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)
July 22, 2003
CHICAGO MERCANTILE EXCHANGE HOLDINGS INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 001-31553 36-4459170
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
30 South Wacker Drive, Chicago, Illinois 60606
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(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (312) 930-1000
N/A
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(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 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
July 22, 2003, reporting Chicago Mercantile Exchange Holdings Inc.'s financial
results for the second quarter of 2003.
EXHIBIT INDEX
Exhibit
Number Description
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99.1 Press Release, dated July 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: July 22, 2003 By: /s/ Kathleen M. Cronin
------------------------
Kathleen M. Cronin
Corporate Secretary
Exhibit 99.1
CHICAGO MERCANTILE
EXCHANGE HOLDINGS INC. NEWS RELEASE
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, Earnings
for the Second Quarter of 2003, Spurred by Strength in Major Product Groups
CHICAGO, July 22, 2003-- Chicago Mercantile Exchange Holdings Inc.
(NYSE: CME) today reported record revenues and earnings for the second quarter
of 2003, spurred by strong trading volume in its three largest product
categories: interest rates, equities and foreign exchange.
Net revenues increased 32 percent to a record $142.4 million for the
second quarter of 2003, compared with $107.5 million for the year-earlier
period. Net income rose 67 percent to a record $35.0 million, versus $21.0
million for the same period in 2002. Earnings per diluted share improved 45
percent to a record $1.03 from 71 cents per diluted share for the second
quarter last year. This growth occurred on a base of shares that has increased
by 3.7 million with the company's initial public offering in December 2002.
Average daily volume increased 23 percent to nearly 2.7 million
contracts for the second quarter of 2003 versus the same period of 2002. Each
of CME's trading venues set quarterly volume records. More than 1.5 million
contracts a day were traded via open outcry, up 5 percent from the second
quarter last year. Nearly 1.1 million contracts a day changed hands on CME's
GLOBEX(R) electronic trading platform, a 63 percent increase from a year ago,
and 41,000 contracts a day were privately negotiated, up 25 percent. During
the second quarter of 2003, 41 percent of CME's volume traded on GLOBEX,
compared with 31 percent during the same period a year ago. June 2003 was the
second busiest month in CME's history for E-mini(TM) equity futures, which
averaged more than 1.0 million contracts a day during the month.
"Our strong second quarter performance was driven by our diverse
product line with substantial trading volume in our three largest product
groups - particularly interest rates - where volume grew each month to
culminate in a new record in June," said Chairman Terry Duffy. "We believe
that one contributor to this growth has been a continuing shift in the global
derivatives landscape as users are increasingly focused on credit quality and
cognizant of the appeal of transparent, exchange-traded instruments with
central counterparty clearing. Our interest rate volume also benefited from
continued mortgage refinancing activity, which increasingly is hedged with our
Eurodollar futures and options contracts - as well as the quarter-point
interest rate adjustment by the U.S. Federal Reserve Board.
"This quarter, we will continue to aggressively prepare for the
launch of the CME/CBOT(R) Common Clearing Link based on the definitive
agreement we reached in April," said Duffy. "We are on track to begin clearing
Chicago Board of Trade(R) commodity, equity and certain interest rate products
on Nov. 24, 2003, with the remainder scheduled to begin on Jan. 2, 2004."
"We've focused significant resources on expanding our distribution,
making it easier than ever before to trade on CME, no matter where you are in
the world," said President and Chief Executive Officer Jim McNulty. "In the
past three years, we opened up access to GLOBEX, dramatically increased the
speed of trading, established a telecommunications hub in Europe and increased
the number of independent software vendors and data centers that offer GLOBEX
interfaces. Since the beginning of this year, we've added 16 network
connections to our European hub, for a total of 36; streamlined our foreign
exchange delivery process to offer cost savings to market participants; and
announced two new programs to expand telecommunications alternatives and
reduce costs for users of GLOBEX, our CLEARING 21(R) system and our market
data. We believe that broadening access and distribution has expanded both our
customer base and trading volume."
For the second quarter of 2003, revenue from clearing and transaction
fees increased 37 percent to $115.8 million from $84.3 million for the same
period of 2002. Quotation data fees rose 14 percent to $13.6 million for the
second quarter of 2003, versus $11.9 million for the same period a year ago,
driven by a pricing change that took effect in April 2003.
Total operating expenses for the second quarter of 2003 were $83.0
million, compared with $73.0 million for the second quarter of 2002. During
the 2003 quarter, the company recorded stock-based compensation expense of
$0.8 million. Based on a stock option and restricted stock grant in June, CME
expects the stock-based compensation portion of compensation and benefits to
increase to approximately $1.4 million per quarter in the third and fourth
quarters of 2003.
Income before income taxes was $59.4 million for the second quarter
of 2003, an increase of 72 percent from $34.5 million for the same period a
year ago. The company's operating margin, defined as income before income
taxes expressed as a percentage of net revenues, was 41.7 percent for the
second quarter of 2003, compared with 32.1 percent for the year-earlier
quarter.
CME's working capital was $381.6 million at June 30, 2003, compared
with $325.6 million at Dec. 31, 2002, primarily due to the operating results
during the first six months of 2003.
Capital expenditures and capitalized software development costs were
$13.9 million for the second quarter. The company paid a quarterly dividend of
14 cents per common share, which totaled $4.6 million in June 2003.
Six-Month Results
For the first six months of 2003, net revenues increased 29 percent
to a record $268.4 million from $208.6 million for the first half of 2002.
Clearing and transaction fees improved 35 percent to $218.2 million from
$162.2 million a year ago, benefiting from higher trading volume. Total
operating expenses were $165.3 million for the first half of 2003, versus
nearly $143.0 million for the comparable period of 2002. Income before income
taxes was $103.1 million for the first half of 2003, up 57 percent from $65.7
million for the same period a year ago. The operating margin was 38.4 percent
for the first six months of 2003, compared with 31.5 percent for the
year-earlier period.
The company reported record net income of $61.1 million, or $1.81 per
diluted share, for the first six months of this year, compared with $39.7
million, or $1.33 per diluted share, for the first half of 2002.
Capital expenditures and capitalized software development costs were
$25.0 million for the first six months of 2003.
During the second quarter of 2003, certain shareholders sold
1,220,635 shares of Class A common stock at a price of $69.60 per share in an
underwritten offering. The company did not sell any shares or receive any
proceeds from the sale of stock by its shareholders in the offering.
Chicago Mercantile Exchange Holdings Inc. became the first publicly
traded U.S. financial exchange on Dec. 6, 2002. The company was added to the
Russell 1000(R) Index on July 1, 2003. It is the parent company of Chicago
Mercantile Exchange Inc. (www.cme.com), the largest futures exchange in the
United States. As an international marketplace, CME brings together buyers and
sellers on its trading floors and its GLOBEX electronic trading platform. CME
offers futures contracts and options on futures contracts 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
half of 2003 and managed $29.1 billion in collateral deposits at June 30,
2003.
CME will hold a conference call to discuss second 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; those
wishing to listen to the live conference via telephone should dial (800)
500-0177 if calling from within the United States or (719) 457-2679 if calling
from outside the United States at least 10 minutes before the call begins.
Following the conference call, an archived recording and PowerPoint slides
will be available at the same site.
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
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. CLEARING 21 is a registered trademark of CME and
New York Mercantile Exchange, Inc. Russell 1000 and other trade names, service
marks, trademarks and registered trademarks that are not proprietary to
Chicago Mercantile Exchange Inc. are the property of their respective owners,
and are used herein under license. 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)
June 30, 2003 Dec. 31, 2002
ASSETS
Current Assets:
Cash and cash equivalents $ 392,835 $ 339,260
Proceeds from securities lending activities 1,057,976 985,500
Accounts receivable 69,316 50,865
Other current assets 8,350 11,515
Cash performance bonds and security deposits 1,968,317 1,827,991
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Total Current Assets 3,496,794 3,215,131
Property, net of accumulated depreciation and amortization 107,096 109,563
Other assets 36,360 30,322
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TOTAL ASSETS $3,640,250 $3,355,016
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 29,173 $ 27,607
Payable under securities lending agreements 1,057,976 985,500
Other current liabilities 59,692 48,396
Cash performance bonds and security deposits 1,968,317 1,827,991
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Total Current Liabilities 3,115,158 2,889,494
Long-term debt 648 2,328
Other liabilities 19,411 17,055
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Total Liabilities 3,135,217 2,908,877
Shareholders' Equity 505,033 446,139
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,640,250 $3,355,016
========== ==========
Balance Sheet Items Excluding
Cash Performance Bonds and Security Deposits and Securities Lending(1)
June 30, 2003 Dec. 31, 2002
Current assets $470,501 $401,640
Total assets 613,957 541,525
Current liabilities 88,865 76,003
Total liabilities 108,924 95,386
1 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.
Chicago Mercantile Exchange Holdings Inc. and Subsidiaries
Consolidated Statements of Income
(dollars in thousands, except share and per share amounts)
Quarter Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
---- ---- ---- ----
REVENUES
Clearing & transaction fees $115,808 $84,274 $218,207 $162,159
Quotation data fees 13,570 11,925 25,369 24,390
GLOBEX access fees 3,883 3,278 7,605 6,408
Communication fees 2,412 2,506 4,828 4,911
Investment income 2,164 1,304 3,310 2,921
Securities lending interest income 2,029 6,275 4,886 9,789
Other operating revenue 4,429 3,518 8,690 6,571
------- ------- ------- -------
TOTAL REVENUES 144,295 113,080 272,895 217,149
Securities lending interest expense (1,904) (5,548) (4,488) (8,525)
------- ------- ------- --------
NET REVENUES 142,391 107,532 268,407 208,624
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EXPENSES
Compensation & benefits 37,970 29,335 71,214 60,108
Occupancy 6,294 5,308 12,575 11,089
Professional fees, outside services & licenses 7,561 8,377 14,939 15,638
Communications & computer & software 11,182 11,325 23,299 21,633
maintenance
Depreciation & amortization 13,321 12,337 26,532 23,151
Marketing, advertising & public relations 1,534 1,354 7,136 2,917
Other operating expense 5,159 5,007 9,588 8,436
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TOTAL EXPENSES 83,021 73,043 165,283 142,972
------ ------ ------- -------
Income before income taxes 59,370 34,489 103,124 65,652
Income tax provision (24,357) (13,498) (41,990) (26,002)
-------- -------- -------- ---------
NET INCOME $ 35,013 $ 20,991 $61,134 $ 39,650
======== ======== ======= ========
EARNINGS PER SHARE
Basic $ 1.07 $ 0.73 $ 1.88 $ 1.38
====== ====== ====== ======
Diluted $ 1.03 $ 0.71 $ 1.81 $ 1.33
====== ====== ====== ======
Weighted average number of common shares:
Basic(2) 32,624,015 28,800,423 32,579,249 28,787,562
Diluted(2) 33,867,000 29,656,429 33,865,295 29,706,321
2 In December 2002, CME Holdings issued approximately 3.7 million shares in its initial public offering.
Average Daily Volume (Round Turns, in Thousands)
2Q 3Q 4Q 1Q 2Q
2002 2002 2002 2003 2003
Interest rates 1,295 1,290 1,030 1,121 1,389
Equity E-mini 598 812 848 958 936
Equity standard-size 140 161 138 142 134
Foreign exchange 102 93 93 127 137
Commodities 32 28 29 35 34
----- ------ ----- ----- -----
Subtotal 2,167 2,384 2,138 2,383 2,630
TRAKRS -- 31 122 18 46
----- ------ ----- ----- -----
Total 2,167 2,415 2,260 2,401 2,676
===== ===== ===== ===== =====
Open outcry 1,467 1,471 1,192 1,299 1,548
Electronic (including TRAKRS) 667 915 1,036 1,063 1,087
Privately negotiated 33 29 32 39 41
----- ------ ----- ----- -----
Total 2,167 2,415 2,260 2,401 2,676
===== ===== ===== ===== =====
Transaction Fees (in Thousands)
2Q(3) 3Q 4Q 1Q 2Q(4)
2002 2002 2002 2003 2003
Interest rates $35,809 $38,314 $33,506 $33,763 $47,174
Equity E-mini 25,946 37,018 37,639 41,607 39,692
Equity standard-size 9,149 11,948 10,691 10,594 10,641
Foreign exchange 11,606 10,320 11,322 14,502 16,235
Commodities 1,764 1,650 1,766 1,920 2,034
------ ------ ------- ------- -------
Subtotal 84,274 99,250 94,924 102,386 115,776
TRAKRS -- 5 58 13 32
------- ------- ------- -------- --------
Total $84,274 $99,255 $94,982 $102,399 $115,808
======= ======= ======= ======== ========
Open outcry $43,968 $49,032 $43,568 $43,986 $56,308
Electronic (including TRAKRS) 32,760 43,489 43,322 48,936 49,245
Privately negotiated 7,546 6,734 8,092 9,477 10,255
------- ------- ------- -------- --------
Total $84,274 $99,255 $94,982 $102,399 $115,808
======= ======= ======= ======== ========
Average Rate Per Trade
2Q(3) 3Q 4Q 1Q 2Q(4)
2002 2002 2002 2003 2003
Interest rates $ 0.43 $ 0.46 $ 0.51 $ 0.49 $ 0.54
Equity E-mini 0.68 0.71 0.69 0.71 0.67
Equity standard-size 1.02 1.16 1.21 1.22 1.26
Foreign exchange 1.77 1.73 1.90 1.88 1.89
Commodities 0.87 0.92 0.95 0.91 0.95
------ ------ ------- ------- -------
Average excluding TRAKRS 0.61 0.65 0.69 0.70 0.70
TRAKRS -- 0.003 0.007 0.012 0.011
------- ------- -------- ------- -------
Overall rate per trade $ 0.61 $ 0.64 $ 0.66 $ 0.70 $ 0.69
Open outcry $ 0.47 $ 0.52 $ 0.57 $ 0.56 $ 0.58
Electronic (including TRAKRS) 0.77 0.74 0.65 0.75 0.72
Privately negotiated 3.62 3.64 3.90 3.96 4.00
------ ------ ------ ------ ------
Overall rate per trade $ 0.61 $ 0.64 $ 0.66 $ 0.70 $ 0.69
3 Second quarter 2002 transaction fees reflect a $5 million reduction for a
fund established for clearing firms related to a one-time adjustment. This
reduced the overall rate per trade by 3.6 cents from 64.4 cents to 60.8
cents, impacting all product groups.
4 Second quarter 2003 transaction fees include a $2.5 million assessment to a
clearing firm which primarily affected the rate per trade for interest rate
contracts. Without this assessment, the interest rate contract rate per
trade would have been 51.2 cents, the assessment increased it 2.7 cents to
53.9 cents. The overall rate per trade, excluding TRAKRS, would have been
68.4 cents, and was increased by 1.5 cents to 69.9 cents. Transaction fee
assessments occur in the regular course of business.
03-108 # # #
