UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported)
April 22, 2003 (April 22, 2003)
CHICAGO MERCANTILE EXCHANGE HOLDINGS INC.
----------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 001-31553 36-4459170
--------------- ----------------- ---------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
30 South Wacker Drive, Chicago, Illinois 60606
- --------------------------------------------------- --------
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (312) 930-1000
N/A
---------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
ITEM 9. Regulation FD Disclosure.
This information set forth under "Item 9. Regulation FD Disclosure"
is intended to be furnished under Item 9 and also under "Item 12. Results Of
Operations And Financial Condition" in accordance with SEC Release No.
33-8216. Such information, including the Exhibit attached hereto, shall not be
deemed "filed" for purposes of Section 18 of the Securities Act of 1934, nor
shall it be deemed incorporated by reference in any filing under the
Securities Act of 1933, except as shall be expressly set forth by specific
reference in such filing.
Attached and incorporated herein by reference as Exhibit 99.1 is a
copy of a press release of Chicago Mercantile Exchange Holdings Inc., dated
April 22, 2003, reporting Chicago Mercantile Exchange Holdings Inc.'s
financial results for the first quarter of 2003.
EXHIBIT INDEX
Exhibit
Number Description
- ------ --------------
99.1 Press Release, dated April 22, 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
CHICAGO MERCANTILE EXCHANGE HOLDINGS INC.
Registrant
Date: April 22, 2003 By: /s/ Kathleen M. Cronin
------------------------------------
Kathleen M. Cronin
Corporate Secretary
Exhibit 99.1
[CHICAGO MERCANTILE EXCHANGE HOLDINGS INC. LOGO] NEWS RELEASE
30 S. Wacker Drive, Chicago, IL 60606 NYSE: CME www.cme.com
Media Contacts
Ellen G. Resnick,
312/930-3435
Maryellen T. Thielen,
312/930-3467
news@cme.com
FOR IMMEDIATE RELEASE
Investor Contact
John Peschier, 312/930-8491
Chicago Mercantile Exchange Holdings Inc. Reports Record Revenues
and a 40 Percent Increase in Net Income for the First Quarter of 2003,
Benefiting From Increased Average Daily Trading Volume
CHICAGO, April 22, 2003 - Chicago Mercantile Exchange Holdings Inc.
(NYSE: CME) today reported record revenues and a 40 percent increase in net
income for the first quarter of 2003, primarily due to higher trading volume.
Net revenues climbed 25 percent to a record $126.0 million for the first
quarter of this year, compared with $101.1 million for the same period of
2002. Net income was $26.1 million, versus $18.7 million for the first quarter
last year. Earnings per diluted share rose 22 percent to 77 cents from 63
cents per diluted share for the year-earlier period.
Average daily volume was 2.4 million contracts for the first quarter
of 2003, a 20 percent increase from the first quarter of last year. In March
2003, average daily volume achieved a monthly record of nearly 2.8 million
contracts a day. At 1.1 million average contracts a day, trading on CME's
GLOBEX(R) electronic trading platform grew 109 percent in the first quarter of
2003 versus 2002 and represented 44 percent of total volume, compared with 25
percent for the same period a year ago. E-mini(TM) equity contract volume led
CME's electronic volume growth, averaging nearly 958,000 contracts a day for
the first quarter of 2003 - more than double the 450,000 contracts a day
recorded in the first quarter of 2002.
"In recent months, CME products again demonstrated their ability to
meet customer needs in a volatile global climate," said Chairman Terry Duffy.
"We benefit from a diverse product line that allows market participants to
hedge against financial risks and obtain 23-hour-a-day investment and asset
allocation opportunities in interest rates, equities, foreign exchange and
commodities. Total volume in all four of our major product areas grew in the
first quarter of 2003 from the fourth quarter of last year, even though we had
three fewer trading days."
"For the first time this past quarter, our GLOBEX electronic trading
platform was the largest contributor to transaction fee revenue, at 48
percent," said President and Chief Executive Officer Jim McNulty. "Also this
quarter, we continued to attract new customers worldwide through GLOBEX, which
contributed to a new monthly record in foreign exchange futures of more than
3.1 million contracts in March. While open outcry and privately negotiated
transactions were strong, much of our foreign exchange growth has been coming
from GLOBEX, which handled about 36 percent of our total foreign exchange
volume in the first quarter, compared with 23 percent in the first quarter of
last year."
For the first quarter of 2003, revenue from clearing and
transaction fees increased 31 percent to $102.4 million from $77.9 million for
the same period of 2002. The category represented 81 percent of net revenues
in the 2003 quarter. Quotation data fees were $11.8 million for the 2003
period, versus $12.5 million for the 2002 quarter, due to a decline in the
number of CME data subscribers that occurred because of contraction in the
financial services industry. Expenses of approximately $5.1 million for a
-more-
CHICAGO MERCANTILE EXCHANGE HOLDINGS INC.
PAGE 2
brand advertising campaign contributed to operating expenses of $82.3 million
for the quarter. For the first quarter of 2002, operating expenses were $69.9
million. Income before income taxes was $43.8 million for the current quarter,
an increase of 40 percent from $31.2 million for the year-earlier period. The
company's operating margin, defined as income before income taxes expressed as
a percentage of net revenues, was 34.7 percent for the first quarter of 2003,
compared with 30.8 percent for the same period a year ago. Operating margin is
presented because it provides an indication of profitability that is not
influenced by the size of an organization or the effect of income taxes, which
may vary by geographical location and corporate structure.
In the first quarter of 2003, CME introduced CME$INDEX(TM) futures
and options. This geometric index of seven foreign currencies is weighted to
reflect the relative competitiveness of U.S. goods in foreign markets, and is
traded both on CME's Chicago-based trading floors and on GLOBEX. Also during
the quarter, CME and Frank Russell Company announced that on April 28, the
exchange will launch futures contracts based on the Russell 1000(R) Index. The
Russell 1000 is composed of stocks of the top 1,000 U.S. corporations based on
market capitalization. In combination with CME's Russell 2000(R) and E-mini
Russell 2000 futures and options, the new contract will offer exposure to the
Russell 3000(R) universe of stocks, representing 98 percent of the investable
U.S. equity market.
While CME continues to engage in securities lending activities, there
were no balances invested at March 31, 2003, as market conditions and the
securities available for lending would not have resulted in a favorable
return.
CME's working capital was $347.6 million at March 31, 2003, compared
with $325.6 million at Dec. 31, 2002. The company paid a dividend of 14 cents
per common share, which totaled $4.6 million in March 2003.
CME will hold a conference call to discuss first quarter results at
8:30 a.m. Eastern time today. A live audio Webcast of the conference call will
be available on the Investor Relations section of CME's Web site. Following
the conference call, an archived recording will be available at the same site.
Chicago Mercantile Exchange Holdings Inc. is the parent company of
Chicago Mercantile Exchange Inc. (www.cme.com), the largest futures exchange
in the United States based on notional value, trading volume and open
interest. On Dec. 6, 2002, CME Holdings became the first publicly traded U.S.
financial exchange. As an international marketplace, CME brings together
buyers and sellers on its trading floors and GLOBEX around-the-clock
electronic trading platform. CME offers futures contracts and options on
futures primarily in four areas: interest rates, stock indexes, foreign
exchange and commodities. The exchange moved about $1.5 billion per day in
settlement payments in the first quarter of 2003 and managed $28.5 billion in
collateral deposits at March 31, 2002.
Statements in this news 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 competitors, including new
entrants into our markets; our ability to keep pace with rapid technological
developments; our ability to continue introducing competitive new products and
services on a timely, cost-effective basis, including through our electronic
trading capabilities; our ability to maintain the competitiveness of our
existing products and services; our ability to efficiently and simultaneously
operate both open outcry trading and electronic trade execution facilities;
our ability to adjust our fixed costs and expenses if our revenues decline;
changes in domestic and foreign regulations; changes in government policy,
including interest rate policy; the costs associated with protecting our
intellectual property rights and our ability to operate our business without
violating the intellectual property rights of others; the ability of our joint
venture, OneChicago, to obtain market acceptance of its products and achieve
sufficient trading volume to operate profitably; and the continued
availability of financial resources in the amounts and on the terms required
to support our future business. In addition, our performance could be affected
by our ability to realize the benefits or efficiencies we expect from our
for-profit initiatives, such as fee increases, volume and member discounts and
new access rules to our markets; our ability to recover market data fees that
may be reduced or eliminated by the growth of electronic trading; changes in
the level of trading activity, price levels and volatility in the derivatives
markets and in underlying fixed income, equity, foreign exchange and
-more-
CHICAGO MERCANTILE EXCHANGE HOLDINGS INC.
PAGE 3
commodities markets; economic, political and market conditions; our ability to
accommodate increases in trading volume without failure or degradation of
performance of our trading systems; our ability to manage the risks associated
with our acquisition, investment and alliance strategy; industry and customer
consolidation; decreases in member trading and clearing activity and
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 Annual Report on
Form 10-K, which is available in the Investor Information section of the CME
Web site. We undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or
otherwise.
GLOBEX is a registered trademark of Chicago Mercantile Exchange Inc.
E-mini is a trademark of CME. Further information about Chicago Mercantile
Exchange Holdings Inc. and Chicago Mercantile Exchange Inc. is available on
the CME Web site at www.cme.com.
Chicago Mercantile Exchange Holdings Inc. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands)
March 31, 2003 Dec. 31, 2002
ASSETS
Current Assets:
Cash and cash equivalents $ 356,954 $ 339,260
Proceeds from securities lending activities --- 985,500
Accounts receivable 63,708 50,865
Other current assets 11,232 11,515
Cash performance bonds and security deposits 1,814,162 1,827,991
---------- ----------
Total Current Assets 2,246,056 3,215,131
Property, net of accumulated depreciation and amortization 107,438 109,563
Other assets 33,191 30,322
---------- -----------
TOTAL ASSETS $2,386,685 $3,355,016
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 27,222 $ 27,607
Payable under securities lending agreements --- 985,500
Other current liabilities 57,076 48,396
Cash performance bonds and security deposits 1,814,162 1,827,991
--------- ---------
Total Current Liabilities 1,898,460 2,889,494
Long-term debt 1,469 2,328
Other liabilities 18,405 17,055
--------- ---------
Total Liabilities 1,918,334 2,908,877
Shareholders' Equity 468,351 446,139
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,386,685 $3,355,016
========== ==========
Balance Sheet Items Excluding
Cash Performance Bonds and Security Deposits and Securities Lending*
March 31, 2003 Dec. 31, 2002
Current assets $431,894 $401,640
Total assets 572,523 541,525
Current liabilities 84,298 76,003
Total liabilities 104,172 95,386
* Securities lending and cash performance bonds and securities deposits are
excluded from this presentation, as there are current assets for these
balances that have equal and offsetting current liabilities. This
presentation results in a more meaningful indication to investors of the
assets owned and related obligations of the company. Clearing firms are
subject to performance bond requirements pursuant to the rules of the
exchange. The clearing firm can elect to satisfy these requirements in
cash, which is reflected in the consolidated balance sheets, or by
depositing securities, which are not reflected in the consolidated balance
sheets. The balance of cash performance bonds and security deposits that
are deposited by clearing firms may change daily as a result of changes in
the clearing firms' open positions and how clearing firms elect to satisfy
their performance bond requirements. Securities lending transactions
utilize a portion of the securities that clearing firms have deposited to
satisfy their proprietary performance bond requirements.
-more-
CHICAGO MERCANTILE EXCHANGE HOLDINGS INC.
PAGE 4
Chicago Mercantile Exchange Holdings Inc. and Subsidiaries
Consolidated Statements of Income
(dollars in thousands, except share and per share amounts)
Quarter Ended March 31,
2003 2002
---- ----
REVENUES
Clearing & transaction fees $ 102,399 $ 77,885
Quotation data fees 11,799 12,465
GLOBEX access fees 3,722 3,130
Communication fees 2,416 2,405
Investment income 1,146 1,617
Securities lending interest income 2,857 3,514
Other 4,261 3,053
---------- ---------
TOTAL REVENUES 128,600 104,069
Securities lending interest expense (2,584) (2,977)
---------- ---------
NET REVENUES 126,016 101,092
---------- ---------
EXPENSES
Compensation & benefits 33,244 30,773
Occupancy 6,281 5,781
Professional fees, outside services & licenses 7,378 7,261
Communications & computer & software maintenance 12,117 10,308
Depreciation & amortization 13,211 10,814
Marketing, advertising & public relations 5,602 1,563
Other 4,429 3,429
--------- ----------
TOTAL EXPENSES 82,262 69,929
--------- ----------
Income before income taxes 43,754 31,163
Income tax provision (17,633) (12,504)
--------- ----------
NET INCOME $ 26,121 $ 18,659
========= ==========
EARNINGS PER SHARE:
Basic $ 0.80 $ 0.65
========= ==========
Diluted $ 0.77 $ 0.63
========= ==========
Weighted average number of common shares:
Basic** 32,534,483 28,774,700
Diluted** 33,863,591 29,756,212
** In December 2002, CME Holdings issued approximately 3.7 million shares in its initial public offering.
-more-
CHICAGO MERCANTILE EXCHANGE HOLDINGS INC.
PAGE 5
Average Daily Volume (Round Turns, in Thousands)
- -------------------------------------------------------------------------------------------------------------------------------
1Q 2Q 3Q 4Q Full Year 1Q
2002 2002 2002 2002 2002 2003
Interest rates 1,295 1,295 1,290 1,030 1,226 1,121
Equity E-mini 450 598 812 848 680 958
Equity standard-size 136 140 161 138 144 142
Foreign exchange 96 103 93 93 96 127
Commodities 32 32 28 29 30 35
------- ------- ------ -------- -------- --------
Subtotal 2,009 2,167 2,385 2,138 2,177 2,383
TRAKRS -- -- 31 122 39 18
------- ------- ------ -------- -------- --------
Total 2,009 2,167 2,415 2,260 2,216 2,401
Open outcry 1,468 1,468 1,472 1,192 1,399 1,299
Electronic (including TRAKRS) 508 667 915 1,036 786 1,063
Privately negotiated 33 33 29 32 32 39
------- ------- ------ -------- -------- --------
Total 2,009 2,167 2,415 2,260 2,216 2,401
- -------------------------------------------------------------------------------------------------------------------------------
Transaction Fees (in Thousands)
- --------------------------------------------------------------------------------------------------------------------------------
1Q 2Q*** 3Q 4Q Full Year 1Q
2002 2002 2002 2002 2002 2003
Interest rates $35,536 $35,809 $38,318 $33,506 $143,169 $33,763
Equity E-mini 20,704 25,945 37,018 37,639 121,306 41,607
Equity standard-size 8,762 9,149 11,945 10,691 40,546 10,594
Foreign exchange 11,139 11,606 10,320 11,322 44,387 14,502
Commodities 1,744 1,764 1,650 1,766 6,924 1,920
--------- --------- --------- -------- -------- ---------
Subtotal 77,885 84,274 99,250 94,924 356,333 102,386
TRAKRS -- -- 5 58 63 13
--------- --------- --------- -------- -------- ---------
Total $77,885 $84,274 $99,255 $94,982 $356,396 $102,399
Open outcry $44,690 $43,968 $49,032 $43,568 $181,258 $43,986
Electronic (including TRAKRS) 25,408 32,760 43,489 43,322 144,979 48,936
Privately negotiated 7,787 7,546 6,734 8,092 30,160 9,477
--------- -------- -------- -------- -------- ---------
Total $77,885 $84,274 $99,255 $94,982 $356,396 $102,399
- ---------------------------------------------------------------------------------------------------------------------------------
Average Rate Per Trade
- --------------------------------------------------------------------------------------------------------------------------
1Q 2Q*** 3Q 4Q Full Year 1Q
2002 2002 2002 2002 2002 2003
Interest rates $0.46 $0.43 $ 0.46 $0.51 $0.46 $0.49
Equity E-mini 0.77 0.68 0.71 0.69 0.71 0.71
Equity standard-size 1.07 1.02 1.16 1.21 1.12 1.22
Foreign exchange 1.93 1.77 1.73 1.90 1.83 1.88
Commodities 0.91 0.87 0.92 0.95 0.91 0.91
Average excluding TRAKRS 0.65 0.61 0.65 0.69 0.65 0.70
TRAKRS -- -- 0.003 0.007 0.006 0.012
Overall rate per trade 0.65 0.61 0.64 0.66 0.64 0.70
Open outcry $0.51 $0.47 $0.52 $0.57 $0.51 $0.56
Electronic (including TRAKRS) 0.83 0.77 0.74 0.65 0.73 0.75
Privately negotiated 3.91 3.62 3.65 3.90 3.77 3.96
Overall rate per trade 0.65 0.61 0.64 0.66 0.64 0.70
- --------------------------------------------------------------------------------------------------------------------------
*** The second quarter 2002 transaction fees and rate per trade figures were impacted by a $5 million fund
established for clearing firms related to a one-time adjustment of the time allowed to submit
transaction fee claim adjustment requests.
# # #
03-58
