Continuing its streak of record results, Atlanta-based IntercontinentalExchange Inc. (ICE), operator of global exchanges and over-the-counter (OTC) markets, reported that its consolidated net income increased 68% to a record $240.6 million in 2007 from $143.3 million in 2006. In addition, the company reported consolidated net income for the fourth quarter of 2007 of $64.7 million, a 32% increase compared to $49 million for the fourth quarter of 2006.
The strong earnings were released on the same day the company announced its acquisition of YellowJacket Software Inc., which is a financial technology firm that operates an electronic trade negotiation platform serving markets in weather, natural gas, power and crude oil.
Diluted earnings per share (EPS) for 2007 were $3.39, an increase of 41% over 2006. The 2007 results include expenses related to ICE's failed merger attempt with the Chicago Board of Trade of $11.1 million, or $7.2 million after tax. Diluted EPS in the fourth quarter was 90 cents, an increase of 11% over the prior year's fourth quarter of 81 cents. Fourth quarter net income and EPS were reduced by $3 million and 4 cents per share due to certain noncash compensation expense related to ICE's performance-based equity program and recorded under an accelerated method of expense recognition.
"By continuing to transform and diversify our global marketplace, we achieved record results for the fourth quarter and for 2007," said ICE CEO Jeffrey C. Sprecher. "The ICE team delivered on many key initiatives over the last year, including completing and integrating five acquisitions as well as a comprehensive redevelopment of our technology platform."
Sprecher noted that the company's success in the new year is picking up right where 2007 left off. "This year is also off to a very strong start, including record levels of OTC commissions and futures volume in January, as well as a record number of participants on the ICE platform," he said. "We are busy pursuing a range of new opportunities while executing on the many initiatives that we began last year to drive both near-term and long-term growth.
"Among these initiatives are introducing our European clearinghouse, growing our equity index business through our exclusive Russell license and expanding the valuable futures and OTC businesses we acquired last year. Importantly, we continue to see organic growth in our core energy futures and OTC businesses. We maintain our focus on innovation and growth by being responsive to our customers' evolving needs, entering new markets, advancing our technology, and continuing our strategic approach to M&A."
ICE said it achieved record revenues for the fourth consecutive year, reporting an 83% rise in consolidated revenues to $574.3 million compared with $313.8 million in the prior year. Consolidated revenues in the fourth quarter increased 67% to a record $159.3 million, from $95.3 million in the fourth quarter of 2006. 4Q2007 marked ICE's eighth consecutive quarter of record revenues.
The company's European and North American futures exchanges achieved record annual volume in 2007, with increases of 49% and 22%, respectively, totaling 192 million contracts combined. In 2007, average daily volume (ADV) for ICE Futures Europe was 539,044; ADV for ICE Futures U.S. and ICE Futures Canada was 232,566 contracts. Average daily commissions for the company's OTC segment during 2007 increased to a record $845,572, a 44% increase over 2006.
For businesses acquired last year, 2007 volume and commission levels reflect only the time period after the closing date of each transaction. ICE Futures U.S., formerly the New York Board of Trade, was acquired on Jan. 12, 2007, and ICE Futures Canada, formerly the Winnipeg Commodity Exchange, was acquired on Aug. 28, 2007.
Regarding its acquisition of YellowJacket, ICE said the new business will be operated as a wholly owned subsidiary of ICE. With the YellowJacket platform traders can aggregate and consolidate fragmented instant message-based communications and key transaction details on a single screen. Formed in 2002, YellowJacket is privately held.
"YellowJacket brings an innovative application that is uniquely positioned to meet the demand for electronic efficiencies in the OTC markets where complex options or structured products are involved," said Sprecher. "We see many applications of this technology beyond the energy and weather categories, particularly when coupled with ICE's expanding clearing capabilities."
ICE said it expects to complete its acquisition of YellowJacket this month. Terms of the transaction were not disclosed.
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