Document and Entity Information
Document and Entity Information Document - shares | 3 Months Ended | |
Mar. 31, 2016 | Apr. 22, 2016 | |
Entity [Abstract] | ||
Entity Registrant Name | CBOE Holdings, Inc. | |
Entity Central Index Key | 1,374,310 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 81,396,052 | |
Entity Current Reporting Status | Yes |
Condensed Consolidated Statemen
Condensed Consolidated Statement of Income - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Operating Revenues: | ||
Transaction fees | $ 118,004 | $ 98,723 |
Access fees | 13,249 | 13,686 |
Exchange services and other fees | 11,391 | 9,728 |
Market data fees | 7,969 | 8,012 |
Regulatory fees | 9,100 | 8,382 |
Other revenue | 2,617 | 4,308 |
Total Operating Revenues | 162,330 | 142,839 |
Operating Expenses: | ||
Compensation and benefits | 27,106 | 25,439 |
Depreciation and amortization | 11,851 | 10,402 |
Technology support services | 5,678 | 5,325 |
Professional fees and outside services | 13,631 | 11,950 |
Royalty fees | 19,114 | 14,150 |
Order routing | 104 | 787 |
Travel and promotional expenses | 2,515 | 2,501 |
Facilities costs | 1,528 | 1,384 |
Other expenses | 1,322 | 1,348 |
Total Operating Expenses | 82,849 | 73,286 |
Operating Income | 79,481 | 69,553 |
Other Income/(Expense): | ||
Investment income | 707 | 51 |
Net income/(loss) from investments | 306 | (327) |
Interest and Debt Expense | (27) | 0 |
Total Other Income/(Expense) | 986 | (276) |
Income Before Income Taxes | 80,467 | 69,277 |
Income tax provision | 31,291 | 27,018 |
Net Income | 49,176 | 42,259 |
Net loss attributable to noncontrolling interests | 224 | 0 |
Net Income Excluding Noncontrolling Interests | 49,400 | 42,259 |
Net income allocated to participating securities | 202 | 180 |
Net Income allocated to common stockholders | $ 49,198 | $ 42,079 |
Net Income Per Share Allocated to Common Stockholders: | ||
Basic | $ 0.60 | $ 0.50 |
Diluted | $ 0.60 | $ 0.50 |
Weighted average shares used in computing income per share: | ||
Basic | 81,818 | 83,956 |
Diluted | 81,818 | 83,956 |
Condensed Consolidated Stateme3
Condensed Consolidated Statement of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Condensed Consolidated Statement of Comprehnsive Income [Abstract] | ||
Net Income (includes noncontrolling interests) | $ 49,176 | $ 42,259 |
Post-retirement benefit obligation | 29 | (181) |
Comprehensive Income | 49,205 | 42,078 |
Comprehensive loss attributable to noncontrolling interests | 224 | 0 |
Comprehensive Income Excluding Noncontrolling Interests | 49,429 | 42,078 |
Net income allocated to participating securities | 202 | 180 |
Comprehensive Income Allocated to Common Stockholders | $ 49,227 | $ 41,898 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Current Assets: | ||
Cash and cash equivalents | $ 107,482 | $ 102,253 |
Accounts receivable—net allowances of 2016 - $75 and 2015 - $150 | 57,604 | 62,535 |
Marketing fee receivable | 6,585 | 5,682 |
Income taxes receivable | 4,778 | 27,901 |
Other prepaid expenses | 7,978 | 5,122 |
Other current assets | 264 | 625 |
Total Current Assets | 184,691 | 204,118 |
Investments | 12,971 | 12,185 |
Investments | 53,485 | 48,430 |
Land | 4,914 | 4,914 |
Property and Equipment: | ||
Construction in progress | 2,308 | 885 |
Building | 70,550 | 70,531 |
Furniture and equipment | 146,732 | 144,597 |
Less accumulated depreciation and amortization | (161,527) | (155,653) |
Total Property and Equipment—Net | 58,063 | 60,360 |
Goodwill | 26,468 | 7,655 |
Other Assets: | ||
Intangible assets (less accumulated amortization—2016 - $544 and 2015 - $182) | 10,016 | 2,378 |
Software development work in progress | 16,519 | 13,836 |
Data processing software and other assets (less accumulated amortization—2016 - $167,746 and 2015 - $164,152) | 40,674 | 43,097 |
Total Other Assets—Net | 67,209 | 59,311 |
Total | 394,830 | 384,788 |
Current Liabilities: | ||
Accounts payable and accrued liabilities | 50,387 | 60,104 |
Marketing fee payable | 7,058 | 6,141 |
Deferred revenue and other liabilities | 14,726 | 4,019 |
Post-retirement benefit obligation - current | 81 | 100 |
Contingent consideration - current | 3,407 | 2,000 |
Income tax payable | 7,695 | 1,633 |
Total Current Liabilities | 83,354 | 73,997 |
Long-term Liabilities: | ||
Post-retirement benefit obligation - long-term | 1,881 | 1,896 |
Contingent consideration - long term | 0 | 1,379 |
Income tax liability | 40,929 | 39,679 |
Other long-term liabilities | 2,995 | 2,883 |
Deferred income taxes | 5,144 | 5,309 |
Total Long-term Liabilities | $ 50,949 | $ 51,146 |
Commitments and Contingencies | ||
Total Liabilities | $ 134,303 | $ 125,143 |
Redeemable Noncontrolling Interests | 12,600 | 0 |
Stockholders’ Equity: | ||
Preferred stock, $0.01 par value: 20,000,000 shares authorized, no shares issued and outstanding at March 31, 2016 or December 31, 2015 | 0 | 0 |
Additional paid-in-capital | 128,080 | 123,577 |
Retained earnings | 633,876 | 603,597 |
Treasury stock at cost – 11,383,858 shares at March 31, 2016 and 10,650,254 shares at December 31, 2015 | (514,163) | (467,632) |
Accumulated other comprehensive loss | (795) | (824) |
Total Stockholders’ Equity | 247,927 | 259,645 |
Total | 394,830 | 384,788 |
Unrestricted Common Stock | ||
Stockholders’ Equity: | ||
Common stock, $0.01 par value: 325,000,000 shares authorized; 92,934,561 issued and 81,550,703 outstanding at March 31, 2016; 92,738,803 issued and 82,088,549 outstanding at December 31, 2015 | $ 929 | $ 927 |
Condensed Consolidated Balance5
Condensed Consolidated Balance Sheets Parenthetical - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Allowance for Doubtful Accounts Receivable, Current | $ 75,000 | $ 150,000 |
Capitalized Computer Software, Accumulated Amortization | 167,746,000 | 164,152,000 |
Finite-Lived Intangible Assets, Accumulated Amortization | $ 544,000 | $ 182,000 |
Preferred Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
Preferred Stock, Shares Authorized | 20,000,000 | 20,000,000 |
Preferred Stock, Shares Issued | 0 | 0 |
Preferred Stock, Shares Outstanding | 0 | 0 |
Common Stock, Par or Stated Value Per Share | $ 0.01 | $ 0.01 |
Common Stock, Shares Authorized | 325,000,000 | 325,000,000 |
Common Stock, Shares, Issued | 92,934,561 | 92,738,803 |
Common Stock, Shares, Outstanding | 81,550,703 | 82,088,549 |
Treasury Stock, Shares | 11,383,858 | 10,650,254 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Stockholders’ Equity - 3 months ended Mar. 31, 2016 - USD ($) $ in Thousands | Total | Preferred Stock | Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Redeemable Noncontrolling Interests |
Balance—January 1, 2016 at Dec. 31, 2015 | $ 259,645 | $ 0 | $ 927 | $ 123,577 | $ 603,597 | $ (467,632) | $ (824) | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Cash dividends on common stock | (18,897) | (18,897) | ||||||
Stock-based compensation | 3,363 | 3,363 | ||||||
Excess tax benefits from stock-based compensation plan | 1,142 | 1,142 | ||||||
Issuance of vested restricted stock granted to employees | 0 | 2 | (2) | |||||
Purchase of common stock | (46,531) | (46,531) | ||||||
Net Income (Loss) Attributable to Parent | 49,400 | 49,400 | ||||||
Post-retirement benefit obligation adjustment—net of tax expense $18 | 29 | 29 | ||||||
Balance—March 31, 2016 at Mar. 31, 2016 | 247,927 | $ 0 | $ 929 | $ 128,080 | 633,876 | $ (514,163) | $ (795) | |
Redeemable Noncontrolling Interests, beginning value at Dec. 31, 2015 | 0 | |||||||
Increase (Decrease) in Temporary Equity [Roll Forward] | ||||||||
Increase due to acquiring majority of outstanding equity of Vest | 12,600 | $ 12,600 | ||||||
Net loss attributable to redeemable noncontrolling interest | (224) | |||||||
Redemption value adjustment | 224 | $ (224) | $ 224 | |||||
Redeemable Noncontrolling Interests, ending value at Mar. 31, 2016 | $ 12,600 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Stockholders’ Equity Parenthetical $ in Millions | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Post-retirement benefit obligation adjustment, tax expense (benefit) | $ 18 |
Condensed Consolidated Stateme8
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Cash Flows from Operating Activities: | ||
Net Income (includes noncontrolling interests) | $ 49,176 | $ 42,259 |
Adjustments to reconcile net income to net cash flows from operating activities: | ||
Depreciation and amortization | 11,851 | 10,402 |
Other amortization | 21 | 11 |
Provision for deferred income taxes | (184) | 601 |
Stock-based compensation | 3,363 | 2,655 |
Loss on disposition of property | 1 | 170 |
Equity (gain) in investment | (306) | (37) |
Impairment of investment and other assets | 0 | 118 |
Change in assets and liabilities: | ||
Accounts receivable | 4,931 | 6,154 |
Marketing fee receivable | (903) | 1,908 |
Income taxes receivable | 23,123 | 20,383 |
Prepaid expenses | (2,831) | (3,966) |
Other current assets | 365 | (372) |
Accounts payable and accrued expenses | (10,221) | (13,239) |
Marketing fee payable | 917 | (1,916) |
Deferred revenue and other liabilities | 10,819 | 11,200 |
Post-retirement benefit obligations | (6) | (5) |
Income tax liability | 1,250 | 1,249 |
Income tax payable | 6,062 | 880 |
Net Cash Flows provided by Operating Activities | 97,428 | 78,455 |
Cash Flows from Investing Activities: | ||
Capital and other assets expenditures | (8,934) | (7,536) |
Acquisition of a majority interest in a business, net of cash received | (14,257) | 0 |
Investments | (4,749) | (30,469) |
Other | 27 | 246 |
Net Cash Flows used in Investing Activities | (27,913) | (37,759) |
Cash Flows from Financing Activities: | ||
Payment of quarterly dividends | (18,897) | (17,725) |
Excess tax benefit from stock-based compensation | 1,142 | 1,194 |
Purchase of common stock from employees | (4,119) | (3,119) |
Purchase of unrestricted common stock under announced program | (42,412) | (31,415) |
Net Cash Flows used in Financing Activities | (64,286) | (51,065) |
Net Increase/(Decrease) in Cash and Cash Equivalents | 5,229 | (10,369) |
Cash and Cash Equivalents at Beginning of Period | 102,253 | 147,927 |
Cash and Cash Equivalents at End of Period | 107,482 | 137,558 |
Supplemental Disclosure of Cash Flow Information | ||
Cash paid for income taxes | $ 0 | $ 2,695 |
Description of Business
Description of Business | 3 Months Ended |
Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description Of Business | DESCRIPTION OF BUSINESS CBOE Holdings, Inc. is the holding company for Chicago Board Options Exchange, Incorporated, CBOE Futures Exchange, LLC, C2 Options Exchange, Incorporated and other subsidiaries, including our majority ownership in Vest Financial Group Inc. ("Vest"). The Company's principal business is operating markets that offer for trading options on various market indexes (index options), mostly on an exclusive basis, and futures contracts, as well as on non-exclusive "multiply-listed" options, such as options on the stocks of individual corporations (equity options) and options on other exchange-traded products (ETP options), such as exchange-traded funds (ETF options) and exchange-traded notes (ETN options). The Company operates CBOE, CFE and C2 as stand-alone exchanges, but reports the results of its operations in a single reporting segment. CBOE is our primary options market and offers trading in listed options through a single system that integrates electronic trading and traditional open outcry trading on our trading floor in Chicago. This integration of electronic trading and traditional open outcry trading into a single exchange is known as our Hybrid trading model. CFE, our all-electronic futures exchange, offers trading of futures on the VIX Index and other products. C2 is our all-electronic exchange that also offers trading for listed options, and may operate with a different market model and fee structure than CBOE. All of our exchanges operate on our proprietary technology platform known as CBOE Command. |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation | These interim unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 . The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, valuation of redeemable noncontrolling interests and reported amounts of revenues and expenses. On an ongoing basis, management evaluates its estimates based upon historical experience, observance of trends, information available from outside sources and various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different conditions or assumptions. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of financial position, results of operations and cash flows at the dates and for the periods presented have been included. The results of operations for interim periods are not necessarily indicative of the results of operations for the full year. Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers . This standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. In addition, the ASU provides guidance on accounting for certain revenue-related costs including when to capitalize costs associated with obtaining and fulfilling a contract. ASU 2014-09 provides companies with two implementation methods. Companies can choose to apply the standard retrospectively to each prior reporting period presented (full retrospective application) or retrospectively with the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings of the annual reporting period that includes the date of initial application (modified retrospective application). This guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The FASB deferred the effective date by one year to December 15, 2017 for annual reporting periods beginning after that date. Early adoption of the standard is permitted, but not before the original effective date of December 15, 2016. The Company is in the process of evaluating this guidance, though we do not expect it will materially impact our consolidated balance sheets, statements of income, comprehensive income or cash flows. In September 2015, the FASB issued ASU 2015-16, Business Combinations . This standard simplifies the accounting for adjustments made to provisional amounts recognized in a business combination. First, it requires that the acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer also should record, in the same period's financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The amendments should be applied prospectively to adjustments to provisional amounts that are identified after December 15, 2015 and that are within the measurement period. Upon transition, an entity would be required to disclose the nature of, and reason for, the change in accounting principle. An entity would provide that disclosure in the first annual period of adoption and in the interim periods within the first annual period. The Company has adopted this guidance, though we do not expect it will materially impact our consolidated balance sheets, statements of income, comprehensive income or cash flows. In February 2016, the FASB issued ASU 2016-02, Leases . This update requires a lessee to recognize on the balance sheet a liability to make lease payments and a corresponding right-of-use asset. The guidance also requires certain qualitative and quantitative disclosures about the amount, timing and uncertainty of cash flows arising from leases. This update is effective for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. The Company is in the process of evaluating this guidance, though we do not expect it will materially impact our consolidated balance sheets, statements of income, comprehensive income or cash flows. In March 2016, the FASB issued ASU 2016-09, Compensation — Stock Compensation . This standard simplifies several aspects of the accounting for stock-based payment transactions, including the recognition of excess tax benefits and deficiencies, the classification of those excess tax benefits on the statement of cash flows, an accounting policy election for forfeitures, the amount an employer can withhold to cover income taxes and still qualify for equity classification and the classification of those taxes paid on the statement of cash flows. This update is effective for annual and interim periods beginning after December 15, 2016 and can be applied either prospectively, retrospectively or using a modified retrospective transition method, depending on the area covered in this update. Early adoption is permitted. The Company is in the process of evaluating this guidance, though we do not expect it will materially impact our consolidated balance sheets, statements of income, comprehensive income or cash flows. |
Acquisition of Business (Notes)
Acquisition of Business (Notes) | 3 Months Ended |
Mar. 31, 2016 | |
Business Combinations [Abstract] | |
Business Combination Disclosure [Text Block] | 3. ACQUISITIONS - GOODWILL AND INTANGIBLE ASSETS Vest Financial Group Inc. In January 2016, the Company, through its subsidiary CBOE Vest, LLC, acquired a majority of the outstanding equity of Vest, an asset management firm that provides options-based investments through structured protective strategies and innovative technology solutions which allows for enhanced integration of our proprietary products, strategy indexes and options expertise. The purchase price consisted of $18.9 million in cash, reflecting payments of $14.9 million to former stockholders and $4.0 million to Vest for newly issued shares, and represented an ownership interest of 60% resulting in the consolidation of the operations. The purchase price was allocated on a preliminary basis, subject to final allocation, to the assets acquired based on their fair values at the acquisition date. (amounts in thousands) As of March 31, 2016 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 The intangible assets acquired are listed below and consisted of the following as of March 31, 2016 (in thousands): As of March 31, 2016 Estimated Useful Lives Customer relationships $ 3,000 8 years Trade names 1,000 7 years Technology 4,000 5 years Total Intangible Assets Acquired $ 8,000 The remaining 40% noncontrolling interest is held by the remaining Vest stockholders. The remaining Vest stockholders have a put option that can be exercised to Vest and Vest has a call option that can be exercised to the remaining stockholders. The put and call options can be exercised after five years though they could be accelerated by certain employment-related actions. The combination of the noncontrolling interest and a redemption feature resulted in a redeemable noncontrolling interest, which is classified outside of permanent equity on the condensed consolidated balance sheet. In addition to the tangible and intangible assets, goodwill totaling $18.8 million was recorded in connection with the acquisition. Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents potential future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The goodwill is not expected to be deductible for tax purposes. Pro forma financial information has not been provided as the Vest acquisition is not material to our consolidated balance sheets, statements of income, comprehensive income or cash flows and did not meet the conditions of a significant subsidiary under Rule 1-02 of Regulation S-X. Livevol, Inc. On August 7, 2015, the Company acquired the market data services and trading analytics platforms of Livevol, Inc. ("Livevol"), which included Livevol Core, Livevol Pro and Livevol X trading analytics platforms, as well as Livevol Enterprise and other market data solutions products. The purchase price consisted of $7.0 million cash, including $4.0 million paid to existing Livevol debt holders and $3.0 million to Livevol owners, upon closing plus contingent consideration based on achievement of certain performance targets, measured at nine and eighteen months from the acquisition date of August 7, 2015. The purchase price was allocated on a preliminary basis, subject to final allocation, to the assets acquired based on their fair values at the acquisition date. The acquisition included tangible and intangible assets totaling $0.1 million and $2.6 million , respectively. The tangible assets primarily reflect computer hardware and intangible assets include: customer relationships, trade names, existing technology, non-compete agreements and a leasehold right. In addition to the assets, goodwill totaling $7.7 million was recorded in connection with the acquisition. Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents potential future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The goodwill is expected to be fully deductible for tax purposes. As of March 31, 2016 , the company recorded contingent consideration of $3.4 million , which is based on management's estimate of the performance target achievement by Livevol. If Livevol were to exceed management's estimates it could result in an additional payment in excess of the recorded contingent consideration. Livevol - Intangible Assets Intangible assets totaling $2.6 million were recorded in 2015 in connection with the acquisition of Livevol. The intangible assets include: customer relationships, trade names, existing technology, non-compete agreements and leasehold rights. Intangible assets and related accumulated amortization consisted of the following as of March 31, 2016 (in thousands): As of March 31, 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 291 Total Intangibles, net $ 2,269 For the three months ended March 31, 2016 , amortization of Livevol intangible assets was $0.1 million . The remaining weighted average useful lives of the intangible assets is 7.9 years as of March 31, 2016 . The future expected amortization expense from the intangible assets related to the Livevol acquisition as of March 31, 2016 is as follows (in thousands): Year Amortization expense 2016 (1) $ 326 2017 428 2018 349 2019 348 2020 277 Total $ 1,728 (1) Includes expected amortization for the remaining nine months of 2016. |
Redeemable Noncontrolling Inter
Redeemable Noncontrolling Interest | 3 Months Ended |
Mar. 31, 2016 | |
Equity [Abstract] | |
Redeemable Noncontrolling Interest | NOTE 4 — REDEEMABLE NONCONTROLLING INTEREST Redeemable noncontrolling interests are reported on the condensed consolidated balance sheets in mezzanine equity in "Redeemable Noncontrolling Interests." We recognize changes to the redemption value of redeemable noncontrolling interests as they occur and adjust the carrying value to equal the redemption value at the end of each reporting period. The resulting increases or decreases in the estimated redemption amount are affected by corresponding charges or credits against retained earnings, or in the absence of retained earnings, additional paid in capital. The redemption amounts have been estimated based on the fair value of the majority-owned subsidiary, determined based on a weighting of the discounted cash flow and other economic factors. For the three months ended March 31, 2016 , the following reflects changes in our redeemable noncontrolling interests (in thousands): Three Months Ended March 31, 2016 Balance as of 1/1/2016 $ — Increase due to acquiring majority of outstanding equity of Vest 12,600 Net loss attributable to redeemable noncontrolling interest (224 ) Redemption value adjustment 224 Balance as of March 31, 2016 $ 12,600 |
Net Income per Common Share
Net Income per Common Share | 3 Months Ended |
Mar. 31, 2016 | |
Earnings Per Share [Abstract] | |
New Income per Common Share | NET INCOME PER COMMON SHARE The computation of basic net income allocated to common stockholders is calculated by reducing net income for the period by dividends paid or declared and undistributed net income for the period that are allocated to participating securities to arrive at net income allocated to common stockholders. Net income allocated to common stockholders is divided by the weighted average number of common shares outstanding during the period to determine net income per share allocated to common stockholders. The computation of diluted earnings per share is calculated by dividing net income allocated to common stockholders by the sum of the weighted average number of common shares outstanding plus all additional common shares that would have been outstanding if the potentially dilutive common shares had been issued. The dilutive effect is calculated using the more dilutive of the two-class or treasury stock method. The following table reconciles net income allocated to common stockholders and the number of shares used to calculate the basic and diluted net income per common share for the three months ended March 31, 2016 and 2015 : Three Months Ended March 31, (in thousands, except per share amounts) 2016 2015 Basic EPS Numerator: Net Income $ 49,176 $ 42,259 Add: Loss attributable to noncontrolling interests 224 — Net income excluding noncontrolling interests 49,400 42,259 Less: Earnings allocated to participating securities (202 ) (180 ) Net Income allocated to common stockholders $ 49,198 $ 42,079 Basic EPS Denominator: Weighted average shares outstanding 81,818 83,956 Basic Net Income Per Common Share $ 0.60 $ 0.50 Diluted EPS Numerator: Net Income $ 49,176 $ 42,259 Add: Loss attributable to noncontrolling interests 224 — Net income excluding noncontrolling interests 49,400 42,259 Less: Earnings allocated to participating securities (202 ) (180 ) Net Income allocated to common stockholders $ 49,198 $ 42,079 Diluted EPS Denominator: Weighted average shares outstanding 81,818 83,956 Dilutive common shares issued under stock program — — Diluted Net Income Per Common Share $ 0.60 $ 0.50 For the periods presented, the Company did not have shares of restricted stock or restricted stock units that would have an anti-dilutive effect on the computation of diluted net income per common share. |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2016 | |
Share-based Compensation [Abstract] | |
Stock-Based Compensation | STOCK-BASED COMPENSATION Stock-based compensation is based on the fair value of the award on the date of grant, which is recognized over the related service period, net of estimated forfeitures. The service period is the period over which the related service is performed, which is generally the same as the vesting period. On February 19, 2016 , the Company granted 170,081 restricted stock units ("RSUs"), each of which entitles the holders to one share of common stock upon vesting, to certain officers and employees at a fair value of $61.80 per share. The RSUs vest ratably over three years, with one-third vesting on each anniversary of the grant date, and vesting accelerates upon the occurrence of a change in control. Unvested RSUs will be forfeited if the officer or employee leaves the Company prior to the applicable vesting date, except in limited circumstances. The RSUs have no voting rights but entitle the holder to receive dividend equivalents. In addition, on February 19, 2016 , the Company granted 49,238 RSUs contingent on the achievement of performance conditions, including 24,619 RSUs, at a fair value of $61.80 per RSU, related to earnings per share during the performance period and 24,619 RSUs, at a fair value of $83.00 per RSU, related to total shareholder return during the performance period. The Company used the Monte Carlo valuation model method to estimate the fair value of the total shareholder return RSUs which incorporated the following assumptions: risk-free interest rate ( 0.90% ), three-year volatility ( 21.1% ) and three-year correlation with S&P 500 Index (0.41). Each of these performance shares has a performance condition under which the number of units ultimately awarded will vary from 0% to 200% of the original grant, with each unit representing the contingent right to receive one share of our common stock. The vesting period for the RSUs contingent on the achievement of performance is three years. For each of the performance awards, the RSUs will be settled in shares of our common stock following vesting of the RSU assuming that the participant has been continuously employed during the vesting period, subject to acceleration in the event of a change in control of the Company or in the event of a participant’s earlier death or disability. Participants have no voting rights with respect to RSUs until the issuance of the shares of stock. Dividends are accrued by the Company and will be paid once the RSUs contingent on the achievement of performance conditions vest. For the three months ended March 31, 2016 and 2015 , the Company recognized $3.4 million and $2.7 million of stock-based compensation expense, respectively. The three months ended March 31, 2016 included $0.2 million of accelerated stock-based compensation expense for certain officers and employees as a result of attaining certain age and service based requirements in our long-term incentive plan and award agreements. Stock-based compensation expense is included in compensation and benefits in the condensed consolidated statements of income. As of March 31, 2016 , the Company had unrecognized stock-based compensation of $24.0 million . The remaining unrecognized stock-based compensation is expected to be recognized over a weighted average period of 29.9 months. The activity in the Company’s restricted stock and restricted stock units for the three months ended March 31, 2016 was as follows: Number of Shares Weighted Average Unvested at January 1, 2016 456,570 $ 55.70 Granted 219,319 64.18 Vested (195,731 ) 47.36 Forfeited (4,133 ) 59.67 Unvested at March 31, 2016 476,025 $ 63.17 |
Investments
Investments | 3 Months Ended |
Mar. 31, 2016 | |
Investments in and Advances to Affiliates, Schedule of Investments [Abstract] | |
Investments in Affiliates | INVESTMENTS At March 31, 2016 and December 31, 2015 , the Company's investments were comprised of the following (in thousands): March 31, December 31, Equity Method Investment in Signal Trading Systems, LLC 12,971 12,185 Investment in CBOE Stock Exchange, LLC — — Total equity method investments 12,971 12,185 Cost Method Investment in OCC 30,333 30,333 Other cost method investments 10,181 5,912 Total cost method investments 40,514 36,245 Total Investments $ 53,485 $ 48,430 Equity Method The carrying amount of our equity method investments totaled $13.0 million and $12.2 million as of March 31, 2016 and December 31, 2015 , respectively, and is included in Investments in our Consolidated Balance Sheet. Our equity method investments include our investments in Signal Trading Systems, LLC ("Signal") and CBOE Stock Exchange, LLC ("CBSX"). In May 2010, CBOE acquired a 50% interest in Signal from FlexTrade Systems, Inc. ("FlexTrade"). The joint venture develops and markets a multi-asset front-end order entry system, known as "Pulse," which has a particular emphasis on options trading. The Company assists in the development of the terminals and provides marketing services to the joint venture, which is accounted for under the equity method. We account for the investment in Signal under the equity method due to the substantive participating rights provided to the other limited liability company member, FlexTrade. In the three months ended March 31, 2016 , the Company recorded contributions to Signal of $0.5 million and equity earnings in Signal of $0.3 million . The Company currently holds a 49.96% equity interest in CBSX in return for non-cash property contributions. CBSX ceased trading operations on April 30, 2014. CBOE is responsible for the compliance and regulation of the CBSX marketplace. In addition, the Company has a services agreement under which it provides CBSX with financial, accounting and technology support. Cost method The carrying amount of our cost method investments totaled $40.5 million and $36.2 million as of March 31, 2016 and December 31, 2015 , respectively, and is included in Investments in our Consolidated Balance Sheet. We account for investments under the cost-method primarily as a result of our inability to exercise significant influence. As of March 31, 2016 , our cost method investments primarily reflect our 20% investment in OCC and minority investments in American Financial Exchange ("AFX") and CurveGlobal. As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2015, the SEC approved OCC’s rule change implementing OCC's new capital plan on February 11, 2016. Certain petitioners subsequently appealed the SEC approval order for the OCC capital plan to the U.S. Court of Appeals for the D.C. Circuit and moved to stay the SEC approval order. On February 23, 2016, the Court denied the petitioners’ motion to stay. The appeal of the SEC approval order remains pending. In 2015, CBOE Holdings, through its subsidiary Loan Markets, LLC, acquired a minority interest in AFX, an electronic marketplace for small and mid-sized banks to lend and borrow short-term funds. In January 2016, CBOE Holdings, through its subsidiary CBOE III, LLC, acquired a minority interest in CurveGlobal, a new interest rate derivatives venture. |
Accounts Payable and Accured Li
Accounts Payable and Accured Liabilities | 3 Months Ended |
Mar. 31, 2016 | |
Payables and Accruals [Abstract] | |
Accounts Payable and Accrued Liabilities | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES As of March 31, 2016 and December 31, 2015 , accounts payable and accrued liabilities consisted of the following (in thousands): March 31, December 31, Compensation and benefit-related liabilities (1) $ 8,593 $ 23,304 Royalties 16,588 15,409 Contract services 7,139 6,684 Accounts payable 4,178 1,762 Purchase of common stock (2) 1,825 1,778 Facilities 1,868 2,099 Legal 2,042 1,536 Market linkage 522 628 Other 7,632 6,904 Total $ 50,387 $ 60,104 (1) As of March 31, 2016 , primarily reflects accrued costs for 2016 incentive compensation expense. At December 31, 2015 , primarily reflects 2015 annual incentive compensation expense, which was paid in the first quarter of 2016 . (2) Reflects shares purchased at the end of the period not settled until three trading days after the trade occurs. |
Marketing Fee
Marketing Fee | 3 Months Ended |
Mar. 31, 2016 | |
Marketing Fee [Abstract] | |
Marketing Fees | MARKETING FEE CBOE facilitates the collection and payment of marketing fees assessed on certain trades taking place at CBOE. Funds resulting from the marketing fees are made available to Designated Primary Market Makers and Preferred Market Makers as an economic inducement to route orders to CBOE. Pursuant to ASC 605-45, Revenue Recognition—Principal Agent Considerations , the Company reflects the assessments and payments on a net basis, with no impact on revenues or expenses. As of March 31, 2016 and December 31, 2015 , amounts assessed by the Company on behalf of others included in current assets totaled $6.6 million and $5.7 million , respectively, and payments due to others included in current liabilities totaled $7.1 million and $6.1 million , respectively. |
Deferred Revenue
Deferred Revenue | 3 Months Ended |
Mar. 31, 2016 | |
Deferred Revenue [Abstract] | |
Deferred Revenue | DEFERRED REVENUE The following table summarizes the activity in deferred revenue for the three months ended March 31, 2016 (in thousands): Balance at December 31, 2015 Cash Additions Revenue Recognition Balance at March 31, 2016 Other – net $ 4,019 $ 4,556 $ (2,849 ) $ 5,726 Liquidity provider sliding scale (1) — 11,400 (2,400 ) 9,000 Total deferred revenue $ 4,019 $ 15,956 $ (5,249 ) $ 14,726 (1) Liquidity providers are eligible to participate in the sliding scale program, which involves prepayment of transaction fees, and receive reduced fees based on the achievement of certain volume thresholds within a calendar month. The prepayment of 2016 transaction fees totaled $11.4 million . This amount is amortized and recorded ratably, as transaction fees, over the respective twelve month period. |
Employee Benefits
Employee Benefits | 3 Months Ended |
Mar. 31, 2016 | |
Employee Benefits [Abstract] | |
Employee Benefits | EMPLOYEE BENEFITS Employees are eligible to participate in the Chicago Board Options Exchange SMART Plan (“SMART Plan”). The SMART Plan is a defined contribution plan, which is qualified under Internal Revenue Code Section 401(k). In addition, eligible employees may participate in the Supplemental Employee Retirement Plan, Executive Retirement Plan and Deferred Compensation Plan. Each plan is a defined contribution plan that is non-qualified under Internal Revenue Code. The Company contributed $1.3 million and $1.1 million to the defined contribution plans for the three months ended March 31, 2016 and 2015 , respectively. The Company has a post-retirement medical plan for former members of senior management. The Company recorded immaterial post-retirement benefits expense for the three months ended March 31, 2016 and 2015 . |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | INCOME TAXES Income tax provision includes United States federal, state and local taxes and is based on reported pre-tax income. For the three months ended March 31, 2016 and 2015 , the Company recorded income tax provisions of $31.3 million and $27.0 million , resulting in an effective tax rate of 38.9% and 39.0% , respectively. Income tax expense is provided on an interim basis based upon our estimate of the annual effective income tax rate, adjusted each quarter for discrete items. In determining the estimated annual effective income tax rate, we analyze various factors, including projections of our annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, and our ability to use tax credits. As of March 31, 2016 and December 31, 2015 , the Company had $32.4 million and $31.9 million , in unrecognized tax benefits, respectively, all of which would favorably impact the effective tax rate if recognized. As of March 31, 2016 and December 31, 2015 , the Company has recognized a liability for interest and penalties of $8.4 million and $7.7 million , respectively. We file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. Federal income tax returns are generally not subject to examination by the Internal Revenue Service ("IRS") for tax years prior to 2010. Tax years open to examination by state and local taxing authorities vary by jurisdiction. We are generally not subject to state or local tax examinations for tax years prior to 2007. The IRS is currently examining tax years 2008 through 2013. The New York State Department of Taxation and Finance is currently examining the returns filed for tax years 2007 through 2012. Tax returns for tax years 2010 through 2012 are currently under examination by the New Jersey Division of Taxation. We have been notified by the Illinois Department of Revenue that it intends to examine our tax returns filed for the 2013 and 2014 tax years. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Disclosures | FAIR VALUE MEASUREMENTS Fair value is the price that would be received upon the sale of an asset or paid upon the transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk, including the Company’s own credit risk. The Company applied FASB ASC 820, Fair Value Measurement and Disclosure , which provides guidance for using fair value to measure assets and liabilities by defining fair value and establishing the framework for measuring fair value. ASC 820 applies to financial and non-financial instruments that are measured and reported on a fair value basis. The three-level hierarchy of fair value measurements is based on whether the inputs to those measurements are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. The fair-value hierarchy requires the use of observable market data when available and consists of the following levels: • 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. The Company has included a tabular disclosure for financial assets that are measured at fair value on a recurring basis in the condensed consolidated balance sheet as of March 31, 2016 and December 31, 2015 . The Company holds no financial liabilities that are measured at fair value on a recurring basis. (amounts in thousands) Level 1 Level 2 Level 3 Total Assets at fair value: Money market funds $ 87,000 $ — $ — $ 87,000 Total assets at fair value at March 31, 2016 $ 87,000 $ — $ — $ 87,000 (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 In 2015, CBOE Holdings, through its subsidiary Loan Markets, LLC, acquired a minority interest in AFX. The investment, measured at fair value on a non-recurring basis, is classified as level 3 as the fair value was based on both observable and unobservable inputs. In January 2016, CBOE Holdings, through its subsidiary CBOE III, LLC, acquired a minority interest in CurveGlobal. The investment, measured at fair value on a non-recurring basis, is classified as level 3 as the fair value was based on both observable and unobservable inputs. The Company has recorded contingent consideration of $3.4 million through March 31, 2016, categorized as level 3, which is based on management's estimate of the achievement by Livevol of certain performance targets at nine and eighteen months from the acquisition date. If Livevol were to exceed management's estimates it could result in an additional payment in excess of the recorded contingent consideration. |
Legal Proceedings
Legal Proceedings | 3 Months Ended |
Mar. 31, 2016 | |
Legal Proceedings [Abstract] | |
Legal Proceedings | NOTE 14 — LEGAL PROCEEDINGS As of March 31, 2016 , the end of the period covered by this report, the Company was subject to various legal proceedings and claims, as well as certain other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. For a description of each of these proceedings, please see Note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015 . The Company reviews its legal proceedings and claims, regulatory reviews and inspections and other legal proceedings on an ongoing basis and follows appropriate accounting guidance when making accrual and disclosure decisions. The Company establishes accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and we disclose the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for our financial statements to not be misleading. The Company does not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote. The Company's assessment of whether a loss is reasonably possible or probable is based on its assessment of the ultimate outcome of the matter following all appeals. As of March 31, 2016 , the Company does not believe that there is a reasonable possibility that any material loss exceeding the amounts already recognized for these reviews, inspections or other legal proceedings, if any, has been incurred. While the consequences of certain unresolved proceedings are not presently determinable, the outcome of any litigation is inherently uncertain and an adverse outcome from certain matters could have a material effect on our earnings in any given reporting period. However, in the opinion of management, the ultimate liability is not expected to have a material effect on our financial position, liquidity or capital resources. ISE -- QRM On November 12, 2012, CBOE brought suit against International Securities Exchange, LLC ("ISE") in the United States District Court for the Northern District of Illinois alleging that ISE infringed three of its patents (United States Patent Nos. 7,356,498; 7,980,457; and 8,266,044 (the "QRM patents")) related to quote risk monitor ("QRM") technology. CBOE had requested injunctive relief and monetary damages. On February 20, 2013, the court ruled that the case be transferred to the United States District Court for the Southern District of New York, and on October 31, 2013, the Court stayed the litigation pending resolution of Covered Business Method ("CBM") Patent Reviews at the United States Patent and Trademark Office ("USPTO"), which ISE requested. On March 4, 2014, the USPTO instituted CBM Patent Reviews on CBOE’s three QRM patents. On May 22, 2014, the USPTO instituted Inter Parties Review ("IPR") Proceedings, which ISE requested, on some but not all claims of two of CBOE’s QRM patents (United States Patent Nos. 7,356,498 and 7,980,457). On March 2, 2015, the USPTO ruled in the CBM proceedings, finding that the subject matter of the patents is not eligible for patent protection, and in the IPR proceedings, finding for CBOE that the claims were not invalidated by the asserted prior art. On April 30, 2015, ISE filed notice of its appeal of the IPR decisions, and on May 1, 2015, CBOE filed notice of its appeal of the CBM decisions. The appeals are being handled by the United States Court of Appeals for the Federal Circuit. On March 25, 2016, the Court of Appeals affirmed the USPTO’s decisions that the QRM patents were directed to ineligible subject matter and dismissed ISE’s appeal and vacated the USPTO’s IPR decisions. Lanier Litigation On May 23, 2014, Harold R. Lanier sued 14 securities exchanges, including CBOE, in the United States District Court for the Southern District of New York on behalf of himself and a putative class consisting of all persons in the United States who entered into contracts to receive market data through certain data plans at any time since May 19, 2008 to the present. The complaint alleged that the market data provided under the CQ Plan and CTA Plans was inferior to the data that the exchanges provided to those that directly receive other data from the exchanges, which the plaintiffs alleged is a breach of their “subscriber contracts” and a violation of the exchanges’ obligations under the CQ and CTA Plans. The plaintiffs sought monetary and injunctive relief. On May 30, 2014, Mr. Lanier filed two additional suits in the same Court, alleging substantially the same claims and requesting the same types of relief against the exchanges who participate in the UTP and the OPRA data plans. CBOE was a defendant in each of these suits, while C2 was only a defendant in the suit regarding the OPRA Plan. On April 28, 2015, the Court dismissed Lanier’s complaint with prejudice because it was preempted by the federal regulatory scheme and because the claims were precluded by the terms of the applicable subscriber agreements. Mr. Lanier appealed the orders dismissing each of his three cases and, on September 2, 2015, he filed his opening appellate briefs in those cases. The defendants’ response briefs were filed November 24, 2015 and briefing on the appeals has concluded. The oral arguments on the appeals were heard on March 3, 2016. ISE -- '707 On November 22, 2006, ISE filed an action in the United States District Court for the Southern District of New York claiming that CBOE's Hybrid trading system infringes ISE's U.S. Patent No. 6,618,707 (the "'707 patent"). On January 31, 2007, CBOE filed an action in federal court in the Northern District of Illinois seeking a declaratory judgment that the '707 patent was not infringed, not valid and/or not enforceable against CBOE. The New York case was transferred to the federal court in the Northern District of Illinois on August 9, 2007. On March 14, 2013, ISE conceded to an adverse judgment in this matter and asked that the federal court in the Northern District of Illinois enter judgment for CBOE. ISE appealed certain court rulings to the Federal Circuit Court of Appeals. The federal court in the Northern District of Illinois on January 14, 2014 issued an opinion and order awarding certain costs associated with the litigation to CBOE. On April 7, 2014, the Federal Circuit Court of Appeals issued a favorable opinion to CBOE. On March 31, 2016, the federal court in the Northern District of Illinois granted CBOE’s motion for attorney fees and expenses and CBOE subsequently supplemented such request on April 7, 2016. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
New Accounting Pronouncements, Policy | Recent Accounting Pronouncements In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers . This standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. In addition, the ASU provides guidance on accounting for certain revenue-related costs including when to capitalize costs associated with obtaining and fulfilling a contract. ASU 2014-09 provides companies with two implementation methods. Companies can choose to apply the standard retrospectively to each prior reporting period presented (full retrospective application) or retrospectively with the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings of the annual reporting period that includes the date of initial application (modified retrospective application). This guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The FASB deferred the effective date by one year to December 15, 2017 for annual reporting periods beginning after that date. Early adoption of the standard is permitted, but not before the original effective date of December 15, 2016. The Company is in the process of evaluating this guidance, though we do not expect it will materially impact our consolidated balance sheets, statements of income, comprehensive income or cash flows. In September 2015, the FASB issued ASU 2015-16, Business Combinations . This standard simplifies the accounting for adjustments made to provisional amounts recognized in a business combination. First, it requires that the acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amount is determined. The acquirer also should record, in the same period's financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The amendments should be applied prospectively to adjustments to provisional amounts that are identified after December 15, 2015 and that are within the measurement period. Upon transition, an entity would be required to disclose the nature of, and reason for, the change in accounting principle. An entity would provide that disclosure in the first annual period of adoption and in the interim periods within the first annual period. The Company has adopted this guidance, though we do not expect it will materially impact our consolidated balance sheets, statements of income, comprehensive income or cash flows. In February 2016, the FASB issued ASU 2016-02, Leases . This update requires a lessee to recognize on the balance sheet a liability to make lease payments and a corresponding right-of-use asset. The guidance also requires certain qualitative and quantitative disclosures about the amount, timing and uncertainty of cash flows arising from leases. This update is effective for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. The Company is in the process of evaluating this guidance, though we do not expect it will materially impact our consolidated balance sheets, statements of income, comprehensive income or cash flows. In March 2016, the FASB issued ASU 2016-09, Compensation — Stock Compensation . This standard simplifies several aspects of the accounting for stock-based payment transactions, including the recognition of excess tax benefits and deficiencies, the classification of those excess tax benefits on the statement of cash flows, an accounting policy election for forfeitures, the amount an employer can withhold to cover income taxes and still qualify for equity classification and the classification of those taxes paid on the statement of cash flows. This update is effective for annual and interim periods beginning after December 15, 2016 and can be applied either prospectively, retrospectively or using a modified retrospective transition method, depending on the area covered in this update. Early adoption is permitted. The Company is in the process of evaluating this guidance, though we do not expect it will materially impact our consolidated balance sheets, statements of income, comprehensive income or cash flows. |
Acquisition of Business (Tables
Acquisition of Business (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Schedule of Business Acquisitions, by Acquisition [Table Text Block] | The purchase price was allocated on a preliminary basis, subject to final allocation, to the assets acquired based on their fair values at the acquisition date. (amounts in thousands) As of March 31, 2016 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 |
Redeemable Noncontrolling Int25
Redeemable Noncontrolling Interest (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Equity [Abstract] | |
Redeemable Noncontrolling Interest | For the three months ended March 31, 2016 , the following reflects changes in our redeemable noncontrolling interests (in thousands): Three Months Ended March 31, 2016 Balance as of 1/1/2016 $ — Increase due to acquiring majority of outstanding equity of Vest 12,600 Net loss attributable to redeemable noncontrolling interest (224 ) Redemption value adjustment 224 Balance as of March 31, 2016 $ 12,600 |
Net Income per Common Share (Ta
Net Income per Common Share (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | The following table reconciles net income allocated to common stockholders and the number of shares used to calculate the basic and diluted net income per common share for the three months ended March 31, 2016 and 2015 : Three Months Ended March 31, (in thousands, except per share amounts) 2016 2015 Basic EPS Numerator: Net Income $ 49,176 $ 42,259 Add: Loss attributable to noncontrolling interests 224 — Net income excluding noncontrolling interests 49,400 42,259 Less: Earnings allocated to participating securities (202 ) (180 ) Net Income allocated to common stockholders $ 49,198 $ 42,079 Basic EPS Denominator: Weighted average shares outstanding 81,818 83,956 Basic Net Income Per Common Share $ 0.60 $ 0.50 Diluted EPS Numerator: Net Income $ 49,176 $ 42,259 Add: Loss attributable to noncontrolling interests 224 — Net income excluding noncontrolling interests 49,400 42,259 Less: Earnings allocated to participating securities (202 ) (180 ) Net Income allocated to common stockholders $ 49,198 $ 42,079 Diluted EPS Denominator: Weighted average shares outstanding 81,818 83,956 Dilutive common shares issued under stock program — — Diluted Net Income Per Common Share $ 0.60 $ 0.50 For the periods presented, the Company did not have shares of restricted stock or restricted stock units that would have an anti-dilutive effect on the computation of diluted net income per common share. |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Share-based Compensation [Abstract] | |
Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity | The activity in the Company’s restricted stock and restricted stock units for the three months ended March 31, 2016 was as follows: Number of Shares Weighted Average Unvested at January 1, 2016 456,570 $ 55.70 Granted 219,319 64.18 Vested (195,731 ) 47.36 Forfeited (4,133 ) 59.67 Unvested at March 31, 2016 476,025 $ 63.17 |
Investments (Tables)
Investments (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Investments in and Advances to Affiliates, Schedule of Investments [Abstract] | |
Investments in and Advances to Affiliates | At March 31, 2016 and December 31, 2015 , the Company's investments were comprised of the following (in thousands): March 31, December 31, Equity Method Investment in Signal Trading Systems, LLC 12,971 12,185 Investment in CBOE Stock Exchange, LLC — — Total equity method investments 12,971 12,185 Cost Method Investment in OCC 30,333 30,333 Other cost method investments 10,181 5,912 Total cost method investments 40,514 36,245 Total Investments $ 53,485 $ 48,430 Equity Method The carrying amount of our equity method investments totaled $13.0 million and $12.2 million as of March 31, 2016 and December 31, 2015 , respectively, and is included in Investments in our Consolidated Balance Sheet. Our equity method investments include our investments in Signal Trading Systems, LLC ("Signal") and CBOE Stock Exchange, LLC ("CBSX"). In May 2010, CBOE acquired a 50% interest in Signal from FlexTrade Systems, Inc. ("FlexTrade"). The joint venture develops and markets a multi-asset front-end order entry system, known as "Pulse," which has a particular emphasis on options trading. The Company assists in the development of the terminals and provides marketing services to the joint venture, which is accounted for under the equity method. We account for the investment in Signal under the equity method due to the substantive participating rights provided to the other limited liability company member, FlexTrade. In the three months ended March 31, 2016 , the Company recorded contributions to Signal of $0.5 million and equity earnings in Signal of $0.3 million . The Company currently holds a 49.96% equity interest in CBSX in return for non-cash property contributions. CBSX ceased trading operations on April 30, 2014. CBOE is responsible for the compliance and regulation of the CBSX marketplace. In addition, the Company has a services agreement under which it provides CBSX with financial, accounting and technology support. Cost method The carrying amount of our cost method investments totaled $40.5 million and $36.2 million as of March 31, 2016 and December 31, 2015 , respectively, and is included in Investments in our Consolidated Balance Sheet. We account for investments under the cost-method primarily as a result of our inability to exercise significant influence. As of March 31, 2016 , our cost method investments primarily reflect our 20% investment in OCC and minority investments in American Financial Exchange ("AFX") and CurveGlobal. As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2015, the SEC approved OCC’s rule change implementing OCC's new capital plan on February 11, 2016. Certain petitioners subsequently appealed the SEC approval order for the OCC capital plan to the U.S. Court of Appeals for the D.C. Circuit and moved to stay the SEC approval order. On February 23, 2016, the Court denied the petitioners’ motion to stay. The appeal of the SEC approval order remains pending. In 2015, CBOE Holdings, through its subsidiary Loan Markets, LLC, acquired a minority interest in AFX, an electronic marketplace for small and mid-sized banks to lend and borrow short-term funds. In January 2016, CBOE Holdings, through its subsidiary CBOE III, LLC, acquired a minority interest in CurveGlobal, a new interest rate derivatives venture. |
Accounts Payable and Accured 29
Accounts Payable and Accured Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Payables and Accruals [Abstract] | |
Schedule of Accounts Payable and Accrued Liabilities | As of March 31, 2016 and December 31, 2015 , accounts payable and accrued liabilities consisted of the following (in thousands): March 31, December 31, Compensation and benefit-related liabilities (1) $ 8,593 $ 23,304 Royalties 16,588 15,409 Contract services 7,139 6,684 Accounts payable 4,178 1,762 Purchase of common stock (2) 1,825 1,778 Facilities 1,868 2,099 Legal 2,042 1,536 Market linkage 522 628 Other 7,632 6,904 Total $ 50,387 $ 60,104 (1) As of March 31, 2016 , primarily reflects accrued costs for 2016 incentive compensation expense. At December 31, 2015 , primarily reflects 2015 annual incentive compensation expense, which was paid in the first quarter of 2016 . (2) Reflects shares purchased at the end of the period not settled until three trading days after the trade occurs. |
Deferred Revenue (Tables)
Deferred Revenue (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Deferred Revenue [Abstract] | |
Deferred Revenue, by Arrangement, Disclosure | The following table summarizes the activity in deferred revenue for the three months ended March 31, 2016 (in thousands): Balance at December 31, 2015 Cash Additions Revenue Recognition Balance at March 31, 2016 Other – net $ 4,019 $ 4,556 $ (2,849 ) $ 5,726 Liquidity provider sliding scale (1) — 11,400 (2,400 ) 9,000 Total deferred revenue $ 4,019 $ 15,956 $ (5,249 ) $ 14,726 (1) Liquidity providers are eligible to participate in the sliding scale program, which involves prepayment of transaction fees, and receive reduced fees based on the achievement of certain volume thresholds within a calendar month. The prepayment of 2016 transaction fees totaled $11.4 million . This amount is amortized and recorded ratably, as transaction fees, over the respective twelve month period. |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value, Measurement Inputs, Disclosure | The Company has included a tabular disclosure for financial assets that are measured at fair value on a recurring basis in the condensed consolidated balance sheet as of March 31, 2016 and December 31, 2015 . The Company holds no financial liabilities that are measured at fair value on a recurring basis. (amounts in thousands) Level 1 Level 2 Level 3 Total Assets at fair value: Money market funds $ 87,000 $ — $ — $ 87,000 Total assets at fair value at March 31, 2016 $ 87,000 $ — $ — $ 87,000 (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 |
Acquisition of Business (Detail
Acquisition of Business (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Payments to Acquire Businesses, Gross | $ 14,257,000 | $ 0 | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Current Assets | 4,700,000 | ||
Goodwill | 26,468,000 | $ 7,655,000 | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Assets | 31,500,000 | ||
Redeemable Noncontrolling Interest, Equity, Carrying Amount | 12,600,000 | 0 | |
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Net | 18,900,000 | ||
Business Combination Consideration Transferred Liabilities Extinguished | 4,000,000 | ||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Property, Plant, and Equipment | 100,000 | ||
Intangible Assets, Net (Excluding Goodwill) | 10,016,000 | 2,378,000 | |
Contingent consideration - long term | 0 | 1,379,000 | |
Contingent consideration - current | 3,407,000 | 2,000,000 | |
Finite-Lived Intangible Assets, Accumulated Amortization | $ 544,000 | $ 182,000 | |
Business Acquisition, Percentage of Voting Interests Acquired | 60.00% | ||
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners | 40.00% | ||
Maximum [Member] | Technology-Based Intangible Assets [Member] | |||
Finite-Lived Intangible Asset, Useful Life | 5 years | ||
Maximum [Member] | Other Intangible Assets [Member] | |||
Finite-Lived Intangible Asset, Useful Life | 4 years | ||
Minimum [Member] | Technology-Based Intangible Assets [Member] | |||
Finite-Lived Intangible Asset, Useful Life | 2 years | ||
Minimum [Member] | Other Intangible Assets [Member] | |||
Finite-Lived Intangible Asset, Useful Life | 1 year | ||
Vest Financial [Member] | |||
Payments to Acquire Businesses, Gross | $ 18,900,000 | ||
Finite-Lived Intangible Assets, Gross | 8,000,000 | ||
Goodwill | 18,800,000 | ||
Other Payments to Acquire Businesses | 14,900,000 | ||
Vest Financial [Member] | Customer Relationships [Member] | |||
Finite-Lived Intangible Assets, Gross | $ 3,000,000 | ||
Finite-Lived Intangible Asset, Useful Life | 8 years | ||
Vest Financial [Member] | Trade Names [Member] | |||
Finite-Lived Intangible Assets, Gross | $ 1,000,000 | ||
Finite-Lived Intangible Asset, Useful Life | 7 years | ||
Vest Financial [Member] | Technology-Based Intangible Assets [Member] | |||
Finite-Lived Intangible Assets, Gross | $ 4,000,000 | ||
Finite-Lived Intangible Asset, Useful Life | 5 years | ||
Livevol [Member] | |||
Payments to Acquire Businesses, Gross | $ 7,000,000 | ||
Finite-Lived Intangible Assets, Gross | 2,560,000 | ||
Goodwill | 7,700,000 | ||
Other Payments to Acquire Businesses | 3,000,000 | ||
Intangible Assets, Net (Excluding Goodwill) | 2,269,000 | ||
Finite-Lived Intangible Assets, Accumulated Amortization | 291,000 | ||
Livevol [Member] | Customer Relationships [Member] | |||
Finite-Lived Intangible Assets, Gross | $ 910,000 | ||
Finite-Lived Intangible Asset, Useful Life | 13 years | ||
Livevol [Member] | Trade Names [Member] | |||
Finite-Lived Intangible Assets, Gross | $ 370,000 | ||
Finite-Lived Intangible Asset, Useful Life | 10 years | ||
Livevol [Member] | Technology-Based Intangible Assets [Member] | |||
Finite-Lived Intangible Assets, Gross | $ 1,130,000 | ||
Livevol [Member] | Other Intangible Assets [Member] | |||
Finite-Lived Intangible Assets, Gross | $ 150,000 |
Redeemable Noncontrolling Int33
Redeemable Noncontrolling Interest (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Increase (Decrease) in Temporary Equity [Roll Forward] | ||
Redeemable Noncontrolling Interests, beginning value | $ 0 | |
Increase due to acquiring majority of outstanding equity of Vest | 12,600 | |
Net loss attributable to noncontrolling interests | (224) | $ 0 |
Redemption value adjustment | 224 | |
Redeemable Noncontrolling Interests, ending value | $ 12,600 |
Net Income per Common Share (De
Net Income per Common Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Earnings Per Share [Abstract] | ||
Net Income (includes noncontrolling interests) | $ 49,176 | $ 42,259 |
Net loss attributable to noncontrolling interests | 224 | 0 |
Net Income (Loss) Attributable to Parent | 49,400 | 42,259 |
Less: Earnings allocated to participating securities | 202 | 180 |
Net Income allocated to common stockholders | $ 49,198 | $ 42,079 |
Weighted average shares outstanding | 81,818 | 83,956 |
Basic net income per common share | $ 0.60 | $ 0.50 |
Weighted average shares outstanding | 81,818 | 83,956 |
Dilutive common shares issued under stock program | 0 | 0 |
Diluted net income per common share | $ 0.60 | $ 0.50 |
Stock-Based Compensation (Narra
Stock-Based Compensation (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands | Feb. 20, 2016 | Mar. 31, 2016 | Mar. 31, 2015 |
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Equity instruments other than options, grants in period (in shares) | 219,319 | ||
Equity instruments other than options, grants in period, weighted average grant date fair value (in USD per share) | $ 64.18 | ||
Stock-based compensation expense | $ 3,363 | $ 2,655 | |
Unrecognized stock-based compensation expense | $ 24,000 | ||
Risk free interest rate | 0.90% | ||
Expected volatility rate | 21.10% | ||
Unrecognized stock-based compensation expense, period for recognition | 29 months 27 days | ||
Restricted Stock Units (RSUs) [Member] | |||
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Equity instruments other than options, grants in period (in shares) | 170,081 | ||
Restricted Stock [Member] | |||
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Equity instruments other than options, grants in period, weighted average grant date fair value (in USD per share) | $ 61.80 | ||
Performance Shares [Member] | |||
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Equity instruments other than options, grants in period (in shares) | 49,238 | ||
Earnings Per Share [Member] | Performance Shares [Member] | |||
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Equity instruments other than options, grants in period (in shares) | 24,619 | ||
Equity instruments other than options, grants in period, weighted average grant date fair value (in USD per share) | $ 61.80 | ||
Total Shareholder Return [Member] | Performance Shares [Member] | |||
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | |||
Equity instruments other than options, grants in period (in shares) | 24,619 | ||
Equity instruments other than options, grants in period, weighted average grant date fair value (in USD per share) | $ 83 |
Stock-Based Compensation (Resti
Stock-Based Compensation (Resticted Stock) (Details) - $ / shares | Feb. 20, 2016 | Mar. 31, 2016 |
Number of Shares | ||
Beginning balance (in shares) | 456,570 | |
Granted (in shares) | 219,319 | |
Vested (in shares) | (195,731) | |
Forfeited (in shares) | (4,133) | |
Ending balance (in shares) | 476,025 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract] | ||
Beginning balance (in USD per share) | $ 55.70 | |
Granted (in USD per share) | 64.18 | |
Vested (in USD per share) | 47.36 | |
Forfeited (in USD per share) | 59.67 | |
Ending balance (in USD per share) | $ 63.17 | |
Restricted Stock [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract] | ||
Granted (in USD per share) | $ 61.80 | |
Performance Shares [Member] | ||
Number of Shares | ||
Granted (in shares) | 49,238 | |
Restricted Stock Units (RSUs) [Member] | ||
Number of Shares | ||
Granted (in shares) | 170,081 | |
Earnings Per Share [Member] | Performance Shares [Member] | ||
Number of Shares | ||
Granted (in shares) | 24,619 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract] | ||
Granted (in USD per share) | $ 61.80 | |
Total Shareholder Return [Member] | Performance Shares [Member] | ||
Number of Shares | ||
Granted (in shares) | 24,619 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract] | ||
Granted (in USD per share) | $ 83 |
Investments (Details)
Investments (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Investments | $ 12,971 | $ 12,185 |
Cost Method Investments | 40,514 | 36,245 |
Investments | $ 53,485 | 48,430 |
Cost Method Investment, Ownership Percentage, Other | 20.00% | |
Investment in OCC [Member] | ||
Cost Method Investments | $ 30,333 | 30,333 |
Investment in Signal Trading Systems, LLC [Member] | ||
Investments in Affiliates | $ 12,971 | 12,185 |
Equity Method Investment, Ownership Percentage | 50.00% | |
Investment in CBOE Stock Exchange, LLC [Member] [Member] | ||
Investments in Affiliates | $ 0 | 0 |
Other Investments [Member] | ||
Cost Method Investments | $ 10,181 | $ 5,912 |
CBOE STOCK EXCHANGE [Member] | ||
Equity Method Investment, Ownership Percentage | 49.96% |
Accounts Payable and Accured 38
Accounts Payable and Accured Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Payables and Accruals [Abstract] | ||
Compensation and benefit-related liabilities | $ 8,593 | $ 23,304 |
Royalties | 16,588 | 15,409 |
Contract services | 7,139 | 6,684 |
Accounts payable | 4,178 | 1,762 |
Purchase of common stock | 1,825 | 1,778 |
Facilities | 1,868 | 2,099 |
Legal | 2,042 | 1,536 |
Market linkage | 522 | 628 |
Other | 7,632 | 6,904 |
Total | $ 50,387 | $ 60,104 |
Marketing Fee (Details)
Marketing Fee (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Marketing Fee [Abstract] | ||
Marketing fee receivable | $ 6,585 | $ 5,682 |
Marketing fee payable | $ 7,058 | $ 6,141 |
Deferred Revenue (Details)
Deferred Revenue (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Deferred Revenue [Roll Forward] | |
Balance at December 31, 2015 | $ 4,019 |
Cash Additions | 15,956 |
Revenue Recognition | (5,249) |
Balance at March 31, 2016 | 14,726 |
Other – net | |
Deferred Revenue [Roll Forward] | |
Balance at December 31, 2015 | 4,019 |
Cash Additions | 4,556 |
Revenue Recognition | (2,849) |
Balance at March 31, 2016 | 5,726 |
Liquidity Provider Sliding Scale | |
Deferred Revenue [Roll Forward] | |
Cash Additions | 11,400 |
Revenue Recognition | (2,400) |
Balance at March 31, 2016 | $ 9,000 |
Employee Benefits (Details)
Employee Benefits (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Employee Benefits [Abstract] | ||
Contributions by employer | $ 1.3 | $ 1.1 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Income tax provision | $ 31,291 | $ 27,018 | |
Effective tax rate | 38.90% | 39.00% | |
Unrecognized tax benefits | $ 32,400 | $ 31,900 | |
Unrecognized tax benefits, liability for interest and penalties | $ 8,400 |
Fair Value Measurements (Narrat
Fair Value Measurements (Narrative) (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Fair Value Disclosures [Abstract] | ||
Contingent consideration - long term | $ 0 | $ 1,379 |
Fair Value Measurements Fair Va
Fair Value Measurements Fair Value Measurements (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Contingent consideration - current | $ 3,407 | $ 2,000 |
Cost Method Investment, Ownership Percentage, Other | 20.00% | |
Level 1 | ||
Money market funds | $ 87,000 | 84,000 |
Assets at fair value | 87,000 | 84,000 |
Total | ||
Money market funds | 87,000 | 84,000 |
Assets at fair value | $ 87,000 | $ 84,000 |