05.01.2014
By Terry Flanagan

CME Group Inc. Reports Solid First-Quarter 2014 Financial Results

CHICAGO, May 1, 2014 /PRNewswire/ — CME Group Inc. (NASDAQ: CME) today reported revenues of $777 million and operating income of $454 million for the first quarter of 2014. Net income attributable to CME Group was $267 million and diluted earnings per share were $0.79. Excluding the items noted in the reconciliation, adjusted earnings per share would have been $0.831.

CME Group logo

“In first-quarter 2014, we posted industry-leading volume growth of 9 percent, driven by our interest rate, equity index and agricultural products,” said CME Group Executive Chairman and President Terry Duffy.  “Following Federal Reserve comments related to quantitative easing and the target federal funds rate, our Eurodollar futures reached a daily record of 6 million contracts traded on March 19. Further, market participants have begun to adjust their risk management activities in the short end of the interest rate curve, as evidenced by our 47 percent growth in Eurodollar volume in the first quarter followed by 73 percent growth in April.”

“In 2014, we continue to meet the needs of our customers by delivering innovative new products and services,” said CME Group Chief Executive Officer Phupinder Gill.  “We recently launched our London-based derivatives exchange, CME Europe, allowing our European clients to manage risk and access liquidity in their local jurisdiction.  With London as the center of global FX trading, we will focus on FX futures initially, and add other products going forward.  We also launched a Euro-denominated deliverable swap futures product, and plan to launch a North American physically delivered aluminum futures contract in second-quarter 2014.”

First-quarter 2014 average daily volume was 13.7 million contracts, up 9 percent from first-quarter 2013, and included 19 percent growth in interest rate volume. Clearing and transaction fee revenues were $652 million, up 10 percent compared with the same period last year. First-quarter total average rate per contract was 76.7 cents, down from 78.0 cents in fourth-quarter 2013, driven primarily by a higher proportion of total volume coming from interest rate products, which have lower average fees.

As of March 31, 2014, the company had $1.1 billion of cash and marketable securities and $2.1 billion of debt after paying off $750 million of debt in February.

CME Group will hold a conference call to discuss first-quarter 2014 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 across asset classes for exchange-traded contracts and over-the-counter derivatives transactions. These products and services ensure that businesses everywhere can substantially mitigate counterparty credit risk.

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. KCBOT, KCBT and Kansas City Board of Trade are trademarks of The Board of Trade of Kansas City, Missouri, 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. We want to caution you not to place undue reliance on any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. 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 while maintaining reliability and ensuring that such technology is not vulnerable to security risks; 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 swaps 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, including the impact of any changes in domestic and foreign laws or government policy with respect to our industry, such as any changes to regulations and policies that require increased financial and operational resources from us or our customers; the costs associated with protecting our intellectual property rights and our ability to operate our business without violating the intellectual property rights of others; decreases in revenue from our market data as a result of decreased demand; 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, 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 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; our ability to accommodate increases in contract volume and order transaction traffic and to implement enhancements without failure or degradation of the 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 strategy for acquisitions, investments and alliances;  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 repeal of the 60/40 tax treatment of such transactions; the unfavorable resolution of material legal proceedings; and the seasonality of the futures business.  For a detailed discussion of these and other factors that might affect our performance, see our filings with the Securities and Exchange Commission, including our most recent periodic reports filed on Form 10-K and Form 10-Q.

 

  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)

March 31, 2014

December 31, 2013

ASSETS

Current Assets:

Cash and cash equivalents

$

1,053.7

$

2,469.7

Marketable securities

72.2

68.4

Accounts receivable, net of allowance

344.6

302.7

Other current assets (includes $37.0 and $40.0 in restricted cash)

180.7

209.7

Performance bonds and guaranty fund contributions

21,658.5

21,355.1

Total current assets

23,309.7

24,405.6

Property, net of accumulated depreciation and amortization

508.4

513.4

Intangible assets—trading products

17,175.3

17,175.3

Intangible assets—other, net

2,716.1

2,741.2

Goodwill

7,569.0

7,569.0

Other assets (includes $74.9 and $74.0 in restricted cash)

1,888.6

1,873.3

Total Assets

$

53,167.1

$

54,277.8

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities:

Accounts payable

$

43.1

$

36.2

Short-term debt

749.9

Other current liabilities

328.1

1,169.8

Performance bonds and guaranty fund contributions

21,658.5

21,355.1

Total current liabilities

22,029.7

23,311.0

Long-term debt

2,107.4

2,107.2

Deferred income tax liabilities, net

7,276.1

7,249.7

Other liabilities

443.8

449.4

Total Liabilities

31,857.0

33,117.3

CME Group shareholders’ equity

21,304.6

21,154.8

Non-controlling interest

5.5

5.7

Total Equity

21,310.1

21,160.5

Total Liabilities and Equity

$

53,167.1

$

54,277.8

 

 

CME Group Inc. and Subsidiaries

Consolidated Statements of Income

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

Quarter Ended
March 31,

2014

2013

Revenues

Clearing and transaction fees

$

652.2

$

593.2

Market data and information services

89.4

80.9

Access and communication fees

20.4

21.5

Other

15.4

23.0

Total Revenues

777.4

718.6

Expenses

Compensation and benefits

135.5

129.4

Communications

8.2

8.9

Technology support services

13.9

12.4

Professional fees and outside services

29.6

21.9

Amortization of purchased intangibles

25.2

25.9

Depreciation and amortization

34.1

32.6

Occupancy and building operations

23.2

18.5

Licensing and other fee agreements

29.0

21.2

Other

24.2

42.3

Total Expenses

322.9

313.1

Operating Income

454.5

405.5

Non-Operating Income (Expense)

Investment income

3.2

3.6

Interest and other borrowing costs

(33.7)

(39.0)

Equity in net gains (losses) of unconsolidated subsidiaries

22.4

17.5

Total Non-Operating

(8.1)

(17.9)

Income before Income Taxes

446.4

387.6

Income tax provision

179.8

150.2

Net Income

266.6

237.4

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

(0.2)

1.6

Net Income Attributable to CME Group

$

266.8

$

235.8

Earnings per Common Share Attributable to CME Group:

Basic

$

0.80

$

0.71

Diluted

0.79

0.71

Weighted Average Number of Common Shares:

Basic

333,905

331,953

Diluted

335,644

333,372

 

CME Group Inc. and Subsidiaries

Quarterly Operating Statistics

1Q 2013

2Q 2013

3Q 2013

4Q 2013

1Q 2014

Trading Days

60

64

64

64

61

 

Quarterly Average Daily Volume (ADV)

CME Group ADV (in thousands)

Product Line

1Q 2013

2Q 2013

3Q 2013

4Q 2013

1Q 2014

Interest rate

5,656

6,828

5,839

5,274

6,725

Equity

2,608

3,079

2,408

2,471

2,890

Foreign exchange

1,010

1,042

792

705

817

Energy

1,730

1,796

1,609

1,571

1,705

Agricultural commodity

1,084

1,106

1,009

992

1,168

Metal

396

471

360

317

355

Total

12,484

14,323

12,018

11,331

13,659

Venue

Electronic

10,908

12,457

10,199

9,723

11,703

Open outcry

885

1,134

1,173

957

1,179

Privately negotiated*

691

731

646

651

778

Total

12,484

14,323

12,018

11,331

13,659

Average Rate Per Contract (RPC)

CME Group RPC

Product Line

1Q 2013

2Q 2013

3Q 2013

4Q 2013

1Q 2014

Interest rate

$

0.468

$

0.455

$

0.484

$

0.504

$

0.481

Equity

0.691

0.714

0.695

0.702

0.712

Foreign exchange

0.848

0.826

0.819

0.835

0.804

Energy

1.390

1.260

1.300

1.279

1.364

Agricultural commodity

1.318

1.378

1.323

1.327

1.369

Metal

1.656

1.613

1.626

1.682

1.707

Average RPC

$

0.785

$

0.748

$

0.762

$

0.780

$

0.767

Note: 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

March 31, 2014

GAAP Net Income Attributable to CME Group

$

266.8

Less:  Foreign exchange transaction gains1

(3.1)

Add:  Income tax effect related to above

1.1

Add: Tax expense related to certain state taxes1

12.9

Adjusted Net Income Attributable to CME Group

$

277.7

GAAP Earnings per Common Share Attributable to CME Group:

     Basic

$

0.80

     Diluted

0.79

Adjusted earnings per Common Share Attributable to CME Group:

     Basic

$

0.83

     Diluted

0.83

Weighted Average Number of Common Shares:

     Basic

333,905

     Diluted

335,644

1.  First-quarter 2014 results included a $3.1 million foreign exchange transaction gain during the quarter principally related to cash held in British pounds within foreign entities whose functional currency is the U.S. dollar, as well as a $12.9 million tax expense primarily attributable to changes in future state apportionment factors resulting from state law changes.

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CME-G

SOURCE CME Group Inc.

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