UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported)
October 24, 2007
CME GROUP INC.
(Exact Name of Registrant as Specified in Charter)
| Delaware | 000-33379 | 36-4459170 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File No.) | (IRS Employer Identification No.) |
20 South Wacker Drive
Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (312) 930-1000
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02. | Results of Operations and Financial Condition. |
The information set forth under “Item 2.02. Results Of Operations And Financial Condition,” including the Exhibit attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
Attached and incorporated herein by reference as Exhibit 99.1 is a copy of a press release of CME Group Inc. dated October 24, 2007, reporting CME Group Inc.’s financial results for the third quarter ended September 30, 2007.
| Item 9.01. | Financial Statements and Exhibits |
EXHIBIT INDEX
| Exhibit Number |
Description | |
| 99.1 |
Press Release, dated October 24, 2007. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CHICAGO MERCANTILE EXCHANGE HOLDINGS INC. | ||||
| Registrant | ||||
| Date: October 23, 2007 |
By: | /s/ Kathleen M. Cronin | ||
| Name: | Kathleen M. Cronin | |||
| Title: | Managing Director, General Counsel and Corporate Secretary | |||
Exhibit 99.1
| Media Contacts |
Investor Contact | |||
| Anita Liskey, 312 466 4613 |
John Peschier, 312 930 8491 | |||
| William Parke, 312 930 3467 |
CME-E | |||
| news@cmegroup.com http://cmegroup.mediaroom.com/ |
FOR IMMEDIATE RELEASE
CME Group Inc. Reports Strong Third-Quarter Revenues and Profits
CHICAGO, October 24, 2007 – CME Group Inc. (NYSE, NASDAQ: CME) today reported total revenues increased 106 percent to $565 million and net income increased 94 percent to $202 million for third-quarter 2007 compared with third-quarter 2006. Diluted earnings per share rose 31 percent to $3.87 from $2.95. These GAAP results include the operations of the predecessor to CME Group, Chicago Mercantile Exchange Holdings Inc. (CME), for the full quarter, the results of the Chicago Board of Trade (CBOT) after July 12, 2007 when the merger between CME and CBOT closed, $20 million in merger-related operating expenses, and $28 million of non-operating expense associated with the ERP guarantee. The comparative results for 2006 reflect the operations of CME only.
Pro forma non-GAAP diluted earnings per share in the third quarter were $4.31, a 68 percent increase from $2.56 in the third-quarter 2006. Third-quarter 2007 pro forma results exclude merger-related costs consisting of restructuring charges, integration and legal costs, acceleration of depreciation related to CBOT data centers, and include CBOT operating results for the full third quarter. The pro forma comparative results for 2006 reflect the operating results of both CME and CBOT as if they were combined. Using this methodology, total pro forma revenues were $585 million, a 41 percent increase compared to the same period a year ago, and pro forma net income was $236 million, a 68 percent increase. Pro forma measures do not replace and are not a substitute for GAAP financial results, but are provided to improve overall understanding of current financial performance and to provide a meaningful comparison to prior periods. A full reconciliation of these pro forma results is included in the attached tables.
“CME Group finished a record quarter with an unprecedented volume increase of nearly 50 percent,” said CME Group Executive Chairman Terry Duffy. “Our successful merger with the Chicago Board of Trade has positioned us as a leader in all major asset classes, and we saw robust growth in our agricultural, equity index, foreign exchange and interest rate products, as well as in our energy and metals derivatives processing business. Looking ahead, we are intensely focused on successfully completing our integration with CBOT and serving our expanding customer base around the world.”
In addition to delivering outstanding third-quarter results, we are building on our robust core business by serving customers in over-the-counter derivatives markets and launching innovative new products across existing and new asset classes,” said CME Group Chief Executive Officer Craig Donohue. “We also are poised to drive further growth through expanding our global distribution and processing capabilities, as exemplified by our proposed agreements with the Brazilian Mercantile & Futures Exchange, the largest derivatives exchange in South America, and the Korea Exchange, a premier capital marketplace for Northeast Asia.
All references to volume and rate per contract information in the text of this document exclude our non-traditional TRAKRS products, for which CME Group receives significantly lower clearing fees than other CME Group products, CME Group Auction Markets products, which were available to trade prior to July 2007, and Swapstream products.
CME Group Inc. Third-Quarter 2007 Results
Financial Highlights:
GAAP
| ($s in millions, except per share) | Q3 FY07 | Q3 FY06 | Y/Y | YTD FY07 | YTD FY06 | Y/Y | ||||||||||||||||
| Revenues |
$ | 565 | $ | 275 | 106 | % | $ | 1,227 | $ | 809 | 52 | % | ||||||||||
| Expenses |
$ | 220 | $ | 118 | 87 | % | $ | 489 | $ | 346 | 41 | % | ||||||||||
| Operating Income |
$ | 345 | $ | 157 | 120 | % | $ | 738 | $ | 463 | 59 | % | ||||||||||
| Operating Margin % |
61.0 | % | 57.2 | % | 60.2 | % | 57.2 | % | ||||||||||||||
| Net Income |
$ | 202 | $ | 104 | 94 | % | $ | 457 | $ | 305 | 50 | % | ||||||||||
| Diluted EPS |
$ | 3.87 | $ | 2.95 | 31 | % | $ | 11.18 | $ | 8.68 | 29 | % | ||||||||||
Pro Forma Non-GAAP
| ($s in millions, except per share) | Q3 FY07 | Q3 FY06 | Y/Y | YTD FY07 | YTD FY06 | Y/Y | ||||||||||||||||
| Revenues |
$ | 585 | $ | 414 | 41 | % | $ | 1,593 | $ | 1,204 | 32 | % | ||||||||||
| Expenses |
$ | 211 | $ | 197 | 7 | % | $ | 631 | $ | 589 | 7 | % | ||||||||||
| Operating Income |
$ | 375 | $ | 216 | 73 | % | $ | 962 | $ | 615 | 56 | % | ||||||||||
| Operating Margin % |
64.0 | % | 52.3 | % | 60.4 | % | 51.1 | % | ||||||||||||||
| Net Income |
$ | 236 | $ | 141 | 68 | % | $ | 615 | $ | 399 | 54 | % | ||||||||||
| Diluted EPS |
$ | 4.31 | $ | 2.56 | 68 | % | $ | 11.19 | $ | 7.26 | 54 | % | ||||||||||
NOTE: See the CME Group Inc. Reconciliation of Pro Forma Non-GAAP to GAAP Measures for detail related to the adjustments made to reach the pro forma results.
Pro Forma Non-GAAP Financial Results Detail
Third-quarter 2007 volume averaged a record 12.7 million contracts per day, up 49 percent, assuming combined CME/CBOT volumes for the entire quarter. Total quarterly volume exceeded 798 million contracts, of which 77 percent traded electronically. This strong volume drove $496 million of CME Group clearing and transaction fee revenue, an increase of 46 percent from $340 million in third-quarter 2006, assuming the CME and CBOT were combined at that time. The pro forma average rate per contract was $0.622 for the quarter compared with $0.632 in the third quarter of 2006. This 2 percent rate decrease was primarily driven by volume discounts due to significantly higher volumes.
Keeping in mind that the historical CME clearing business revenue and related CBOT expense are excluded from the pro-forma non-GAAP results, CME Group processing services revenue for the combined company tripled from $5 million to $15 million. The third quarter was the fifth consecutive record quarter of NYMEX volume on CME Globex. Additionally, quotation data fees were up 12 percent to $49 million.
Total pro forma expenses increased 7 percent to $211 million. The majority of this increase was driven by an increase in volume-related expenses including license fees and the bonus component of compensation, which is tied to performance.
Third-quarter operating income on a combined pro forma basis was $375 million, an increase of 73 percent from $216 million for the year-ago period. The company’s operating margin was 64 percent compared with 52 percent for the same period last year. Operating margin is defined as operating income as a percentage of total revenues.
CME Group will hold a conference call to discuss third-quarter 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 (http://www.cmegroup.com/) is the world’s largest and most diverse exchange. Formed by the 2007 merger of the Chicago Mercantile Exchange Holdings Inc. (CME) and CBOT Holdings, Inc. (CBOT), 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 its trading floors. 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, agricultural commodities, and alternative investment products such as weather and real estate. CME Group is traded on the New York Stock Exchange and NASDAQ under the symbol “CME”.
The Globe logo, CME, Chicago Mercantile Exchange, CME Group, Globex and E-mini, are trademarks of Chicago Mercantile Exchange Inc. CBOT and Chicago Board of Trade are trademarks of the Board of Trade of the City of Chicago. TRAKRS and Total Return Asset Contracts are trademarks of Merrill Lynch & Co., Inc. These trademarks are used herein under license. All other trademarks are the property of their respective owners. Further information about CME Group and its products can be found at http://www.cmegroup.com/.
Statements in this news 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: our ability to successfully integrate the businesses of CME Holdings and CBOT Holdings, including the fact that such integration may be more difficult, time consuming or costly than expected and revenues following the merger may be lower than expected; 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 continue to generate revenues from our processing services provided to third parties; our ability to maintain existing customers and attract new ones; our ability to expand and offer our products in foreign jurisdictions; changes in domestic and foreign regulations; changes in government policy, including policies relating to common or directed clearing; 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; 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; 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; 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 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 Quarterly Report on Form 10-Q, which is 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.
# # #
CME Group Inc. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands)
| September 30, 2007 |
December 31, 2006 | |||||
| ASSETS |
||||||
| Current Assets: |
||||||
| Cash and cash equivalents |
$ | 677,034 | $ | 969,504 | ||
| Collateral from securities lending |
2,543,648 | 2,130,156 | ||||
| Marketable securities, including pledged securities |
220,516 | 269,516 | ||||
| Accounts receivable, net of allowance |
198,853 | 121,128 | ||||
| Other current assets |
68,275 | 37,566 | ||||
| Cash performance bonds and security deposits |
746,990 | 521,180 | ||||
| Total current assets |
4,455,316 | 4,049,050 | ||||
| Property, net of accumulated depreciation and amortization |
347,910 | 168,755 | ||||
| Intangible assets - trading products |
7,937,000 | — | ||||
| Intangible assets - other, net of accumulated amortization |
1,809,316 | 12,776 | ||||
| Goodwill |
5,044,081 | 11,496 | ||||
| Other assets |
106,051 | 64,428 | ||||
| Total Assets |
$ | 19,699,674 | $ | 4,306,505 | ||
| LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||
| Current Liabilities: |
||||||
| Accounts payable |
$ | 52,823 | $ | 25,552 | ||
| Payable under securities lending agreements |
2,543,648 | 2,130,156 | ||||
| Short-term debt |
164,675 | — | ||||
| Other current liabilities |
192,513 | 78,466 | ||||
| Cash performance bonds and security deposits |
746,990 | 521,180 | ||||
| Total current liabilities |
3,700,649 | 2,755,354 | ||||
| Deferred tax liabilities |
3,796,699 | — | ||||
| Other liabilities |
90,931 | 32,059 | ||||
| Total Liabilities |
7,588,279 | 2,787,413 | ||||
| Shareholders' equity |
12,111,395 | 1,519,092 | ||||
| Total Liabilities and Shareholders' Equity |
$ | 19,699,674 | $ | 4,306,505 | ||
CME Group Inc. and Subsidiaries
Consolidated Statements of Income
(in thousands, except per share amounts)
| Quarter Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
| Revenues |
||||||||||||||||
| Clearing and transaction fees |
$ | 477,839 | $ | 216,999 | $ | 988,803 | $ | 646,315 | ||||||||
| Quotation data fees |
45,821 | 20,057 | 95,163 | 60,736 | ||||||||||||
| Processing services |
17,981 | 23,910 | 90,300 | 62,219 | ||||||||||||
| Access and communication fees |
10,325 | 7,328 | 25,345 | 21,480 | ||||||||||||
| Building and other |
13,256 | 6,411 | 26,951 | 17,881 | ||||||||||||
| Total Revenues |
565,222 | 274,705 | 1,226,562 | 808,631 | ||||||||||||
| Expenses |
||||||||||||||||
| Compensation and benefits |
78,462 | 51,159 | 191,591 | 149,051 | ||||||||||||
| Communications |
12,044 | 7,691 | 29,973 | 23,484 | ||||||||||||
| Technology support services |
15,747 | 8,459 | 33,284 | 23,377 | ||||||||||||
| Professional fees and outside services |
15,046 | 7,178 | 36,328 | 24,457 | ||||||||||||
| Amortization of purchased intangibles |
15,963 | 324 | 16,591 | 798 | ||||||||||||
| Depreciation and amortization |
32,872 | 18,609 | 72,661 | 53,592 | ||||||||||||
| Occupancy and building operations |
14,647 | 7,731 | 32,835 | 22,202 | ||||||||||||
| Licensing and other fee agreements |
11,471 | 6,394 | 25,300 | 19,255 | ||||||||||||
| Restructuring |
4,512 | — | 4,512 | — | ||||||||||||
| Marketing and other |
19,443 | 10,123 | 45,620 | 29,648 | ||||||||||||
| Total Expenses |
220,207 | 117,668 | 488,695 | 345,864 | ||||||||||||
| Operating Income |
345,015 | 157,037 | 737,867 | 462,767 | ||||||||||||
| Non-Operating Income and Expense |
||||||||||||||||
| Investment income |
21,088 | 14,654 | 57,787 | 38,789 | ||||||||||||
| Securities lending interest income |
23,150 | 19,343 | 91,560 | 70,439 | ||||||||||||
| Securities lending interest expense |
(21,350 | ) | (18,943 | ) | (88,106 | ) | (68,809 | ) | ||||||||
| Interest expense |
(1,420 | ) | (75 | ) | (1,444 | ) | (167 | ) | ||||||||
| Guarantee of exercise right privileges |
(28,500 | ) | — | (28,500 | ) | — | ||||||||||
| Equity in losses of unconsolidated subsidiaries |
(3,663 | ) | (1,502 | ) | (10,054 | ) | (2,110 | ) | ||||||||
| Total Non-Operating |
(10,695 | ) | 13,477 | 21,243 | 38,142 | |||||||||||
| Income Before Income Taxes |
334,320 | 170,514 | 759,110 | 500,909 | ||||||||||||
| Income tax provision |
(132,748 | ) | (66,714 | ) | (301,635 | ) | (196,163 | ) | ||||||||
| Net Income |
$ | 201,572 | $ | 103,800 | $ | 457,475 | $ | 304,746 | ||||||||
| Earnings per Common Share: |
||||||||||||||||
| Basic |
$ | 3.90 | $ | 2.99 | $ | 11.28 | $ | 8.79 | ||||||||
| Diluted |
$ | 3.87 | $ | 2.95 | $ | 11.18 | $ | 8.68 | ||||||||
| Weighted Average Number of Common Shares: |
||||||||||||||||
| Basic |
51,748 | 34,749 | 40,556 | 34,657 | ||||||||||||
| Diluted |
52,103 | 35,153 | 40,920 | 35,098 | ||||||||||||
CME Group Inc. and Subsidiaries
Pro Forma Non-GAAP Consolidated Statements of Income
(in thousands, except per share amounts)
| Quarter Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
| Revenues | ||||||||||||||||
| Clearing and transaction fees |
$ | 496,192 | $ | 340,167 | $ | 1,328,362 | $ | 993,054 | ||||||||
| Quotation data fees |
48,958 | 43,765 | 147,558 | 134,373 | ||||||||||||
| Processing services |
15,250 | 5,239 | 42,313 | 6,035 | ||||||||||||
| Access and communication fees |
10,325 | 9,120 | 28,605 | 26,685 | ||||||||||||
| Building and other |
14,486 | 15,368 | 46,618 | 44,134 | ||||||||||||
| Total Revenues |
585,211 | 413,659 | 1,593,456 | 1,204,281 | ||||||||||||
| Expenses | ||||||||||||||||
| Compensation and benefits |
80,605 | 71,307 | 235,020 | 209,648 | ||||||||||||
| Communications |
12,798 | 13,010 | 38,256 | 36,880 | ||||||||||||
| Technology support services |
16,545 | 16,423 | 49,682 | 47,379 | ||||||||||||
| Professional fees and outside services |
11,414 | 10,838 | 34,775 | 36,605 | ||||||||||||
| Amortization of purchased intangibles |
17,237 | 16,652 | 51,476 | 49,849 | ||||||||||||
| Depreciation and amortization |
30,328 | 32,280 | 93,428 | 96,138 | ||||||||||||
| Occupancy and building operations |
15,199 | 12,012 | 43,381 | 36,747 | ||||||||||||
| Licensing and other fee agreements |
11,740 | 9,172 | 32,173 | 27,804 | ||||||||||||
| Marketing and other |
14,766 | 15,526 | 52,956 | 48,267 | ||||||||||||
| Total Expenses |
210,632 | 197,220 | 631,147 | 589,317 | ||||||||||||
| Operating Income | 374,579 | 216,439 | 962,309 | 614,964 | ||||||||||||
| Non-Operating Income and Expense | ||||||||||||||||
| Investment income |
21,869 | 20,036 | 71,948 | 52,017 | ||||||||||||
| Securities lending interest income |
23,150 | 19,342 | 91,560 | 70,438 | ||||||||||||
| Securities lending interest expense |
(21,350 | ) | (18,943 | ) | (88,106 | ) | (68,809 | ) | ||||||||
| Interest expense |
(1,427 | ) | (379 | ) | (1,689 | ) | (1,444 | ) | ||||||||
| Equity in losses of unconsolidated subsidiaries |
(3,747 | ) | (1,842 | ) | (10,824 | ) | (2,933 | ) | ||||||||
| Total Non-Operating |
18,495 | 18,214 | 62,889 | 49,269 | ||||||||||||
| Income Before Income Taxes | 393,074 | 234,653 | 1,025,198 | 664,233 | ||||||||||||
| Income tax provision |
(157,230 | ) | (93,861 | ) | (410,079 | ) | (265,693 | ) | ||||||||
| Net Income |
$ | 235,844 | $ | 140,792 | $ | 615,119 | $ | 398,540 | ||||||||
| Earnings per Diluted Common Share |
$ | 4.31 | $ | 2.56 | $ | 11.19 | $ | 7.26 | ||||||||
| Weighted Avg. Number of Diluted Common Shares* |
54,693 | 54,977 | 54,948 | 54,917 | ||||||||||||
Note: Pro Forma Non-GAAP results exclude merger-related costs and include CBOT operating results for the full quarter. The pro forma comparative results for 2006 reflect both the operating results for CME and CBOT as if they were combined. See CME Group Inc. Reconciliation of Pro Forma Non-GAAP to GAAP Measures for detail on the adjustments made to reach the pro forma results.
| * | Weighted average number of diluted common shares includes CBOT sharecount for the entire period reported. |
CME Group Inc. and Subsidiaries
Reconciliation of Pro Forma Non-GAAP to GAAP Measures
(in thousands)
| Quarter Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
| GAAP Results | ||||||||||||||||
| Revenues |
$ | 565,222 | $ | 274,705 | $ | 1,226,562 | $ | 808,631 | ||||||||
| Expenses |
220,207 | 117,668 | 488,695 | 345,864 | ||||||||||||
| Operating Income |
345,015 | 157,037 | 737,867 | 462,767 | ||||||||||||
| Non-Operating Income and Expense |
(10,695 | ) | 13,477 | 21,243 | 38,142 | |||||||||||
| Income before income taxes |
334,320 | 170,514 | 759,110 | 500,909 | ||||||||||||
| Income tax provision |
(132,748 | ) | (66,714 | ) | (301,635 | ) | (196,163 | ) | ||||||||
| Net Income |
$ | 201,572 | $ | 103,800 | $ | 457,475 | $ | 304,746 | ||||||||
| Pro Forma Adjustments |
||||||||||||||||
| Revenues: |
||||||||||||||||
| CBOT premerger revenue |
$ | 22,720 | $ | 157,625 | $ | 414,881 | $ | 451,834 | ||||||||
| Common clearing service elimination(1) |
(2,731 | ) | (18,671 | ) | (47,987 | ) | (56,184 | ) | ||||||||
| Total Pro Forma Revenue Adjustment |
19,989 | 138,954 | 366,894 | 395,650 | ||||||||||||
| Expenses: |
||||||||||||||||
| CBOT premerger expense |
11,247 | 81,866 | 219,296 | 251,602 | ||||||||||||
| Common clearing service elimination(1) |
(2,731 | ) | (18,671 | ) | (47,987 | ) | (56,184 | ) | ||||||||
| Amortization of intangibles(2) |
2,111 | 16,357 | 34,825 | 49,071 | ||||||||||||
| Other(3) |
(20,202 | ) | — | (63,682 | ) | (1,036 | ) | |||||||||
| Total Pro Forma Expense Adjustment |
(9,575 | ) | 79,552 | 142,452 | 243,453 | |||||||||||
| Adjustment to Operating Income |
29,564 | 59,402 | 224,442 | 152,197 | ||||||||||||
| Non-Operating Income and Expense: |
||||||||||||||||
| CBOT premerger non-operating income |
690 | 4,737 | 13,146 | 11,127 | ||||||||||||
| Other(4) |
28,500 | — | 28,500 | — | ||||||||||||
| Total Pro Forma Non-Operating Income and Expense Adjustment |
29,190 | 4,737 | 41,646 | 11,127 | ||||||||||||
| Adjustment to income before income taxes |
58,754 | 64,139 | 266,088 | 163,324 | ||||||||||||
| Adjustment to income tax provision(5) |
(24,482 | ) | (27,147 | ) | (108,444 | ) | (69,530 | ) | ||||||||
| Adjustment to Net Income |
$ | 34,272 | $ | 36,992 | $ | 157,644 | $ | 93,794 | ||||||||
| Pro Forma Non-GAAP Results |
||||||||||||||||
| Revenues |
$ | 585,211 | $ | 413,659 | $ | 1,593,456 | $ | 1,204,281 | ||||||||
| Expenses |
210,632 | 197,220 | 631,147 | 589,317 | ||||||||||||
| Operating Income |
374,579 | 216,439 | 962,309 | 614,964 | ||||||||||||
| Non-Operating Income and Expense |
18,495 | 18,214 | 62,889 | 49,269 | ||||||||||||
| Income before income taxes |
393,074 | 234,653 | 1,025,198 | 664,233 | ||||||||||||
| Income tax provision |
(157,230 | ) | (93,861 | ) | (410,079 | ) | (265,693 | ) | ||||||||
| Net Income |
$ | 235,844 | $ | 140,792 | $ | 615,119 | $ | 398,540 | ||||||||
Notes:
| (1) | Eliminate clearing services provided to CBOT prior to the merger. |
| (2) | Add amortization of intangible assets recorded in purchase of CBOT. |
| (3) | Reverse effect of restructuring, accelerated depreciation, integraton and legal expenses related to the merger with CBOT. Also includes CBOT merger-related transaction costs that were expensed. |
| (4) | Reverse impact of exercise right guarantee associated with CBOT merger. |
| (5) | Adjust income taxes to arrive at an average effective tax rate of 40% on pro forma income. |
CME Group Inc.
Pro Forma Operating Statistics
Trading Days
| 3Q 2006 | 4Q 2006 | 1Q 2007 | 2Q 2007 | 3Q 2007 | |||||||||||
| Trading Days |
63 | 63 | 62 | 64 | 63 | ||||||||||
| Average Daily Volume (ADV) | |||||||||||||||
| (in thousands, average daily volumes combined for entire period) | |||||||||||||||
| Product Line |
3Q 2006 | 4Q 2006 | 1Q 2007 | 2Q 2007 | 3Q 2007 | ||||||||||
| Interest Rates |
5,655 | 5,470 | 6,671 | 6,670 | 8,060 | ||||||||||
| Equity E-mini |
1,667 | 1,700 | 2,107 | 2,127 | 3,057 | ||||||||||
| Equity standard-size |
161 | 156 | 197 | 180 | 202 | ||||||||||
| Foreign Exchange |
423 | 508 | 555 | 527 | 635 | ||||||||||
| Commodities & Alternative Investments |
624 | 748 | 789 | 818 | 716 | ||||||||||
| Total |
8,530 | 8,581 | 10,320 | 10,322 | 12,670 | ||||||||||
| TRAKRS |
116 | 294 | 145 | 98 | 114 | ||||||||||
| Venue |
|||||||||||||||
| Open outcry |
2,367 | 2,106 | 2,312 | 2,297 | 2,652 | ||||||||||
| Electronic (excluding TRAKRS) |
6,033 | 6,342 | 7,846 | 7,838 | 9,806 | ||||||||||
| Privately negotiated |
130 | 133 | 162 | 188 | 212 | ||||||||||
| Total |
8,530 | 8,581 | 10,320 | 10,322 | 12,670 | ||||||||||
| Average Rate Per Contract (RPC) | |||||||||||||||
| (in thousands, rate per contract generated from combined average daily volumes for entire period) | |||||||||||||||
| Product Line |
3Q 2006 | 4Q 2006 | 1Q 2007 | 2Q 2007 | 3Q 2007 | ||||||||||
| Interest Rates |
$ | 0.528 | $ | 0.536 | $ | 0.519 | $ | 0.516 | $ | 0.519 | |||||
| Equity E-mini |
0.717 | 0.714 | 0.712 | 0.700 | 0.673 | ||||||||||
| Equity standard-size |
1.303 | 1.385 | 1.387 | 1.334 | 1.451 | ||||||||||
| Foreign Exchange |
1.146 | 1.085 | 1.106 | 1.090 | 0.951 | ||||||||||
| Commodities & Alternative Investments |
0.832 | 0.938 | 0.952 | 1.034 | 1.032 | ||||||||||
| Average RPC (excluding TRAKRS) |
$ | 0.632 | $ | 0.654 | $ | 0.640 | $ | 0.639 | $ | 0.622 | |||||
| TRAKRS |
0.033 | 0.019 | 0.020 | 0.028 | 0.023 | ||||||||||
| Venue |
|||||||||||||||
| Open outcry |
$ | 0.493 | $ | 0.516 | $ | 0.498 | $ | 0.492 | $ | 0.473 | |||||
| Electronic (excluding TRAKRS) |
0.629 | 0.642 | 0.630 | 0.626 | 0.613 | ||||||||||
| Privately negotiated |
3.315 | 3.389 | 3.130 | 2.948 | 2.878 | ||||||||||
Note: All volume and rate per contract data is based upon pro forma results. Aside from the rows specifically titled "TRAKRS", all data excludes our non-traditional TRAKRS products, for which CME Group receives significantly lower clearing fees than other CME Group products. Additionally, all data excludes Swapstream products and CME Group Auction Markets products while the CME Group Auction Market products were available prior to July 2007.