CME: Futures volumes behind higher profits

CHICAGO, July 28, 2011 /PRNewswire/ -- CME Group Inc. (NASDAQ: CME) today reported that second-quarter revenues increased 3 percent to a record $838 million and operating income increased 4 percent to $534 million from a year ago. Second-quarter 2011 operating margin was 64 percent, up from 63 percent in the second quarter of 2010. Operating margin is defined as operating income as a percentage of total revenues.

Second-quarter net income attributable to CME Group was $294 million, up 8 percent compared with the second quarter of 2010. Diluted earnings per share were $4.38, up 7 percent compared with the same period last year.

"CME Group delivered record revenue during the second quarter, driven by strong performance across interest rates, metals and agricultural commodities," said CME Group Executive Chairman Terry Duffy. "Volume accelerated during the period and we reached record open interest of more than 100 million contracts in June. These results show that CME Group is uniquely positioned to provide the solutions customers need in today's challenging economic and geopolitical environment, and the company will continue to take a leadership role in contributing to the resolution of legislative and regulatory issues so important to markets worldwide."

"We are extremely pleased with both our top- and bottom-line results, which highlight the operating leverage inherent in our business model," said CME Group Chief Executive Officer Craig Donohue. "We plan to build on these results, with a heightened focus on expenses, and we are reducing our second-half 2011 operating and capital expense guidance. Going forward, we intend to continue to successfully execute our global growth strategy by ensuring that we have the products, technology, clearing capabilities and global distribution systems to benefit from the opportunities created by changing market dynamics. We remain confident about our growth prospects and our ability to deliver shareholder value."

Second-quarter 2011 average daily volume was 13.5 million contracts, in line with the second quarter of 2010, which included May 2010 record monthly average daily volume of 16.8 million contracts. Clearing and transaction fee revenue of $688 million was up 1 percent from $684 million in second-quarter 2010.

Second-quarter total average rate per contract was 80.7 cents, up 2 percent from second-quarter 2010. Although total volume contained a higher proportion of lower-priced interest rates volume relative to the first quarter of 2011, the second quarter average rate per contract was in line with first-quarter 2011 due to lower volume discounts and a favorable venue mix.

Second-quarter 2011 operating expense was $304 million, down $4 million from first quarter this year. Second-quarter 2011 non-operating expense was $25 million, driven primarily by interest expense and borrowing costs of $29 million, offset by $5 million of investment income.

As of June 30, the company had $749 million of cash and marketable securities and $2.1 billion of debt. Following the Board authorization of a $750 million share buyback program on May 9, 2011, the company purchased 220,000 shares with an approximate aggregate value of $65 million.

Updated Guidance

  • The company expects 2011 total operating expense of $1.235 billion, down from $1.26 billion.
  • The company expects 2011 total capital expenditures of $165 million, down from $180 million.
  • For the second half of 2011, the company estimates an effective tax rate of approximately 42.5 percent, down from 43 percent.
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