CME Group Inc. Reports Fourth-Quarter and Full-Year 2011 Financial Results

CHICAGO, Feb. 2, 2012 /PRNewswire/ -- CME Group Inc. (NASDAQ: CME) today reported full-year 2011 results, primarily driven by a 10 percent increase in overall average daily volume.  During the year, the company posted annual average daily volume records across the foreign exchange, agricultural commodities, energy and metals product lines.  

Reflecting CME Group's strong cash flow, and consistent with our capital structure guiding principles, CME Group's board of directors raised the first-quarter regular dividend 59 percent, to $2.23 per share, based on a change to our dividend policy, increasing our payout target from 35 percent to 50 percent of prior year's cash earnings.

Furthermore, the company declared an additional, annual variable dividend, amounting to $3.00 per share in 2012.  Going forward, this dividend will be considered in the first quarter of each year and will supplement the regular dividend.  The amount of the annual variable dividend will be determined after the end of each year, and the level will increase or decrease from year to year based on operating results, potential M&A activity, and other forms of capital return including regular dividends and share buybacks during the prior year.  Both dividends, totaling $5.23 per share, will be payable on March 26, 2012, to shareholders of record as of March 9, 2012.

Full-year 2011 revenues were $3.3 billion and operating income was $2.0 billion.  Full-year net income attributable to CME Group was $1.8 billion and diluted earnings per share were $27.15.  Fourth-quarter revenues were $736 million, which includes a $3 million negative impact related to MF Global's bankruptcy, and operating income was $390 million.  Fourth-quarter net income attributable to CME Group was $746 million and diluted earnings per share were $11.25.

Fourth-quarter 2011 results included a $528 million non-cash benefit from a tax adjustment primarily due to a revaluation of our deferred tax liabilities as a result of revisions to our state tax apportionment, and a negative impact of $30 million driven by activities related to MF Global's bankruptcy.  Excluding these items, fourth-quarter diluted EPS would have been $3.55 and full-year diluted EPS would have been $17.04.(1)  

"Despite a very challenging environment, 2011 was another productive year for CME Group," said CME Group Executive Chairman Terry Duffy.  "During the year we delivered the highest volume in our history, approaching 3.4 billion contracts traded.  We have performed well navigating through uncertain events such as the Fed's zero interest rate policy, the Eurozone crisis and the final rulemaking for Dodd-Frank.  As market participants adjusted to these factors during the fourth quarter, 2012 has started out strong, with open interest up 11 percent to date."

"CME Group's 2011 results and accomplishments demonstrated the sustainable strength and balance of our broad-based business," said CME Chief Executive Officer Craig Donohue.  "During the year, OTC clearing began to achieve some traction, we announced our proposed partnership with McGraw Hill, and we made steady progress with CME Clearing Europe.  We also supplemented our non-transactional revenue by achieving significant customer commitments for co-location services.  Overall, we continue to take decisive long-term strategic actions to expand our core business and continue to successfully advance our globalization strategy."

"The increase in our regular dividend and the addition of the variable dividend confirm both our optimism about our ability to drive continued growth and strong cash flows, and also our strong commitment to returning capital to CME Group's shareholders," said Jamie Parisi, CME Chief Financial Officer.  "We believe a strong and growing dividend, and significant dividend yield, will attract shareholders to what we believe is an exceptional business model that is not capital intensive and is highly cash-generative."

Fourth-quarter 2011 average daily volume was 11.7 million contracts, down 2 percent compared with the fourth quarter of 2010.  Clearing and transaction fee revenues of $599 million were down 4 percent from $625 million in fourth-quarter 2010.  Market data and information services revenue was $106 million, up 2 percent from $104 million in the same quarter last year.

Fourth-quarter total average rate per contract was 81.1 cents, in line with fourth-quarter 2010, and up 4 percent from third-quarter 2011.  The sequential variance can be attributed primarily to a greater proportion of higher-priced commodity product volume to lower-priced financial products, relative to the third quarter of 2011.

Fourth-quarter 2011 operating expense was $346 million, including $27 million of expense related to MF Global's bankruptcy.  Fourth-quarter 2011 non-operating expense was $21 million, driven primarily by interest expense and borrowing costs of $29 million, offset by $10 million of investment income.

As of December 31, the company had $1.1 billion of cash and marketable securities and $2.1 billion of long-term debt.

CME Group will hold a conference call to discuss fourth-quarter 2011 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.

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 and its trading facilities in New York and Chicago.  CME Group also operates CME Clearing, one of the world's leading central counterparty clearing providers, which offers clearing and settlement services for exchange-traded contracts, as well as for over-the-counter derivatives transactions through CME ClearPort^®. These products and services ensure that businesses everywhere can substantially mitigate counterparty credit risk in both listed and over-the-counter derivatives markets.

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.  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. 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; 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 over-the-counter market; our ability to adjust our fixed costs and expenses if our revenues decline; our ability to  generate revenues from our processing services; 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; changes in government policy, including policies relating to common or directed clearing and changes as a result of legislation stemming from the implementation of the Dodd-Frank Act; the costs associated with protecting our intellectual property rights and our ability to operate our business without violating the intellectual property rights of others; our ability to generate revenue from our market data that may be reduced or eliminated by the growth of electronic trading, the state of the overall economy or declines in subscriptions; 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 fixed income, 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 stemming from the financial crisis that began in 2008 and any other future crises; our ability to accommodate increases in trading volume and order transaction traffic without failure or degradation of 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 acquisition, investment and alliance strategy; 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 the repeal of the 60/40 tax treatment of such transactions; the unfavorable resolution of material legal proceedings and the seasonality of the futures business. More detailed information about factors that may affect our performance may be found in our filings with the Securities and Exchange Commission, including our most recent periodic reports filed on Form 10-K and Form 10-Q, which are available in the Investor Relations section of the CME Group Web site. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

(1) A reconciliation of the non-GAAP EPS mentioned to the respective GAAP figure can be found within the Reconciliation of GAAP to Non-GAAP Measures chart at the end of the financial statements.

CME-E

SOURCE CME Group

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