IntercontinentalExchange Group, Inc. — Q3 2013 Form 10-Q
Reporting period: Quarter ended September 30, 2013. ICE Group was incorporated on March 6, 2013, solely to facilitate ICE’s pending acquisition of NYSE Euronext. It had not commenced operations and was wholly owned by ICE at quarter-end. This filing therefore does not report the operating results of ICE or NYSE Euronext.
Financial results and position
- Revenue, expenses, profit and margins: No revenue, expenses, income taxes, net income or comprehensive income were reported for the quarter or from incorporation through September 30.
- Cash flow: For the period from incorporation through September 30, operating cash flow was $1,329,000, reflecting the increase in amounts due to an affiliate. Financing cash flow was negative $1,328,990, including $10 of capitalization proceeds from ICE and $1,329,000 of debt issuance costs paid by ICE. Ending cash was $10.
- Balance sheet: Total assets were $1,329,010, consisting of $10 cash and $1,329,000 of capitalized debt issuance costs. Total liabilities were $1,329,000, all due to an affiliate; equity was $10. No debt principal was reported as outstanding at September 30.
- Liquidity and debt: ICE Group stated it had no liquidity or capital resource requirements as of quarter-end. The statements show minimal cash; the affiliate payable reflects the debt issuance costs paid by ICE and reimbursable by ICE Group.
The filing presents no prior-year comparable operating period because ICE Group was newly incorporated. Amounts are reported in dollars; the financial statements do not state a different unit.
Acquisition financing and subsequent developments
- The proposed NYSE Euronext acquisition was valued at approximately $10.9 billion, based on ICE’s November 1, 2013 closing share price. Consideration was expected to include $2.7 billion cash and 42.4 million shares issued to NYSE Euronext stockholders.
- On October 8, 2013, after quarter-end, the company issued $600 million of 2.50% senior notes due 2018 and $800 million of 4.00% senior notes due 2023. Interest is payable semiannually beginning April 15, 2014.
- ICE also borrowed $400 million under its $2.1 billion five-year revolving credit facility on October 31, 2013. The notes, cash on hand and revolver borrowings were intended to fund the cash portion of the acquisition.
- Following the acquisition, the company expected to commence a $300 million annual dividend program. The notes include covenants restricting, among other matters, liens, indebtedness, mergers and certain asset dispositions. Cross-guarantees among relevant debt issuers and borrowers were contemplated after closing.
Management commentary, risks and controls
Management stated that ICE Group conducted no material activities other than formation and acquisition-related matters and therefore incurred no significant market risk. The filing directs readers to the acquisition proxy statement and ICE’s 2012 Form 10-K for risk factors. Management cautioned that forward-looking statements are subject to risks and uncertainties and are not guarantees of future results. Disclosure controls were assessed as effective; no material change in internal control over financial reporting was reported. No legal proceedings were listed.
Investor facts to verify
- Whether and when the NYSE Euronext acquisition closed, and the final consideration and share issuance.
- Final use of the $1.4 billion note proceeds, the $400 million revolver borrowing and cash on hand; also verify post-close debt balances, guarantees and covenant terms.
- Whether the planned $300 million annual dividend program was implemented and how it was funded.
- Post-acquisition consolidated operating results and liquidity: this filing contains no meaningful operating results for the ICE or NYSE Euronext businesses.