CBOE Holdings, Inc. Reports Record Fourth Quarter And 2012 Financial Results

 CBOE Holdings, Inc. Reports Record Fourth Quarter And 2012 Financial Results

Fourth Quarter Financial Highlights

-- Operating Revenues Increase 8 Percent to $130.1 Million

-- GAAP Net Income Allocated to Common Stockholders Increases 25 Percent to
$39.2 Million; Diluted EPS Up 29 Percent to $0.45

-- GAAP Operating Margin of 45.9 Percent; Adjusted Operating Margin of 49.9
Percent, Up 300 Basis Points(1)

2012 Full-Year Financial Highlights

-- Operating Revenues of $512.3 Million Increases 1 Percent(1)

-- GAAP Net Income Allocated to Common Stockholders Increases 14 Percent to
$155.3 Million; Diluted EPS Up 17 Percent to $1.78

-- GAAP Operating Margin of 47.6 Percent; Adjusted Operating Margin of 48.7
Percent, Up 30 Basis Points

PR Newswire

CHICAGO, Feb. 8, 2013

CHICAGO, Feb. 8, 2013 /PRNewswire/ -- CBOE Holdings, Inc. (NASDAQ: CBOE) today
reported record fourth-quarter GAAP net income allocated to common
stockholders of $39.2 million, or $0.45 per diluted share, compared with $31.3
million, or $0.35 per diluted share in the fourth quarter of 2011. On an
adjusted basis, net income allocated to common stockholders was $38.9 million,
or $0.45 per diluted share, compared with $33.2 million, or $0.37 per diluted
share, in the prior year period. Operating revenues for the fourth quarter
were $130.1 million, an increase of 8 percent compared to $120.2 million in
2011's fourth quarter.

(Logo: http://photos.prnewswire.com/prnh/20121022/MM97794LOGO-a)

For the year ended December31, 2012, CBOE Holdings reported GAAP net income
allocated to common stockholders increased 14 percent to $155.3 million, or
$1.78 per diluted share, on total operating revenues of $512.3 million. For
the comparable period in 2011, the company reported GAAP net income allocated
to common stockholders of $136.6 million, or $1.52 per diluted share, on
operating revenues of $508.1 million. On an adjusted basis, net income
allocated to common stockholders increased 3 percent to $147.5 million from
$143.1 million in 2011, while adjusted diluted earnings per share grew 6
percent to $1.69 from $1.59 in 2011.

Financial results presented on an adjusted basis for the three and twelve
months ended December31, 2012 and 2011 exclude certain items which the
company believes are not representative of its core operating performance.

(1) A full reconciliation of CBOE Holdings' non-GAAP results to its GAAP
results for the reporting periods is included in the attached tables. See
"Non-GAAP Information" in the accompanying financial tables.

"CBOE Holdings' record-setting financial results for the fourth quarter and
strong overall performance for 2012 were made more noteworthy given the year's
well-known macro challenges. Our ability to leverage our higher-margin,
proprietary products and to effectively manage our resources enabled CBOE to
return increased value to stockholders while continuing to invest in product
development, trading technology and investor education. As a result, we enter
2013 well positioned to continue to enhance stockholder value and to grow and
shape the options and volatility space," said William J. Brodsky, CBOE
Holdings Chairman and Chief Executive Officer.

"Our record fourth-quarter results cap another year of strong performance for
CBOE Holdings as we focused on optimizing our financial performance and
investing in key initiatives to drive our long-term performance," said Alan J.
Dean, CBOE Holdings Executive Vice President and Chief Financial Officer. "In
addition, we returned $167 million in capital to our stockholders in 2012
through dividends and share repurchases, nearly doubling the $92 million paid
out in 2011. We ended the year with a strong cash position of $136 million,
which will provide us with the flexibility to continue to deliver enhanced
stockholder value through both internal investments and other capital
allocation opportunities," Dean added.

The table below highlights CBOE Holdings' operating results on a GAAP basis
and an adjusted basis for the comparative quarters and twelve-month periods
ended December31, 2012 and 2011. Financial results presented on an adjusted
basis provide supplemental information to measure period-over-period
comparisons by adjusting for certain items that management believes are not
indicative of the company's core operating performance.

Key Statistics and Financial Highlights:

(in millions, except
per share and fee    4Q 2012  4Q 2011  Y/Y Change YTD 2012 YTD 2011 Y/Y Change
per contract)
Key Statistics:
Total Trading Days   62       63                  250      252
(1)
Average Daily Volume
(options and         4.13     4.30     (4)%       4.54     4.83     (6)%
futures)
Total Trading Volume
(options and         255.7    270.9    (6)%       1,134.3  1,216.9  (7)%
futures)
Average Transaction  $ 0.355  $ 0.321  11%        $ 0.315  $ 0.307  3%
Fee Per Contract
GAAP Financial
Highlights:
Total Operating      $ 130.1  $ 120.2  8%         $ 512.3  $ 508.1  1%
Revenues
Total Operating      70.3     67.5     4%         268.2    266.5    1%
Expenses
Operating Income     59.8     52.7     13%        244.1    241.6    1%
Operating Margin %   45.9%    43.8%    210 bps    47.6%    47.5%    —
Net Income           $ 39.7   $ 31.8   25%        $ 157.4  $ 139.4  13%
Net Income Allocated
to Common            $ 39.2   $ 31.3   25%        $ 155.3  $ 136.6  14%
Stockholders
Diluted EPS          $ 0.45   $ 0.35   29%        $ 1.78   $ 1.52   17%
Weighted Average     87,272   89,397   (2)%       87,460   89,994   (3)%
Shares Outstanding
Adjusted Financial
Highlights (2)
Total Operating      $ 130.1  $ 120.2  8%         $ 512.3  $ 508.1  1%
Revenues
Total Operating      65.2     63.8     2%         262.9    262.4    —
Expenses
Operating Income       64.9   56.4     15%        249.4    245.7    2%
Operating Margin %   49.9%    46.9%    300 bps    48.7%    48.4%    30 bps
Net Income           $ 39.4   $ 33.7   17%        $ 149.5  $ 146.1  2%
Net Income Allocated
to Common            $ 38.9   $ 33.2   17%        $ 147.5  $ 143.1  3%
Stockholders
Diluted EPS          $ 0.45   $ 0.37   22%        $ 1.69   $ 1.59   6%

(1) In the fourth quarter of 2012, all U.S. exchanges were closed for two days
    as a result of Hurricane Sandy.
    A full reconciliation of our non-GAAP results to our GAAP results for the
(2) 2012 and 2011 reporting periods is included in the attached tables. See
    "Non-GAAP Information" in the accompanying financial tables.

Revenues

Operating revenues in the fourth quarter of 2012 increased by $9.9 million, or
8 percent, to $130.1 million from $120.2 million in 2011's fourth quarter.
This increase primarily reflects a $3.8 million increase in transaction fees,
a $3.6 million increase in exchange services and other fees and a $2.3 million
increase in regulatory fees, offset somewhat by a $1.2 million decrease in
access fees. The decrease in access fees was primarily due to fee changes
implemented in January 2012. Exchange services and other fees were up
primarily due to fee increases for certain user services versus the fourth
quarter of 2011. Regulatory fees increased primarily as a result of CBOE
raising its options regulatory fee rate and implementation of an options
regulatory fee in August of 2012 by C2 Options Exchange (C2).

Transaction fees increased 4 percent for the quarter as a result of an 11
percent increase in the average revenue per contract (RPC) compared with the
fourth quarter of 2011, offset somewhat by a 6 percent decline in trading
volume. Trading volume for the fourth quarter was 255.7 million contracts, or
4.13 million contracts per day, versus 2011's fourth quarter volume of 270.9
million contracts, or 4.30 million contracts per day. In addition, the
company lost two trading days in the fourth quarter of 2012 due to the closing
of all U.S. exchanges as a result of Hurricane Sandy. RPC increased to $0.355
compared with $0.321 in the fourth quarter of 2011.

The increase in RPC primarily resulted from a shift in trading volume mix,
with higher-margin index options and futures contracts accounting for 34.4
percent of total contracts traded during the quarter versus 28.9 percent in
the fourth quarter of 2011. In addition, transaction fee changes implemented
in 2012 increased the average revenue per contract for index options and
futures contracts by 6 percent and 9 percent, respectively, compared with the
fourth quarter of 2011.

The average transaction fee per contract represents total transaction fee
revenue divided by total reported trading volume for CBOE, C2 and CBOE Futures
Exchange (CFE).

Adjusted Operating Expenses

Adjusted operating expenses were $65.2 million for the fourth quarter of 2012,
up $1.4 million or 2 percent compared with $63.8 million in the fourth quarter
of 2011. Adjusted operating expenses for the fourth quarter of 2012 exclude
$0.1 million for accelerated stock-based compensation and $5.0 million of
expense accrued for an estimated liability related to the resolution of a
previously disclosed SEC investigation. While the company is engaged in
settlement discussions with the SEC staff on the resolution of this matter, no
agreement has been reached and any final resolution could differ from the
amount accrued. Adjusted operating expenses in the fourth quarter of 2011
exclude $3.7 million for severance paid pursuant to an executive employment
contract.

The company's core operating expenses, which include total operating expenses
less volume-based expenses, depreciation and amortization, accelerated
stock-based compensation expense and unusual or one-time expenses, were $46.3
million for the fourth quarter of 2012, an increase of $4.8 million or 11
percent, compared with last year's fourth quarter. This increase primarily
reflects higher expenses for outside services, which were driven by higher
legal costs.

Volume-based expenses, which include royalty fees and trading volume
incentives, were $12.7 million in the fourth quarter of 2012, representing a
decrease of $2.1 million, or 14 percent, compared with the same period last
year. Royalty fees decreased $0.7 million due to expenses recognized in the
fourth quarter of 2011 to adjust for the under-accrual of certain volume-based
fees. Trading volume incentives were down $1.4 million primarily due to lower
trading volume in multiply-listed options and changes to the incentive program
criteria.

Adjusted Operating Margin

The company's adjusted operating margin increased 300 basis points to 49.9
percent for the fourth quarter of 2012, compared with 46.9 percent in the same
period in 2011. The adjusted operating margin for the full-year 2012 was 48.7
percent, the highest annual level in the company's history.

Effective Tax Rate

On a GAAP basis, the company reported an effective tax rate of 33.1 percent
for the fourth quarter versus 39.2 percent in last year's fourth quarter. The
effective tax rate for the fourth quarter of 2012 includes the benefit of
significant discrete items relating to prior years totaling $5.4 million, or
$0.06 per share, as well as the recognition of other discrete items.

The adjusted effective tax rate for the fourth quarter of 2012 and 2011, which
excludes the benefit for tax credits related to prior years, was 39.0 percent
and 39.8 percent, respectively.

Fourth Quarter 2012 Operational Highlights and Recent Developments

  oFor the fourth consecutive quarter, CFE experienced record-setting
    quarterly volume.
  oOn November 2, 2012, CBOE announced that the Illinois Court ruled in favor
    of CBOE and McGraw-Hill, deciding that the International Securities
    Exchange (ISE) would violate a previously-issued injunction if it listed
    and traded what it calls "ISE Max SPY Index" options. The court ruled that
    these options would violate its earlier injunction that prohibits ISE from
    listing any options that are based on the S&P 500 Index. CBOE holds the
    exclusive right to provide a market for options based on that index. On
    November 13, 2012, ISE withdrew its filing with the SEC to list these
    options.
  oOn November 30, 2012, CBOE began disseminating values for a new benchmark
    index, the CBOE Low Volatility Index^SM (ticker: LOVOL), which is designed
    for investors whose preferences have shifted from investing in riskier
    assets to lower-volatility assets. The new index aims to provide investors
    with the ability to replicate an investment strategy that is subject to
    less downside volatility in a portfolio of S&P 500^® stocks, while still
    preserving the bulk of market gains.
  oOn December 6, 2012, CBOE was named "Exchange of the Year, North America,"
    and "U.S. Options Exchange of the Year" at an awards ceremony during
    Futures and Options World magazine's Derivatives World London Conference.
  oOn December 10, 2012, CFE launched trading in S&P 500 Variance futures.
    The S&P 500 Variance futures contract, like over-the-counter (OTC)
    variance swaps, allows users to trade the difference between the implied
    and realized variance of the S&P 500 Index.
  oOn December 11, 2012, the company announced that its Board of Directors
    declared a special cash dividend of $0.75 per share on its common stock.
    The dividend was paid on December 28, 2012 to stockholders of record on
    December 21, 2012. The special dividend was in addition to the Company's
    regular fourth-quarter cash dividend of $0.15 per share that was declared
    on October 30, 2012.
  oOn December 12, 2012, the company announced that William J. Brodsky,
    Chairman and CEO, advised the Board that he will step down as CEO
    effective following the 2013 Annual Meeting in May 2013. Following the
    annual meeting, it is anticipated that he will assume the role of
    Executive Chairman of the Board. The company also announced that its
    Board of Directors unanimously elected Edward T. Tilly, CBOE President and
    COO, as CEO, also effective following the 2013 Annual Meeting. Edward L.
    Provost, CBOE Chief Business Development Officer, will succeedTilly as
    CBOE President and COO.
  oOn January 14, 2013,the company launched a new data service, the CBOE
    Customized Option Pricing Service (COPS), which employs the market-making
    expertise of CBOE's liquidity-providing community, offering subscribers
    end-of-day indicative valuations for "customized" options such as FLexible
    EXchange (FLEX) options and certain OTC options.
  oOn January 18, 2013, CBOE announced plans to transition its SPXpm product
    from C2 to CBOE on February 19, 2013,pending regulatory approval, where
    it will be traded on CBOE's hybrid trading model. CBOE's hybrid model
    incorporates both electronic and open outcry trading. The transition will
    consolidate the company's entire S&P 500 options product line on one
    exchange, CBOE.
  oOn February 1,2013,the company reported that average daily volume (ADV)
    for total options in January 2013 was 4.10 million contracts, an 8 percent
    increase from December 2012 ADV of 3.81 million contracts and a 9 percent
    decrease from January 2012 ADV of 4.52 million contracts. In addition,
    CFE reported ADV of 139,410 contracts in January 2013, up 244 percent
    compared with 40,564 per day during January 2012 and a 14 percent increase
    from 122,324 contracts per day in December 2012.

Return of Capital to Stockholders

As announced on February 6, 2013, CBOE Holdings' Board of Directors declared a
quarterly dividend of $0.15 per share, payable March 22, 2013 to shareholders
of record on March 1, 2013.

During the fourth quarter of 2012, the company did not repurchase any shares
of its common stock under the announced authorizations. For the full-year
2012, the company repurchased 1,871,424 shares at an average price of $26.58
per share, for an aggregate purchase price of $49.7 million under the
authorizations.

At December 31, 2012, the company had approximately $103.3 million of
availability remaining on its existing stock repurchase authorizations.

2013 Fiscal Year Financial Guidance

CBOE Holdings currently expects the following for the year ended December 31,
2013:

  oCore operating expenses are expected to be in the range of $189.0 million
    to $194.0 million. The projected increase in core operating expenses in
    2013 compared with 2012 primarily reflects higher expenses related to
    regulatory services, which are expected to be offset by higher revenue
    from regulatory fees, and an increase in continuing stock-based
    compensation as a result of new stock awards scheduled to be granted in
    February and May of 2013. Continuing stock-based compensation expense
    included in core expenses is expected to be approximately $18.0 million
    for the full year. Excluding stock-based compensation, core expenses for
    2013 are expected to be in a range of $171.0 million to $176.0 million, an
    increase of 2 percent to 5 percent versus 2012's comparable expense of
    $167.0 million.
  oThe company also plans to recognize accelerated stock-based compensation
    expense of approximately $3.2 million in 2013. This expense is expected
    to be recorded in the first quarter of 2013 to recognize the fair value of
    stock awards granted to certain executives due to provisions contained in
    their respective agreements regarding employment. This expense is
    reported in employee costs and will be included in the company's non-GAAP
    reconciliation.
  oThe consolidated effective tax rate is expected to be in the range of 39.5
    percent to 40.0 percent for the year ended December 31, 2013. Significant
    changes in trading volume, expenses, state and local tax rates and other
    items, including ongoing state and federal tax audits, could materially
    impact this expectation.
  oDepreciation and amortization expense is expected to be in the range of
    $37.0 million to $39.0 million.
  oCapital expenditures are projected in the range of $35.0 million to $40.0
    million, primarily driven by ongoing investments in systems hardware and
    software that enhance trading technology and regulatory systems.

Earnings Conference Call

Executives of CBOE Holdings will host a conference call to review its fourth
quarter financial results today, February 8, 2013, at 8:30 a.m. ET/7:30 a.m.
CT. The conference call and any accompanying slides will be publicly
available via live webcast from the Investor Relations section of the
company's website at www.cboe.com under Events & Presentations. Participants
may also listen via telephone by dialing (877) 372-0876 from the United States
or Canada, or (253) 237-1167 for international callers. Telephone
participants should place calls 10 minutes prior to the start of the call. The
webcast will be archived on the company's website for replay. A telephone
replay of the earnings call also will be available from approximately 11:00
a.m. CT, February 8, through 11:00 p.m. CT, March 4, 2013, by calling (800)
585-8367 within the U.S. and Canada, or (404) 537-3406 for international
callers, using replay code 78897636.

About CBOE Holdings

CBOE Holdings, Inc. (NASDAQ: CBOE) is the holding company for Chicago Board
Options Exchange (CBOE), CBOE Futures Exchange (CFE) and other subsidiaries.
CBOE, the largest U.S. options exchange and creator of listed options,
continues to set the bar for options and volatility trading through product
innovation, trading technology and investor education. CBOE Holdings offers
equity, index and ETF options, including proprietary products, such as S&P 500
options (SPX), the most active U.S. index option, and options and futures on
the CBOE Volatility Index (the VIX Index). Other products engineered by CBOE
include equity options, security index options, LEAPS options, FLEX options,
and benchmark products such as the CBOE S&P 500 BuyWrite Index (BXM). CBOE
Holdings is home to the world-renowned Options Institute and www.cboe.com, the
go-to place for options and volatility trading resources. CBOE is regulated by
the Securities and Exchange Commission (SEC), with all trades cleared by the
OCC.

Forward-Looking Statements

This press release may contain forward-looking statements, within the meaning
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements are those statements that reflect our expectations, assumptions or
projections about the future and involve a number of risks and uncertainties.
These statements are only predictions based on our current expectations and
projections about future events. There are important factors that could cause
actual results to differ materially from that expressed or implied by the
forward-looking statements, including: the loss of our exclusive licenses to
list certain index options; decreases in the amount of trading volumes or a
shift in the mix of products traded on our exchanges; legislative or
regulatory changes affecting the options markets; increasing competition by
foreign and domestic entities, including increased competition from new
entrants into our markets and consolidation of existing entities; increasing
price competition; our ability to maintain access fee revenues; economic,
political and market conditions; our ability to operate our business without
violating the intellectual property rights of others and the costs associated
with protecting our intellectual property rights; our ability to accommodate
increases in trading volume and order transaction traffic without failure or
degradation of performance of our systems; our ability to protect our systems
and communication networks from security risks, including cyber attacks; our
ability to attract and retain skilled management and other personnel; our
ability to maintain our growth effectively; our dependence on third party
service providers; and the ability of our compliance and risk management
methods to effectively monitor and manage our risks.

More detailed information about factors that may affect our performance may be
found in our filings with the SEC, including in our Annual Report on Form 10-K
for the year ended December 31, 2011 and other filings made from time to time
with the SEC.

The condensed consolidated statements of income, balance sheets and statements
of cash flows are unaudited and subject to reclassification.

CBOE-F

Trademarks:

CBOE^®, Chicago Board Options Exchange^®, CFE^®, FLEX^®, LEAPS^®, ^ CBOE
Volatility Index^® ^ and VIX^® ^ are registered trademarks and BuyWrite^SM,
BXM^SM, CBOE Futures Exchange^SM, CBOE Low Volatility Index^SM, COPS^SM,
LOVOL^SM, SPX^SM and The Options Institute^SM are service marks of Chicago
Board Options Exchange, Incorporated (CBOE). C2^SM, ^ C2 Options Exchange ^
SM and SPXpm^SM are service marks of C2 Options Exchange, Incorporated (C2).
Standard & Poor's®, S&P® and S&P 500® are registered trademarks of Standard &
Poor's Financial Services LLC and have been licensed for use by CBOE, C2 and
CFE. All other trademarks and service marks are the property of their
respective owners.



CBOE Holdings, Inc.
Selected Quarterly Operating Statistics
Average Daily Volume by Product (in thousands)
                                      4Q 2012 3Q 2012 2Q 2012 1Q 2012 4Q 2011
PRODUCT:
Equities                             1,617   1,964   2,007   2,320   1,695
Indexes                              1,294   1,150   1,252   1,174   1,202
Exchange-traded products             1,091   1,124   1,451   1,321   1,366
 Total Options Average Daily Volume 4,002   4,238   4,710   4,815   4,263
Futures                               123     99      93      67      38
Total Average Daily Volume            4,125   4,337   4,803   4,882   4,301



Mix of Trading Volume by Product
                          4Q 2012 3Q 2012 2Q 2012 1Q 2012 4Q 2011
PRODUCT:
Equities                 39.2  % 45.3  % 41.8  % 47.5  % 39.4  %
Indexes                  31.4  % 26.5  % 26.1  % 24.0  % 28.0  %
Exchange-traded products 26.4  % 25.9  % 30.2  % 27.1  % 31.7  %
Futures                   3.0   % 2.3   % 1.9   % 1.4   % 0.9   %
 Total                  100.0 % 100.0 % 100.0 % 100.0 % 100.0 %



Average Revenue Per Contract by Product
                                       4Q 2012 3Q 2012 2Q 2012 1Q 2012 4Q 2011
Trading Days                           62      63      63      62      63
PRODUCT:
Equities                              0.134   0.118   0.123   0.110   0.167
Indexes                               0.670   0.682   0.677   0.658   0.631
Exchange-traded products              0.186   0.177   0.180   0.171   0.212
Total Options Average Revenue Per      0.322   0.287   0.288   0.261   0.312
Contract
Futures                                1.442   1.606   1.607   1.697   1.329
Total Average Revenue Per Contract     0.355   0.317   0.314   0.280   0.321



Transaction Fees by Product (in thousands)
                             4Q 2012   3Q 2012   2Q 2012   1Q 2012   4Q 2011
PRODUCT:
Equities                    $ 13,472  $ 14,645  $ 15,617  $ 15,894  $ 17,860
Indexes                     53,764    49,385    53,383    47,907    47,808
Exchange-traded products    12,552    12,561    16,429    14,036    18,230
 Total Options Transaction $ 79,788  $ 76,591  $ 85,429  $ 77,837  $ 83,898
Fees
Futures                      11,017    10,030    9,456     6,998     3,149
 Total Transaction Fees    $ 90,805  $ 86,621  $ 94,885  $ 84,835  $ 87,047

Non-GAAP Information

In addition to disclosing results determined in accordance with GAAP, CBOE
Holdings has disclosed certain non-GAAP measures of operating performance.
These measures are not in accordance with, or a substitute for, GAAP, and may
be different from or inconsistent with non-GAAP financial measures used by
other companies. The non-GAAP measures provided in this press release include
core operating expenses, adjusted operating expenses, adjusted operating
income, adjusted operating margin, adjusted effective tax rate, adjusted net
income, adjusted net income allocated to common stockholders and adjusted
diluted earnings per share.

Management believes that the non-GAAP financial measures presented in this
press release, including adjusted net income and core operating expenses,
provide useful and comparative information to assess trends in our core
operations and a means to evaluate period-to-period comparisons. Non-GAAP
financial measures disclosed by management, including adjusted diluted EPS,
are provided as additional information to investors in order to provide them
with an alternative method for assessing our financial condition and operating
results.

The table below shows core operating expenses, which is the company's
operating expenses after excluding (i) volume-based expenses, (ii)
depreciation and amortization expense, (iii) accelerated stock-based
compensation expense and (iv) other unusual or one-time expenses.

                     Three months ended December  Twelve months ended December
                     31,                          31,
(in thousands)       2012           2011          2012            2011
Total Operating      $  70,325      $  67,529     $  268,241      $  266,512
Expenses
Less:
Depreciation and     6,210          7,506         31,485          34,094
amortization
Accelerated
stock-based          149            —             343             453
compensation
expense
Severance expense
pursuant to
executive            —              3,709         —               3,709
employment
agreement
Estimated liability
related to SEC       5,000          —             5,000           —
investigation (in
other expenses)
Volume-based
expenses:
Royalty fees         11,639         12,346        46,135          47,822
Trading volume       1,027          2,440         6,275           14,239
incentives
Core Operating
Expenses             $  46,300      $  41,528     $  179,003      $  166,195
(non-GAAP):
Less: Continuing
stock-based          (3,151)        (3,010)       (12,005)        (12,166)
compensation
expense
Core Operating
Expenses Excluding
Continuing           $  43,149      $  38,518     $  166,998      $  154,029
Stock-Based
Compensation
(non-GAAP)
Detail of Core
Operating Expenses
(non-GAAP)
Employee costs       $  26,291      $  24,560     $  103,853      $  100,292
Data processing      4,707          4,263         19,603          17,933
Outside services     10,790         6,657         36,300          27,310
Travel and
promotional          1,988          3,345         10,006          9,812
expenses
Facilities costs     1,269          1,426         5,066           5,400
Other expenses       1,255          1,277         4,175           5,448
Total                $  46,300      $  41,528     $  179,003      $  166,195

The table below shows the reconciliation of each financial measure from GAAP
to non-GAAP. The non-GAAP financial measures exclude the impact of those
items detailed in the footnotes below and are referred to as adjusted
financial measures.

(in thousands,
except per     Three months ended December 31, 2012                   Three months ended December 31, 2011
share amounts)
                          Items Impacting                                        Items Impacting
                          Results                                                Results
               Reported   Operating Operating Income Tax Adjusted    Reported   Operating Income   Adjusted
               (GAAP)     Expenses  Expenses  ^3         (non-GAAP)  (GAAP)     Expenses  Tax ^5   (non-GAAP)
                          ^1         ^2                                          ^4
Total
Operating      $ 130,077                                  $ 130,077   $ 120,208                     $ 120,208
Revenues
Total
Operating      70,325     (149)      (5,000)              65,176      67,529     (3,709)            63,820
Expenses
Operating      59,752     149        5,000                64,901      52,679     3,709              56,388
Income
Operating      45.9%                                      49.9%       43.8%                         46.9%
Margin
Total Other
Income         (353)                                      (353)       (343)                         (343)
/(Expense)
Income Before  59,399     149        5,000                64,548      52,336     3,709              56,045
Income Taxes
Income Tax     19,674     63         —         5,415      25,152      20,529     1,478     322      22,329
Provision
Effective
Income Tax     33.1%                                      39.0%       39.2%                         39.8%
Rate
Net Income     $ 39,725   $    86    $  5,000  $ (5,415)  $ 39,396    $ 31,807   $  2,231  $ (322)  $ 33,716
Net Income
Allocated to   (479)      (1)        (56)      61         (475)       (520)      (37)      5        (552)
Participating
Securities
Net Income
Allocated to   $ 39,246   $    85    $  4,944  $ (5,354)  $ 38,921    $ 31,287   $  2,194  $ (317)  $ 33,164
Common
Stockholders
Diluted Net
Income per
Share          $ 0.45     $    —     $  0.06   $ (0.06)   $ 0.45      $ 0.35     $  0.02   $ —      $ 0.37
Allocated to
Common
Stockholders


(in
thousands,
except per     Twelve months ended December 31, 2012                   Twelve months ended December 31, 2011
share
amounts)
                          Items Impacting                                         Items Impacting Results
                          Results
               Reported   Operating Operating  Income Tax  Adjusted    Reported   Operating Other   Income   Adjusted
               (GAAP)     Expenses  Expenses^2 ^3          (non-GAAP)  (GAAP)     Expenses  Expense Tax ^5   (non-GAAP)
                          ^1                                                      ^4        ^6
Total
Operating      $ 512,338                                   $ 512,338   $ 508,144                             $ 508,144
Revenues
Total
Operating      268,241    (343)     (5,000)                262,898     266,512    (4,162)                    262,350
Expenses
Operating      244,097    343       5,000                  249,440     241,632    4,162     —                245,794
Income
Operating      47.6%                                       48.7%       47.6%                                 48.4%
Margin
Total Other
Income         (1,546)                                     (1,546)     (1,548)              460              (1,088)
/(Expense)
Income Before  242,551    343       5,000                  247,894     240,084    4,162     460              244,706
Income Taxes
Income Tax     85,156     139       —          13,054      98,349      100,678    1,677     185     (3,901)  98,639
Provision
Effective
Income Tax     35.1%                                       39.7%       41.9%                                 40.3%
Rate
Net Income     $ 157,395  $  204    $  5,000   $ (13,054)  $ 149,545   $ 139,406  $  2,485  $  275  $ 3,901  $ 146,067
Net Income
Allocated to   (2,141)    (3)       (68)       177         (2,035)     (2,824)    (40)      (6)     (63)     (2,933)
Participating
Securities
Net Income
Allocated to   $ 155,254  $  201    $  4,932   $ (12,877)  $ 147,510   $ 136,582  $  2,445  $  269  $ 3,838  $ 143,134
Common
Stockholders
Diluted Net
Income per
Share          $ 1.78     $  —      $  0.06    $ (0.15)    $ 1.69      $ 1.52     $  0.03   $  —    $ 0.04   $ 1.59
Allocated to
Common
Stockholders

NOTES: Amounts may not foot due to rounding.
   In the first quarter of 2012, the company accelerated the recognition of
   stock-based compensation expense to recognize the remaining fair value of
   the stock-based compensation awards granted to two board members who left
1) the Board. In the fourth quarter of 2012, the company accelerated the
   recognition of stock-based compensation expense to recognize the remaining
   fair value of the stock-based compensation awards granted to three board
   members who are leaving the Board in May 2013.
2) In the fourth quarter of 2012, the company recognized an expense for an
   estimated liability related to the resolution of an SEC investigation.
3) In the fourth quarter and third quarter of 2012, the company recorded tax
   benefits relating to significant discrete items relating to prior years.
   In the fourth quarter of 2011, the company recorded severance expense
   pursuant to an executive employment agreement. In the first and second
4) quarters of 2011, the company accelerated the recognition of stock-based
   compensation expense to recognize the remaining fair value of the
   stock-based compensation awards granted to three board members who left the
   Board in May 2011.
   In the fourth quarter of 2011, the company recorded a benefit for research
   and development credits pertaining to prior years. In the third quarter of
5) 2011, the company recorded a charge for additional income tax expense due
   to potential additional tax liabilities for prior periods dating back to
   2007 as a result of an advisory opinion from New York State taxing
   authorities issued during the quarter.
6) In the first quarter of 2011, the company recorded an impairment charge to
   write off its investment in NSX Holdings, Inc.

CBOE Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
Three and twelve months ended December 31, 2012 and 2011
                     Three Months Ended December  Twelve Months Ended December
                     31,                          31,
(in thousands,
except per share     2012           2011          2012            2011
amounts)
Operating
Revenues:
Transaction fees     $  90,805      $  87,047     $  357,146      $  373,065
Access fees          15,963         17,128        64,070          68,693
Exchange services    8,296          4,684         31,368          18,181
and other fees
Market data fees     5,511          5,059         24,360          19,906
Regulatory fees      6,508          4,249         20,995          19,243
Other revenue        2,994          2,041         14,399          9,056
Total Operating      130,077        120,208       512,338         508,144
Revenues
Operating
Expenses:
Employee costs       26,440         28,269        104,196         104,454
Depreciation and     6,210          7,506         31,485          34,094
amortization
Data processing      4,707          4,263         19,603          17,933
Outside services     10,790         6,657         36,300          27,310
Royalty fees         11,639         12,346        46,135          47,822
Trading volume       1,027          2,440         6,275           14,239
incentives
Travel and
promotional          1,988          3,345         10,006          9,812
expenses
Facilities costs     1,269          1,426         5,066           5,400
Other expenses       6,255          1,277         9,175           5,448
Total Operating      70,325         67,529        268,241         266,512
Expenses
Operating Income     59,752         52,679        244,097         241,632
Other Income /
(Expense):
Investment income    60             24            149             142
Net loss from
investment in        (413)          (161)         (1,695)         (811)
affiliates
Interest and other   —              (206)         —               (879)
borrowing costs
Total Other Income   (353)          (343)         (1,546)         (1,548)
/ (Expense)
Income Before        59,399         52,336        242,551         240,084
Income Taxes
Income Tax           19,674         20,529        85,156          100,678
Provision
Net Income           39,725         31,807        157,395         139,406
Net Income
allocated to         (479)          (520)         (2,141)         (2,824)
participating
securities
Net Income
allocated to         $  39,246      $  31,287     $  155,254      $  136,582
common
stockholders
Net income per
share allocated to
common
stockholders
Basic                $  0.45        $  0.35       $  1.78         $  1.52
Diluted              0.45           0.35          1.78            1.52
Weighted average
shares used in
computing income
per share:
Basic                87,272         89,397        87,460          89,994
Diluted              87,272         89,397        87,460          89,994

CBOE Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
December 31, 2012 and December 31, 2011
(in thousands, except share amounts)       December31, 2012 December31, 2011
Assets
Current Assets:
Cash and cash equivalents                  $    135,597      $    134,936
Accounts receivable - net of allowances    45,666            37,578
of $340 and $304
Marketing fee receivable                   5,216             5,195
Income taxes receivable                    11,717            6,756
Other prepaid expenses                     4,146             4,152
Other current assets                       567               1,065
Total Current Assets                       202,909           189,682
Investments in Affiliates                  14,270            14,305
Land                                       4,914             4,914
Property and Equipment:
Construction in progress                   89                1,264
Building                                   62,442            60,917
Furniture and equipment                    263,155           252,905
Less accumulated depreciation and          (251,641)         (238,288)
amortization
Total Property and Equipment—Net           74,045            76,798
Other Assets:
Software development work in progress      7,924             6,168
Data processing software and other assets
(less accumulated amortization of          34,796            36,001
$133,862 and $121,173)
Total Other Assets—Net                     42,720            42,169
Total                                      $    338,858      $    327,868
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses      $    45,148       $    46,071
Marketing fee payable                      5,808             5,765
Deferred revenue                           1,084             351
Post-retirement medical benefits           110               100
Total Current Liabilities                  52,150            52,287
Long-term Liabilities:
Post-retirement medical benefits           1,794             1,781
Income taxes payable                       20,857            12,185
Other long-term liabilities                3,946             3,906
Deferred income taxes                      20,989            21,439
Total Long-term Liabilities                47,586            39,311
Total Liabilities                          99,736            91,598
Commitments and Contingencies
Stockholders' Equity
Preferred Stock, $0.01 par value:
20,000,000 shares authorized, no shares    —                 —
issued and outstanding at December 31,
2012 and December, 31, 2011
Unrestricted Common Stock, $0.01 par
value: 325,000,000 shares authorized,
90,270,274 issued and 87,271,683           913               908
outstanding at December 31, 2012;
90,781,222 issued and 88,768,885
outstanding at December 31, 2011
Additional paid-in-capital                 67,812            55,469
Retained Earnings                          275,491           232,121
Treasury Stock, at cost: 3,998,591 shares
at December 31, 2012; 2,012,337 shares at  (104,201)         (51,329)
December 31, 2011
Accumulated other comprehensive loss       (893)             (899)
Total Stockholders' Equity                 239,122           236,270
Total                                      $    338,858      $    327,868

CBOE Holdings, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Twelve Months Ended December 31, 2012 and 2011
                                              Twelve Months Ended December 31,
(in thousands)                                2012             2011
Cash Flows from Operating Activities:
Net Income                                    $   157,395      $   139,406
Adjustments to reconcile net income to
net cash flows from operating activities:
Depreciation and amortization                 31,485           34,094
Other amortization                            88               90
Provision for deferred income taxes           (493)            940
Stock-based compensation                      12,348           12,618
Loss on disposition of property               1                1,225
Loss on investment in affiliates              1,695            352
Impairment of investment in affiliates and    —                459
other assets
Net change in assets and liabilities:         (1,984)          13,945
Net Cash Flows Provided by Operating          200,535          203,129
Activities
Cash Flows from Investing Activities:
Capital and other assets expenditures         (30,066)         (29,143)
Investment in affiliates                      (2,911)          (1,250)
Other                                         —                112
Net Cash Flows Used in Investing Activities   (32,977)         (30,281)
Cash Flows from Financing Activities:
Payment of dividends                          (47,828)         (40,372)
Payment of special dividend                   (66,197)         —
Purchase of unrestricted stock from           (3,128)          (4,339)
employees
Purchase of unrestricted stock under          (49,744)         (46,990)
repurchase program
Net Cash Flows Used in Financing Activities   (166,897)        (91,701)
Net Increase (Decrease) in Cash and Cash      661              81,147
Equivalents
Cash and Cash Equivalents at Beginning of     $   134,936      $   53,789
Period
Cash and Cash Equivalents at End of Period    $   135,597      $   134,936
Supplemental Disclosure of Cash Flow
Information
Cash paid for income taxes                    $   82,633       $   93,224
Non-cash activities:
Change in post-retirement benefit obligation  $   (25)         $   (90)
Unpaid liability to acquire equipment and     $   755          $   1,537
software
Unpaid estimated liability related to SEC     $   5,000        $   —
investigation





SOURCE CBOE Holdings, Inc.

Contact: CBOE Media Contacts, Gail Osten, +1-312-786-7123, osten@cboe.com, or
Gary Compton, +1-312-786-7612, comptong@cboe.com; Analyst Contact, Debbie
Koopman, +1-312-786-7136, koopman@cboe.com
 
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