CME Group posts 'solid' Q1

Source: CME Group

CME Group (Nasdaq:CME) today reported that first-quarter total revenues increased 7 percent to $693 million and operating income increased 7 percent to $415 million from the year-ago period.

First-quarter 2010 operating margin was 60 percent, in line with first-quarter 2009. Operating margin is defined as operating income as a percentage of total revenues.

First-quarter net income was $240 million and diluted earnings per share were $3.62, both up 21 percent from the same period last year. First-quarter 2010 results included $6 million in non-operating income for the recovery of a bankruptcy claim and a $6 million reduction in certain tax reserves, offset primarily by $10 million of professional fees related to the company's joint venture with Dow Jones. These three items increased net income by $2 million. First-quarter 2010 figures include the results of Dow Jones Indexes beginning March 19, 2010.

"CME Group's discipline and focus helped deliver a strong quarter, and we see ongoing opportunities domestically and internationally to improve on this performance," said CME Group Executive Chairman Terry Duffy. "First-quarter operating income of $415 million and earnings per share of $3.62 were the best quarterly results since 2008. With volume, liquidity and depth of book improving across asset classes, CME Group is poised to continue to serve our customers worldwide and deliver sustainable financial results."

"The first quarter highlighted the resiliency of CME Group's business amid improving macroeconomic trends," said CME Chief Executive Officer Craig Donohue. "We achieved overall volume growth of 12 percent, and average daily volumes for our foreign exchange, metals and interest rate products grew by 75 percent, 52 percent and 33 percent, respectively. Building on the momentum of the first quarter, April volumes are up 28 percent from the year-ago period - a positive trend. In addition, we are successfully executing our long-term strategy to expand our global distribution network and client acquisition efforts, as well as our OTC clearing services initiatives in interest rate swaps, OTC FX and credit default swaps."

CME Group Inc. First-Quarter 2010 Financial Highlights*

($s in millions, except per share)

Q1 FY10

Q1 FY09



$ 693

$ 647



$ 278

$ 261


Operating Income

$ 415

$ 386


Operating Margin %



Net Income

$ 240

$ 199


Diluted EPS




*As a result of the company's acquisition of NYMEX being included in the prior year's results for the full year, we no longer believe the non-GAAP financials are necessary to provide an understanding of our current financial performance or to provide a meaningful comparison with prior periods.

First-quarter 2010 average daily volume was 11.5 million contracts, up 12 percent compared with first-quarter 2009. Clearing and transaction fee revenue was $578 million, up 10 percent from $528 million in first-quarter 2009, and up 4 percent from fourth-quarter 2009. The total average rate per contract for CME Group decreased 2 percent from first-quarter 2009 to 82 cents due to a larger proportion of volume coming from the interest rate product area, which has the lowest average rate per contract. Quotation data fees were up 2 percent to $88 million in the first quarter.

First-quarter 2010 non-operating expense was $16 million, driven primarily by interest expense and borrowing costs of $31 million, which was offset by $11 million of investment income. Additionally, the first-quarter 2010 effective tax rate was 39.8 percent, down from 43.2 percent in first-quarter 2009. The effective tax rate for the first quarter of 2010 was favorably impacted by a $6 million reduction in certain tax reserves.

As of March 31, the company had $491 million of cash and marketable securities and $3.1 billion of debt. This includes $612.5 million of debt associated with the company's joint venture with Dow Jones issued on March 18, 2010.

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