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)
July 22, 2008
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 July 22, 2008, reporting CME Group Inc.’s financial results for the second quarter ended June 30, 2008.
| Item 9.01 | Financial Statements and Exhibits. |
A copy of the press release is attached hereto as Exhibit 99.1.
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: July 21, 2008 | By: | /s/ Kathleen M. Cronin | ||
| Name: | Kathleen M. Cronin | |||
| Title: | Managing Director, General Counsel and Corporate Secretary | |||
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1 | Press Release, dated July 22, 2008. |
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 IMMEDIATELY RELEASE
CME Group Inc. Reports Strong Second-Quarter Revenues and Net Income
| • | GAAP second-quarter earnings per share increased three percent to $3.67 |
| • | Pro forma non-GAAP second-quarter earnings per share increased 12 percent to $3.93 |
CHICAGO, July 22, 2008 – CME Group Inc. (NASDAQ: CME) today reported total revenues increased 71 percent to $563 million and net income increased 60 percent to $201 million for second-quarter 2008 compared with second-quarter 2007. Diluted earnings per share rose 3 percent to $3.67. The 2008 GAAP results reflect the operations of both Chicago Mercantile Exchange (CME) and Board of Trade of the City of Chicago (CBOT) and include: $6.7 million of CBOT merger-related operating expenses consisting of restructuring charges, integration and legal costs, and the acceleration of depreciation related to CBOT data centers; $13.2 million of costs related primarily to changes in the fair value of the company’s FX hedge associated with its investment in BM&F BOVESPA SA; and a $3.6 million increase to non-operating expenses associated with the guarantee for holders of the Chicago Board Options Exchange (CBOE) exercise right privilege (ERP). The GAAP results for 2007 reflect the operations of CME only.
Pro forma non-GAAP diluted earnings per share in the second quarter were $3.93, a 12 percent increase versus second-quarter 2007. Pro forma results for second-quarter 2008 exclude the items listed above related to the CBOT merger, BM&F BOVESPA SA and the CBOE ERP guarantee. Pro forma non-GAAP revenues increased 10 percent to $563 million and net income increased 11 percent to $215 million for second-quarter 2008 compared with second-quarter 2007. The pro forma comparative results for 2007 reflect the operating results of both CME and CBOT as if they were combined. Pro forma measures do not replace and are not a substitute for GAAP financial results. They are provided to improve overall understanding of current financial performance and to provide a meaningful comparison with prior periods. A full reconciliation of these pro forma results is included in the attached tables.
“CME Group’s product diversity helps customers mitigate risks across a wide array of asset classes, which is especially important in a challenging economy,” said CME Group Executive Chairman Terry Duffy. “We have seen record quarterly volumes in our foreign exchange and commodities product lines, and view current market conditions for interest rates
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.
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as a cyclical slowdown rather than a long-term issue. We have a number of new interest rate and treasury products in the pipeline – including cleared swaps and inter-commodity spreads – and continue to innovate within all our product lines as we extend distribution and enhance speed and functionality. We also continue to expand globally, and are on schedule to launch order routing from CME Group to BM&FBOVESPA, the largest exchange in Latin America, in September.”
“The increased revenues and earnings posted by CME Group reflect the strength and stability of our business model and the continued success of our global growth plan,” said CME Chief Executive Officer Craig Donohue. “We serve our expanding base of customers through the growth of new products that build on our core business and also through multiple non-core initiatives that strengthen our position in the exchange space. Going forward, for example, our proposed NYMEX transaction will enable us to diversify into energy and metals markets as well as expand into over-the-counter markets. In addition to new trading opportunities, our customers will benefit from the potential for significant cost savings and streamlined operations. We are confident in the value this transaction represents for shareholders of both companies and in the opportunity it provides for capitalizing on the global growth trend in derivatives.”
CME Group Inc. Second-Quarter 2008 Results
Financial Highlights:
GAAP
| ($s in millions, except per share) | Q2 FY08 | Q2 FY07 | Y/Y | YTD FY08 | YTD FY07 | Y/Y | ||||||||||||||||
| Revenues |
$ | 563 | $ | 329 | 71 | % | $ | 1,188 | $ | 661 | 80 | % | ||||||||||
| Expenses |
$ | 220 | $ | 137 | 61 | % | $ | 446 | $ | 268 | 66 | % | ||||||||||
| Operating Income |
$ | 343 | $ | 192 | 79 | % | $ | 742 | $ | 393 | 89 | % | ||||||||||
| Operating Margin % |
61.0 | % | 58.4 | % | 62.5 | % | 59.4 | % | ||||||||||||||
| Net Income |
$ | 201 | $ | 126 | 60 | % | $ | 485 | $ | 256 | 89 | % | ||||||||||
| Diluted EPS |
$ | 3.67 | $ | 3.57 | 3 | % | $ | 8.91 | $ | 7.26 | 23 | % | ||||||||||
Pro Forma Non-GAAP
| ($s in millions, except per share) | Q2 FY08 | Q2 FY07 | Y/Y | YTD FY08 | YTD FY07 | Y/Y | ||||||||||||||||
| Revenues |
$ | 563 | $ | 510 | 10 | % | $ | 1,188 | $ | 1,008 | 18 | % | ||||||||||
| Expenses |
$ | 213 | $ | 211 | 1 | % | $ | 427 | $ | 420 | 2 | % | ||||||||||
| Operating Income |
$ | 350 | $ | 299 | 17 | % | $ | 761 | $ | 588 | 30 | % | ||||||||||
| Operating Margin % |
62.2 | % | 58.7 | % | 64.1 | % | 58.3 | % | ||||||||||||||
| Net Income |
$ | 215 | $ | 194 | 11 | % | $ | 508 | $ | 379 | 34 | % | ||||||||||
| Diluted EPS |
$ | 3.93 | $ | 3.52 | 12 | % | $ | 9.34 | $ | 6.89 | 36 | % | ||||||||||
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. The first quarter 2008 pro forma results are shown as excluding the impact of the company’s FX hedge related to the BM&F BOVESPA SA investment.
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Pro Forma Non-GAAP Second-Quarter 2008 Financial Results
Second-quarter 2008 volume averaged 11.1 million contracts per day, up 7 percent versus the same period in 2007. This volume growth resulted in $458 million in clearing and transaction fee revenue, an increase of 9 percent from $422 million in second-quarter 2007. The average rate per contract was $0.648 for the quarter, up one percent compared with the average rate per contract of $0.639 in second-quarter 2007.
CME Group processing services revenue for the combined company increased 32 percent to $19 million for second-quarter 2008 from $14 million for second-quarter 2007. NYMEX volume on CME Globex has increased every quarter since the NYMEX products began trading on CME Globex in June 2006. Additionally, second-quarter 2008 quotation data fees were up 23 percent to $60 million, in part due to the addition of Credit Market Analysis Limited (CMA) revenue.
Total pro forma operating expenses increased one percent to $213 million compared with the same period last year. In addition, second-quarter pro forma operating expenses were down slightly from the first quarter of this year despite the addition of expense related to CMA.
Second-quarter operating income on a pro forma basis was $350 million, an increase of 17 percent from $299 million for the year-ago period. The company’s operating margin was 62 percent compared with 59 percent for the same period last year. Operating margin is defined as operating income as a percentage of total revenues.
Company Guidance
CME Group currently expects full-year 2008 pro forma operating expense to be closer to the bottom end of the previously stated guidance range of $855 to $870 million, excluding NYMEX.
CME Group will hold a conference call to discuss first-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 derivatives exchange. Formed by the 2007 merger of 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, Inc. 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/.
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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 obtain the required approvals and to satisfy the closing conditions for our proposed merger with NYMEX Holdings, Inc. and our ability to realize the benefits and control the costs of the proposed transaction; 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; 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 or as a result of a combination with the Securities and Exchange Commission and the Commodity Futures Trading Commission; 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 decreased demand or 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; 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, geopolitical and market conditions; natural disasters and other catastrophes, 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)
| June 30, 2008 | December 31, 2007 | |||||
| ASSETS |
||||||
| Current Assets: |
||||||
| Cash and cash equivalents |
$ | 1,067,644 | $ | 845,312 | ||
| Collateral from securities lending |
— | 2,862,026 | ||||
| Marketable securities, including pledged securities |
138,484 | 203,308 | ||||
| Accounts receivable, net of allowance |
237,346 | 187,487 | ||||
| Other current assets |
85,858 | 55,900 | ||||
| Cash performance bonds and security deposits |
971,560 | 833,022 | ||||
| Total current assets |
2,500,892 | 4,987,055 | ||||
| Property, net of accumulated depreciation and amortization |
389,828 | 377,452 | ||||
| Intangible assets - trading products |
7,987,000 | 7,987,000 | ||||
| Intangible assets - other, net of accumulated amortization |
1,804,467 | 1,796,789 | ||||
| Goodwill |
5,108,034 | 5,049,211 | ||||
| Other assets |
772,411 | 108,690 | ||||
| Total Assets |
$ | 18,562,632 | $ | 20,306,197 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||
| Current Liabilities: |
||||||
| Accounts payable |
$ | 63,198 | $ | 58,965 | ||
| Payable under securities lending agreements |
— | 2,862,026 | ||||
| Short-term debt |
164,938 | 164,435 | ||||
| Other current liabilities |
147,074 | 157,615 | ||||
| Cash performance bonds and security deposits |
971,560 | 833,022 | ||||
| Total current liabilities |
1,346,770 | 4,076,063 | ||||
| Deferred tax liabilities |
3,809,926 | 3,848,240 | ||||
| Other liabilities |
77,567 | 76,257 | ||||
| Total Liabilities |
5,234,263 | 8,000,560 | ||||
| Shareholders’ equity |
13,328,369 | 12,305,637 | ||||
| Total Liabilities and Shareholders’ Equity |
$ | 18,562,632 | $ | 20,306,197 | ||
CME Group Inc. and Subsidiaries
Consolidated Statements of Income
(in thousands, except per share amounts)
| Quarter Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| Revenues |
||||||||||||||||
| Clearing and transaction fees |
$ | 458,492 | $ | 252,722 | $ | 983,559 | $ | 510,963 | ||||||||
| Quotation data fees |
59,872 | 24,326 | 116,637 | 49,342 | ||||||||||||
| Processing services |
18,552 | 37,560 | 36,034 | 72,319 | ||||||||||||
| Access and communication fees |
10,761 | 7,712 | 21,300 | 15,375 | ||||||||||||
| Other |
15,511 | 6,689 | 30,768 | 13,341 | ||||||||||||
| Total Revenues |
563,188 | 329,009 | 1,188,298 | 661,340 | ||||||||||||
| Expenses |
||||||||||||||||
| Compensation and benefits |
73,588 | 56,729 | 146,877 | 113,129 | ||||||||||||
| Communications |
12,850 | 8,850 | 27,622 | 17,929 | ||||||||||||
| Technology support services |
18,118 | 8,645 | 35,112 | 17,537 | ||||||||||||
| Professional fees and outside services |
16,074 | 12,110 | 30,825 | 21,282 | ||||||||||||
| Amortization of purchased intangibles |
17,901 | 322 | 34,111 | 628 | ||||||||||||
| Depreciation and amortization |
34,467 | 20,106 | 68,782 | 39,789 | ||||||||||||
| Occupancy and building operations |
17,211 | 9,361 | 33,944 | 18,188 | ||||||||||||
| Licensing and other fee agreements |
12,049 | 6,794 | 25,539 | 13,829 | ||||||||||||
| Restructuring |
236 | — | 2,016 | — | ||||||||||||
| Other |
17,234 | 13,848 | 41,349 | 26,178 | ||||||||||||
| Total Expenses |
219,728 | 136,765 | 446,177 | 268,489 | ||||||||||||
| Operating Income |
343,460 | 192,244 | 742,121 | 392,851 | ||||||||||||
| Non-Operating Income and Expense |
||||||||||||||||
| Investment income |
12,049 | 19,395 | 23,423 | 36,700 | ||||||||||||
| Gains (losses) on derivative investments |
(13,065 | ) | — | (15,262 | ) | — | ||||||||||
| Securities lending interest income |
— | 35,520 | 23,644 | 68,410 | ||||||||||||
| Securities lending interest expense |
— | (34,331 | ) | (18,219 | ) | (66,756 | ) | |||||||||
| Interest expense |
(1,240 | ) | (24 | ) | (3,344 | ) | (24 | ) | ||||||||
| Guarantee of exercise right privileges |
(3,624 | ) | — | 4,773 | — | |||||||||||
| Equity in losses of unconsolidated subsidiaries |
(3,941 | ) | (3,371 | ) | (7,870 | ) | (6,391 | ) | ||||||||
| Other non-operating expense |
(75 | ) | — | (8,465 | ) | — | ||||||||||
| Total Non-Operating |
(9,896 | ) | 17,189 | (1,320 | ) | 31,939 | ||||||||||
| Income Before Income Taxes |
333,564 | 209,433 | 740,801 | 424,790 | ||||||||||||
| Income tax provision |
(132,382 | ) | (83,558 | ) | (256,071 | ) | (168,887 | ) | ||||||||
| Net Income |
$ | 201,182 | $ | 125,875 | $ | 484,730 | $ | 255,903 | ||||||||
| Earnings per Common Share: |
||||||||||||||||
| Basic |
$ | 3.69 | $ | 3.61 | $ | 8.96 | $ | 7.34 | ||||||||
| Diluted |
$ | 3.67 | $ | 3.57 | $ | 8.91 | $ | 7.26 | ||||||||
| Weighted Average Number of Common Shares: |
||||||||||||||||
| Basic |
54,500 | 34,882 | 54,125 | 34,867 | ||||||||||||
| Diluted |
54,752 | 35,242 | 54,390 | 35,236 | ||||||||||||
CME Group Inc. and Subsidiaries
Pro Forma Non-GAAP Consolidated Statements of Income
(in thousands, except per share amounts)
| Quarter Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| Revenues |
||||||||||||||||
| Clearing and transaction fees |
$ | 458,492 | $ | 422,276 | $ | 983,559 | $ | 832,170 | ||||||||
| Quotation data fees |
59,872 | 48,502 | 116,637 | 98,600 | ||||||||||||
| Processing services |
18,552 | 14,100 | 36,034 | 27,063 | ||||||||||||
| Access and communication fees |
10,761 | 9,334 | 21,300 | 18,634 | ||||||||||||
| Other |
15,511 | 15,761 | 30,768 | 31,778 | ||||||||||||
| Total Revenues |
563,188 | 509,973 | 1,188,298 | 1,008,245 | ||||||||||||
| Expenses |
||||||||||||||||
| Compensation and benefits |
73,588 | 76,319 | 146,877 | 154,415 | ||||||||||||
| Communications |
12,850 | 12,512 | 27,622 | 25,458 | ||||||||||||
| Technology support services |
18,118 | 16,340 | 35,112 | 33,137 | ||||||||||||
| Professional fees and outside services |
14,266 | 12,592 | 26,573 | 23,361 | ||||||||||||
| Amortization of purchased intangibles |
17,901 | 17,114 | 34,111 | 34,239 | ||||||||||||
| Depreciation and amortization |
30,296 | 31,957 | 60,611 | 63,100 | ||||||||||||
| Occupancy and building operations |
17,211 | 14,162 | 33,944 | 28,182 | ||||||||||||
| Licensing and other fee agreements |
12,049 | 10,030 | 25,539 | 20,433 | ||||||||||||
| Other |
16,719 | 19,641 | 36,573 | 38,191 | ||||||||||||
| Total Expenses |
212,998 | 210,667 | 426,962 | 420,516 | ||||||||||||
| Operating Income |
350,190 | 299,306 | 761,336 | 587,729 | ||||||||||||
| Non-Operating Income and Expense |
||||||||||||||||
| Investment income |
12,115 | 26,397 | 23,489 | 50,079 | ||||||||||||
| Gains (losses) on derivative investments |
— | — | — | — | ||||||||||||
| Securities lending interest income |
— | 35,520 | 23,644 | 68,410 | ||||||||||||
| Securities lending interest expense |
— | (34,331 | ) | (18,219 | ) | (66,756 | ) | |||||||||
| Interest expense |
(1,240 | ) | (46 | ) | (3,344 | ) | (261 | ) | ||||||||
| Equity in losses of unconsolidated subsidiaries |
(3,941 | ) | (3,638 | ) | (7,870 | ) | (7,077 | ) | ||||||||
| Total Non-Operating |
6,934 | 23,902 | 17,700 | 44,395 | ||||||||||||
| Income Before Income Taxes |
357,124 | 323,208 | 779,036 | 632,124 | ||||||||||||
| Income tax provision |
(141,733 | ) | (129,283 | ) | (271,238 | ) | (252,849 | ) | ||||||||
| Net Income |
$ | 215,391 | $ | 193,925 | $ | 507,798 | $ | 379,275 | ||||||||
| Earnings per Diluted Common Share |
$ | 3.93 | $ | 3.52 | $ | 9.34 | $ | 6.89 | ||||||||
| Weighted Average Number of Diluted Common Shares* |
54,752 | 55,088 | 54,390 | 55,078 | ||||||||||||
Note: Pro Forma Non-GAAP results exclude merger-related costs. The pro forma results for 2007 reflect both the operating results for CME and CBOT as if they were combined. See CME Group Inc. Reconciliation of GAAP to Pro Forma Non-GAAP Measures for detail on the adjustments made to reach the pro forma results. The first quarter 2008 pro forma results are shown as excluding the impact of the company’s FX hedge related to the BM&F BOVESPA SA investment.
| * | Weighted average number of diluted common shares includes CBOT sharecount for the entire period reported. |
CME Group Inc. and Subsidiaries
Reconciliation of GAAP to Pro Forma Non-GAAP Measures
(in thousands)
| Quarter Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| GAAP Results |
||||||||||||||||
| Revenues |
$ | 563,188 | $ | 329,009 | $ | 1,188,298 | $ | 661,340 | ||||||||
| Expenses |
219,728 | 136,765 | 446,177 | 268,489 | ||||||||||||
| Operating income |
343,460 | 192,244 | 742,121 | 392,851 | ||||||||||||
| Non-operating income and expense |
(9,896 | ) | 17,189 | (1,320 | ) | 31,939 | ||||||||||
| Income before income taxes |
333,564 | 209,433 | 740,801 | 424,790 | ||||||||||||
| Income tax provision |
(132,382 | ) | (83,558 | ) | (256,071 | ) | (168,887 | ) | ||||||||
| Net Income |
$ | 201,182 | $ | 125,875 | $ | 484,730 | $ | 255,903 | ||||||||
| Pro Forma Adjustments |
||||||||||||||||
| Revenues: |
||||||||||||||||
| CBOT pre-merger revenue |
$ | — | $ | 204,424 | $ | — | $ | 392,161 | ||||||||
| Common clearing service elimination (1) |
— | (23,460 | ) | — | (45,256 | ) | ||||||||||
| Total Pro Forma Revenue Adjustment |
— | 180,964 | — | 346,905 | ||||||||||||
| Expenses: |
||||||||||||||||
| CBOT pre-merger expense |
— | 109,830 | — | 208,049 | ||||||||||||
| Common clearing service elimination (1) |
— | (23,460 | ) | — | (45,256 | ) | ||||||||||
| Amortization of intangibles (2) |
— | 16,357 | — | 32,714 | ||||||||||||
| Other (3) |
(6,730 | ) | (28,825 | ) | (19,215 | ) | (43,480 | ) | ||||||||
| Total Pro Forma Expense Adjustment |
(6,730 | ) | 73,902 | (19,215 | ) | 152,027 | ||||||||||
| Adjustment to operating income |
6,730 | 107,062 | 19,215 | 194,878 | ||||||||||||
| Non-operating income and expense: |
||||||||||||||||
| CBOT pre-merger non-operating income |
— | 6,713 | — | 12,456 | ||||||||||||
| ERP guarantee (4) |
3,624 | — | (4,773 | ) | — | |||||||||||
| BM&F (5) |
13,206 | — | 23,793 | — | ||||||||||||
| Total Pro Forma Non-Operating Income and Expense Adjustment |
16,830 | 6,713 | 19,020 | 12,456 | ||||||||||||
| Adjustment to income before income taxes |
23,560 | 113,775 | 38,235 | 207,334 | ||||||||||||
| Adjustment to income tax provision |
(9,351 | ) | (45,725 | ) | (15,167 | ) | (83,962 | ) | ||||||||
| Adjustment to net income |
$ | 14,209 | $ | 68,050 | $ | 23,068 | $ | 123,372 | ||||||||
| Pro Forma Non-GAAP Results |
||||||||||||||||
| Revenues |
$ | 563,188 | $ | 509,973 | $ | 1,188,298 | $ | 1,008,245 | ||||||||
| Expenses |
212,998 | 210,667 | 426,962 | 420,516 | ||||||||||||
| Operating income |
350,910 | 299,306 | 761,336 | 587,729 | ||||||||||||
| Non-operating income and expense |
6,934 | 23,902 | 17,700 | 44,395 | ||||||||||||
| Income before income taxes |
357,124 | 323,208 | 779,036 | 632,124 | ||||||||||||
| Income tax provision(6) |
(141,733 | ) | (129,283 | ) | (271,238 | ) | (252,849 | ) | ||||||||
| Net Income |
$ | 215,391 | $ | 193,925 | $ | 507,798 | $ | 379,275 | ||||||||
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, integration and legal expenses related to the merger with CBOT. Also removes CBOT merger-related transaction costs that were expensed and transaction costs related to the acquisition of Credit Market Analysis Limited (CMA). |
| (4) | Reverse impact of exercise right guarantee associated with CBOT merger. |
| (5) | Transaction costs related to investment in BM&F BOVESPA SA including costs related to changes in the fair value of the company’s FX hedge associated that investment. |
| (6) | First-quarter 2008 includes tax benefit of $38.6 million due to a change in Illinois state tax treatment for apportionment of revenues sourced within the state. |
CME Group Inc.
Quarterly Operating Statistics
(Pro forma for periods prior to 4Q 2007)
| 2Q 2007 | 3Q 2007 | 4Q 2007 | 1Q 2008 | 2Q 2008 | |||||||||||
| Trading Days |
64 | 63 | 64 | 61 | 64 | ||||||||||
| Average Daily Volume (ADV) (in thousands, average daily volumes combined for entire period) | |||||||||||||||
| Product Line |
2Q 2007 | 3Q 2007 | 4Q 2007 | 1Q 2008 | 2Q 2008 | ||||||||||
| Interest rates |
6,670 | 8,060 | 6,290 | 8,251 | 6,467 | ||||||||||
| Equity E-mini |
2,127 | 3,057 | 2,817 | 3,628 | 2,833 | ||||||||||
| Equity standard-size |
180 | 202 | 166 | 201 | 161 | ||||||||||
| Foreign exchange |
527 | 635 | 561 | 640 | 665 | ||||||||||
| Commodities & alternative investments |
818 | 716 | 740 | 949 | 933 | ||||||||||
| Total |
10,322 | 12,670 | 10,574 | 13,669 | 11,060 | ||||||||||
| Venue |
|||||||||||||||
| Open outcry |
2,297 | 2,652 | 1,876 | 2,336 | 1,836 | ||||||||||
| Electronic (excluding TRAKRS) |
7,838 | 9,806 | 8,528 | 11,097 | 9,054 | ||||||||||
| Privately negotiated |
188 | 212 | 169 | 236 | 170 | ||||||||||
| Total |
10,322 | 12,670 | 10,574 | 13,669 | 11,060 | ||||||||||
| Average Rate Per Contract (RPC) (in thousands, rate per contract generated from combined average daily volumes for entire period) | |||||||||||||||
| Product Line |
2Q 2007 | 3Q 2007 | 4Q 2007 | 1Q 2008 | 2Q 2008 | ||||||||||
| Interest rates |
$ | 0.516 | $ | 0.519 | $ | 0.530 | $ | 0.505 | $ | 0.522 | |||||
| Equity E-mini |
0.700 | 0.673 | 0.687 | 0.684 | 0.668 | ||||||||||
| Equity standard-size |
1.334 | 1.451 | 1.427 | 1.506 | 1.453 | ||||||||||
| Foreign exchange |
1.090 | 0.951 | 0.985 | 0.927 | 0.907 | ||||||||||
| Commodities & alternative investments |
1.034 | 1.032 | 1.074 | 1.119 | 1.134 | ||||||||||
| Average RPC (excluding TRAKRS) |
$ | 0.639 | $ | 0.622 | $ | 0.648 | $ | 0.630 | $ | 0.648 | |||||
| Venue |
|||||||||||||||
| Open outcry |
$ | 0.492 | $ | 0.473 | $ | 0.517 | $ | 0.553 | $ | 0.572 | |||||
| Electronic (excluding TRAKRS) |
0.626 | 0.613 | 0.629 | 0.609 | 0.629 | ||||||||||
| Privately negotiated |
2.948 | 2.878 | 3.057 | 2.345 | 2.427 | ||||||||||
Note: All volume and rate per contract data prior to 4Q 2007 is based upon pro forma results. 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.