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Press release from PR Newswire

CME Group Inc. Reports First-Quarter 2012 Financial Results

Thursday, April 26, 2012

CME Group Inc. Reports First-Quarter 2012 Financial Results07:00 EDT Thursday, April 26, 2012CHICAGO, April 26, 2012 /PRNewswire/ -- CME Group Inc. (NASDAQ: CME) today reported first-quarter 2012 revenues of $775 million and operating income of $451 million.  First-quarter net income attributable to CME Group was $267 million and diluted earnings per share were $4.02."During the first quarter, global trading volumes were impacted by low levels of volatility, particularly in financial instruments," said CME Group Executive Chairman Terry Duffy.  "The uncertainty about market direction has led to a greater focus on the release of economic data that measures the overall health of the economy.  While concerns remain, there are some positive signs that an improving economy would bode well for our product set as the trading community responds to better news.""We have accomplished a great deal during the first 90 days of the year as we build our business by investing in our product, technology and clearing offerings," said CME Chief Executive Officer Craig Donohue.  "Our over-the-counter clearing momentum has continued, as customers have utilized our multi-asset class platform well ahead of the regulatory mandate.  To date, more than 1,800 buy side accounts have cleared more than $515 billion in total notional value in interest rate swaps and credit default swaps, with $283 billion cleared during the first quarter." "We continue to successfully execute in a number of key areas, which includes deepening and strengthening our partnerships, enhancing our capital return policy and maintaining strong expense discipline," said CME President Phupinder Gill.  "Areas of focus have included launching our co-location facility, increasing our stake in the Dubai Mercantile Exchange and announcing several innovative new products.  The strengths that are embedded in this company provide a foundation that allows us to continue to lead the industry with the breadth of our product innovation and our global relationships."  First-quarter 2012 average daily volume was 12.3 million contracts, up 5 percent from fourth-quarter 2011, but down 11 percent compared with 13.8 million contracts during the first quarter of 2011.  Average daily volume in first-quarter 2011 was exceptionally strong driven by the impact of significant unrest in the Middle East and a natural disaster in Japan.Clearing and transaction fee revenues of $621 million were up 4 percent from fourth-quarter 2011, but down 10 percent from the strong first quarter in 2011.  First-quarter market data and information services revenue was $114 million, up 8 percent from fourth-quarter 2011 and up 7 percent compared with the same quarter last year.  First-quarter total average rate per contract was 81.1 cents, in line with fourth-quarter 2011, and up slightly from first-quarter 2011.  First-quarter 2012 operating expense was $323 million, up 5 percent from first-quarter 2011, and down 7 percent sequentially.  During the first quarter the effective tax rate was 38.6 percent, which included a one-time adjustment.  The company expects the effective tax rate to be 41 percent for the remaining quarters of the year, representing the lower end of the original guidance range.  As of March 31, the company had $1.1 billion of cash and marketable securities and $2.1 billion of long-term debt.CME Group will hold a conference call to discuss first-quarter 2012 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.As the world's leading and most diverse derivatives marketplace, CME Group (www.cmegroup.com) is where the world comes to manage risk.  CME Group exchanges offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather and real estate.  CME Group brings buyers and sellers together through its CME Globex® electronic trading platform and its trading facilities in New York and Chicago.  CME Group also operates CME Clearing, one of the world's leading central counterparty clearing providers, which offers clearing and settlement services for exchange-traded contracts, as well as for over-the-counter derivatives transactions through CME ClearPort®. These products and services ensure that businesses everywhere can substantially mitigate counterparty credit risk in both listed and over-the-counter derivatives markets.CME Group is a trademark of CME Group Inc. The Globe Logo, CME, Globex and Chicago Mercantile Exchange are trademarks of Chicago Mercantile Exchange Inc.  CBOT and the Chicago Board of Trade are trademarks of the Board of Trade of the City of Chicago, Inc.  NYMEX, New York Mercantile Exchange and ClearPort are registered 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, implementation and maintenance 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, including our ability to provide effective services to the over-the-counter 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 the United States; changes in domestic and non-U.S. regulations; changes in government policy, including policies relating to common or directed clearing and changes as a result of legislation stemming from the implementation of the Dodd-Frank Act; 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 average 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, including our ability to prevent errors and misconduct and protect our infrastructure against security breaches and misappropriation of our intellectual property assets; changes in price levels and volatility in the derivatives markets and in underlying fixed income, equity, foreign exchange, interest rate and commodities markets; economic, political and market conditions, including the volatility of the capital and credit markets and the impact of economic conditions on the trading activity of our current and potential customers stemming from the financial crisis that began in 2008 and any other future crises; our ability to accommodate increases in trading volume and order transaction traffic without failure or degradation of performance of our trading and clearing 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 or user fee 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. CME Group Inc. and SubsidiariesConsolidated Balance Sheets(in millions)March 31, 2012December 31, 2011ASSETSCurrent Assets:     Cash and cash equivalents$                   1,061.7$                  1,042.3     Marketable securities45.447.6     Accounts receivable, net of allowance360.0289.4     Other current assets (includes $0.0 and $40.0 in restricted cash)149.7232.6     Cash performance bonds and guaranty fund contributions7,737.89,333.9Total current assets9,354.610,945.8Property, net of accumulated depreciation and amortization816.5821.9Intangible assets - trading products17,040.517,040.5Intangible assets - other, net of accumulated amortization3,280.33,312.8Goodwill7,984.77,984.0Other assets (includes $60.5 and $20.5 in restricted cash)812.5653.7Total Assets$                 39,289.1$                40,758.7LIABILITIES AND SHAREHOLDERS' EQUITYCurrent Liabilities:     Accounts payable$                       29.0$                      31.1     Other current liabilities343.1250.2     Cash performance bonds and guaranty fund contributions7,737.89,333.9Total current liabilities8,109.99,615.2Long-term debt2,107.22,106.8Deferred income tax liabilities, net7,256.57,226.8Other liabilities196.4187.6Total Liabilities 17,670.019,136.4Redeemable non-controlling interest70.070.3Shareholders' equity21,549.121,552.0Total Liabilities and Shareholders' Equity$                 39,289.1$                40,758.7 CME Group Inc. and SubsidiariesConsolidated Statements of Income(dollars in millions, except per share amounts; shares in thousands)Quarter EndedMarch 31,20122011Revenues     Clearing and transaction fees$621.1$691.3     Market data and information services114.2107.0     Access and communication fees19.711.5     Other19.621.8     Total Revenues774.6831.6Expenses     Compensation and benefits135.1122.3     Communications10.39.9     Technology support services12.812.0     Professional fees and outside services32.230.7     Amortization of purchased intangibles32.833.2     Depreciation and amortization34.931.0     Occupancy and building operations20.319.4     Licensing and other fee agreements20.723.5     Other24.325.5     Total Expenses323.4307.5Operating Income451.2524.1Non-Operating Income (Expense)     Investment income12.118.8     Gains (losses) on derivative investments-(0.1)     Interest and other borrowing costs(29.1)(30.1)     Equity in net losses of unconsolidated subsidiaries(0.8)(1.1)     Total Non-Operating(17.8)(12.5)Income Before Income Taxes433.4511.6Income tax provision167.154.5Net Income266.3457.1Less: Net income (loss) attributable to redeemable non-controlling interest(0.3)0.5Net Income Attributable to CME Group$266.6$456.6Earnings per Common Share Attributable to CME Group:     Basic$  4.03$  6.83     Diluted4.026.81Weighted Average Number of Common Shares:     Basic66,16366,857     Diluted66,37067,062Notes:Q1 2011 results include a tax adjustment reflecting a $164 million benefit within income tax provision associated with a change in our expected effective tax rate and its impact on our deferred tax expense and the release of reserves related to a foreign investment.CME Group Inc.Quarterly Operating Statistics1Q 20112Q 20113Q 20114Q 20111Q 2012Trading Days6263646362Quarterly Average Daily Volume (ADV)CME Group ADV (in thousands)Product Line1Q 20112Q 20113Q 20114Q 20111Q 2012Interest rates6,4246,4496,5184,7295,613Equities2,9062,8424,0403,1472,390Foreign exchange961918988820846Energy1,9731,7571,6701,7041,952Agricultural commodities1,1541,1591,0321,0041,122Metals376403454315385     Total13,79413,52814,70211,71912,308VenueElectronic11,60511,45412,4639,86410,177Open outcry1,4671,3931,5571,1731,348Privately negotiated224242257204229Exchange-traded Total13,29613,09014,27611,24011,754CME ClearPort498438426479554     Total13,79413,52814,70211,71912,308Average Rate Per Contract (RPC)CME Group RPCProduct Line1Q 20112Q 20113Q 20114Q 20111Q 2012Interest rates$         0.481$         0.486$         0.479$         0.480$         0.475Equities0.7050.7090.7030.7050.692Foreign exchange0.8230.8680.8010.8280.841Energy1.5731.5951.5801.5071.517Agricultural commodities1.2711.3031.2641.2301.216Metals1.7321.6361.6491.7061.647     Average RPC$         0.808$         0.807$         0.779$         0.811$         0.811VenueExchange-traded$         0.740$         0.745$         0.724$         0.748$         0.737CME ClearPort2.6302.6652.6212.2902.388CME-ESOURCE CME Group Inc.For further information: Media, Anita Liskey, +1-312-466-4613, or William Parke, +1-312-930-3467, news@cmegroup.com, www.cmegroup.mediaroom.com; or Investors, John Peschier, +1-312-930-8491