CHICAGO, April 22 /PRNewswire-FirstCall/ -- CME Group Inc.
(NYSE:CMENASDAQ:CME) today reported total revenues increased 88
percent to $625 million and net income increased 118 percent to
$284 million for first-quarter 2008 compared with first-quarter
2007. Diluted earnings per share rose 42 percent to $5.25. These
GAAP results reflect the operations of both Chicago Mercantile
Exchange (CME) and Board of Trade of the City of Chicago (CBOT) and
include: $8.7 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;
$8.4 million of transaction costs related to the definitive
cross-equity agreement with the Brazilian Mercantile & Futures
Exchange (BM&F); $3.8 million related to the acquisition of
Credit Market Analysis Limited (CMA), which was closed during the
first quarter; and an $8.4 million reduction to non-operating
expenses associated with the guarantee for holders of the Chicago
Board Options Exchange (CBOE) exercise right privilege (ERP). In
addition, the GAAP and pro forma non-GAAP results include a tax
benefit of $38.6 million due to a change in Illinois state tax
treatment for apportionment of revenues sourced within the state.
The GAAP results for 2007 reflect the operations of CME only. Pro
forma non-GAAP diluted earnings per share in the first quarter were
$5.39, a 60 percent increase versus first-quarter 2007. Excluding
the tax benefit mentioned above, pro forma diluted EPS would have
been $4.67, a 39 percent increase versus first-quarter 2007. Pro
forma results for first-quarter 2008 exclude the items listed above
related to the CBOT merger, BM&F and CMA transactions, and the
CBOE ERP guarantee. Pro forma non-GAAP revenues increased 25
percent to $625 million and net income increased 57 percent to $291
million for first-quarter 2008 compared with first-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. "During what was
a challenging environment for many financial services companies,
CME Group achieved volume growth of 32 percent in the first
quarter, reflecting strength from all product areas," said CME
Group Executive Chairman Terry Duffy. "This performance illustrates
the benefits of the exchange model for managing risks in diverse
global markets. We saw healthy trading activity from algorithmic
oriented firms, hedge funds, and proprietary trading desks of
investment banks, and from both members and non-member customers of
CME Group. These users are attracted to the significant liquidity
provided by all our product segments, coupled with the safety and
soundness of our marketplace." "In addition to seeing strong
first-quarter activity in our core business, we also laid the
groundwork for future growth opportunities," said CME Chief
Executive Officer Craig Donohue. "We are on track to deliver the
synergies projected from the CME/CBOT merger, which will enable us
to operate more efficiently and effectively. We integrated e-CBOT
interest rate, equity and agricultural products onto the CME Globex
electronic platform, and implemented significant speed improvements
that cut processing times in half. Further, as part of our global
growth strategy, we completed our first-ever equity swap and
strategic partnership with BM&F, the world's fourth largest
futures exchange, to enhance our long-term growth opportunities in
Latin America, and signed a definitive agreement to purchase NYMEX
to provide new trading opportunities for customers around the
world." CME Group Inc. First-Quarter 2008 Results Financial
Highlights: GAAP ($s in millions, except per share) Q1 FY08 Q1 FY07
Y/Y Revenues $625 $332 88% Expenses $226 $132 72% Operating Income
$399 $201 99% Operating Margin % 63.8% 60.4% Net Income $284 $130
118% Diluted EPS $5.25 $3.69 42% Pro Forma Non-GAAP ($s in
millions, except per share) Q1 FY08 Q1 FY07 Y/Y Revenues $625 $498
25% Expenses $214 $210 2% Operating Income $411 $288 43% Operating
Margin % 65.8% 57.9% Net Income $291 $185 57% Diluted EPS $5.39
$3.37 60% 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
First-Quarter 2008 Financial Results First-quarter 2008 volume
averaged a record 13.7 million contracts per day, up 32 percent
versus the same period in 2007. This strong volume drove $525
million in clearing and transaction fee revenue, an increase of 28
percent from $410 million on a pro forma basis in first-quarter
2007, assuming CME and CBOT were combined during that time. The
average rate per contract was $0.630 for the quarter, down 2
percent compared with the pro forma average rate per contract of
$0.640 in first-quarter 2007. CME Group processing services revenue
for the combined company increased 35 percent to $17 million for
first-quarter 2008 from $13 million for first-quarter 2007. NYMEX
volume on CME Globex has increased every quarter since the NYMEX
products began trading on CME Globex in June 2006. Additionally,
first-quarter 2008 quotation data fees were up 13 percent to $57
million. First-quarter operating income on a pro forma basis was
$411 million, an increase of 43 percent from $288 million for the
year-ago period. The company's operating margin was a record 66
percent compared with 58 percent for the same period last year.
Operating margin is defined as operating income as a percentage of
total revenues. First-quarter 2008 pro forma non-operating income
decreased 58 percent from first-quarter 2007 due primarily to lower
interest rates earned on investment balances and the impact of a
foreign currency hedge that the company instituted related to the
BM&F transaction. 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
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
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/. 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. 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
Annual Report on Form 10-K, 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) March 31, 2008 December 31, 2007 ASSETS
Current Assets: Cash and cash equivalents $1,066,356 $845,312
Collateral from securities lending - 2,862,026 Marketable
securities, including pledged securities 155,373 203,308 Accounts
receivable, net of allowance 251,981 187,487 Other current assets
98,394 55,900 Cash performance bonds and security deposits
1,610,025 833,022 Total current assets 3,182,129 4,987,055
Property, net of accumulated depreciation and amortization 379,269
377,452 Intangible assets - trading products 7,987,000 7,987,000
Intangible assets - other, net of accumulated amortization
1,824,926 1,796,789 Goodwill 5,090,250 5,049,211 Other assets
774,329 108,690 Total Assets $19,237,903 $20,306,197 LIABILITIES
AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable
$51,804 $58,965 Payable under securities lending agreements -
2,862,026 Short-term debt 164,952 164,435 Other current liabilities
358,447 157,615 Cash performance bonds and security deposits
1,610,025 833,022 Total current liabilities 2,185,228 4,076,063
Deferred tax liabilities 3,805,598 3,848,240 Other liabilities
70,247 76,257 Total Liabilities 6,061,073 8,000,560 Shareholders'
equity 13,176,830 12,305,637 Total Liabilities and Shareholders'
Equity $19,237,903 $20,306,197 CME Group Inc. and Subsidiaries
Consolidated Statements of Income (in thousands, except per share
amounts) Quarter Ended March 31, 2008 2007 Revenues Clearing and
transaction fees $525,067 $258,241 Quotation data fees 56,765
25,016 Processing services 17,482 34,759 Access and communication
fees 10,539 7,663 Other 15,257 6,652 Total Revenues 625,110 332,331
Expenses Compensation and benefits 73,289 56,400 Communications
14,772 9,079 Technology support services 16,994 8,892 Professional
fees and outside services 14,751 9,172 Amortization of purchased
intangibles 16,210 306 Depreciation and amortization 34,315 19,683
Occupancy and building operations 16,733 8,827 Licensing and other
fee agreements 13,490 7,035 Restructuring 1,780 - Other 24,115
12,330 Total Expenses 226,449 131,724 Operating Income 398,661
200,607 Non-Operating Income and Expense Investment income 9,177
17,305 Securities lending interest income 23,644 32,890 Securities
lending interest expense (18,219) (32,425) Interest expense (2,104)
- Guarantee of exercise right privileges 8,397 - Equity in losses
of unconsolidated subsidiaries (3,929) (3,020) Other non-operating
expense (8,390) - Total Non-Operating 8,576 14,750 Income Before
Income Taxes 407,237 215,357 Income tax provision (123,689)
(85,329) Net Income $283,548 $130,028 Earnings per Common Share:
Basic $5.28 $3.73 Diluted $5.25 $3.69 Weighted Average Number of
Common Shares: Basic 53,751 34,851 Diluted 54,028 35,229 CME Group
Inc. and Subsidiaries Pro Forma Non-GAAP Consolidated Statements of
Income (in thousands, except per share amounts) Quarter Ended March
31, 2008 2007 Revenues Clearing and transaction fees $525,067
$409,894 Quotation data fees 56,765 50,098 Processing services
17,482 12,963 Access and communication fees 10,539 9,114 Other
15,257 16,203 Total Revenues 625,110 498,272 Expenses Compensation
and benefits 73,289 78,096 Communications 14,772 12,946 Technology
support services 16,994 16,797 Professional fees and outside
services 12,308 10,769 Amortization of purchased intangibles 16,210
17,125 Depreciation and amortization 30,315 31,143 Occupancy and
building operations 16,733 14,020 Licensing and other fee
agreements 13,490 10,403 Other 19,854 18,550 Total Expenses 213,965
209,849 Operating Income 411,145 288,423 Non-Operating Income and
Expense Investment income 9,177 23,682 Securities lending interest
income 23,644 32,890 Securities lending interest expense (18,219)
(32,425) Interest expense (2,104) (215) Equity in losses of
unconsolidated subsidiaries (3,929) (3,439) Total Non-Operating
8,569 20,493 Income Before Income Taxes 419,714 308,916 Income tax
provision (128,634) (123,566) Net Income $291,080 $185,350 Earnings
per Diluted Common Share $5.39 $3.37 Weighted Average Number of
Diluted Common Shares* 54,028 55,067 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. * 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 March 31, 2008 2007
GAAP Results Revenues $625,110 $332,331 Expenses 226,449 131,724
Operating income 398,661 200,607 Non-operating income and expense
8,576 14,750 Income before income taxes 407,237 215,357 Income tax
provision (123,689) (85,329) Net Income $283,548 $130,028 Pro Forma
Adjustments Revenues: CBOT pre-merger revenue $- $187,737 Common
clearing service elimination (1) - (21,796) Total Pro Forma Revenue
Adjustment - 165,941 Expenses: CBOT pre-merger expense - 98,219
Common clearing service elimination (1) - (21,796) Amortization of
intangibles (2) - 16,357 Other (3) (12,484) (14,655) Total Pro
Forma Expense Adjustment (12,484) 78,125 Adjustment to operating
income 12,484 87,816 Non-operating income and expense: CBOT
pre-merger non-operating income - 5,743 ERP guarantee (4) (8,397) -
BM&F (5) 8,390 - Total Pro Forma Non-Operating Income and
Expense Adjustment (7) 5,743 Adjustment to income before income
taxes 12,477 93,559 Adjustment to income tax provision (4,945)
(38,237) Adjustment to net income $7,532 $55,322 Pro Forma Non-GAAP
Results Revenues $625,110 $498,272 Expenses 213,965 209,849
Operating income 411,145 288,423 Non-operating income and expense
8,569 20,493 Income before income taxes 419,714 308,916 Income tax
provision(6) (128,634) (123,566) Net Income $291,080 $185,350
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 removes CBOT merger-related transaction costs that
were expensed. (4) Reverse impact of exercise right guarantee
associated with CBOT merger. (5) Transaction costs related to
establishing the investment in BM&F during the first quarter.
(6) 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) 1Q 2007 2Q 2007 3Q 2007 4Q
2007 1Q 2008 Trading Days 62 64 63 64 61 Average Daily Volume (ADV)
(in thousands, average daily volumes combined for entire period)
Product Line 1Q 2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 Interest rates
6,671 6,670 8,060 6,290 8,251 Equity E-mini 2,107 2,127 3,057 2,817
3,628 Equity standard-size 197 180 202 166 201 Foreign exchange 555
527 635 561 640 Commodities & alternative investments 789 818
716 740 949 Total 10,320 10,322 12,670 10,574 13,669 Venue Open
outcry 2,312 2,297 2,652 1,876 2,336 Electronic (excluding TRAKRS)
7,846 7,838 9,806 8,528 11,097 Privately negotiated 162 188 212 169
236 Total 10,320 10,322 12,670 10,574 13,669 Average Rate Per
Contract (RPC) (in thousands, rate per contract generated from
combined average daily volumes for entire period) Product Line 1Q
2007 2Q 2007 3Q 2007 4Q 2007 1Q 2008 Interest rates $0.519 $0.516
$0.519 $0.530 $0.505 Equity E-mini 0.712 0.700 0.673 0.687 0.684
Equity standard-size 1.387 1.334 1.451 1.427 1.506 Foreign exchange
1.106 1.090 0.951 0.985 0.927 Commodities & alternative
investments 0.952 1.034 1.032 1.074 1.119 Average RPC (excluding
TRAKRS) $0.640 $0.639 $0.622 $0.648 $0.630 Venue Open outcry $0.498
$0.492 $0.473 $0.517 $0.553 Electronic (excluding TRAKRS) 0.630
0.626 0.613 0.629 0.609 Privately negotiated 3.130 2.948 2.878
3.057 2.345 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. CME-E DATASOURCE: CME
Group Inc. 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 Inc. Web site:
http://www.cme.com/ http://cmegroup.mediaroom.com/
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