Pro forma non-GAAP diluted earnings per share in the third quarter were $4.31, a 68 percent increase from $2.56 in the third-quarter 2006. Third-quarter 2007 pro forma results exclude merger-related costs consisting of restructuring charges, integration and legal costs, acceleration of depreciation related to CBOT data centers, and include CBOT operating results for the full third quarter. The pro forma comparative results for 2006 reflect the operating results of both CME and CBOT as if they were combined. Using this methodology, total pro forma revenues were $585 million, a 41 percent increase compared with the same period a year ago, and pro forma net income was $236 million, a 68 percent increase. Pro forma measures do not replace and are not a substitute for GAAP financial results, but are provided to improve overall understanding of current financial performance and to provide a meaningful comparison to prior periods.
"CME Group finished a record quarter with an unprecedented volume increase of nearly 50 percent," said CME Group Executive Chairman Terry Duffy. "Our successful merger with the Chicago Board of Trade has positioned us as a leader in all major asset classes, and we saw robust growth in our agricultural, equity index, foreign exchange and interest rate products, as well as in our energy and metals derivatives processing business. Looking ahead, we are intensely focused on successfully completing our integration with CBOT and serving our expanding customer base around the world."
"In addition to delivering outstanding third-quarter results, we are building on our robust core business by serving customers in over-the-counter derivatives markets and launching innovative new products across existing and new asset classes," said CME Group Chief Executive Officer Craig Donohue. "We also are poised to drive further growth through expanding our global distribution and processing capabilities, as exemplified by our proposed agreements with the Brazilian Mercantile & Futures Exchange, the largest derivatives exchange in South America, and the Korea Exchange, a premier capital marketplace for Northeast Asia."
All references to volume and rate per contract information in the text of this document exclude our non-traditional TRAKRS products, for which CME Group receives significantly lower clearing fees than other CME Group products, CME Group Auction Markets products, which were available to trade prior to July 2007, and Swapstream products.
Third-quarter 2007 volume averaged a record 12.7 million contracts per day, up 49 percent, assuming combined CME/CBOT volumes for the entire quarter. Total quarterly volume exceeded 798 million contracts, of which 77 percent traded electronically. This strong volume drove $496 million of CME Group clearing and transaction fee revenue, an increase of 46 percent from $340 million in third-quarter 2006, assuming the CME and CBOT were combined at that time. The pro forma average rate per contract was $0.622 for the quarter compared with $0.632 in the third quarter of 2006. This 2 percent rate decrease was primarily driven by volume discounts due to significantly higher volumes.
Keeping in mind that the historical CME clearing business revenue and related CBOT expense are excluded from the pro-forma non-GAAP results, CME Group processing services revenue for the combined company tripled from $5 million to $15 million. The third quarter was the fifth consecutive record quarter of NYMEX volume on CME Globex. Additionally, quotation data fees were up 12 percent to $49 million.
Total pro forma expenses increased 7 percent to $211 million. The majority of this increase was driven by an increase in volume-related expenses including license fees and the bonus component of compensation, which is tied to performance.
Third-quarter operating income on a combined pro forma basis was $375 million, an increase of 73 percent from $216 million for the year-ago period. The company's operating margin was 64 percent compared with 52 percent for the same period last year. Operating margin is defined as operating income as a percentage of total revenues.
