CHICAGO, Oct. 24 /PRNewswire-FirstCall/ -- CME Group Inc.
(NYSE:CMENASDAQ: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 $28.5 million
of non-operating expense associated with the ERP guarantee. The
comparative results for 2006 reflect the operations of CME only.
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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 with 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, Q3 FY07 Q3 FY06 Y/Y YTD FY07 YTD FY06 Y/Y
except per share) ------- ------- --- -------- -------- ---
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, Q3 FY07 Q3 FY06 Y/Y YTD FY07
YTD FY06 Y/Y except per share) ------- ------- --- --------
-------- --- 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 http://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 Nine Months Ended September 30, 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. CME-E
http://www.newscom.com/cgi-bin/prnh/20070712/AQTH147LOGO
http://photoarchive.ap.org/ DATASOURCE: CME Group CONTACT: Media,
Anita Liskey, +1-312-466-4613, or William Parke, +1-312-930-3467,
or Investors, John Peschier, +1-312-930-8491, all of CME Group, Web
site: http://www.cme.com/ http://cmegroup.mediaroom.com/
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