Chicago Mercantile Exchange Holdings Inc. (NYSE, Nasdaq: CME) today reported strong revenues and profits, with a 22 percent increase in net revenues and a 30 percent increase in net income for third-quarter 2005 compared with third-quarter 2004.
These results were driven by significantly increased trading volume in each major product line. Net revenues climbed 22 percent to $234 million, income before income taxes grew 28 percent to $128 million, and net income rose 30 percent to $77 million. Diluted earnings per share rose 29 percent to $2.22 from $1.72. Yesterday, the company declared a fourth-quarter dividend of 46 cents per share, payable on December 27, 2005 to shareholders of record on December 9, 2005.
Average daily volume was 4.2 million contracts for third-quarter 2005, a 30 percent increase from third-quarter 2004. Trading on the CME Globex electronic trading platform grew 45 percent to 2.9 million contracts per day and represented 69 percent of total CME volume in the quarter, compared with 61 percent in the same period last year.
"CME's strong volume trends in both futures and options underscore the effectiveness of our ongoing strategy to grow our business in existing and new markets," said CME Chairman Terry Duffy. "We posted another solid quarter, fueled by significant volume growth in our foreign exchange, interest rate and equity products. We achieved record monthly volume in September and are seeing sizable volume growth in our equity products in October. Our customer initiatives in Europe and Asia, along with our expanding network of telecommunications hubs, have positioned CME to continue building momentum outside the United States where the potential for growth in exchange-traded derivatives is significant."
"We continue to add new products and expand electronic trading of options to meet the evolving needs of our customers globally," said CME CEO Craig Donohue. "In recent months we have added significant new functionality for trading options on the CME Globex electronic trading platform that has doubled our average daily volume in electronic options to nearly 90,000 contracts. We also extended to 2016 CME's exclusive agreement with Standard & Poor's for futures and options on all of the S&P indexes. This durable franchise benefits our customers and shareholders by strengthening our equity product line on a long-term basis. In addition, we continue to launch innovative new products that further leverage our nearly 24-hour trading day, including derivatives contracts based on the Eurozone HICP inflation index, S&P Asia 50 index, NASDAQ Biotechnology Index and our Economic Derivatives Auctions."
Revenue from clearing and transaction fees from CME products increased 19 percent to $176 million, up from $148 million for third-quarter 2004. Clearing and transaction services revenue rose 23 percent to $18 million and quotation data fees were up 26 percent to $19 million. While net revenues increased 22 percent, expenses increased 15 percent to $106 million, primarily driven by technology spending related to improved functionality and capacity.
Third-quarter income before income taxes was $128 million, an increase of 28 percent from $100 million for the year-ago period. The company's operating margin, defined as income before income taxes expressed as a percentage of net revenues, was 55 percent for the quarter, compared with 52 percent for the same period last year.
Capital expenditures, including capitalized software development costs, were $19 million in third-quarter 2005.
CME's working capital increased by $74 million during the third quarter, to $883 million at September 30, 2005.
For the first nine months of 2005, net revenues increased 26 percent to $688 million from $546 million for the first nine months of 2004. Revenue from clearing and transaction fees improved 26 percent to $520 million from $414 million a year ago, benefiting from higher trading volume. Total operating expenses were $305 million for the first nine months of 2005, versus $272 million for the comparable period of 2004, up 12 percent.
Capital expenditures and capitalized software development costs were $62 million for the first nine months of 2005.
Income before taxes was $383 million for the first nine months of 2005, up 40 percent versus the same period a year ago. The operating margin was 56 percent for the first nine months of 2005, compared with 50 percent for the year-earlier period.
The company reported record net income of $231 million, or $6.63 per diluted share, for the first nine months of this year, compared with $163 million, or $4.74 per diluted share, for the first nine months of 2004. During the first nine months of the year, the company paid dividends totaling $1.38 per common share.Download the document now 42.1 kb (Adobe Acrobat Document)