Summary
CME Group Inc. reported its third quarter and first nine months results for 2012, reflecting a notable decrease in revenues primarily driven by lower clearing and transaction fees due to reduced contract volumes across several key product lines, including interest rate and equity futures. Despite the revenue decline, the company managed to decrease total expenses in the third quarter compared to the prior year, largely due to a reduction in amortization of purchased intangibles following strategic asset divestitures and the formation of a new index business venture. However, for the first nine months, total expenses saw a slight increase driven by higher compensation and benefits, including stock-based compensation and separation costs, along with expenses related to the new index venture. The company also highlighted a significant increase in its effective tax rate, particularly in the nine-month period, influenced by deferred tax liabilities from the formation of the S&P/Dow Jones Indices LLC. Financially, CME Group demonstrated solid liquidity with cash and cash equivalents of $2.0 billion at the end of the quarter, and it actively managed its debt, issuing new notes while planning to retire existing ones. The company also declared a quarterly dividend, underscoring its commitment to returning value to shareholders.
Financial Highlights
48 data points| Revenue | $683.20M |
| Operating Expenses | $287.20M |
| Operating Income | $396.00M |
| Net Income | $218.00M |
| EPS (Basic) | $0.66 |
| EPS (Diluted) | $0.66 |
| Shares Outstanding (Basic) | 331.38M |
| Shares Outstanding (Diluted) | 332.46M |
Key Highlights
- 1Total revenues decreased by 22% in Q3 2012 and 11% in the first nine months of 2012 compared to the prior year, primarily due to a 23% and 13% decline in clearing and transaction fees, respectively, driven by lower contract volumes.
- 2Total expenses decreased by 5% in Q3 2012 but increased by 3% in the first nine months of 2012, with Q3's decrease attributed to lower amortization of purchased intangibles from business divestitures, while the nine-month increase was driven by higher compensation and benefits.
- 3Net income attributable to CME Group fell by 31% in Q3 2012 and 32% in the first nine months of 2012, mirroring the revenue decline.
- 4Contract volume saw a significant reduction, with an aggregate average daily volume decrease of 26% in Q3 2012 and 15% in the first nine months of 2012 year-over-year.
- 5Interest rate and equity product volumes experienced substantial declines, attributed to low market volatility.
- 6The company issued $750.0 million in 3.00% fixed rate notes due September 2022, and ended the period with $2.0 billion in cash and cash equivalents.
- 7CME Group is involved in several ongoing legal matters, including intellectual property disputes and a class action lawsuit related to MF Global, though the company believes these matters are without merit and intends to defend itself vigorously.