CME Group Inc. (Nasdaq: CME) today reported that fourth-quarter revenues increased 14 percent to $763 million and operating income increased 14 percent to $458 million from the year-ago period. Fourth-quarter 2010 operating margin was 60 percent, in line with fourth-quarter 2009. Operating margin is defined as operating income as a percentage of total revenues.
Fourth-quarter net income was $196 million and diluted earnings per share were $2.93. Fourth-quarter 2010 results included a $51.3 million charge within tax expense to record the impact of combined state and local tax rates on the company's existing deferred tax liabilities due to revised state apportionment estimates resulting from annual state tax filings. Results also included an $8.6 million charge to non-operating expense accelerated by termination of an interest rate swap associated with early payoff of a term loan. Excluding these items, fourth-quarter net income would have been $253 million and diluted earnings per share would have been $3.77.*
"CME Group finished the year with a strong fourth quarter, which grew 17 percent based on volume increases across all asset classes," said CME Group Executive Chairman Terry Duffy. "This reflects the strength of our customer base and the unique trading and hedging opportunities we provide through our diverse product base. We also saw 33 percent growth in trading activity outside U.S. trading hours, which reached 16 percent of total CME Globex volume, the highest percent yet achieved. This highlights the early stage success of our global growth efforts."
"In 2010, we continued to build for the future by extending our capabilities through accomplishments such as the addition of Dow Jones Indexes, the launch of our over-the-counter cleared interest rate swaps platform and the expansion of our relationship with BM&FBOVESPA, among many other strategic initiatives," said CME Chief Executive Officer Craig Donohue. "Additionally, we are very proud of our work to support appropriate and balanced financial regulation. With ongoing economic recovery, advancement of the regulatory process and continued investment in products and services to meet customer needs, we believe CME Group has established a strong position for future growth."
*A reconciliation of the non-GAAP net income and non-GAAP EPS mentioned to the respective GAAP figures can be found within the Reconciliation of GAAP to Non-GAAP Measures chart at the end of the financial statements.
CME Group Inc. Fourth-Quarter and Full Year 2010 Financial Highlights
($s in millions, except per share) |
Q4 FY10 |
Q4 FY09 |
Y/Y |
FY10 |
FY09 |
Y/Y |
|
Revenues |
$ 763 |
$ 667 |
14% |
$3,004 |
$2,613 |
15% |
|
Expenses |
$ 305 |
$ 265 |
15% |
$1,173 |
$1,024 |
15% |
|
Operating Income |
$ 458 |
$ 402 |
14% |
$1,831 |
$1,589 |
15% |
|
Operating Margin % |
60.1% |
60.3% |
61.0% |
60.8% |
|||
Net Income Attributable to CME Group |
$ 196 |
$ 203 |
-3% |
$ 951 |
$ 826 |
15% |
|
Diluted EPS |
$2.93 |
$3.04 |
-4% |
$14.31 |
$12.41 |
15% |
|
Fourth-quarter 2010 average daily volume was 12.0 million contracts, up 17 percent compared with fourth-quarter 2009. Clearing and transaction fee revenue was $625 million, up 12 percent from $557 million in fourth-quarter 2009. The total average rate per contract for CME Group was 81 cents, down 4 percent from fourth-quarter 2009, and up slightly from third-quarter 2010.
Fourth-quarter 2010 operating expense was $305 million, up 15 percent compared with fourth-quarter 2009. Full year 2010 operating expense was $1.17 billion, including a $20.5 million write down in second-quarter 2010, up from $1.02 billion in 2009. Within this variance, expenses related to the core business grew at approximately 8 percent, while non-core expenses were driven by the addition of the Dow Jones business in 2010, over-the-counter initiatives, regulatory efforts, and the building of a new multi asset class platform. Fourth-quarter 2010 non-operating expense was $31 million, driven primarily by interest expense and borrowing costs of $35 million, offset by $14 million of investment income.
As of December 31, the company had $905 million of cash and marketable securities and $2.5 billion of debt. The company's Board of Directors recently approved an increase in its dividend payout policy to approximately 35 percent of prior year's cash earnings from approximately 30 percent. Based on 2010 cash earnings results, this would result in an increase of the regular quarterly dividend by more than 20 percent. Future dividends remain subject to actual approval and declaration by the Board.
CME Group will hold a conference call to discuss fourth-quarter 2010 results at 9:00 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.