CME Group Inc. Reports Strong Third-Quarter 2013 Financial Results

04/11/2013

CME Group Inc. (NASDAQ: CME) today reported revenues of $715 million and operating income of $401 million for the third quarter of 2013. Net income attributable to CME Group was $237 million and diluted earnings per share was $0.71. Excluding items noted in the reconciliation, adjusted earnings per share would have been $0.75.1

"Our business continued to trend positively in the third quarter, as demand for our products increased in several major categories, most notably our over-the-counter interest rate swap clearing," said CME Group Executive Chairman and President Terry Duffy. "We experienced an increase in dealer-to-client market share from 5 percent in the first quarter of this year to 31 percent in the third quarter, in addition to approaching 50 percent of open interest. This is due to our strong value proposition and product expansion. Now that the three waves of the Dodd-Frank clearing mandate are completed, the market is shifting from a compliance phase to an optimization phase. Going forward, our interest rate complex will continue to benefit from our success in OTC clearing."

"Third-quarter 2013 top-line results included substantial progress in our core business as well as expansion in over-the-counter clearing," said CME Group Chief Executive Officer Phupinder Gill. "Average daily volume was up 11 percent, driven primarily by continued strong performance in our interest rate and metal complexes, as well as strong growth in our options products, which increased by 31 percent. In addition, our efforts to grow the business globally continue to take root. Electronic trading volumes outside the United States grew 16 percent, with volumes up 23 percent in Latin America, 22 percent in Asia and 15 percent in Europe compared with third-quarter 2012."

Third-quarter 2013 average daily volume was 12.0 million contracts, up 11 percent from third-quarter 2012, and included 29 percent growth in interest rate volume and 10 percent growth in metal volume. Clearing and transaction fee revenues were $598 million, up 6 percent compared with the same period last year. Third-quarter total average rate per contract was 76.2 cents, up from 74.8 cents in second-quarter 2013, driven primarily by strong higher paying, non-member participation during third-quarter relative to last quarter.

CME Group will hold a conference call to discuss third-quarter 2013 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.

1.

A reconciliation of the non-GAAP financial results mentioned to the respective GAAP figures can be found within the Reconciliation of GAAP to Non-GAAP Measures chart at the end of the financial statements.

 

CME Group Inc. and Subsidiaries

Consolidated Balance Sheets

(in millions)

 
   

September 30,

2013

 

December 31,

2012

ASSETS

       

Current Assets:

       

Cash and cash equivalents

 

$

2,065.0

 

$

1,604.7

Marketable securities

 

65.0

 

56.6

Accounts receivable, net of allowance

 

311.9

 

267.5

Other current assets (includes $40.0 in restricted cash)

 

413.4

 

204.3

Cash performance bonds and guaranty fund contributions

 

16,192.8

 

6,584.8

Total current assets

 

19,048.1

 

8,717.9

Property, net of accumulated depreciation and amortization

 

714.2

 

724.0

Intangible assets—trading products

 

17,175.3

 

17,175.3

Intangible assets—other, net

 

2,776.2

 

2,853.7

Goodwill

 

7,569.0

 

7,566.9

Other assets (includes $72.8 and $73.0 in restricted cash)

 

1,697.1

 

1,825.4

Total Assets

 

$

48,979.9

 

$

38,863.2

LIABILITIES AND SHAREHOLDERS' EQUITY

       

Current Liabilities:

       

Accounts payable

 

$

41.0

 

$

41.7

Short-term debt

 

749.7

 

749.7

Other current liabilities

 

229.7

 

240.7

Cash performance bonds and guaranty fund contributions

 

16,192.8

 

6,584.8

Total current liabilities

 

17,213.2

 

7,616.9

Long-term debt

 

2,107.0

 

2,106.8

Deferred income tax liabilities, net

 

7,306.5

 

7,413.3

Other liabilities

 

375.3

 

220.5

Total Liabilities

 

27,002.0

 

17,357.5

Redeemable non-controlling interest

 

 

80.8

CME Group shareholders' equity

 

21,972.3

 

21,419.1

Non-controlling interest

 

5.6

 

5.8

Total Equity

 

21,977.9

 

21,424.9

Total Liabilities and Equity

 

$

48,979.9

 

$

38,863.2

 

 

CME Group Inc. and Subsidiaries

Consolidated Statements of Income

(dollars in millions, except per share amounts; shares in thousands)

 
   

Quarter Ended
September 30,

 

Nine Months Ended
September 30,

   

2013

 

2012

 

2013

 

2012

Revenues

               

Clearing and transaction fees

 

$

597.9

 

$

562.2

 

$

1,883.6

 

$

1,826.9

Market data and information services

 

78.6

 

82.8

 

238.9

 

307.8

Access and communication fees

 

20.3

 

23.2

 

62.4

 

65.5

Other

 

17.8

 

15.0

 

64.4

 

53.5

Total Revenues

 

714.6

 

683.2

 

2,249.3

 

2,253.7

Expenses

               

Compensation and benefits

 

134.0

 

117.5

 

392.3

 

383.7

Communications

 

9.2

 

9.8

 

26.7

 

30.8

Technology support services

 

13.4

 

11.8

 

39.6

 

36.7

Professional fees and outside services

 

35.6

 

26.7

 

85.4

 

99.2

Amortization of purchased intangibles

 

25.6

 

26.2

 

77.4

 

90.3

Depreciation and amortization

 

35.0

 

34.5

 

100.8

 

103.0

Occupancy and building operations

 

19.2

 

18.8

 

56.7

 

57.8

Licensing and other fee agreements

 

25.7

 

19.2

 

73.8

 

63.2

Other

 

16.4

 

22.7

 

82.8

 

72.6

Total Expenses

 

314.1

 

287.2

 

935.5

 

937.3

Operating Income

 

400.5

 

396.0

 

1,313.8

 

1,316.4

Non-Operating Income (Expense)

               

Investment income

 

12.6

 

13.1

 

34.9

 

31.3

Interest and other borrowing costs

 

(34.6)

 

(30.2)

 

(112.8)

 

(88.2)

Equity in net gains (losses) of unconsolidated subsidiaries

 

20.4

 

16.5

 

58.1

 

14.8

Other non-operating income (expense)

 

 

0.4

 

 

65.6

Total Non-Operating

 

(1.6)

 

(0.2)

 

(19.8)

 

23.5

Income before Income Taxes

 

398.9

 

395.8

 

1,294.0

 

1,339.9

Income tax provision

 

162.6

 

176.9

 

509.0

 

601.3

Net Income

 

236.3

 

218.9

 

785.0

 

738.6

Less: net income (loss) attributable to non-controlling interests

 

(0.4)

 

0.9

 

1.3

 

9.1

Net Income Attributable to CME Group

 

$

236.7

 

$

218.0

 

$

783.7

 

$

729.5

Earnings per Common Share Attributable to CME Group:

               

Basic

 

$

0.71

 

$

0.66

 

$

2.36

 

$

2.20

Diluted

 

0.71

 

0.66

 

2.35

 

2.20

Weighted Average Number of Common Shares:

               

Basic

 

332,763

 

331,377

 

332,355

 

331,091

Diluted

 

334,674

 

332,458

 

334,055

 

332,147

 

 

CME Group Inc. and Subsidiaries

Quarterly Operating Statistics

   
   

3Q 2012

 

4Q 2012

 

1Q 2013

 

2Q 2013

 

3Q 2013

Trading Days

 

63

 

64

 

60

 

64

 

64

                     
 

Quarterly Average Daily Volume (ADV)

CME Group ADV (in thousands)

 

Product Line

 

3Q 2012

 

4Q 2012

 

1Q 2013

 

2Q 2013

 

3Q 2013

Interest rate

 

4,514

 

4,094

 

5,656

 

6,828

 

5,839

Equity

 

2,391

 

2,532

 

2,608

 

3,079

 

2,408

Foreign exchange

 

846

 

767

 

1,010

 

1,042

 

792

Energy

 

1,590

 

1,489

 

1,730

 

1,796

 

1,609

Agricultural commodity

 

1,171

 

982

 

1,084

 

1,106

 

1,009

Metal

 

327

 

324

 

396

 

471

 

360

Total

 

10,839

 

10,188

 

12,484

 

14,323

 

12,018

Venue

                   

Electronic

 

9,293

 

8,899

 

10,908

 

12,457

 

10,199

Open outcry

 

979

 

751

 

885

 

1,134

 

1,173

Privately negotiated*

 

566

 

539

 

691

 

731

 

646

Total

 

10,839

 

10,188

 

12,484

 

14,323

 

12,018

 
 

Average Rate Per Contract (RPC)

CME Group RPC

 

Product Line

 

3Q 2012

 

4Q 2012

 

1Q 2013

 

2Q 2013

 

3Q 2013

Interest rate

 

$

0.481

 

$

0.494

 

$

0.468

 

$

0.455

 

$

0.484

Equity

 

0.685

 

0.697

 

0.691

 

0.714

 

0.695

Foreign exchange

 

0.808

 

0.835

 

0.848

 

0.826

 

0.819

Energy

 

1.473

 

1.487

 

1.390

 

1.260

 

1.300

Agricultural commodity

 

1.301

 

1.298

 

1.318

 

1.378

 

1.323

Metal

 

1.693

 

1.709

 

1.656

 

1.613

 

1.626

Average RPC

 

$

0.822

 

$

0.831

 

$

0.785

 

$

0.748

 

$

0.762

 

Note: Fourth-quarter 2012 and first-quarter 2013 volume and RPC data does not include volume and revenue from our acquisition of the Kansas City Board of Trade completed on November 30, 2012. Kansas City Board of Trade average daily volume for first-quarter 2013 totaled 24,579.

 

*The privately negotiated venue average daily volume includes both traditional block trades as well as what was historically categorized as CME ClearPort. Going forward there will no longer be a break out for CME ClearPort.

 

CME Group Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

(dollars in millions, except per share amounts; shares in thousands)

     
   

Quarter Ended

   

September 30, 2013

GAAP Net Income Attributable to CME Group

 

$

236.7

     

Add: Market value adjustment of KCBT building, net of non-controlling interest

 

0.7

     

Less: Foreign exchange transaction gains

 

(12.0)

     

Add: Increases to tax reserves for uncertain tax positions (2012 and prior) and deferred tax expense for change in state and local apportionment factors less tax benefit accrued for domestic production activities deduction (2012 and prior), and income tax effect related to the KCBT building and foreign exchange transaction gains

 

24.9

     

Adjusted Net Income Attributable to CME Group

 

$

250.3

     

GAAP Earnings per Common Share Attributable to CME Group:

   

Basic

 

$

0.71

Diluted

 

0.71

     

Adjusted earnings per Common Share Attributable to CME Group:

   

Basic

 

$

0.75

Diluted

 

0.75

     

Weighted Average Number of Common Shares:

   

Basic

 

332,763

Diluted

 

334,674

     

CME-G

SOURCE CME Group Inc.