What was the primary driver for the revenue decline in the reported period?

The primary driver for the revenue decline was a decrease in clearing and transaction fees, which in turn was caused by lower contract volume across several product lines, particularly interest rate and energy products.

What significant transactions or events occurred during this quarter?

Key events included the formation of the S&P/Dow Jones Indices LLC, a new index business venture with The McGraw-Hill Companies, and the sale of Credit Market Analysis Ltd. (CMA) to McGraw. The company also sold the north and south towers of the CBOT building.

How did the company's expense structure change during this period?

Overall expenses increased due to higher compensation and benefits (driven by salary increases, rising healthcare costs, and increased headcount), costs associated with the new business ventures, and expenses related to a CEO transition and voluntary exit incentive plan. These increases were partially offset by decreases in litigation settlements and marketing expenses.

What is the company's liquidity and debt position?

CME Group maintained a strong liquidity position with $1.3 billion in cash and cash equivalents. Long-term debt remained stable at approximately $2.1 billion. The company also has significant borrowing capacity under its credit facilities and expects to maintain its investment-grade rating.

CME 10-Q Quarterly Report Q2 FY2012 — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-Q filed August 8, 2012. Cited figures are marked; the original filing is the authoritative source.

CME Group Inc. reported a decrease in revenues for the quarter and six months ended June 30, 2012, compared to the prior year, primarily due to lower clearing and transaction fees resulting from reduced contract volume.

While overall expenses increased due to higher compensation, benefits, and expenses related to business ventures, the company also realized a significant gain from the formation of the S&P/Dow Jones Indices LLC. Net income attributable to CME Group and diluted earnings per share saw a notable decline year-over-year. The company's balance sheet reflects a decrease in total assets, largely driven by a reduction in cash performance bonds and guaranty fund contributions.

Long-term debt remained relatively stable. Despite a challenging revenue environment, CME Group maintained strong operating margins and demonstrated improved cash flow from operations.

The company's liquidity remains robust with substantial cash and cash equivalents and available credit facilities. Significant events during the period included the formation of the S&P/Dow Jones Indices LLC and the sale of Credit Market Analysis Ltd. (CMA), alongside the sale of CBOT building properties.

02—Key points

Key Highlights

Total revenues decreased by 5% for the quarter and 6% for the six months ended June 30, 2012, driven by a decline in clearing and transaction fees due to lower contract volume.
Operating expenses increased by 8% for the quarter and 6% for the six months, primarily due to higher compensation and benefits, and expenses related to new business ventures and CEO transition.
A significant gain of $65.2 million was recognized in non-operating income from the formation of the S&P/Dow Jones Indices LLC and the sale of CMA.
Net income attributable to CME Group decreased by 17% for the quarter and 32% for the six months compared to the prior year.
Diluted earnings per share declined to $0.74 for the quarter and $1.54 for the six months, down from $0.88 and $2.24, respectively.
Cash flows from operating activities increased by 14% for the six months ended June 30, 2012, reflecting improved cash generation.
Total assets decreased to $37.9 billion from $40.8 billion primarily due to lower cash performance bonds and guaranty fund contributions.

03—One dollar

04—Financials

Financial Highlights

10-QQ2 FY2012filed August 8, 2012

Revenue$795.90M Net Income$244.90M30.8% Net Margin EPS (Diluted)$0.74 Total Assets$37.95B Cash & Equivalents$1.29B Free Cash Flow$225.30M

Financial Statements

Q2 FY2012 against Q2 FY2011

Line item	Q2 FY2012Q2 FY2011	Q2 FY2011	Change
Revenue	$795.90M$838.30M	$838.30M	−5.1%
Operating Expenses	$326.70M$303.80M	$303.80M	+7.5%
Operating Income	$469.20M$534.50M	$534.50M	−12.2%
Net Income	$244.90M$293.70M	$293.70M	−16.6%
EPS (Basic)	$0.74$0.88	$0.88	−15.9%
EPS (Diluted)	$0.74$0.88	$0.88	−15.9%
Shares Outstanding (Basic)	331.08M333.79M	333.79M	−0.8%
Shares Outstanding (Diluted)	332.16M333.34M	333.34M	−0.4%

05—Questions

Frequently Asked Questions

What was the primary driver for the revenue decline in the reported period?
The primary driver for the revenue decline was a decrease in clearing and transaction fees, which in turn was caused by lower contract volume across several product lines, particularly interest rate and energy products.
What significant transactions or events occurred during this quarter?
Key events included the formation of the S&P/Dow Jones Indices LLC, a new index business venture with The McGraw-Hill Companies, and the sale of Credit Market Analysis Ltd. (CMA) to McGraw. The company also sold the north and south towers of the CBOT building.
How did the company's expense structure change during this period?
Overall expenses increased due to higher compensation and benefits (driven by salary increases, rising healthcare costs, and increased headcount), costs associated with the new business ventures, and expenses related to a CEO transition and voluntary exit incentive plan. These increases were partially offset by decreases in litigation settlements and marketing expenses.
What is the company's liquidity and debt position?
CME Group maintained a strong liquidity position with $1.3 billion in cash and cash equivalents. Long-term debt remained stable at approximately $2.1 billion. The company also has significant borrowing capacity under its credit facilities and expects to maintain its investment-grade rating.

06—Continue

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