10-QPeriod: Q2 FY2011

CME GROUP INC. Quarterly Report for Q2 Ended Jun 30, 2011

Filed August 5, 2011For Securities:CME

Summary

CME Group Inc. reported solid financial results for the second quarter and first six months of 2011, demonstrating resilience despite a challenging economic environment. Total revenues increased by 3% for the quarter and 11% year-to-date, driven by strong performance in clearing and transaction fees, as well as growth in market data and information services. The company saw a notable increase in interest rate and agricultural commodity products volume, reflecting market volatility and changing supply dynamics. Expenses also rose, largely due to higher compensation and benefits, but operating income and net income attributable to CME Group shareholders showed positive growth. The company's effective tax rate saw a significant decrease, particularly in the six-month period, due to favorable tax adjustments. CME Group maintained a strong liquidity position, with substantial operating cash flows. The company also continues to manage its debt effectively and has access to significant credit facilities. Despite ongoing market uncertainties related to the U.S. budget deficit and the European debt crisis, CME Group remains focused on operational efficiency and strategic initiatives to drive future growth.

Financial Highlights

45 data points
Beta

Revenue

$838.30M

Net Income

$293.70M

35.0% Net Margin

EPS (Diluted)

$0.88

Total Assets

$35.59B

Cash & Equivalents

$693.60M

Free Cash Flow

$167.00M

Financial Statements
Beta
Revenue$838.30M
Operating Expenses$303.80M
Operating Income$534.50M
Net Income$293.70M
EPS (Basic)$0.88
EPS (Diluted)$0.88
Shares Outstanding (Basic)333.79M
Shares Outstanding (Diluted)333.34M

Key Highlights

  • 1Total revenues increased by 3% to $838.3 million for the quarter ended June 30, 2011, and by 11% to $1,669.9 million for the six months ended June 30, 2011, compared to the prior year periods.
  • 2Net income attributable to CME Group increased by 8% to $293.7 million for the quarter and by 47% to $750.3 million for the six months, compared to the prior year periods.
  • 3Diluted earnings per common share increased to $4.38 for the quarter and $11.20 for the six months, up from $4.11 and $7.73, respectively, in the prior year.
  • 4Clearing and transaction fees, the company's primary revenue source, saw a modest 1% increase for the quarter but a significant 9% increase for the six months, driven by increased volumes in interest rate and agricultural commodity products.
  • 5The effective tax rate decreased significantly to 42.0% for the quarter and 26.3% for the six months, from 43.5% and 41.8%, respectively, due to favorable tax adjustments including a change in state tax apportionment.
  • 6Cash flows from operating activities were $576.1 million for the six months ended June 30, 2011, a decrease of 11% from the prior year, primarily due to an increase in restricted cash and accounts receivable.
  • 7The company has access to significant liquidity through a $1.0 billion multi-currency revolving senior credit facility and a $1.0 billion 364-day secured revolving credit facility for its clearing house.

Frequently Asked Questions

CME Group reported total revenues of $838.3 million for the second quarter of 2011, a 3% increase compared to $813.9 million in the same period of 2010. For the first six months of 2011, total revenues were $1,669.9 million, an 11% increase from $1,507.1 million in the first six months of 2010. This growth was primarily driven by increases in clearing and transaction fees and market data and information services.

The report indicates that market volatility, influenced by factors such as the U.S. budget deficit and the European debt crisis, had mixed impacts on trading volumes. While interest rate and agricultural commodity product volumes increased due to market uncertainty and supply changes, equity and foreign exchange volumes saw decreases attributed to lower overall volatility or specific market events. Despite these fluctuations, overall contract volume for the six months increased by 9%.

As of June 30, 2011, CME Group had $2,105.8 million in long-term debt, primarily consisting of fixed-rate notes. The company has a strong liquidity position with $693.6 million in cash and cash equivalents. It also has access to a $1.0 billion multi-currency revolving senior credit facility and a $1.0 billion 364-day secured revolving credit facility for its clearing house, with no current borrowings under the senior credit facility.

CME Group experienced a significant decrease in its effective tax rate. For the first six months of 2011, the rate was 26.3%, down from 41.8% in the same period of 2010. This reduction was primarily due to a $118.1 million tax benefit from a change in state tax apportionment and a $48.8 million reduction in valuation allowances on unrealized capital losses, partly related to marking its investment in BM&FBOVESPA to market.