10-QPeriod: Q1 FY2009

CME GROUP INC. Quarterly Report for Q1 Ended Mar 31, 2009

Filed May 8, 2009For Securities:CME

Summary

CME Group Inc. reported a revenue of $647.1 million for the first quarter of 2009, a 4% increase compared to the same period in 2008. This growth was primarily driven by the inclusion of NYMEX products and services, along with increased quotation data fees. However, operating expenses rose by 15% to $260.7 million, mainly due to higher amortization of purchased intangibles and increased compensation and benefits following the NYMEX merger. Consequently, net income declined by 30% to $199.1 million, and diluted earnings per share fell to $3.00 from $5.25 in the prior year. The company experienced a significant decrease in trading volume for interest rate products, attributed to the ongoing credit crisis and the Federal Reserve's zero interest rate policy. This decline was partially offset by the addition of NYMEX products and an increase in the average rate per contract. The balance sheet reflects a substantial decrease in total assets and liabilities compared to year-end 2008, largely due to the reduction in cash performance bonds and security deposits. The company has also refinanced debt, issuing new notes and repaying commercial paper, strengthening its liquidity position.

Financial Highlights

27 data points
Beta

Revenue

$647.10M

Net Income

$199.10M

30.8% Net Margin

EPS (Diluted)

$0.60

Cash & Equivalents

$339.20M

Free Cash Flow

$219.40M

Financial Statements
Beta
Revenue$647.10M
Operating Expenses$260.70M
Operating Income$386.40M
Net Income$199.10M
EPS (Basic)$0.60
EPS (Diluted)$0.60
Shares Outstanding (Basic)331.51M
Shares Outstanding (Diluted)332.19M

Key Highlights

  • 1Total revenues increased by 4% to $647.1 million, driven by NYMEX integration and higher quotation data fees.
  • 2Net income decreased by 30% to $199.1 million, impacted by rising operating expenses and stock issuances related to the NYMEX merger.
  • 3Diluted earnings per share fell to $3.00 from $5.28 in the prior year's quarter.
  • 4Interest rate product trading volumes significantly declined due to the credit crisis and low interest rates.
  • 5The company issued $750 million in fixed rate notes due 2014 to repay commercial paper and for general corporate purposes.
  • 6Operating expenses increased by 15% to $260.7 million, largely due to amortization of purchased intangibles and higher compensation costs post-NYMEX acquisition.
  • 7Cash flow from operations decreased by 32% to $254.7 million.

Frequently Asked Questions

Revenue growth was primarily driven by the inclusion of trading volumes and services from the recently acquired NYMEX, as well as an increase in quotation data fees. The higher average rate per contract also contributed to revenue growth, partially offsetting declines in certain product volumes.

The decrease in net income and EPS was primarily due to a substantial increase in operating expenses, particularly amortization of purchased intangibles and compensation costs, stemming from the NYMEX merger. Additionally, common stock issuances related to the merger diluted earnings per share.

The credit crisis has led to a significant decline in trading volumes for interest rate products, as market participants have become more risk-averse and debt issuance has slowed. This has negatively impacted revenue from these product lines. However, the overall impact on CME Group's total revenue was partially offset by the addition of new products and services from NYMEX.

CME Group refinanced a portion of its debt by issuing $750 million in fixed rate notes due 2014, using the proceeds to repay commercial paper borrowings. This move aimed to strengthen its liquidity and manage its debt structure. The company also reported sufficient borrowing capacity under its credit facilities.