01—Abstract
Summary
Summary of the 10-Q filed May 10, 2011. Cited figures are marked; the original filing is the authoritative source.
CME Group Inc. reported strong financial results for the first quarter of 2011, with total revenues increasing by 20% year-over-year to $831.6 milliona.
This growth was primarily driven by a 20% increase in clearing and transaction fees, fueled by a 21% rise in total contract volume. Net income attributable to CME Group surged by 90% to $456.6 millionb, leading to a significant 88% increase in diluted earnings per share to $6.81. The company also demonstrated robust operational efficiency, with operating income growing by 26% and the operating margin expanding to 63%.
A notable factor contributing to the bottom-line improvement was a substantial decrease in the effective tax rate to 10.7%c from 39.8% in the prior year, largely due to a favorable change in state tax apportionment and a reduction in valuation allowances on capital losses. Despite increased operating expenses, mainly driven by higher compensation, benefits, and bonus expenses, CME Group's financial performance remained strong, underscoring its leading position in the derivatives market.
02—Key points
Key Highlights
- Total revenues increased by 20% to $831.6 million in Q1 2011 compared to Q1 2010.
- Clearing and transaction fees, the primary revenue driver, grew by 20% year-over-year, supported by a 21% increase in total contract volume.
- Net income attributable to CME Group more than doubled, rising 90% to $456.6 million.
- Diluted earnings per share (EPS) saw a substantial increase of 88%, reaching $6.81.
- Operating margin improved to 63% from 60% in the prior year period.
- The effective tax rate significantly decreased to 10.7% from 39.8%, positively impacting net income.
- Cash flows from operating activities remained strong, slightly increasing by 2% to $362.1 million.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2011filed May 10, 2011Financial Statements
Q1 FY2011 against Q1 FY2010
| Line item | Q1 FY2011Q1 FY2010 | Change |
|---|---|---|
| Revenue | $831.60M$693.20M | +20.0% |
| Operating Expenses | $307.50M$278.50M | +10.4% |
| Operating Income | $524.10M$414.70M | +26.4% |
| Net Income | $456.60M$240.20M | +90.1% |
| EPS (Basic) | $1.37$0.73 | +88.7% |
| EPS (Diluted) | $1.36$0.72 | +87.8% |
| Shares Outstanding (Basic) | 334.29M331.17M | +0.9% |
| Shares Outstanding (Diluted) | 335.31M332.14M | +1.0% |
05—Questions
Frequently Asked Questions
What was the main driver of revenue growth in Q1 2011?
The primary driver of revenue growth was the increase in clearing and transaction fees, which rose by 20% year-over-year. This was directly attributable to a 21% increase in total contract volume traded across CME Group's exchanges.
Why did the effective tax rate decrease so significantly?
The effective tax rate dropped from 39.8% in Q1 2010 to 10.7% in Q1 2011. This substantial decrease was mainly due to a favorable change in state tax apportionment, which reduced the income tax provision by $118.1 million, and a $48.8 million reduction in valuation allowances on unrealized capital losses related to the company's investment in BM&FBOVESPA.
What caused the increase in operating expenses?
Operating expenses increased by 10% to $307.5 million. Key factors contributing to this rise included higher compensation and benefits expenses due to increased headcount and bonus payouts, as well as increased litigation settlements and associated legal fees, and amortization of purchased intangibles.
How has the company managed its debt and liquidity?
CME Group repaid a $420.5 million term loan in January 2011. The company has a $1.0 billion multi-currency revolving senior credit facility maturing in January 2014 and a 364-day fully secured, committed line of credit up to $1.0 billion for its clearing house. As of March 31, 2011, the company had excess borrowing capacity of approximately $1.0 billion for general corporate purposes and was in compliance with all debt covenants.
06—Continue