CME GROUP INC. CHICAGO, Feb. 5, 2015 /PRNewswire/ -- CME Group Inc. (NASDAQ: CME) today reported revenues of $841 million and operating income of $472 million for the fourth quarter of 2014. Net income attributable to CME Group was $306 million and diluted earnings per share were $0.91. Excluding the items noted in the reconciliation, adjusted earnings per share would have been $0.95(1).
"During the fourth quarter, we saw a pickup in volatility that helped drive broad-based growth across all our major product offerings," said CME Group Executive Chairman and President Terry Duffy. "Average daily volume reached nearly 15 million contracts, up more than 30 percent and representing the second highest quarterly volume in our history. This strong performance also reflects the success of our investments to spur organic growth by attracting trading from customers outside the United States. In addition, we have made significant progress with our OTC initiatives, which continue to drive more activity in our core products. As a result, our revenue during the quarter was up more than 20 percent, and earnings per share rose more than 50 percent."
"We saw significant growth in every product area during the fourth quarter, ranging from 14 percent in metals to 41 percent in interest rates," said CME Group Chief Executive Officer Phupinder Gill. "Total options rose 38 percent and futures grew 29 percent compared with the same period last year, while electronic options increased more than 50 percent. International volumes also grew by nearly 50 percent, reaching a record 3 million contracts per day in the fourth quarter. We also reached our highest level of open interest ever and broke the record for highest daily volume. Further, we restructured the business during the quarter, positioning ourselves to generate higher margins and earnings going forward."
1. A reconciliation of the non-GAAP financial results mentioned to the respective GAAP figures can be found within the Reconciliation of GAAP to Non-GAAP Measures chart at the end of the financial statements.
Fourth-quarter 2014 average daily volume was 14.8 million contracts, up 31 percent from fourth-quarter 2013, and the highest quarterly average daily volume since the first quarter of 2008. Clearing and transaction fee revenues were $713.0 million, up 24 percent compared with fourth-quarter 2013. Fourth-quarter 2014 total average rate per contract was 73.1 cents, up from 72.5 cents in third-quarter 2014, driven primarily by a higher proportion of total volume coming from commodities products, which have higher average fees.
As of December 31, 2014, the company had $1.4 billion of cash and marketable securities and $2.1 billion of long-term debt.
The company declared dividends during 2014 of $1.3 billion, including the annual variable dividend for 2014 of $671 million, which was paid in January 2015. The company has returned more than $4 billion to shareholders in the form of dividends since the implementation of the variable dividend policy in early 2012.
CME Group will hold a conference call to discuss fourth-quarter 2014 results at 4:30 p.m. Eastern Time today. A live audio Webcast of the call will be available on the Investor Relations section of CME Group's Web site at www.cmegroup.com. An archived recording will be available for up to two months after the call.
As the world's leading and most diverse derivatives marketplace, CME Group (www.cmegroup.com) is where the world comes to manage risk. CME Group exchanges offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather and real estate. CME Group brings buyers and sellers together through its CME Globex® electronic trading platform, its trading facilities in New York and Chicago, and through its London-based CME Europe derivatives exchange. CME Group also operates one of the world's leading central counterparty clearing providers through CME Clearing and CME Clearing Europe, which offer clearing and settlement services across asset classes for exchange-traded contracts and over-the-counter derivatives transactions. These products and services ensure that businesses everywhere can substantially mitigate counterparty credit risk.
CME Group is a trademark of CME Group Inc. The Globe Logo, CME, Globex and Chicago Mercantile Exchange are trademarks of Chicago Mercantile Exchange Inc. CBOT and the Chicago Board of Trade are trademarks of the Board of Trade of the City of Chicago, Inc. NYMEX, New York Mercantile Exchange and ClearPort are registered trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. KCBOT, KCBT and Kansas City Board of Trade are trademarks of The Board of Trade of Kansas City, Missouri, Inc. All other trademarks are the property of their respective owners. Further information about CME Group (NASDAQ: CME) and its products can be found at www.cmegroup.com.
Statements in this press release that are not historical facts are forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statements. We want to caution you not to place undue reliance on any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Among the factors that might affect our performance are increasing competition by foreign and domestic entities, including increased competition from new entrants into our markets and consolidation of existing entities; our ability to keep pace with rapid technological developments, including our ability to complete the development, implementation and maintenance of the enhanced functionality required by our customers while maintaining reliability and ensuring that such technology is not vulnerable to security risks; our ability to continue introducing competitive new products and services on a timely, cost-effective basis, including through our electronic trading capabilities, and our ability to maintain the competitiveness of our existing products and services, including our ability to provide effective services to the swaps market; our ability to adjust our fixed costs and expenses if our revenues decline; our ability to maintain existing customers, develop strategic relationships and attract new customers; our ability to expand and offer our products outside the United States; changes in domestic and non-U.S. regulations, including the impact of any changes in domestic and foreign laws or government policy with respect to our industry, such as any changes to regulations and policies that require increased financial and operational resources from us or our customers; the costs associated with protecting our intellectual property rights and our ability to operate our business without violating the intellectual property rights of others; decreases in revenue from our market data as a result of decreased demand; changes in our rate per contract due to shifts in the mix of the products traded, the trading venue and the mix of customers (whether the customer receives member or non-member fees or participates in one of our various incentive programs) and the impact of our tiered pricing structure; the ability of our financial safeguards package to adequately protect us from the credit risks of clearing members; the ability of our compliance and risk management methods to effectively monitor and manage our risks, including our ability to prevent errors and misconduct and protect our infrastructure against security breaches and misappropriation of our intellectual property assets; changes in price levels and volatility in the derivatives markets and in underlying equity, foreign exchange, interest rate and commodities markets; economic, political and market conditions, including the volatility of the capital and credit markets and the impact of economic conditions on the trading activity of our current and potential customers; our ability to accommodate increases in contract volume and order transaction traffic and to implement enhancements without failure or degradation of the performance of our trading and clearing systems; our ability to execute our growth strategy and maintain our growth effectively; our ability to manage the risks and control the costs associated with our strategy for acquisitions, investments and alliances; our ability to continue to generate funds and/or manage our indebtedness to allow us to continue to invest in our business; industry and customer consolidation; decreases in trading and clearing activity; the imposition of a transaction tax or user fee on futures and options on futures transactions and/or repeal of the 60/40 tax treatment of such transactions; the unfavorable resolution of material legal proceedings; and the seasonality of the futures business. For a detailed discussion of these and other factors that might affect our performance, see our filings with the Securities and Exchange Commission, including our most recent periodic reports filed on Form 10-K and Form 10-Q.
CME Group Inc. and Subsidiaries
Consolidated Balance Sheets
(in millions)
December 31, 2014 December 31, 2013
----------------- -----------------
ASSETS
Current Assets:
Cash and cash equivalents $1,366.1 $2,469.7
Marketable securities 74.7 68.4
Accounts receivable, net
of allowance 341.2 302.7
Other current assets
(includes $37.0 and $40.0
in restricted cash) 196.5 209.7
Performance bonds and
guaranty fund
contributions 40,566.8 21,355.1
-------- --------
Total current assets 42,545.3 24,405.6
Property, net of
accumulated depreciation
and amortization 508.9 513.4
Intangible assets-trading
products 17,175.3 17,175.3
Intangible assets-other,
net 2,637.4 2,741.2
Goodwill 7,569.0 7,569.0
Other assets (includes
$72.4 and $74.0 in
restricted cash) 1,805.6 1,873.3
------- -------
Total Assets $72,241.5 $54,277.8
========= =========
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable $36.9 $36.2
Short-term debt - 749.9
Other current liabilities 927.5 1,169.8
Performance bonds and
guaranty fund
contributions 40,566.8 21,355.1
-------- --------
Total current liabilities 41,531.2 23,311.0
Long-term debt 2,107.9 2,107.2
Deferred income tax
liabilities, net 7,302.7 7,249.7
Other liabilities 376.2 449.4
----- -----
Total Liabilities 51,318.0 33,117.3
CME Group shareholders'
equity 20,923.5 21,154.8
Non-controlling interest - 5.7
--- ---
Total Equity 20,923.5 21,160.5
-------- --------
Total Liabilities and
Equity $72,241.5 $54,277.8
========= =========
CME Group Inc. and Subsidiaries
Consolidated Statements of Income
(dollars in millions, except per share amounts; shares in thousands)
Quarter Ended Year Ended
December 31,
December 31,
------------
2014 2013 2014 2013
---- ---- ---- ----
Revenues
Clearing and transaction fees $713.0 $576.8 $2,616.3 $2,460.4
Market data and information
services 89.6 76.5 356.3 315.4
Access and communication fees 21.1 20.8 82.7 83.2
Other 17.4 12.9 57.2 77.3
---- ---- ---- ----
Total Revenues 841.1 687.0 3,112.5 2,936.3
Expenses
Compensation and benefits 144.8 126.6 552.1 518.9
Communications 7.7 8.6 32.0 35.3
Technology support services 15.9 14.0 58.2 53.6
Professional fees and outside
services 29.7 44.9 129.0 130.3
Amortization of purchased
intangibles 24.9 25.6 100.6 103.0
Depreciation and amortization 31.5 34.3 132.6 135.1
Occupancy and building operations 25.7 21.6 96.8 78.3
Licensing and other fee agreements 34.0 24.1 114.2 97.9
Other 55.4 64.1 128.6 146.9
---- ---- ----- -----
Total Expenses 369.6 363.8 1,344.1 1,299.3
----- ----- ------- -------
Operating Income 471.5 323.2 1,768.4 1,637.0
Non-Operating Income (Expense)
Investment income 10.1 10.0 35.8 44.9
Interest and other borrowing costs (28.7) (38.6) (119.4) (151.4)
Equity in net earnings (losses) of
unconsolidated subsidiaries 20.9 12.4 84.8 70.5
Other non-operating income
(expense) - - 1.8 -
--- --- --- ---
Total Non-Operating 2.3 (16.2) 3.0 (36.0)
--- ----- --- -----
Income before Income Taxes 473.8 307.0 1,771.4 1,601.0
Income tax provision 167.3 113.9 644.5 622.9
----- ----- ----- -----
Net Income 306.5 193.1 1,126.9 978.1
Less: net income (loss)
attributable to non-controlling
interests - - (0.2) 1.3
--- --- ---- ---
Net Income Attributable to CME
Group $306.5 $193.1 $1,127.1 $976.8
====== ====== ======== ======
Earnings per Common Share Attributable to CME
Group:
Basic $0.91 $0.58 $3.37 $2.94
Diluted 0.91 0.58 3.35 2.92
Weighted Average Number of Common Shares:
Basic 335,197 333,636 334,409 332,678
Diluted 336,630 335,311 336,063 334,398
CME Group Inc. and Subsidiaries
Quarterly Operating Statistics
4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014
------- ------- ------- ------- -------
Trading Days 64 61 63 64 64
Quarterly Average Daily Volume (ADV)
CME Group ADV (in thousands)
Product Line 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014
------- ------- ------- ------- -------
Interest rate 5,274 6,725 6,668 7,181 7,445
Equity 2,471 2,890 2,465 2,586 3,114
Foreign
exchange 705 817 638 797 959
Energy 1,571 1,705 1,457 1,562 1,797
Agricultural
commodity 992 1,168 1,084 1,058 1,173
Metal 317 355 323 308 361
--- --- --- --- ---
Total 11,331 13,659 12,636 13,493 14,848
Venue
-----
Electronic 9,723 11,703 10,888 11,627 12,982
Open outcry 957 1,179 1,100 1,208 1,218
Privately
negotiated* 651 778 647 657 648
--- --- --- --- ---
Total 11,331 13,659 12,636 13,493 14,848
Average Rate Per Contract (RPC)
CME Group RPC
Product Line 4Q 2013 1Q 2014 2Q 2014 3Q 2014 4Q 2014
------- ------- ------- ------- -------
Interest rate $0.504 $0.481 $0.473 $0.473 $0.472
Equity 0.702 0.712 0.714 0.687 0.697
Foreign
exchange 0.835 0.804 0.861 0.788 0.760
Energy 1.279 1.364 1.298 1.291 1.279
Agricultural
commodity 1.327 1.369 1.430 1.362 1.321
Metal 1.682 1.707 1.715 1.707 1.664
----- ----- ----- ----- -----
Average RPC $0.780 $0.767 $0.749 $0.725 $0.731
CME Group Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Measures
(dollars in millions, except per share amounts; shares in thousands)
Quarter
Ended
December 31,
2014
------------
GAAP Net Income Attributable to CME
Group $306.5
Foreign exchange transaction losses(1) 11.2
Acquisition-related costs 2.0
Reorganization costs 12.4
Data center lease termination fee 2.1
Income tax effect related to above (6.1)
Other income tax items(2) (9.2)
Adjusted Net Income Attributable to
CME Group $318.9
======
GAAP Earnings per Common Share Attributable to CME
Group:
Basic $0.91
Diluted 0.91
Adjusted Earnings per Common Share Attributable to
CME Group:
Basic $0.95
Diluted 0.95
Weighted Average Number of Common Shares:
Basic 335,197
Diluted 336,630
1. Fourth-quarter 2014 results
included foreign exchange transaction
net losses principally related to cash
held in British pounds within foreign
entities whose functional currency is
the U.S. dollar.
2. Other income tax items include the
impact of a change in state and local
tax apportionment factors and a
favorable settlement of various tax
audits.
CME-G
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SOURCE CME Group Inc.
