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): September 29, 2006
CBOT HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
| Delaware | 001-32650 | 36-4468986 | ||
| (State or other jurisdiction of incorporation or organization) |
(Commission File Number) | (I.R.S. Employer Identification No.) |
141 West Jackson Blvd.
Chicago, Illinois 60604
(Address, including zip code, of principal executive offices)
Registrant’s telephone number, including area code: (312) 435-3500
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 8.01 Other Events
CBOT Holdings, Inc. (the “Company”) is furnishing presentation materials included as Exhibit 99.1 to this report pursuant to Item 8.01 of Form 8-K which were used at a September 29, 2006 meeting with certain members of the investment community. The Company is not undertaking to update this presentation. This report will not be deemed an admission as to the materiality of any information herein (including Exhibit 99.1).
Item 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
| 99.1 | CBOT Holdings, Inc. presentation dated September 29, 2006. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CBOT HOLDINGS, INC. | ||||
| Date: September 29, 2006 | By: | /s/ Bernard W. Dan | ||
| Name: | Bernard W. Dan | |||
| Title: | President and Chief Executive Officer | |||
INDEX TO EXHIBITS
| Exhibit Number |
Description |
|||
| 99.1 | CBOT Holdings, Inc. presentation dated September 29, 2006. | |||
 EXHIBIT
99.1 |
 CBOT Holdings, Inc. September 29, 2006 Debbie Koopman, Director Investor Relations
|
 Forward Looking Statements September 29, 2006 Certain statements in this presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and includes any use of the words “may,” “should,” “could,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue”. These statements are based on management’s current expectations and involve assumptions that may be subject to change or risks and uncertainties that could cause actual results to differ materially from those set forth in the statements. Accordingly, actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statement contained in this presentation. The factors that may affect our performance may be found in the Annual Report on Form 10-K and other periodic reports filed by CBOT Holdings, Inc. with the U.S. Securities and Exchange Commission (“SEC”). These filings can be obtained at the SEC’s website at www.sec.gov. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. |
 Overview CBOT’s Comprehensive Approach Bryan Durkin, Executive Vice President and Chief Operating Officer Tour Trading Floor and Market Operations Strategic Growth Initiatives Bryan Durkin Financial Review Glen Johnson, Senior Vice President and Chief Financial Officer Question and Answer Session |
 Meeting the needs of the marketplace with functionality, access and liquidity Bryan Durkin Executive Vice President and Chief Operating Officer |
 CBOT’s Comprehensive Approach The CBOT’s strategic plan places heavy emphasis on providing customers with state-of-the-art technology and growing its business by: Responding directly to customer needs Increasing electronic trading functionality Expanding global access to CBOT products Building liquidity across all product categories |
 CBOT
Electronic Platform Upgrade CBOT implemented a major upgrade to its
electronic trading platform in October 2005 The upgrade was based upon customer input on the functionality they required Increased trading capabilities and risk management opportunities the CBOT delivers to the marketplace Built on the functionality previously available on the CBOT platform Provided enhanced speed and capacity for the platform Implemented a North American Trading Host Expanded the electronic trading session to 22 hours/day for interest rate, equity
index and metals products |
 CBOT
Electronic Platform 2006 Algorithms Enhancements CBOT created additional matching algorithm capability in 2006 which has been implemented in our 2 Year Treasury Note Futures contract and our 5 Year Treasury Note Futures contract Spanning the Globe 13 Access Points across North America, Europe and the Far East 262 direct connections across 150 firms supporting more than 40,000 terminals
with licenses spanning 16 geographic locations around the globe. 20 Independent Software Vendors, 99 Trading Firm front ends accessing e-cbot
|
 CBOT
Electronic Platform 2006 The Exchange is taking steps to bring the CBOT
platform’s open architecture to the next level. These efforts
will position the CBOT to: Increase its electronic trading system’s performance and reliability Handle expanded capacity of message traffic Prepare to meet the future needs of customers |
 CBOT
Electronic Platform Upgrade to Linux based Gateways Increased throughput Lower total cost of ownership Upgrade currently underway and will be substantively completed in 2006 Implement a distributed trading host architecture |
 CBOT
Advances in Floor Technology Launch of Side-by-Side Trading of
Agricultural Futures Integrated the floor with screen trading of Agricultural futures to create a single pool of liquidity Floor based electronic order routing system processes more than 90% of all filled
agricultural orders Local handheld technology is utilized by more than 325 users, encompassing more
than 80% of local trades across all CBOT futures pits |
 Side-by-Side Trading of Ags Launched Aug. 1 Greater Global Access to Benchmark Agricultural Products On-floor plasma screens display e-cbot market data. Hand-held devices allow simultaneous trading on floor and e-cbot. |
 Strategic Growth Initiatives Bryan Durkin Executive Vice President and Chief Operating Officer |
 Overview Market positioning Growth strategies Future opportunities |
 CBOT: Market Positioning Market leader: Futures and options on futures #2 in United States #3 in World |
 CBOT’s Volume Growth Average Daily Volume by Venue (in thousands) 927 1,033 1,365 1,802 2,372 2,677 3,189 2000 2001 2002 2003 2004 2005 YTD 2006* Electronic *YTD through Sept. 26 |
 Industry Growth Drivers Technological advances Deregulation Globalization Commodities as asset class Importance of risk management U.S. government spending Asset class convergence |
 CBOT: Growth Strategies New products, new services Global expansion Strategic alliances |
 Growth: New Products, New Services CBOT Full-Sized Gold Futures Full-Sized Gold and Silver Options $25 Big Dow Futures Soybean Crush Options Binary Options Ethanol Dow Jones-AIG Commodity Index Excess Return Futures |
 Gold
and Silver Futures Market Share (North American Market) 0% 10% 20% 30% 40% 50% 60% CBOT silver share CBOT gold share CBOT share of North American listed Gold and Silver futures contracts traded
*Through Sept. 26 |
 CBOT
Metals Complex – ADV & Market Share Growth CBOT share of North American listed Gold and Silver futures contracts
traded *Through Sept. 26 CBOT Metals Complex Futures ADV & Futures Market Share - 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 0% 10% 20% 30% 40% 50% 60% CBOT Futures Complex ADV CBOT Futures Market Share |
 Enhancements to Metals Complex Expanded the hours of EFPs to a 24-hour schedule Launched a directed fungibility program between Full- sized and mini-sized Metals contracts on Sept. 1, 2006 Electronic Warehouse Receipt system for Metals complex targeted for completion in 4Q06 List options on Full-sized Gold and Silver futures on CBOT open auction trading floor, side-by-side with e-cbot electronic in 4Q06 |
 Growth: New Products, New Services CBOT Full-sized Gold Futures Full-sized Gold and Silver Options $25 Big Dow Futures Soybean Crush Options Binary Options Ethanol Dow Jones-AIG Commodity Index Excess Return Futures |
 Growth: New Products, New Services Technology upgrades on e-cbot ® Increased speculative position limits |
 Growth: Global Expansion Global access to e-cbot ® Ease of access to CBOT for market users Side-by-side trading of Ag futures launched Aug. 1 |
 Electronic Agriculture Futures Side-by-Side trading of Agricultural Futures started 08/01/06 *Includes off exchange 01/01/06 thru 07/31/06 Electronic 3.5% Open Auction 96.5% 08/01/06 thru 09/26/06 *Open Auction 74.2% Electronic 25.8% Pre and Post Side-by-Side Trading of Ag Futures |
 Growth: Strategic Alliances Hosting agreements with regional North American exchanges JADE 50/50 Joint Venture |
 CBOT: Growth Strategies New products, new services Global expansion Strategic alliances |
 Future Opportunities |
 CBOT: Growth Strategies New products, new services Global expansion Strategic alliances |
 Opportunities: New Products, New Services Derivatives of existing products Options on existing futures contracts Contracts derived from existing products 30-year U.S. Treasury auctions Flexible algorithmic capabilities |
 Growth in Swap Futures Citigroup and Goldman Sachs began providing liquidity July 3, 2006 Open interest has quadrupled to 75,651 contracts at September 26, 2006 ADV third quarter to date is 4,639 contracts, 3.5 times greater than second quarter 2006 ADV September to date is 9,776 contracts, 3 times greater than August 2006 Swap Futures Average Daily Volume - 2,000 4,000 6,000 8,000 10,000 APR-06 MAY-06 JUN-06 JUL-06 AUG-06 SEP-06 |
 Opportunities: Global Expansion Offer contracts with international points of delivery Offer existing and new tailored products to global participants Capitalize on asset class convergence trend |
 Opportunities: Strategic Alliances JADE 50/50 Joint Venture Hosting agreements with regional North American exchanges MOUs with global exchanges |
 Greatest Opportunity: Organic Growth Robust electronic platform provides strong positioning for product diversification Global reach - ease of access to the Exchange for market users Focusing international educational efforts to drive organic growth of core products |
 Financial Review Glen Johnson Senior Vice President and Chief Financial Officer |
 Financial Highlights Trading-volume and pricing increases spur revenue growth Proven track record Expanding operating leverage Strong cash flow with high capital efficiency Efficient and scalable operating platform |
 Historical Volume 672 771 1,064 1,450 1,937 2,199 2,548 475 109 118 265 289 337 364 241 239 95 63 36 21 15 5 3 1 48 2000 2001 2002 2003 2004 2005 *YTD 2006 Metals, energy, and other Equity index Agricultural Interest rate Average Daily Volume (in thousands) *Through Sept. 26 |
 Rate
per Contract $0 $25,000 $50,000 $75,000 $100,000 $125,000 $0.000 $0.100 $0.200 $0.300 $0.400 $0.500 $0.600 Exchange Rev ($) 54,351 52,529 49,675 46,326 66,518 69,657 62,696 68,086 83,120 91,855 Clearing Rev ($) 16,589 19,634 18,609 18,724 21,277 22,559 20,027 18,274 23,231 25,366 RPC ($) 0.519 0.455 0.451 0.424 0.507 0.499 0.501 0.570 0.552 0.564 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06: 5-8% increase over 2Q06 4Q04 to 1Q05: 20% increase 3Q05 to 4Q05: 14% increase (11.5% excluding accrual adjustments) Overall Rate per Contract (RPC) 4Q06: 3-5% increase over 3Q06 |
 Recent Pricing Changes July 1 Pricing Changes: Overall CBOT clearing fees increased by one cent Certain off-exchange transaction fees were amended Exchange fees for electronic Ag products were realigned Rate per contract expected to increase 5% to 8% in 2006 third quarter over 2006 second quarter Upcoming October 1 Pricing Changes: Certain membership types will have lower thresholds for volume discounts Certain non-member Treasury complex fees will increase Fee schedule reorganized to align fees with the Exchange’s membership and product structure Rate per contract expected to increase 3% to 5% in 2006 fourth quarter over 2006 third quarter |
 Services $9
3% Interest Income & Other $9 3% Building $11 4% Market Data $50 16% Exchange Fees & Clearing $224 74% Sources of Revenue Total Exchange & Clearing Fees = $224mm Metals $5 2% 30 yr $30 13% 5 yr $33 15% 10 yr $81 37% Agriculture $40 18% 2 yr $10 4% Other Interest $14 6% Equities $11 5% Six Months 2006 Revenue Components ($ in millions) Six Months 2006 Exchange & Clearing Fees ($ in millions) Total Revenues = $302mm |
 Financial Highlights Trading volume growth, pricing increases fuel revenue growth Proven track record Expanding operating leverage Strong cash flow with high capital efficiency Efficient and scalable operating platform |
 Proven Track Record $308 $252 $215 $467 $381 $380 2000 2001 2002 2003 2004 2005 Revenues ($mm) $334 $306 $264 $249 $240 $226 2000 2001 2002 2003 2004 2005 Operating Expenses ($mm) |
 Financial Highlights Trading volume growth, pricing increases fuel revenue growth Proven track record Expanding operating leverage Strong cash flow with high capital efficiency Efficient and scalable operating platform |
 Operating Leverage 19.5% 4.6% (5.0%) 28.4% 30.6% 19.1% 43.5% – 500 1,000 1,500 2,000 2,500 3,000 3,500 2000 2001 2002 2003 2004 2005 6 mos 06 (10.0%) 10.0% 30.0% 50.0% 70.0% Average Daily Volume (000's) Operating Margin (%) Item 2000-2005 CAGR Avg. Daily Volume 24% Revenues 17% Expenses 8% |
 Operating Leverage $37 $62 $101 $90 $126 $190 2000 2001 2002 2003 2004 2005 EBITDA ($mm) * Operating Income ($mm) $74 ($11) $12 $59 $117 $133 2000 2001 2002 2003 2004 2005 * EBITDA is a Non-GAAP financial measure. Reconciliation of this to the most
comparable GAAP financial measure can be found at the end of this
presentation |
 Fixed and Volume-Based Expenses $177 $202 $195 $201 $98 $100 $37 $33 $46 $55 $28 $29 $41 $249 $264 $306 $334 $167 $171 $1 $4 $21 $1 $4 $7 $29 $14 $61 $71 $37 2002 2003 2004 2005 Six Mos. 2005 Six Mos. 2006 Fixed D&A Special / Other Volume-based Note: Special / Other expenses include loss impairment on long-lived assets,
litigation, and severance and related costs ($ in millions)
|
 Growing Operating Leverage New products, wider distribution of existing products Education programs Fixed-cost control Global expansion, broader tech efforts Price increases |
 Six
Months Ended June 30, 2006 and 2005 Six months 06 compared to 05: Average daily volume up 12% Revenue up 27% Operating margin of 43.5% vs. 29.4% Net income increase of 101% $237.0 $302.0 29.4% 43.5% 2,864 3,206 $39.0 $78.6 Average Daily Volume Revenue Operating Margin Net Income 05 06 YTD 06 vs. YTD 05 (millions of dollars, thousands of contracts) |
 CBOT: Looking to the Future |
 |
 Supplementary Information 2000 2001 2002 2003 2004 2005 1Q06 2Q06 Non-GAAP Financial Measure - EBITDA $37 $62 $101 $90 $126 $190 $73 $88 Deduct: Interest Expense (7) (7) (5) (4) (5) (3) (1) (1) Income Tax Expense (1) (5) (24) (22) (33) (55) (23) (29) Depreciation and Amortization Expense (41) (44) (38) (33) (46) (55) (14) (15) Comparable GAAP Measure - Net Income ($12) $6 $34 $31 $42 $77 $35 $43 Reconciliation of Non-GAAP Measure Earnings before Interest, Tax, and Depreciation and Amortization Expense (EBITDA) to Net Income ($ in millions) |
 Financial Options - % Electronic 14 24 28 29 33 54 85 70 0 25 50 75 100 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06* 0 2 4 6 8 10 12 14 16 18 20 ADV (000s) e-cbot % *Through Sept. 26 |
 Agriculture Complex Growth Rate 373 404 350 331 412 529 482 0 100 200 300 400 500 600 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06* -5 0 5 10 15 20 25 30 35 40 ADV (000s) Growth vs. Pr Yr % *Through Sept. 26 |