|
|
Total Intangible Assets Acquired
|
8,000
|
|
|
|
Less accumulated amortization
|
957
|
|
|
|
Total Intangibles, net
|
$
|
7,043
|
|
|
Year
|
|
Amortization expense
|
||
2016 (1)
|
|
$
|
319
|
|
2017
|
|
1,276
|
|
|
2018
|
|
1,276
|
|
|
2019
|
|
1,276
|
|
|
2020
|
|
1,276
|
|
|
Total
|
|
$
|
5,423
|
|
|
|
|
|
As of September 30, 2016
|
Estimated Useful Lives
|
||
Customer relationships
|
$
|
910
|
|
13 years
|
Trade names
|
370
|
|
10 years
|
|
Technology
|
1,130
|
|
2-5 years
|
|
Other
|
150
|
|
1-4 years
|
|
Total
|
2,560
|
|
|
|
Less accumulated amortization
|
507
|
|
|
|
Total Intangibles, net
|
$
|
2,053
|
|
|
|
|
|
Year
|
|
Amortization expense
|
||
2016 (1)
|
|
$
|
109
|
|
2017
|
|
379
|
|
|
2018
|
|
349
|
|
|
2019
|
|
309
|
|
|
2020
|
|
206
|
|
|
Total
|
|
$
|
1,352
|
|
|
|
|
|
Redeemable Noncontrolling Interest
|
||
Balance as of January 1, 2016
|
$
|
—
|
|
Increase due to acquiring majority of outstanding equity of Vest
|
12,600
|
|
|
Net loss attributable to redeemable noncontrolling interest
|
(792
|
)
|
|
Redemption value adjustment
|
792
|
|
|
Balance as of September 30, 2016
|
$
|
12,600
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(in thousands, except per share amounts)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Basic EPS Numerator:
|
|
|
|
|
|
|
|
|
||||||||
Net Income
|
|
$
|
40,451
|
|
|
$
|
67,516
|
|
|
$
|
140,558
|
|
|
$
|
154,621
|
|
Loss attributable to noncontrolling interests
|
|
270
|
|
|
—
|
|
|
792
|
|
|
—
|
|
||||
Net Income excluding noncontrolling interests
|
|
40,721
|
|
|
67,516
|
|
|
141,350
|
|
|
154,621
|
|
||||
Change in redemption value of noncontrolling interest
|
|
(270
|
)
|
|
—
|
|
|
(792
|
)
|
|
—
|
|
||||
Earnings allocated to participating securities
|
|
(171
|
)
|
|
(297
|
)
|
|
(584
|
)
|
|
(676
|
)
|
||||
Net Income allocated to common stockholders
|
|
$
|
40,280
|
|
|
$
|
67,219
|
|
|
$
|
139,974
|
|
|
$
|
153,945
|
|
Basic EPS Denominator:
|
|
|
|
|
|
|
|
|
||||||||
Weighted average shares outstanding
|
|
81,285
|
|
|
82,755
|
|
|
81,481
|
|
|
83,329
|
|
||||
Basic Net Income Per Common Share
|
|
$
|
0.50
|
|
|
$
|
0.81
|
|
|
$
|
1.72
|
|
|
$
|
1.85
|
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted EPS Numerator:
|
|
|
|
|
|
|
|
|
||||||||
Net Income
|
|
$
|
40,451
|
|
|
$
|
67,516
|
|
|
$
|
140,558
|
|
|
$
|
154,621
|
|
Loss attributable to noncontrolling interests
|
|
270
|
|
|
—
|
|
|
792
|
|
|
—
|
|
||||
Net Income excluding noncontrolling interests
|
|
40,721
|
|
|
67,516
|
|
|
141,350
|
|
|
154,621
|
|
||||
Change in redemption value of noncontrolling interest
|
|
(270
|
)
|
|
—
|
|
|
(792
|
)
|
|
—
|
|
||||
Earnings allocated to participating securities
|
|
(171
|
)
|
|
(297
|
)
|
|
(584
|
)
|
|
(676
|
)
|
||||
Net Income allocated to common stockholders
|
|
$
|
40,280
|
|
|
$
|
67,219
|
|
|
$
|
139,974
|
|
|
$
|
153,945
|
|
Diluted EPS Denominator:
|
|
|
|
|
|
|
|
|
||||||||
Weighted average shares outstanding
|
|
81,285
|
|
|
82,755
|
|
|
81,481
|
|
|
83,329
|
|
||||
Dilutive common shares issued under stock program
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Diluted Net Income Per Common Share
|
|
$
|
0.50
|
|
|
$
|
0.81
|
|
|
$
|
1.72
|
|
|
$
|
1.85
|
|
|
|
|
Number of Shares
|
|
Weighted Average
Grant Date Fair Value |
|||
|
Unvested at January 1, 2016
|
|
456,570
|
|
|
$
|
55.70
|
|
|
Granted
|
|
241,681
|
|
|
64.10
|
|
|
|
Vested
|
|
(211,235
|
)
|
|
48.14
|
|
|
|
Forfeited
|
|
(4,133
|
)
|
|
59.67
|
|
|
|
Unvested at September 30, 2016
|
|
482,883
|
|
|
$
|
63.34
|
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
Equity Method
|
|
|
|
||||
Investment in Signal Trading Systems, LLC
|
12,955
|
|
|
12,185
|
|
||
Investment in CBOE Stock Exchange, LLC
|
—
|
|
|
—
|
|
||
Total equity method investments
|
12,955
|
|
|
12,185
|
|
||
|
|
|
|
||||
Cost Method
|
|
|
|
||||
Investment in OCC
|
30,333
|
|
|
30,333
|
|
||
Other cost method investments
|
30,181
|
|
|
5,912
|
|
||
Total cost method investments
|
60,514
|
|
|
36,245
|
|
||
|
|
|
|
||||
Total Investments
|
$
|
73,469
|
|
|
$
|
48,430
|
|
|
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
|
Compensation and benefit-related liabilities (1)
|
|
$
|
19,532
|
|
|
$
|
23,304
|
|
|
Royalties
|
|
17,076
|
|
|
15,409
|
|
||
|
Contract services
|
|
8,030
|
|
|
6,684
|
|
||
|
Acquisition related (2)
|
|
7,669
|
|
|
—
|
|
||
|
Accounts payable
|
|
3,087
|
|
|
1,762
|
|
||
|
Purchase of common stock (3)
|
|
—
|
|
|
1,778
|
|
||
|
Facilities
|
|
1,690
|
|
|
2,099
|
|
||
|
Legal
|
|
1,305
|
|
|
1,536
|
|
||
|
Market linkage
|
|
1,180
|
|
|
628
|
|
||
|
Other
|
|
6,852
|
|
|
6,904
|
|
||
|
Total
|
|
$
|
66,421
|
|
|
$
|
60,104
|
|
|
|
Balance at December 31, 2015
|
|
Cash
Additions |
|
Revenue
Recognition |
|
Balance at September 30, 2016
|
||||||||
Other – net
|
|
$
|
4,019
|
|
|
$
|
9,533
|
|
|
$
|
(9,542
|
)
|
|
$
|
4,010
|
|
Liquidity provider sliding scale (1)
|
|
—
|
|
|
11,400
|
|
|
(8,400
|
)
|
|
3,000
|
|
||||
Total deferred revenue
|
|
$
|
4,019
|
|
|
$
|
20,933
|
|
|
$
|
(17,942
|
)
|
|
$
|
7,010
|
|
•
|
Level 1—Unadjusted inputs based on quoted markets for identical assets or liabilities.
|
•
|
Level 2—Observable inputs, either direct or indirect, not including Level 1, corroborated by market data or based upon quoted prices in non-active markets.
|
•
|
Level 3—Unobservable inputs that reflect management’s best assumptions of what market participants would use in valuing the asset or liability.
|
(amounts in thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds
|
|
$
|
52,500
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
52,500
|
|
Total assets at fair value at September 30, 2016
|
|
$
|
52,500
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
52,500
|
|
(amounts in thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds
|
|
$
|
84,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
84,000
|
|
Total assets at fair value at December 31, 2015
|
|
$
|
84,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
84,000
|
|
|
|
2016
|
|
2015
|
|
Inc./(Dec.)
|
|
Percent
Change |
|||||||
|
|
(in millions, except per share amounts)
|
|
|
|||||||||||
Total Operating Revenues
|
|
$
|
156.2
|
|
|
$
|
187.0
|
|
|
$
|
(30.8
|
)
|
|
(16.5
|
)%
|
Total Operating Expenses
|
|
90.6
|
|
|
85.9
|
|
|
4.7
|
|
|
5.4
|
%
|
|||
Operating Income
|
|
65.6
|
|
|
101.1
|
|
|
(35.5
|
)
|
|
(35.1
|
)%
|
|||
Total Other Income
|
|
1.7
|
|
|
0.3
|
|
|
1.4
|
|
|
394.4
|
%
|
|||
Income Before Income Taxes
|
|
67.3
|
|
|
101.4
|
|
|
(34.1
|
)
|
|
(33.6
|
)%
|
|||
Income Tax Provision
|
|
26.9
|
|
|
33.9
|
|
|
(7.0
|
)
|
|
(20.8
|
)%
|
|||
Net Income
|
|
$
|
40.4
|
|
|
$
|
67.5
|
|
|
$
|
(27.1
|
)
|
|
(40.1
|
)%
|
Net Income Allocated to Common Stockholders
|
|
$
|
40.3
|
|
|
$
|
67.2
|
|
|
$
|
(26.9
|
)
|
|
(40.1
|
)%
|
Operating Margin
|
|
42.0
|
%
|
|
54.1
|
%
|
|
|
|
|
|||||
Net Income Percentage
|
|
25.9
|
%
|
|
36.1
|
%
|
|
|
|
|
|||||
Diluted Net Income Per Share Allocated to Common Stockholders
|
|
$
|
0.50
|
|
|
$
|
0.81
|
|
|
|
|
|
•
|
Total operating revenues
decreased
primarily due to lower transaction fees partially offset by higher market data fees.
|
•
|
Total operating expenses
increased
primarily due to higher professional fees and outside services, partially offset by lower compensation and benefits, depreciation and amortization, and royalty fees.
The increase in professional fees and outside services was mainly due to acquisition-related costs, which resulted in a lower operating margin for the quarter.
|
|
|
2016
|
|
2015
|
|
Inc./(Dec.)
|
|
Percent
Change |
|||||||
|
|
|
|
(in millions)
|
|
|
|
|
|||||||
Transaction fees
|
|
$
|
111.9
|
|
|
$
|
144.8
|
|
|
$
|
(32.9
|
)
|
|
(22.7
|
)%
|
Access fees
|
|
13.0
|
|
|
13.1
|
|
|
(0.1
|
)
|
|
(0.3
|
)%
|
|||
Exchange services and other fees
|
|
11.6
|
|
|
11.0
|
|
|
0.6
|
|
|
4.9
|
%
|
|||
Market data fees
|
|
8.2
|
|
|
7.1
|
|
|
1.1
|
|
|
15.3
|
%
|
|||
Regulatory fees
|
|
9.1
|
|
|
8.2
|
|
|
0.9
|
|
|
11.1
|
%
|
|||
Other revenue
|
|
2.4
|
|
|
2.8
|
|
|
(0.4
|
)
|
|
(15.0
|
)%
|
|||
Total Operating Revenues
|
|
$
|
156.2
|
|
|
$
|
187.0
|
|
|
$
|
(30.8
|
)
|
|
(16.5
|
)%
|
|
|
2016
|
|
2015
|
|
Inc./(Dec.)
|
|
Percent
Change |
|||||||
|
|
|
|
(in millions)
|
|
|
|
|
|||||||
Equities
|
|
$
|
4.8
|
|
|
$
|
10.0
|
|
|
$
|
(5.2
|
)
|
|
(52.7
|
)%
|
Indexes
|
|
74.1
|
|
|
94.2
|
|
|
(20.1
|
)
|
|
(21.3
|
)%
|
|||
Exchange-traded products
|
|
6.4
|
|
|
13.1
|
|
|
(6.7
|
)
|
|
(50.8
|
)%
|
|||
Total options transaction fees
|
|
85.3
|
|
|
117.3
|
|
|
(32.0
|
)
|
|
(27.3
|
)%
|
|||
Futures
|
|
26.6
|
|
|
27.5
|
|
|
(0.9
|
)
|
|
(3.1
|
)%
|
|||
Total transaction fees
|
|
$
|
111.9
|
|
|
$
|
144.8
|
|
|
$
|
(32.9
|
)
|
|
(22.7
|
)%
|
|
|
2016
|
|
2015
|
|
Volume
Percent Change |
|
ADV
Percent Change |
|||||||||
|
|
Volume
|
|
ADV
|
|
Volume
|
|
ADV
|
|
|
|||||||
|
|
|
|
(in millions)
|
|
|
|
|
|
|
|||||||
Equities
|
|
94.6
|
|
|
1.48
|
|
|
94.5
|
|
1.48
|
|
|
0.1
|
%
|
|
0.1
|
%
|
Indexes
|
|
104.9
|
|
|
1.64
|
|
|
132.8
|
|
2.08
|
|
|
(21.1
|
)%
|
|
(21.1
|
)%
|
Exchange-traded products
|
|
81.2
|
|
|
1.27
|
|
|
91.7
|
|
1.43
|
|
|
(11.4
|
)%
|
|
(11.4
|
)%
|
Total options contracts
|
|
280.7
|
|
|
4.39
|
|
|
319.0
|
|
4.99
|
|
|
(12.0
|
)%
|
|
(12.0
|
)%
|
Futures
|
|
15.6
|
|
|
0.24
|
|
|
16.7
|
|
0.26
|
|
|
(6.7
|
)%
|
|
(6.7
|
)%
|
Total contracts
|
|
296.3
|
|
|
4.63
|
|
|
335.7
|
|
5.25
|
|
|
(11.8
|
)%
|
|
(11.8
|
)%
|
|
|
2016
|
|
2015
|
|
||
Equities
|
|
31.9
|
%
|
|
28.1
|
%
|
|
Indexes
|
|
35.4
|
%
|
|
39.6
|
%
|
|
Exchange-traded products
|
|
27.4
|
%
|
|
27.3
|
%
|
|
Futures
|
|
5.3
|
%
|
|
5.0
|
%
|
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
2016
|
|
2015
|
|
Percent
Change |
|||||
Equities
|
|
$
|
0.050
|
|
|
$
|
0.106
|
|
|
(52.8
|
)%
|
Indexes
|
|
0.707
|
|
|
0.709
|
|
|
(0.3
|
)%
|
||
Exchange-traded products
|
|
0.079
|
|
|
0.143
|
|
|
(44.4
|
)%
|
||
Total options average revenue per contract
|
|
0.304
|
|
|
0.368
|
|
|
(17.4
|
)%
|
||
Futures
|
|
1.709
|
|
|
1.647
|
|
|
3.8
|
%
|
||
Total average revenue per contract
|
|
$
|
0.378
|
|
|
$
|
0.431
|
|
|
(12.4
|
)%
|
•
|
Volume Mix —
We experienced a shift in the mix of products traded. As a percentage of total volume, index options and futures contracts accounted for
40.7%
of total trading volume,
down
from
44.6%
in the prior year period. Index options and futures contracts represent our highest options average revenue per contract and highest average revenue per contract, respectively.
|
•
|
Rate structure —
Our rate structure includes sliding scales, volume discounts, volume incentive programs and caps on fees as part of our effort to increase liquidity and market share in multiply-listed options (equities and exchange-traded products). The decrease in average revenue per contract in multiply-listed options was primarily a result of higher volume discounts and incentives.
|
|
|
2016
|
|
2015
|
|
Inc./(Dec.)
|
|
Percent
Change |
|||||||
|
|
|
|
(in millions)
|
|
|
|
|
|||||||
Compensation and benefits
|
|
$
|
28.4
|
|
|
$
|
29.6
|
|
|
$
|
(1.2
|
)
|
|
(4.2
|
)%
|
Depreciation and amortization
|
|
10.2
|
|
|
12.4
|
|
|
(2.2
|
)
|
|
(17.7
|
)%
|
|||
Technology support services
|
|
5.6
|
|
|
5.3
|
|
|
0.3
|
|
|
5.0
|
%
|
|||
Professional fees and outside services
|
|
21.4
|
|
|
12.6
|
|
|
8.8
|
|
|
69.4
|
%
|
|||
Royalty fees
|
|
19.4
|
|
|
21.8
|
|
|
(2.4
|
)
|
|
(11.2
|
)%
|
|||
Order routing
|
|
0.5
|
|
|
0.6
|
|
|
(0.1
|
)
|
|
(7.7
|
)%
|
|||
Travel and promotional expenses
|
|
2.6
|
|
|
1.4
|
|
|
1.2
|
|
|
85.5
|
%
|
|||
Facilities costs
|
|
1.3
|
|
|
0.9
|
|
|
0.4
|
|
|
51.3
|
%
|
|||
Other expenses
|
|
1.2
|
|
|
1.3
|
|
|
(0.1
|
)
|
|
(7.7
|
)%
|
|||
Total Operating Expenses
|
|
$
|
90.6
|
|
|
$
|
85.9
|
|
|
$
|
4.7
|
|
|
5.4
|
%
|
|
|
2016
|
|
2015
|
|
Inc./(Dec.)
|
|
Percent
Change |
|||||||
|
|
(in millions, except per share amounts)
|
|
|
|||||||||||
Total Operating Revenues
|
|
$
|
481.9
|
|
|
$
|
478.6
|
|
|
$
|
3.3
|
|
|
0.7
|
%
|
Total Operating Expenses
|
|
258.8
|
|
|
234.6
|
|
|
24.2
|
|
|
10.3
|
%
|
|||
Operating Income
|
|
223.1
|
|
|
244.0
|
|
|
(20.9
|
)
|
|
(8.6
|
)%
|
|||
Total Other Income
|
|
8.5
|
|
|
0.3
|
|
|
8.2
|
|
|
--
|
|
|||
Income Before Income Taxes
|
|
231.6
|
|
|
244.3
|
|
|
(12.7
|
)
|
|
(5.2
|
)%
|
|||
Income Tax Provision
|
|
91.1
|
|
|
89.7
|
|
|
1.4
|
|
|
1.5
|
%
|
|||
Net Income
|
|
$
|
140.5
|
|
|
$
|
154.6
|
|
|
$
|
(14.1
|
)
|
|
(9.1
|
)%
|
Net Income Allocated to Common Stockholders
|
|
$
|
140.0
|
|
|
$
|
153.9
|
|
|
$
|
(13.9
|
)
|
|
(9.1
|
)%
|
Operating Margin
|
|
46.3
|
%
|
|
51.0
|
%
|
|
|
|
|
|||||
Net Income Percentage
|
|
29.2
|
%
|
|
32.3
|
%
|
|
|
|
|
|||||
Diluted Net Income Per Share Allocated to Common Stockholders
|
|
$
|
1.72
|
|
|
$
|
1.85
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
•
|
Total operating revenues
increased
primarily due to higher transaction fees, exchange services and other fees, market data fees and regulatory fees, partially offset by lower other revenue.
|
•
|
Total operating expenses
increased
primarily due to higher compensation and benefits, professional fees and outside services and royalty fees.
The increase in professional fees and outside services was mainly due to acquisition-related costs, which resulted in a lower operating margin for the period.
|
|
|
2016
|
|
2015
|
|
Inc./(Dec.)
|
|
Percent
Change |
|||||||
|
|
|
|
(in millions)
|
|
|
|
|
|||||||
Transaction fees
|
|
$
|
347.9
|
|
|
$
|
345.2
|
|
|
$
|
2.7
|
|
|
0.8
|
%
|
Access fees
|
|
39.4
|
|
|
40.1
|
|
|
(0.7
|
)
|
|
(1.7
|
)%
|
|||
Exchange services and other fees
|
|
34.3
|
|
|
30.5
|
|
|
3.8
|
|
|
12.5
|
%
|
|||
Market data fees
|
|
24.4
|
|
|
22.7
|
|
|
1.7
|
|
|
7.3
|
%
|
|||
Regulatory fees
|
|
27.4
|
|
|
25.3
|
|
|
2.1
|
|
|
8.3
|
%
|
|||
Other revenue
|
|
8.5
|
|
|
14.8
|
|
|
(6.3
|
)
|
|
(42.8
|
)%
|
|||
Total Operating Revenues
|
|
$
|
481.9
|
|
|
$
|
478.6
|
|
|
$
|
3.3
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
Inc./(Dec.)
|
|
Percent
Change |
|||||||
|
|
|
|
(in millions)
|
|
|
|
|
|||||||
Equities
|
|
$
|
18.4
|
|
|
$
|
27.5
|
|
|
$
|
(9.1
|
)
|
|
(33.1
|
)%
|
Indexes
|
|
229.5
|
|
|
218.4
|
|
|
11.1
|
|
|
5.1
|
%
|
|||
Exchange-traded products
|
|
23.9
|
|
|
32.0
|
|
|
(8.1
|
)
|
|
(25.4
|
)%
|
|||
Total options transaction fees
|
|
271.8
|
|
|
277.9
|
|
|
(6.1
|
)
|
|
(2.2
|
)%
|
|||
Futures
|
|
76.1
|
|
|
67.3
|
|
|
8.8
|
|
|
13.2
|
%
|
|||
Total transaction fees
|
|
$
|
347.9
|
|
|
$
|
345.2
|
|
|
$
|
2.7
|
|
|
0.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
Volume
Percent Change |
|
ADV
Percent Change |
||||||||||
|
|
Volume
|
|
ADV
|
|
Volume
|
|
ADV
|
|
|
||||||||
|
|
|
|
(in millions)
|
|
|
|
|
|
|
||||||||
Equities
|
|
270.2
|
|
|
1.43
|
|
|
301.2
|
|
|
1.60
|
|
|
(10.3
|
)%
|
|
(10.7
|
)%
|
Indexes
|
|
323.6
|
|
|
1.71
|
|
|
309.3
|
|
|
1.65
|
|
|
4.6
|
%
|
|
4.1
|
%
|
Exchange-traded products
|
|
239.6
|
|
|
1.27
|
|
|
252.2
|
|
|
1.34
|
|
|
(5.0
|
)%
|
|
(5.5
|
)%
|
Total options contracts
|
|
833.4
|
|
|
4.41
|
|
|
862.7
|
|
|
4.59
|
|
|
(3.4
|
)%
|
|
(3.4
|
)%
|
Futures
|
|
45.3
|
|
|
0.24
|
|
|
39.7
|
|
|
0.21
|
|
|
14.3
|
%
|
|
13.7
|
%
|
Total contracts
|
|
878.7
|
|
|
4.65
|
|
|
902.4
|
|
|
4.80
|
|
|
(2.6
|
)%
|
|
(3.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
||
Equities
|
|
30.7
|
%
|
|
33.3
|
%
|
|
Indexes
|
|
36.8
|
%
|
|
34.3
|
%
|
|
Exchange-traded products
|
|
27.3
|
%
|
|
28.0
|
%
|
|
Futures
|
|
5.2
|
%
|
|
4.4
|
%
|
|
Total
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
Percent
Change |
|||||
Equities
|
|
$
|
0.068
|
|
|
$
|
0.091
|
|
|
(25.5
|
)%
|
Indexes
|
|
0.709
|
|
|
0.706
|
|
|
0.4
|
%
|
||
Exchange-traded products
|
|
0.100
|
|
|
0.127
|
|
|
(21.4
|
)%
|
||
Total options average revenue per contract
|
|
0.326
|
|
|
0.322
|
|
|
1.2
|
%
|
||
Futures
|
|
1.680
|
|
|
1.696
|
|
|
(0.9
|
)%
|
||
Total average revenue per contract
|
|
$
|
0.396
|
|
|
$
|
0.383
|
|
|
3.5
|
%
|
|
|
|
|
|
|
|
•
|
Product mix —
Average revenue per contract reflects a shift in the mix of products traded. Index options and futures accounted for
42.0%
of total trading volume as compared to
38.7%
in the prior year period.
|
•
|
Rate structure —
The decrease in average revenue per contract in multiply-listed options was primarily the result of higher volume discounts and incentives.
|
|
|
2016
|
|
2015
|
|
Inc./(Dec.)
|
|
Percent
Change |
|||||||
|
|
|
|
(in millions)
|
|
|
|
|
|||||||
Compensation and benefits
|
|
$
|
84.0
|
|
|
$
|
79.2
|
|
|
$
|
4.8
|
|
|
6.1
|
%
|
Depreciation and amortization
|
|
34.3
|
|
|
34.1
|
|
|
0.2
|
|
|
0.7
|
%
|
|||
Technology support services
|
|
16.9
|
|
|
15.5
|
|
|
1.4
|
|
|
9.5
|
%
|
|||
Professional fees and outside services
|
|
49.8
|
|
|
37.2
|
|
|
12.6
|
|
|
33.9
|
%
|
|||
Royalty fees
|
|
57.8
|
|
|
52.7
|
|
|
5.1
|
|
|
9.7
|
%
|
|||
Order routing
|
|
0.6
|
|
|
2.0
|
|
|
(1.4
|
)
|
|
(70.0
|
)%
|
|||
Travel and promotional expenses
|
|
7.6
|
|
|
6.4
|
|
|
1.2
|
|
|
18.8
|
%
|
|||
Facilities costs
|
|
4.3
|
|
|
3.5
|
|
|
0.8
|
|
|
20.2
|
%
|
|||
Other expenses
|
|
3.5
|
|
|
4.0
|
|
|
(0.5
|
)
|
|
(12.2
|
)%
|
|||
Total Operating Expenses
|
|
$
|
258.8
|
|
|
$
|
234.6
|
|
|
$
|
24.2
|
|
|
10.3
|
%
|
|
|
|
|
|
|
|
|
|
•
|
we may be required, under certain circumstances, to pay Bats a termination fee of $110 million or reimburse Bats’ expenses up to $10 million under the Merger Agreement;
|
•
|
we will be required to pay certain costs relating to the Merger, whether or not the Merger is completed, such as legal, accounting, financial advisory and printing fees;
|
•
|
under the Merger Agreement, we are subject to certain restrictions on the conduct of our business prior to completing the Merger that may adversely affect our ability to execute certain of our business strategies; and
|
•
|
matters relating to the Merger may require substantial commitments of time and resources by our management, which could otherwise have been devoted to other opportunities that may have been beneficial to us as an independent company and such commitments may impact future earnings of the combined company.
|
▪
|
the impairment of our ability to attract, retain and motivate our employees, including key personnel;
|
▪
|
the diversion of significant management time and resources towards the completion of the Merger;
|
▪
|
difficulties maintaining relationships with customers and other business partners;
|
▪
|
delays or deferments of certain business decisions by our customers and other business partners;
|
▪
|
the inability to pursue alternative business opportunities or make appropriate changes to our business because of requirements in the Merger Agreement that we conduct our business in the ordinary course of business consistent with past practice and not engage in certain kinds of transactions prior to the completion of the Merger;
|
▪
|
litigation relating to the Merger and the costs related thereto; and
|
▪
|
the incurrence of significant costs, expenses and fees for professional services and other transaction costs in connection with the Merger.
|
•
|
unanticipated issues in integrating information technology, communications and other systems;
|
•
|
unforeseen expenses or delays associated with the integration or the Merger;
|
•
|
managing a significantly larger company;
|
•
|
the potential diversion of management focus and resources from other strategic opportunities and from operational matters, and potential disruption associated with the Merger;
|
•
|
maintaining employee morale and retaining key management and other key employees;
|
•
|
integrating two unique business cultures, which may prove to be incompatible;
|
•
|
the possibility of faulty assumptions underlying expectations regarding the integration process and expense synergies;
|
•
|
consolidating corporate and administrative infrastructures and eliminating duplicative operations;
|
•
|
coordinating geographically separate organizations;
|
•
|
changes in applicable laws and regulations;
|
•
|
managing costs or inefficiencies associated with integrating the operations of the combined company; and
|
•
|
making any necessary modifications to internal financial control standards to comply with the Sarbanes‑Oxley Act of 2002 and the rules and regulations promulgated thereunder.
|
|
|
CBOE HOLDINGS, INC.
|
|
|
|
Registrant
|
|
|
|
|
|
|
|
By:
|
/s/ Edward T. Tilly
|
|
|
|
Edward T. Tilly
|
|
|
|
Chief Executive Officer (Principal Executive Officer)
|
Date:
|
November 8, 2016
|
|
|
|
|
|
|
|
|
By:
|
/s/ Alan J. Dean
|
|
|
|
Alan J. Dean
|
|
|
|
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
|
Date:
|
November 8, 2016
|
|
|
Exhibit No.
|
|
Description
|
2.1
|
|
Agreement and Plan of Merger, dated as of September 25, 2016, by and among CBOE Holdings, Inc., CBOE Corporation, CBOE V, LLC and Bats Global Markets, Inc., incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 001-34774), filed on September 28, 2016.*
|
|
|
|
10.1
|
|
Debt Commitment Letter, dated as of September 25, 2016, by and among CBOE Holdings, Inc., Bank of America, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (Filed herewith).
|
|
|
|
10.2
|
|
Form of Voting and Support Agreement between CBOE Holdings, Inc. and the directors and executive officers of Bats Global Markets, Inc., incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 001-34774), filed on September 28, 2016.
|
|
|
|
10.3
|
|
Form of Voting and Support Agreement between Bats Global Markets, Inc. and the directors and executive officers of CBOE Holdings, Inc., incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 001-34774), filed on September 28, 2016.
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer pursuant to Rule 13a-14 (Filed herewith).
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer pursuant to Rule 13a-14 (Filed herewith).
|
|
|
|
32.1
|
|
Certificate of Chief Executive Officer pursuant to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (Filed herewith).
|
|
|
|
32.2
|
|
Certificate of Chief Financial Officer pursuant to Rule 13a-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (Filed herewith).
|
|
|
|
101.INS
|
|
XBRL Instance Document (Filed herewith).
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document (Filed herewith).
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document (Filed herewith).
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase (Filed herewith).
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document (Filed herewith).
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document (Filed herewith).
|
|
|
|
*Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the Securities and Exchange Commission upon request.
|
||
|
|
|
|
|
|
|
|
|
BORROWER:
|
CBOE Holdings, Inc., a Delaware corporation (the “
Borrower
”).
|
GUARANTORS:
|
None.
|
AGENT:
|
Bank of America, N.A. (“
Bank of America
”) will act as sole and exclusive administrative agent (the “
Administrative Agent
”).
|
BOOKRUNNER:
|
Merrill Lynch, Pierce, Fenner & Smith Incorporated will act as sole lead arranger and bookrunner (the “
Lead
Arranger
” or “
MLPFS
”).
|
LENDERS:
|
A syndicate of financial institutions (including
Bank of America) arranged by the Lead Arranger (collectively, the “
Lenders
”).
|
FACILITY:
|
A 364-day bridge term loan facility in an aggregate principal amount of up to $1,650 million (the “
Bridge Facility
” the bridge term loans thereunder, the “
Loans
”).
|
TRANSACTION:
|
The proceeds of the Loans shall be used to finance in part (i) the acquisition (the “
Acquisition
”) of all of the outstanding shares of common stock of RADAR, a Delaware corporation (the “
Target
” and, together with its subsidiaries, the “
Acquired Business
”), pursuant to an agreement and plan of merger (including the exhibits and schedules thereto, the “
Acquisition Agreement
”), (ii) the repayment of certain existing indebtedness of the Acquired Business and (iii) the payment of fees and expenses in connection with the Transactions (as defined below) (the Acquisition, debt repayments, the entering into and the borrowings under the Bridge Facility and/or the issuance by the Borrower of senior unsecured debt securities in a public or private offering and/or senior unsecured term loans (the “
Term Facility
” and, together with the Securities (as defined below), the “
Permanent Financing
”), in each case, for the purpose of financing the Transactions (the “
Securities
”)
the payment of all fees and expenses associated therewith and all related transactions are hereinafter collectively referred to as the
“
Transactions
”).
|
AVAILABILITY:
|
The loans shall be available in a single borrowing on the Closing Date (as defined below).
|
CLOSING DATE:
|
The date of funding under the Bridge Facility Documentation (the “
Closing Date
”) to occur on or before the Expiration Date.
|
MATURITY:
|
The Bridge Facility shall terminate and all amounts outstanding thereunder shall be due and payable 364 days from the Closing Date (the “
Maturity Date
”).
|
REDUCTIONS:
|
On or prior to the Closing Date, the aggregate commitments in respect of the Bridge Facility shall be automatically and permanently reduced by an amount equal to, and after the Closing Date the Borrower shall make prepayments of Loans from (in each case, subject to exceptions to be agreed):
|
REDUCTIONS:
|
At its option, the Borrower may (i) prepay borrowings under the Bridge Facility in whole or in part at any time without premium or penalty, subject to reimbursement of the Lenders’ breakage and redeployment costs in the case of prepayment of LIBOR borrowings and (ii) irrevocably reduce or terminate the unutilized portion of the commitments under the Bridge Facility in whole or in part at any time without premium or penalty.
|
EXPIRATION DATE:
|
The earliest of (i)
July 25, 2017, (or if the Outside Date (as defined in the Acquisition Agreement) is extended pursuant to Section 7.1(b)(iv) of the Acquisition Agreement, October 23, 2017),
(ii) the closing of the Acquisition without the use of the Bridge Facility and (iii) the termination of the Acquisition Agreement (in accordance with the terms of the Acquisition Agreement) (the “
Expiration Date
”).
|
PRINCIPLES
|
The Bridge Facility Documentation shall be generally not less favorable to the Borrower than the Borrower’s Revolving Credit Facility Agreement, dated as of December 23, 2008, among the Borrower, Bank of America, N.A., as administrative agent and the other parties thereto (including the exceptions and qualifications contained therein and such additional exceptions and qualifications as the Borrower and the Arranger shall negotiate in good faith and reasonably agree), modified as agreed for transactions of this type, and with other modifications (a) to reflect the terms set forth in the Commitment Letter (including the exhibits thereto) (including the nature of the Bridge Facility as a bridge facility) and the Fee Letter, (b) to reflect the operational or administrative requirements of the Administrative Agent as reasonably agreed by the Borrower, (c) to
|
TO CLOSING:
|
Subject to the terms of the next paragraph, the closing and the extension of credit under the Bridge Facility will solely be subject to (i), subject to the Certain Funds Provision, the making of all the representations and warranties in the Bridge Facility Documentation and (ii) the satisfaction (or waiver) of the Bridge Facility Conditions. For the avoidance of doubt but without limiting the terms of the next paragraph, any failure of any representation or warranty set forth in the Bridge Facility Documentation to be true and correct in any material respect shall be an event of default as set forth in the Bridge Facility Documentation.
|
AND WARRANTIES:
|
Consistent with Documentation Principles, and limited to the following: (i) legal existence, qualification and power, (ii) due authorization and no contravention of law, contracts or organizational documents, (iii) governmental and third party approvals and consents, (iv) enforceability, (v) specified financial statements and no Material Adverse Effect, (vi) no material litigation, (vii) no default, (viii) ownership of property (including intellectual property), (ix) tax matters, (x) use of proceeds and not engaging in business of purchasing/carrying margin stock (subject to necessary carve outs for broker/dealer subsidiaries), (xi) status under Investment Company Act, (xii) accuracy of disclosure and (xiii) compliance with laws (including the Patriot Act, anti-corruption laws and sanctions).
|
COVENANTS:
|
Consistent with Documentation Principles, and limited to the following: (i) delivery of financial statements, SEC filings, compliance certificates and other information, (ii) notices of default and ERISA events, (iii) payment of taxes, (iv) preservation of existence, (v) compliance with laws, (vi) maintenance of books and records, (vii) inspection rights, (viii) use of proceeds, (ix) compliance with anti-corruption laws and sanctions and (x) limitations on (a) liens, (b) indebtedness of subsidiaries, (c) restricted payments and (d) mergers and other fundamental changes.
|
•
|
Consolidated Leverage Ratio (to be defined as total debt to trailing four-quarter EBITDA) not to exceed 3.50 to 1.00.
|
•
|
Consolidated Interest Coverage Ratio (to be defined as trailing four-quarter EBIT to interest expense (on an annualized basis for the first three fiscal quarters and on a trailing four-quarter basis thereafter)) not to be less than 4.00 to 1.00.
|
EVENTS OF DEFAULT:
|
Consistent with Documentation Principles, and limited to the following: (i) nonpayment of principal, interest, fees or other amounts (with a 5 business day grace period for payments other than payments of principal), (ii) failure to perform or observe covenants set forth in the Bridge Facility Documentation, (iii) any representation or warranty proving to have been materially incorrect when made or confirmed, (iv) cross-default to other indebtedness in an aggregate principal amount of $50 million or more, (v) bankruptcy and insolvency defaults, (vi) inability to pay debts, (vii) monetary judgment defaults in an amount of $50 million or more, (viii) customary ERISA defaults, (ix) actual or asserted invalidity or impairment of any Bridge Facility Documentation and (x) change of control.
|
PARTICIPATIONS:
|
Subject to the consents described below (which consents will not be unreasonably withheld or delayed), each Lender will be permitted to make assignments to other financial institutions in respect of the Bridge Facility in a minimum amount equal to $5 million.
|
AMENDMENTS:
|
Amendments and waivers of the provisions of the loan agreement and other definitive credit documentation will require the approval of Lenders holding loans and commitments representing more than 50% of the aggregate amount of the loans and commitments under the Bridge Facility (the “
Required Lenders
”), except that (a) the consent of each Lender shall be required with respect to (i) the waiver of certain conditions precedent to be agreed to for the credit extension under the Bridge Facility, (ii) the amendment of pro rata sharing provisions, and (iii) the amendment of the voting percentages of the Lenders, and (b) the consent of each Lender affected thereby shall be required with respect to (i) increases or extensions in the commitment of such Lender, (ii) reductions of principal, interest or fees, and (iii) extensions of scheduled maturities or times for payment.
|
INDEMNIFICATION:
|
The Borrower will indemnify and hold harmless the Administrative Agent, the Lead Arranger, each Lender and their respective affiliates and their partners, directors, officers, employees, agents and advisors from and against all losses, claims, damages, liabilities and expenses arising out of or relating to the Bridge Facility, the Borrower’s use of loan proceeds or the commitments, including, but not limited to, reasonable attorneys’ fees and settlement costs of one counsel for all indemnified parties (and, if necessary, of a single local counsel in each required jurisdiction and, in the case of an actual or perceived conflict of interest, one additional counsel in each applicable jurisdiction to affected or similarity situated indemnified parties), but excluding any such losses, claims, damages, liabilities and expenses resulting from disputes solely among the indemnified parties or found in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from such person’s gross negligence, willful misconduct or material breach of the Bridge Facility Documentation. This indemnification shall survive and continue for the benefit of all such persons or entities.
|
GOVERNING LAW:
|
State of New York.
|
AGENT’S COUNSEL:
|
Shearman & Sterling LLP
|
EXPENSES:
|
As set forth in Addendum I.
|
DEFAULTING LENDERS:
|
Usual and customary for transactions of this type (including the ability to classify a Lender as a defaulting lender if such Lender or its parent becomes subject to a bail-in action).
|
EU BAIL-IN:
|
The Bridge Facility Documentation shall contain customary language relating to the EU Bail-in regime.
|
OTHER:
|
Each of the parties shall (i) waive its right to a trial by jury and (ii) submit to New York jurisdiction. The Bridge Facility Documentation will contain customary increased cost, withholding tax, capital adequacy and yield protection provisions. The Borrower shall have the right to replace any Lender that (i) makes a claim for compensation under certain of the foregoing provisions, (ii) is a defaulting lender (including by failing to fund a requested borrowing after satisfaction of the conditions precedent thereto), and/or (iii) fails to consent to a requested amendment to the Bridge Facility Documentation that has obtained the approval of the Required Lenders but also requires the approval of such Lender.
|
INTEREST RATES:
|
At the Borrower’s option, any loan under the Bridge Facility will
bear interest at a rate equal to (i) LIBOR plus the Applicable Margin, as determined in accordance with the Performance Pricing grid set forth below or (ii) the Base Rate (to be defined as the highest of (a) the
Bank of America prime rate, (b) the Federal Funds rate plus 0.50% and (c) the one-month LIBOR rate (determined on a daily basis by reference to such rate without application of breakage or redeployment costs, and which if less than zero shall be deemed to be zero), if available, plus 0.50%)
plus
the Applicable Margin.
|
PRICING:
|
The Applicable Margin for LIBOR Loans and Base Rate Loans, for any fiscal quarter, shall be the applicable rate per annum set forth in the pricing grid below opposite the applicable Level. Additionally, the Applicable Margin for LIBOR Loans and for Base Rate Loans for each Level will increase by 0.25% on the 90
th
day following the Closing Date and by an additional 0.25% on each 90
th
day thereafter.
|
Level
|
Ratings (Moody’s/
S&P) |
Applicable Margin for LIBOR Loans
|
Applicable Margin for Base Rate Loans
|
I
|
≥A3/A-
or better |
1.125%
|
0.125%
|
II
|
≥Baa1/BBB+ but < A3/A-
|
1.25%
|
0.25%
|
III
|
< Baa1/BBB+ or not rated
|
1.50%
|
0.50%
|
DURATION FEES
:
|
The Borrower shall pay non-refundable duration fees based on the following percentages of the aggregate principal amount of Loans outstanding on the dates below, each such duration fee to be payable on such applicable date:
|
INTEREST AND FEES:
|
Other than calculations in respect of interest at the Administrative Agent’s prime rate (which shall be made on the basis of actual number of days elapsed in a 365/366 day year), all calculations of interest and fees shall be made on the basis of actual number of days elapsed in a 360 day year.
|
PROTECTION:
|
Customary for transactions and facilities of this type, including, without limitation, in respect of breakage or redeployment costs incurred in connection with prepayments, changes in capital adequacy and capital requirements or their interpretation, illegality, unavailability, reserves without proration or offset and payments free and clear of withholding or other taxes.
|
EXPENSES:
|
As further detailed in the Commitment Letter (and subject to receipt of estimates and periodic updates), the Borrower will pay all reasonable and documented costs and expenses associated with the preparation, due diligence, administration, syndication and closing of all Bridge Facility Documentation, including, without limitation, the legal fees of outside counsel to the Administrative Agent and the Lead Arranger (but not counsel to any other Lender), regardless of whether or not the Bridge Facility is closed. The Borrower will also pay the expenses of the Administrative Agent and each Lender in connection with the enforcement of any of the Bridge Facility Documentation.
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
Dated:
|
November 8, 2016
|
|
/s/ Edward T. Tilly
|
|
|
|
Edward T. Tilly
|
|
|
|
Chief Executive Officer
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
Dated:
|
November 8, 2016
|
|
/s/ Alan J. Dean
|
|
|
|
Alan J. Dean
|
|
|
|
Executive Vice President and Chief Financial Officer
|
/s/ Edward T. Tilly
|
|
|
Edward T. Tilly
|
|
|
November 8, 2016
|
|
|
/s/ Alan J. Dean
|
|
|
Alan J. Dean
|
|
|
November 8, 2016
|
|
|