CME Group Inc. Reports Strong Third-Quarter 2016 Financial Results
"Our solid third-quarter results included 22 percent year-over-year growth in metals average daily volume and 17 percent growth in energy," said
"We continue to focus on globalizing our business, growing our options franchise and providing innovative product extensions to solve challenges our customers face," said
Third-quarter 2016 average daily volume was 14.3 million contracts, flat compared with an exceptionally strong third-quarter 2015. Clearing and transaction fee revenue was
1. A reconciliation of the non-GAAP financial results mentioned to the respective GAAP figures can be found within the Reconciliation of GAAP to non-GAAP Measures chart at the end of the financial statements and earnings presentation materials. |
As of
As the world's leading and most diverse derivatives marketplace,
Statements in this press release that are not historical facts are forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statements. We want to caution you not to place undue reliance on any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Among the factors that might affect our performance are increasing competition by foreign and domestic entities, including increased competition from new entrants into our markets and consolidation of existing entities; our ability to keep pace with rapid technological developments,
including our ability to complete the development, implementation and maintenance of the enhanced functionality required by our customers while maintaining reliability and ensuring that such technology is not vulnerable to security risks; our ability to continue introducing competitive new products and services on a timely, cost-effective basis, including through our electronic trading capabilities, and our ability to maintain the competitiveness of our existing products and services, including our ability to provide effective services to the swaps market; our ability to adjust our fixed costs and expenses if our revenues decline; our ability to maintain existing customers, develop strategic relationships and attract new customers; our ability to expand and offer our products outside
| ||||||||
Consolidated Balance Sheets | ||||||||
(in millions) | ||||||||
|
| |||||||
ASSETS |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ |
1,420.5 |
$ |
1,692.6 |
||||
Marketable securities |
83.3 |
72.5 |
||||||
Accounts receivable, net of allowance |
395.7 |
357.8 |
||||||
Other current assets (includes |
269.4 |
228.6 |
||||||
Performance bonds and guaranty fund contributions |
31,607.1 |
35,553.0 |
||||||
Total current assets |
33,776.0 |
37,904.5 |
||||||
Property, net of accumulated depreciation and amortization |
426.7 |
491.7 |
||||||
Intangible assets—trading products |
17,175.3 |
17,175.3 |
||||||
Intangible assets—other, net |
2,465.9 |
2,537.9 |
||||||
|
7,569.0 |
7,569.0 |
||||||
Other assets (includes |
1,838.4 |
1,681.0 |
||||||
Total Assets |
$ |
63,251.3 |
$ |
67,359.4 |
||||
LIABILITIES AND EQUITY |
||||||||
Current Liabilities: |
||||||||
Accounts payable |
$ |
34.5 |
$ |
28.7 |
||||
Other current liabilities |
247.0 |
1,242.8 |
||||||
Performance bonds and guaranty fund contributions |
31,604.9 |
35,553.0 |
||||||
Total current liabilities |
31,886.4 |
36,824.5 |
||||||
Long-term debt |
2,230.7 |
2,229.3 |
||||||
Deferred income tax liabilities, net |
7,317.7 |
7,358.3 |
||||||
Other liabilities |
551.6 |
395.5 |
||||||
Total Liabilities |
41,986.4 |
46,807.6 |
||||||
Shareholders' equity |
21,264.9 |
20,551.8 |
||||||
Total Liabilities and Equity |
$ |
63,251.3 |
$ |
67,359.4 |
| ||||||||||||||||
Consolidated Statements of Income | ||||||||||||||||
(dollars in millions, except per share amounts; shares in thousands) | ||||||||||||||||
Quarter Ended |
Nine Months Ended | |||||||||||||||
2016 |
2015 |
2016 |
2015 | |||||||||||||
Revenues |
||||||||||||||||
Clearing and transaction fees |
$ |
704.2 |
$ |
715.0 |
$ |
2,267.9 |
$ |
2,105.0 |
||||||||
Market data and information services |
101.1 |
99.5 |
306.4 |
300.3 |
||||||||||||
Access and communication fees |
23.8 |
21.6 |
67.7 |
64.4 |
||||||||||||
Other |
12.6 |
14.2 |
40.3 |
43.3 |
||||||||||||
Total Revenues |
841.7 |
850.3 |
2,682.3 |
2,513.0 |
||||||||||||
Expenses |
||||||||||||||||
Compensation and benefits |
130.6 |
136.4 |
394.2 |
419.2 |
||||||||||||
Communications |
6.9 |
7.1 |
19.9 |
21.3 |
||||||||||||
Technology support services |
17.3 |
15.4 |
52.4 |
47.1 |
||||||||||||
Professional fees and outside services |
33.5 |
33.8 |
104.2 |
90.6 |
||||||||||||
Amortization of purchased intangibles |
24.0 |
24.9 |
72.0 |
74.8 |
||||||||||||
Depreciation and amortization |
31.2 |
32.4 |
95.5 |
97.5 |
||||||||||||
Occupancy and building operations |
19.6 |
23.1 |
65.3 |
69.4 |
||||||||||||
Licensing and other fee agreements |
31.5 |
33.1 |
103.3 |
92.5 |
||||||||||||
Other |
21.8 |
27.7 |
113.0 |
81.8 |
||||||||||||
Total Expenses |
316.4 |
333.9 |
1,019.8 |
994.2 |
||||||||||||
Operating Income |
525.3 |
516.4 |
1,662.5 |
1,518.8 |
||||||||||||
Non-Operating Income (Expense) |
||||||||||||||||
Investment income |
36.5 |
2.5 |
71.3 |
26.7 |
||||||||||||
Gains (losses) on derivative investments |
— |
— |
— |
(1.8) |
||||||||||||
Interest and other borrowing costs |
(31.1) |
(28.3) |
(91.9) |
(88.5) |
||||||||||||
Equity in net earnings (losses) of unconsolidated subsidiaries |
28.6 |
26.6 |
82.4 |
75.1 |
||||||||||||
Other non-operating income (expense) |
(10.5) |
(0.8) |
(30.9) |
(42.0) |
||||||||||||
Total Non-Operating |
23.5 |
— |
30.9 |
(30.5) |
||||||||||||
Income before Income Taxes |
548.8 |
516.4 |
1,693.4 |
1,488.3 |
||||||||||||
Income tax provision |
76.0 |
156.5 |
532.7 |
533.0 |
||||||||||||
Net Income |
$ |
472.8 |
$ |
359.9 |
$ |
1,160.7 |
$ |
955.3 |
||||||||
Earnings per Common Share: |
||||||||||||||||
Basic |
$ |
1.40 |
$ |
1.07 |
$ |
3.44 |
$ |
2.84 |
||||||||
Diluted |
1.39 |
1.06 |
3.43 |
2.83 |
||||||||||||
Weighted Average Number of Common Shares: |
||||||||||||||||
Basic |
337,592 |
336,323 |
337,299 |
336,015 |
||||||||||||
Diluted |
339,143 |
338,139 |
338,834 |
337,804 |
| |||||||||||||||
Quarterly Operating Statistics | |||||||||||||||
3Q 2015 |
4Q 2015 |
1Q 2016 |
2Q 2016 |
3Q 2016 | |||||||||||
Trading Days |
64 |
64 |
61 |
64 |
64 |
||||||||||
Quarterly Average Daily Volume (ADV) | |||||||||||||||
CME Group ADV (in thousands) | |||||||||||||||
Product Line |
3Q 2015 |
4Q 2015 |
1Q 2016 |
2Q 2016 |
3Q 2016 | ||||||||||
Interest rate |
6,658 |
6,097 |
8,246 |
6,776 |
6,791 |
||||||||||
Equity |
3,287 |
2,743 |
3,557 |
2,957 |
2,876 |
||||||||||
Foreign exchange |
855 |
779 |
944 |
838 |
772 |
||||||||||
Energy |
1,965 |
2,032 |
2,536 |
2,322 |
2,294 |
||||||||||
Agricultural commodity |
1,267 |
1,200 |
1,206 |
1,722 |
1,156 |
||||||||||
Metal |
353 |
326 |
454 |
468 |
431 |
||||||||||
Total |
14,384 |
13,178 |
16,944 |
15,082 |
14,319 |
||||||||||
Venue |
|||||||||||||||
Electronic |
12,620 |
11,420 |
14,713 |
13,355 |
12,672 |
||||||||||
Open outcry |
1,110 |
1,055 |
1,423 |
1,075 |
982 |
||||||||||
Privately negotiated |
653 |
704 |
807 |
651 |
665 |
||||||||||
Total |
14,384 |
13,178 |
16,944 |
15,082 |
14,319 |
Average Rate Per Contract (RPC) | ||||||||||||||||||||
CME Group RPC | ||||||||||||||||||||
Product Line |
3Q 2015 |
4Q 2015 |
1Q 2016 |
2Q 2016 |
3Q 2016 | |||||||||||||||
Interest rate |
$ |
0.506 |
$ |
0.517 |
$ |
0.501 |
$ |
0.496 |
$ |
0.508 |
||||||||||
Equity |
0.708 |
0.718 |
0.726 |
0.709 |
0.676 |
|||||||||||||||
Foreign exchange |
0.785 |
0.813 |
0.767 |
0.798 |
0.806 |
|||||||||||||||
Energy |
1.197 |
1.232 |
1.203 |
1.168 |
1.097 |
|||||||||||||||
Agricultural commodity |
1.290 |
1.339 |
1.321 |
1.291 |
1.335 |
|||||||||||||||
Metal |
1.600 |
1.644 |
1.597 |
1.562 |
1.542 |
|||||||||||||||
Average RPC |
$ |
0.759 |
$ |
0.789 |
$ |
0.756 |
$ |
0.782 |
$ |
0.750 |
| ||||||||||||||||
Reconciliation of GAAP to non-GAAP Measures | ||||||||||||||||
(dollars in millions, except per share amounts; shares in thousands) | ||||||||||||||||
Quarter Ended |
Nine Months Ended | |||||||||||||||
2016 |
2015 |
2016 |
2015 | |||||||||||||
Net Income |
$ |
472.8 |
$ |
359.9 |
$ |
1,160.7 |
$ |
955.3 |
||||||||
Restructuring and severance |
— |
13.6 |
— |
21.0 |
||||||||||||
Acquisition-related costs |
— |
— |
— |
0.9 |
||||||||||||
Amortization of purchased intangibles |
24.0 |
24.9 |
72.0 |
74.8 |
||||||||||||
Loss on disposal of building assets |
— |
5.3 |
— |
|||||||||||||
Loss and expenses related to sale-leaseback of data center |
— |
— |
28.6 |
— |
||||||||||||
Real estate taxes and fees |
— |
— |
— |
10.0 |
||||||||||||
Foreign exchange transaction losses (gains)1 |
1.0 |
7.2 |
16.5 |
6.1 |
||||||||||||
Net (gains) losses on CME Venture investments |
(5.2) |
— |
(1.4) |
— |
||||||||||||
(Gains) losses on sale of BM&FBOVESPA shares |
(6.4) |
2.5 |
(6.4) |
(3.4) |
||||||||||||
Debt prepayment costs |
— |
— |
— |
64.1 |
||||||||||||
GFI termination fee - net of the portion paid to outside advisers |
— |
— |
— |
(22.5) |
||||||||||||
Income tax effect related to above |
(3.2) |
(16.9) |
(37.3) |
(51.4) |
||||||||||||
Other income tax items2 |
(126.4) |
(31.4) |
(89.0) |
(14.0) |
||||||||||||
Adjusted Net Income |
$ |
356.6 |
$ |
359.8 |
$ |
1,149.0 |
$ |
1,040.9 |
||||||||
GAAP Earnings per Common Share: |
||||||||||||||||
Basic |
$ |
1.40 |
$ |
1.07 |
$ |
3.44 |
$ |
2.84 |
||||||||
Diluted |
1.39 |
1.06 |
3.43 |
2.83 |
||||||||||||
Adjusted Earnings per Common Share: |
||||||||||||||||
Basic |
$ |
1.06 |
$ |
1.07 |
$ |
3.41 |
$ |
3.10 |
||||||||
Diluted |
1.05 |
1.06 |
3.39 |
3.08 |
||||||||||||
Weighted Average Number of Common Shares: |
||||||||||||||||
Basic |
337,592 |
336,323 |
337,299 |
336,015 |
||||||||||||
Diluted |
339,143 |
338,139 |
338,834 |
337,804 |
||||||||||||
1. Results include foreign exchange transaction net losses principally related to cash held in British pounds within foreign entities whose functional currency is the | ||||||||||||||||
2. Income tax benefit recognized from historical losses in our investment in BM&FBOVESPA in the third quarter of 2016 and income tax expense related to the remeasurement of tax positions resulting from state and local income tax law changes in second-quarter 2016. |
CME-G
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