CME Group Inc. Reports Second-Quarter 2014 Financial Results

CME Group Inc. (NASDAQ: CME) today reported revenues of $732 million and operating income of $412 million for the second quarter of 2014. Net income attributable to CME Group was $264 million and diluted earnings per share were $0.79. Excluding the items noted in the reconciliation, adjusted earnings per share would have been $0.77¹.

"Historically low levels of volatility impacted the overall market during the second quarter, although the effect on CME was lessened by the diversity of our product lines," said CME Group Executive Chairman and President Terry Duffy. "Though total volumes were nearly flat year-to- date through the second quarter, our interest rate complex was up 7 percent, a strong outperformance compared with the rest of the market. We continue to see positive economic signs that could potentially lead to a more traditional Federal Reserve monetary policy. This would affect the Fed Funds rate and likely accelerate market activity as firms shift back into growth mode. Already we are nearing historic levels of open interest as we approach 100 million contracts, up 18 percent year-to-date."

"We continue to strengthen our global footprint with a record 24 percent of our electronic volume coming from outside the United States during the second quarter, mainly driven by activity coming from European customers," said CME Group Chief Executive Officer Phupinder Gill. "Also, we announced plans to acquire Trayport and FENICS, pending regulatory approval. Trayport will give us deepened access to commercial customers in the rapidly evolving European energy markets, while FENICS' strong client base, particularly in Asia, will further complement our foreign exchange (FX) product distribution. In addition, we are encouraged that trading volumes in our recently launched European exchange are beginning to gain early traction."

Second-quarter 2014 average daily volume was 12.6 million contracts, down 12 percent from second-quarter 2013 and impacted by low volatility across all asset classes. Clearing and transaction fee revenues were $609 million, also down 12 percent compared with the strong second-quarter 2013, when market participants reacted to the Federal Reserve chairman's comments about potential tapering of quantitative easing. Second-quarter 2014 total average rate per contract was 74.9 cents, down from 76.7 cents in first-quarter 2014, driven primarily by a higher proportion of total volume coming from interest rate products, which have lower average fees.

As of June 30, 2014, the company had $1.1 billion of cash and marketable securities and $2.1 billion of long-term debt.

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.

CME Group will hold a conference call to discuss second-quarter 2014 results at 8:30 a.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.

CME Group Inc. and Subsidiaries
Consolidated Balance Sheets
(in millions)

	June 30, 2014		December 31, 2013
ASSETS
Current Assets:
Cash and cash equivalents	$	1,037.3	$	2,469.7
Marketable securities	72.9		68.4
Accounts receivable, net of allowance	334.9		302.7
Other current assets (includes $37.0 and $40.0 in restricted cash)	196.2		209.7
Performance bonds and guaranty fund contributions	20,089.9		21,355.1
Total current assets	21,731.2		24,405.6
Property, net of accumulated depreciation and amortization	503.4		513.4
Intangible assets—trading products	17,175.3		17,175.3
Intangible assets—other, net	2,690.9		2,741.2
Goodwill	7,569.0		7,569.0
Other assets (includes $77.2 and $74.0 in restricted cash)	1,941.5		1,873.3
Total Assets	$	51,611.3	$	54,277.8
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	32.1	$	36.2
Short-term debt	—		749.9
Other current liabilities	254.7		1,169.8
Performance bonds and guaranty fund contributions	20,089.9		21,355.1
Total current liabilities	20,376.7		23,311.0
Long-term debt	2,107.5		2,107.2
Deferred income tax liabilities, net	7,271.9		7,249.7
Other liabilities	389.8		449.4
Total Liabilities	30,145.9		33,117.3
CME Group shareholders' equity	21,465.4		21,154.8
Non-controlling interest	—		5.7
Total Equity	21,465.4		21,160.5
Total Liabilities and Equity	$	51,611.3	$	54,277.8

CME Group Inc. and Subsidiaries
Consolidated Statements of Income
(dollars in millions, except per share amounts; shares in thousands)

	Quarter Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Revenues
Clearing and transaction fees	$	609.3	$	692.5	$	1,261.5	$	1,285.7
Market data and information services	89.6		79.4		179.0		160.3
Access and communication fees	20.4		20.6		40.8		42.1
Other	12.3		23.6		27.7		46.6
Total Revenues	731.6		816.1		1,509.0		1,534.7
Expenses
Compensation and benefits	139.7		128.9		275.2		258.3
Communications	8.3		8.6		16.5		17.5
Technology support services	14.6		13.8		28.5		26.2
Professional fees and outside services	37.5		27.9		67.1		49.8
Amortization of purchased intangibles	25.2		25.9		50.4		51.8
Depreciation and amortization	34.3		33.2		68.4		65.8
Occupancy and building operations	23.2		19.0		46.4		37.5
Licensing and other fee agreements	25.7		26.9		54.7		48.1
Other	11.1		24.1		35.3		66.4
Total Expenses	319.6		308.3		642.5		621.4
Operating Income	412.0		507.8		866.5		913.3
Non-Operating Income (Expense)
Investment income	15.1		18.7		18.3		22.3
Interest and other borrowing costs	(28.3)		(39.2)		(62.0)		(78.2)
Equity in net gains (losses) of unconsolidated subsidiaries	21.5		20.2		43.9		37.7
Other non-operating income (expense)	1.8		—		1.8		—
Total Non-Operating	10.1		(0.3)		2.0		(18.2)
Income before Income Taxes	422.1		507.5		868.5		895.1
Income tax provision	158.3		196.2		338.1		346.4
Net Income	263.8		311.3		530.4		548.7
Less: net income (loss) attributable to non-controlling interests	—		0.1		(0.2)		1.7
Net Income Attributable to CME Group	$	263.8	$	311.2	$	530.6	$	547.0
Earnings per Common Share Attributable to CME Group:
Basic	$	0.79	$	0.94	$	1.59	$	1.65
Diluted	0.79		0.93		1.58		1.64
Weighted Average Number of Common Shares:
Basic	334,097		332,341		334,002		332,148
Diluted	335,800		334,073		335,705		333,739

CME Group Inc. and Subsidiaries
Quarterly Operating Statistics

	2Q 2013		3Q 2013		4Q 2013		1Q 2014		2Q 2014
Trading Days	64		64		64		61		63



Quarterly Average Daily Volume (ADV)
CME Group ADV (in thousands)

Product Line	2Q 2013		3Q 2013		4Q 2013		1Q 2014		2Q 2014
Interest rate	6,828		5,839		5,274		6,725		6,668
Equity	3,079		2,408		2,471		2,890		2,465
Foreign exchange	1,042		792		705		817		638
Energy	1,796		1,609		1,571		1,705		1,457
Agricultural commodity	1,106		1,009		992		1,168		1,084
Metal	471		360		317		355		323
Total	14,323		12,018		11,331		13,659		12,636
Venue
Electronic	12,457		10,199		9,723		11,703		10,888
Open outcry	1,134		1,173		957		1,179		1,100
Privately negotiated*	731		646		651		778		647
Total	14,323		12,018		11,331		13,659		12,636


Average Rate Per Contract (RPC)
CME Group RPC

Product Line	2Q 2013		3Q 2013		4Q 2013		1Q 2014		2Q 2014
Interest rate	$	0.455	$	0.484	$	0.504	$	0.481	$	0.473
Equity	0.714		0.695		0.702		0.712		0.714
Foreign exchange	0.826		0.819		0.835		0.804		0.861
Energy	1.260		1.300		1.279		1.364		1.298
Agricultural commodity	1.378		1.323		1.327		1.369		1.430
Metal	1.613		1.626		1.682		1.707		1.715
Average RPC	$	0.748	$	0.762	$	0.780	$	0.767	$	0.749


*The privately negotiated venue average daily volume includes both traditional block trades as well as what was historically categorized as CME ClearPort. Going forward there will no longer be a break out for CME ClearPort.

CME Group Inc. and Subsidiaries
Reconciliation of GAAP to Non-GAAP Measures
(dollars in millions, except per share amounts; shares in thousands)

	Quarter Ended
	June 30, 2014
GAAP Net Income Attributable to CME Group	$	263.8

Less: MF Global bankruptcy claim	(14.5)

Less: Foreign exchange transaction gains¹	(5.5)

Add: Voluntary exit incentive plan	5.8

Add: Acquisition-related costs	4.7

Add: Income tax effect related to above	3.6

Adjusted Net Income Attributable to CME Group	$	257.9

GAAP Earnings per Common Share Attributable to CME Group:
Basic	$	0.79
Diluted	0.79

Adjusted earnings per Common Share Attributable to CME Group:
Basic	$	0.77
Diluted	0.77

Weighted Average Number of Common Shares:
Basic	334,097
Diluted	335,800

1. Second-quarter 2014 results included a $5.5 million foreign exchange transaction gain during the quarter principally related to cash held in British pounds within foreign entities whose functional currency is the U.S. dollar.