CME Q3 2012 volumes drop 26% YoY, operating margin of 58%

CME Group Inc. Reports Third-Quarter 2012 Financial Results
CHICAGO, Oct. 25, 2012 /PRNewswire/ — CME Group Inc. (NASDAQ: CME) today reported revenues of $683 million and operating income of $396 million for the third quarter 2012. Net income attributable to CME Group was $218 million and diluted earnings per share were $0.66.

Third-quarter 2012 results included a non-recurring $16 million increase to the company’s income tax provision related to increases in deferred income tax liabilities associated with S&P Dow Jones Indices and the company’s acquisition of Pivot, Inc. On a non-GAAP basis, third-quarter diluted EPS would have been $0.70.1

“Given the dynamic and changing global environment, we continue to advocate on behalf of our customers, businesses and the futures industry as new regulations are being implemented,” said CME Group Executive Chairman and President Terry Duffy. “At the same time, we remain focused on expanding our business to meet the needs of our global customers. We applied to the Financial Services Authority for approval to create a London-based exchange that will initially offer trading of foreign exchange futures products and ultimately expand into other products. We also announced an agreement to acquire the Kansas City Board of Trade, which gives us the opportunity to expand and diversify our wheat product portfolio and provide capital and operational efficiencies for our customers. Growth, efficiency and returning excess cash to shareholders continue to be our priorities.”

“During the quarter, we continued to expand our industry-leading portfolio of diverse products as part of growing our global footprint,” said CME Group Chief Executive Officer Phupinder Gill. “We strengthened our OTC product offering by announcing the launch of a deliverable interest rate swap futures product and portfolio margining of interest rate swaps and futures positions for customer accounts. With Dodd-Frank regulation driving changes in OTC energy markets, we also are working on providing flexible means of execution for participants in these markets. Overall, we are collaborating with buy-side and sell-side customers to provide the innovative products and services they need to manage their risk effectively in a continuously evolving marketplace.”

Third-quarter 2012 average daily volume was 10.8 million contracts, down 26 percent from an exceptionally strong third-quarter 2011 which included the all-time record August 2011 average daily volume of 17.1 million contracts. This drove a 23 percent decrease in clearing and transaction fee revenues to $562 million. Third-quarter total average rate per contract was 82.2 cents, up 6 percent compared with third-quarter 2011.

Third-quarter 2012 operating expense was $287 million, below recent quarters and partially driven by the removal of expenses previously associated with the Dow Jones Indices business. This highlights the company’s continued focus on managing the organization as efficiently as possible while still progressing with key longer-term growth initiatives. Third-quarter 2012 operating margin was 58 percent. Operating margin is defined as operating income as a percentage of total revenues.

During the third quarter, the effective tax rate was 40.7 percent, excluding the non-recurring item discussed earlier. As of September 30, the company had $2.1 billion of cash and marketable securities and $2.9 billion of debt.

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