CME Group Inc. Reports Solid Second-Quarter 2010 Financial Results
CHICAGO, July 29, 2010 /PRNewswire via COMTEX News Network/ -- CME Group Inc. (Nasdaq: CME) today reported that second-quarter total revenues increased 26 percent to $814 million and operating income increased 29 percent to $515 million from the year-ago period. Second-quarter 2010 operating margin was 63 percent, up from 62 percent in second-quarter 2009. Operating margin is defined as operating income as a percentage of total revenues.
Second-quarter net income was $271 million and diluted earnings per share were $4.11, up 22 percent and 23 percent respectively from the same period last year. Second-quarter 2010 results included a $20.5 million write down of goodwill of the company's subsidiary, Credit Market Analysis Limited (CMA). Excluding the write down, second-quarter diluted EPS would have been $4.43*, a 33 percent increase versus second-quarter 2009.
"During a volatile second quarter, CME Group's markets performed well in their critical functions of providing liquidity, transparency, reliability and security to market participants," said CME Group Executive Chairman Terry Duffy. "Our extensive track record of operating safe and secure markets is what our customers rely on, and what helped us achieve strong second quarter results. We are pleased that the newly signed Dodd-Frank Act reinforces the value of these attributes, and look forward to working with market participants to efficiently implement the tenets of the Act while preserving the integrity of U.S. financial markets."
"CME Group's performance during the second quarter underscored the value of our products to our customers during highly volatile conditions," said CME Chief Executive Officer Craig Donohue. "Volume was up in every asset class, resulting in 31 percent average daily volume growth from the same quarter last year, and generating $814 million in total revenues. Our focus continues to be on leveraging our globally relevant products, our extensive customer network, and our world class technology and clearing platforms to deliver new risk management opportunities to our clients."
CME Group Inc. Second-Quarter 2010 Financial Highlights
($s in millions, except
per share) Q2 FY10 Q2 FY09 Y/Y 1H FY10 1H FY09 Y/Y
------- ------- --- ------- ------- ---
Revenues $814 $648 26% $1,507 $1,295 16%
Expenses $299 $249 20% $577 $510 13%
Operating Income $515 $399 29% $930 $785 18%
Operating Margin % 63.3% 61.6% 61.7% 60.6%
Net Income Attributable to
CME Group $271 $222 22% $511 $421 21%
Diluted EPS $4.11 $3.33 23% $7.73 $6.33 22%
Second-quarter 2010 average daily volume was 13.5 million contracts, up 31 percent compared with second-quarter 2009. Clearing and transaction fee revenue was $684 million, up 27 percent from $537 million in second-quarter 2009, and up 18 percent from first-quarter 2010. Market data and information services revenue was $102 million, up 24 percent from $82 million in the same quarter last year, and includes the first full quarter of revenue from CME Group's index services business. The total average rate per contract for CME Group decreased 4 percent from second-quarter 2009 to 79 cents.
Second-quarter 2010 non-operating expense was $35 million, driven primarily by interest expense and borrowing costs of $38 million, which was offset by $4 million of investment income. Additionally, the second-quarter 2010 effective tax rate was 43.5 percent, up from 40.8 percent in second-quarter 2009. Excluding the CMA write down, the tax rate would have been 41.7 percent*.
As of June 30, the company had $409 million of cash and marketable securities and $2.8 billion of debt. During the quarter, the company paid down $300 million of debt.
CME Group will hold a conference call to discuss second-quarter 2010 results at 8:30 a.m. Eastern Time today. A live audio Webcast of the call will be available on the Investor Relations section of CME Group's Web site at www.cmegroup.com. An archived recording will be available for up to two months after the call.
CME Group (www.cmegroup.com) is the world's largest and most diverse derivatives marketplace. Building on the heritage of CME, CBOT and NYMEX, CME Group serves the risk management needs of customers around the globe. As an international marketplace, CME Group brings buyers and sellers together on the CME Globex electronic trading platform and on trading floors in Chicago and New York. By acting as the buyer to every seller and the seller to every buyer, CME Clearing virtually eliminates counterparty credit risk. CME Clearing also offers financial safeguards to help mitigate systemic risk, providing the security and confidence market participants need to operate, invest and grow. CME Group offers the widest range of benchmark products available across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, and alternative investment products such as weather and real estate. CME Group is listed on NASDAQ under the symbol "CME."
The Globe logo, CME, Chicago Mercantile Exchange, CME Group, Globex, E-mini and CME ClearPort are trademarks of Chicago Mercantile Exchange Inc. CBOT and Chicago Board of Trade, Inc. are trademarks of the Board of Trade of the City of Chicago. NYMEX and New York Mercantile Exchange are trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. All other trademarks are the property of their respective owners. Further information about CME Group (NASDAQ: CME) and its products can be found at www.cmegroup.com.
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. 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 and implementation of the enhanced functionality required by our customers; 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; our ability to adjust our fixed costs and expenses if our revenues decline; our ability to generate revenues from our processing services; our ability to maintain existing customers, develop strategic relationships and attract new customers; our ability to expand and offer our products in foreign jurisdictions; changes in government policy, including policies relating to common or directed clearing, and changes resulting from the adoption and implementation of the Dodd-Frank Act and any changes in the regulation of our industry with respect to speculative trading in commodity interests and derivative contracts; the costs associated with protecting our intellectual property rights and our ability to operate our business without violating the intellectual property rights of others; our ability to generate revenue from our market data that may be reduced or eliminated by the growth of electronic trading, the state of the overall economy or declines in subscriptions; changes in our rate per contract due to shifts in the mix of the products traded, the trading venue and the mix of customers (whether the customer receives member or non-member fees or participates in one of our various incentive programs) and the impact of our tiered pricing structure; the ability of our financial safeguards package to adequately protect us from the credit risks of clearing members; the ability of our compliance and risk management methods to effectively monitor and manage our risks; changes in price levels and volatility in the derivatives markets and in underlying fixed income, equity, foreign exchange and commodities markets; economic, political and market conditions, including the recent volatility of the capital and credit markets and the impact of current economic conditions on the trading activity of our current and potential customers; our ability to accommodate increases in trading volume and order transaction traffic without failure or degradation of performance of our systems; our ability to execute our growth strategy and maintain our growth effectively; our ability to manage the risks and control the costs associated with our acquisition, investment and alliance strategy; our ability to continue to generate funds and/or manage our indebtedness to allow us to continue to invest in our business; industry and customer consolidation; decreases in trading and clearing activity; the imposition of a transaction tax on futures and options on futures transactions and/or the repeal of the 60/40 tax treatment of such transactions; the unfavorable resolution of material legal proceedings and the seasonality of the futures business. More detailed information about factors that may affect our performance may be found in our filings with the Securities and Exchange Commission, including our most recent periodic reports filed on Form 10-K and Form 10-Q, which are available in the Investor Relations section of the CME Group Web site. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
*A reconciliation of the non-GAAP EPS and non-GAAP tax rate 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.
CME Group Inc. and Subsidiaries
Consolidated Balance Sheets
(in millions)
June 30, December 31,
2010 2009
--------- -------------
ASSETS
Current Assets:
Cash and cash equivalents $363.6 $260.6
Marketable securities 45.0 42.6
Accounts receivable, net of allowance 330.8 248.3
Other current assets 103.8 165.6
Cash performance bonds and security
deposits 3,758.8 5,981.9
------- -------
Total current assets 4,602.0 6,699.0
Property, net of accumulated depreciation
and amortization 729.5 738.5
Intangible assets - trading products 17,038.0 16,982.0
Intangible assets -other, net of
accumulated amortization 3,502.0 3,246.5
Goodwill 7,962.8 7,549.2
Other assets 424.6 435.8
----- -----
Total Assets $34,258.9 $35,651.0
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $37.6 $46.7
Short-term debt 300.0 299.8
Other current liabilities 237.9 195.2
Cash performance bonds and security
deposits 3,758.8 5,981.9
------- -------
Total current liabilities 4,334.3 6,523.6
Long-term debt 2,524.4 2,014.7
Deferred tax liabilities 7,775.9 7,645.9
Other liabilities 172.9 165.8
----- -----
Total Liabilities 14,807.5 16,350.0
Redeemable non-controlling interest 67.9 -
Shareholders' equity 19,383.5 19,301.0
-------- --------
Total Liabilities and Shareholders' Equity $34,258.9 $35,651.0
========= =========
CME Group Inc. and Subsidiaries
Consolidated Statements of Income
(dollars in millions, except per share amounts; shares in thousands)
Quarter Ended Six Months Ended
June 30, June 30,
2010 2009 2010 2009
---- ---- ---- ----
Revenues
Clearing and transaction
fees $684.2 $536.8 $1,262.2 $1,064.6
Market data and
information services 102.0 82.1 189.6 167.6
Access and communication
fees 11.2 11.5 22.1 23.1
Other 16.5 17.4 33.2 39.6
---- ---- ---- ----
Total Revenues 813.9 647.8 1,507.1 1,294.9
Expenses
Compensation and benefits 103.1 88.0 201.9 174.7
Communications 10.9 11.6 21.0 24.0
Technology support
services 12.7 11.6 24.9 23.4
Professional fees and
outside services 25.2 22.4 56.4 44.0
Amortization of purchased
intangibles 32.3 30.5 63.1 63.8
Depreciation and
amortization 32.8 30.1 65.0 61.1
Occupancy and building
operations 20.2 18.1 40.7 38.2
Licensing and other fee
agreements 21.2 21.7 42.3 46.3
Restructuring (0.2) 1.4 (0.5) 4.6
Other 40.6 13.6 62.5 29.6
---- ---- ---- ----
Total Expenses 298.8 249.0 577.3 509.7
Operating Income 515.1 398.8 929.8 785.2
Non-Operating Income
(Expense)
Investment income 4.4 10.1 15.5 11.9
Gains (losses) on
derivative investments - - 6.0 -
Securities lending
interest income - 0.4 - 2.8
Securities lending
interest and other costs - 0.3 - (0.1)
Interest and other
borrowing costs (37.9) (32.6) (69.3) (71.1)
Equity in losses of
unconsolidated
subsidiaries (1.5) (1.7) (3.0) (2.9)
Other income (expense) - (0.4) - (0.4)
--- ---- --- ----
Total Non-Operating (35.0) (23.9) (50.8) (59.8)
Income Before Income
Taxes 480.1 374.9 879.0 725.4
Income tax provision (208.9) (153.1) (367.6) (304.5)
------ ------ ------ ------
Net Income $271.2 $221.8 $511.4 $420.9
Less: Net income
attributable to
redeemable non-
controlling interest 0.5 - 0.5 -
Net Income Attributable
to CME Group $270.7 $221.8 $510.9 $420.9
====== ====== ====== ======
Earnings per Common Share
Attributable to CME
Group:
Basic $4.13 $3.34 $7.75 $6.35
Diluted 4.11 3.33 7.73 6.33
Weighted Average Number
of Common Shares:
Basic 65,582 66,329 65,906 66,316
Diluted 65,784 66,526 66,104 66,470
CME Group Inc.
Quarterly Operating Statistics
2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010
------- ------- ------- ------- -------
Trading Days 63 64 64 61 64
Quarterly Average Daily Volume (ADV)
CME Group ADV (in thousands)
Product Line 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010
------------ ------- ------- ------- ------- -------
Interest rates 4,389 4,422 4,368 5,120 6,074
Equities 2,988 2,656 2,514 2,815 3,455
Foreign exchange 568 660 754 887 1,035
Energy 1,396 1,484 1,564 1,609 1,798
Agricultural
Commodities 818 708 750 786 855
Metals 190 201 292 327 308
--- --- --- --- ---
Total 10,349 10,132 10,243 11,544 13,525
Venue
-----
Open outcry 1,431 1,264 1,210 1,318 1,539
Electronic 8,266 8,267 8,399 9,562 11,340
Privately
negotiated 173 147 170 190 198
--- --- --- --- ---
Exchange-traded
Total 9,871 9,679 9,779 11,070 13,077
CME ClearPort 478 453 464 474 448
--- --- --- --- ---
Total 10,349 10,132 10,243 11,544 13,525
Average Rate Per Contract (RPC)
CME Group RPC
Product Line 2Q 2009 3Q 2009 4Q 2009 1Q 2010 2Q 2010
------------ ------- ------- ------- ------- -------
Interest rates $0.525 $0.505 $0.509 $0.503 $0.481
Equities 0.712 0.722 0.733 0.713 0.713
Foreign exchange 0.901 0.853 0.816 0.803 0.798
Energy 1.653 1.694 1.606 1.636 1.581
Agricultural
Commodities 1.130 1.199 1.278 1.244 1.282
Metals 1.808 1.849 1.872 1.734 1.749
----- ----- ----- ----- -----
Average RPC $0.823 $0.834 $0.849 $0.821 $0.790
Venue
-----
Exchange-traded $0.765 $0.765 $0.783 $0.754 $0.732
CME ClearPort 2.031 2.304 2.236 2.392 2.489
Note: Average daily volume and rate per contract figures for prior
periods have been revised due to standardizing NYMEX reporting
conventions to follow CME Group's treatment of post-trade
transactions such as exercises, assignments and deliveries.
CME Group Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Measures
(in millions)
Quarter Ended Year to Date
June 30, June 30,
2010 2009 2010 2009
---- ---- ---- ----
GAAP Results
Revenues $813.9 $647.8 $1,507.1 $1,294.9
Expenses 298.8 249.0 577.3 509.7
----- ----- ----- -----
Operating income 515.1 398.8 929.8 785.2
Operating margin 63.3% 61.6% 61.7% 60.6%
Non-Operating income
(expense) (35.0) (23.9) (50.8) (59.8)
----- ----- ----- -----
Income before income
taxes 480.1 374.9 879.0 725.4
Income tax provision (208.9) (153.1) (367.6) (304.5)
Effective tax rate 43.5% 40.8% 41.8% 42.0%
---- ---- ---- ----
Net income $271.2 $221.8 $511.4 $420.9
Less: Net income
attributable to
redeemable non-
controlling interest 0.5 - 0.5 -
--- --- --- ---
Net Income Attributable
to CME Group $270.7 $221.8 $510.9 $420.9
====== ====== ====== ======
Earnings per Common
Share Attributable to
CME Group:
Basic $4.13 $3.34 $7.75 $6.35
Diluted 4.11 3.33 7.73 6.33
Adjustments for
Impairment of CMA
goodwill
Adjustment to expenses (20.5) - (20.5) -
Adjustment to operating
income 20.5 - 20.5 -
Adjustment to income
before income taxes 20.5 - 20.5 -
Adjustment to net
income $20.5 $- $20.5 $-
===== === ===== ===
Non-GAAP results,
excluding impairment
of CMA goodwill
Revenues $813.9 $647.8 $1,507.1 $1,294.9
Expenses 278.3 249.0 556.8 509.7
----- ----- ----- -----
Operating income 535.6 398.8 950.3 785.2
Operating margin 65.8% 61.6% 63.1% 60.6%
Non-Operating income
(expense) (35.0) (23.9) (50.8) (59.8)
----- ----- ----- -----
Income before income
taxes 500.6 374.9 899.5 725.4
Income tax provision (208.9) (153.1) (367.6) (304.5)
Effective tax rate 41.7% 40.8% 40.9% 42.0%
---- ---- ---- ----
Net income $291.7 $- $221.8 $- $531.9 $- $420.9
Less: Net income
attributable to
redeemable non-
controlling interest 0.5 - 0.5 -
--- --- --- ---
Net Income Attributable
to CME Group $291.2 $221.8 $531.4 $420.9
====== ====== ====== ======
Adjusted earnings per
Common Share
Attributable to CME
Group:
Basic $4.44 $3.34 $8.06 $6.35
Diluted 4.43 3.33 8.04 6.33
CME-G
SOURCE CME Group
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