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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

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FORM 8-K

 

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CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): October 28, 2005

 

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CBOT HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

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Delaware		333-72184		36-4468986
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

 

141 West Jackson Boulevard, Chicago, Illinois		60604
(Address of Principal executive offices)		(Zip Code)

 

(312) 435-3500

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name or former address, if changed since last report)

 

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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))

 

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Item 2.02 Results of Operations and Financial Condition.

 

On October 28, 2005, the press release set forth as Exhibit 99.1 hereto, and incorporated herein by reference, was issued to announce the financial results of CBOT Holdings, Inc. for the quarter ended September 30, 2005.

 

Item 9.01 Financial Statements and Exhibits.

 

(c)

Exhibits.

 

Exhibit No.		Exhibit Description
99.1		Press Release Regarding Financial Results for CBOT Holdings, Inc. for the Quarter Ended September 30, 2005

 

2

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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 hereunto duly authorized.

 

 

Date: October 28, 2005

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EXHIBIT INDEX

 

Exhibit No.		Exhibit Description
99.1		Press Release Regarding Financial Results for CBOT Holdings, Inc. for the Quarter Ended October 28, 2005

Exhibit 99.1

 

 

For Immediate Release		Contact:
		Maria Gemskie
		312.435.3620
		news@cbot.com
		Investor Contact:
		Tami Kamarauskas
		312.213.2558
		InvestorRelations@cbot.com

 

CBOT HOLDINGS THIRD QUARTER 2005 REVENUE UP 20 PERCENT

 

CHICAGO, October 28, 2005 – CBOT Holdings, Inc., holding company for the Chicago Board of Trade (CBOT^®), announced today that revenue in the third quarter of 2005 rose 20 percent from revenue in the same period during 2004, with increased trading volume and a higher average rate per contract contributing to these results. Net income in the third quarter climbed 63 percent to $19.8 million, compared with $12.2 million in the third quarter of 2004.

 

Third quarter revenue was $112.2 million, up from $93.6 million in the third quarter of 2004. Exchange and clearing fee revenue in the third quarter grew 21 percent to $82.7 million compared with $68.3 million in the third quarter of 2004. Third quarter operating income was $32.9 million, rising 66 percent from $19.8 million in the same period during the prior year.

 

CBOT Holdings President and CEO Bernard W. Dan said, “We added significant trading platform enhancements over the past year, which contributed to the recent growth in reported trading volume. Global market participants have benefited from more effective risk management via increased use of reduced tick spreads and enhanced trading and matching algorithms. In addition, on October 9, 2005, we implemented an additional major upgrade to our electronic trading platform, and concurrently expanded the number of trading hours from 21 hours per day to 22, which are collectively intended to drive additional volume in our products.”

 

Third quarter trading volume rose nine percent over the same period during the prior year to 165.2 million contracts. Average daily volume in the third quarter of 2005 increased to 2.6 million contracts, also up nine percent from the third quarter of 2004. In addition, average daily volume on the CBOT’s electronic trading platform, e-cbot powered by LIFFE CONNECT^®, during the third quarter rose 20 percent from the same period last year.

 

Third quarter earnings benefited from trading volume growth along with an increase in the average rate per contract, which rose 11 percent above last year’s third quarter level. The average rate per contract represents total exchange and clearing fee revenue divided by total reported trading volume.

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Separately, on Monday, October 24, 2005, CBOT Holdings closed the initial public offering of 3,191,489 shares of its Class A common stock, which included 2,940,486 shares offered by CBOT Holdings and 251,003 shares offered by selling stockholders. The initial public offering price was $54.00 per share. CBOT Holdings also sold an additional 478,723 shares of Class A common stock pursuant to the exercise in full by the underwriters of their over-allotment option.

 

Key Financial Metrics (in millions, except rate per contract)

 

Quarter Ended		Sept 30 2005				Sept.30 2004				June 30 2005
Average Daily Volume			2.6				2.4				2.9
Reported Trading Volume			165.2				151.5				184.9
Average Rate per Contract		$	0.501			$	0.451			$	0.499
Revenue		$	112.2			$	93.6			$	120.6
Operating Income		$	32.9			$	19.8			$	33.7
Operating Margin			29	%			21	%			28	%
Net Income		$	19.8			$	12.2			$	18.2
Depreciation & Amortization		$	13.1			$	11.5			$	14.2
Capital Expenditures		$	7.8			$	17.0			$	14.7

 

CBOT Third Quarter Operational Highlights

 

•

CBOT announced upgrades to e-cbot, along with increases in exchange fee rates for certain transactions on e-cbot, effective October 1, 2005. New functionality on e-cbot includes order book management, stop orders at the host level that expand order type access via e-cbot, nine inter-commodity spread strategies for financial products and an expansion of trading hours per day from 21 to 22.

 

•

CBOT and Singapore Exchange announced an effort to jointly explore the establishment of a commodity derivatives exchange in Singapore.

 

Outlook

 

Given current market conditions and what is known today, the CBOT currently expects the following for the fourth quarter 2005:

 

•

Baseline expenses, which equals total operating expenses less volume based expenses, of about $66 million to $69 million, including $1.8 million to $2.0 million of non-cash stock compensation expense.

 

•

Volume based expenses, which include clearing costs and contracted license fees, of about $0.105 per reported contract.

 

•

The exchange fee rate increase implemented October 1, 2005 is currently expected to raise the overall rate per contract in the fourth quarter of 2005 about seven to ten percent from the rate during the third quarter of 2005.

 

The company does not provide an outlook for trading volume or revenue, but does report the trading volume daily on its website at http://www.cbot.com/cbot/pub/page/0,3181,541,00.html.

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		3Q 2005			2Q 2005			1Q 2005			4Q 2004			3Q 2004			2Q 2004			1Q 2004
Trading Days			64			64			61			64			64			63			62
AVERAGE RATE PER CONTRACT
		3Q 2005			2Q 2005			1Q 2005			4Q 2004			3Q 2004			2Q 2004			1Q 2004
PRODUCT:
Interest Rate			0.469			0.467			0.482			0.386			0.417			0.408			0.484
Agriculture			0.631			0.643			0.641			0.640			0.637			0.673			0.678
Equity Index			0.672			0.630			0.578			0.560			0.564			0.550			0.525
Metals, Energy & Other			1.360			1.312			0.855			0.654			0.848			0.870			0.851
Overall average rate per contract			0.501			0.499			0.507			0.424			0.451			0.455			0.519
VENUE:
Open-Auction			0.485			0.483			0.491			0.441			0.490			0.506			0.525
Electronic			0.411			0.397			0.400			0.315			0.330			0.319			0.429
Off-Exchange			2.117			2.404			2.131			1.786			1.880			1.668			1.597
Overall average rate per contract			0.501			0.499			0.507			0.424			0.451			0.455			0.519
AVERAGE DAILY VOLUME (Round Turns, in thousands)
		3Q 2005			2Q 2005			1Q 2005			4Q 2004			3Q 2004			2Q 2004			1Q 2004
PRODUCT:
Interest Rate			2,123			2,368			2,356			2,006			1,974			2,028			1,735
Agriculture			350			404			373			287			295			391			375
Equity Index			103			115			105			99			96			94			90
Metals, Energy & Other			5			3			4			5			2			2			2
Total			2,582			2,889			2,838			2,398			2,367			2,516			2,203
VENUE:
Open-Auction			773			940			940			780			843			1,007			913
Electronic			1,707			1,843			1,772			1,507			1,426			1,395			1,194
Off-Exchange			102			106			126			110			97			115			96
Total			2,582			2,889			2,838			2,398			2,367			2,516			2,203
TRANSACTION FEES (in thousands)
		3Q 2005			2Q 2005			1Q 2005			4Q 2004			3Q 2004			2Q 2004			1Q 2004
PRODUCT:
Interest Rate		$	63,741		$	70,733		$	69,327		$	49,524		$	52,666		$	52,199		$	52,092
Agriculture			14,150			16,604			14,598			11,761			12,037			16,558			15,777
Equity Index			4,439			4,627			3,687			3,562			3,453			3,270			2,942
Metals, Energy & Other			393			252			184			202			127			135			130
Total		$	82,722		$	92,216		$	87,796		$	65,050		$	68,284		$	72,163		$	70,940
VENUE:
Open-Auction		$	23,979		$	29,085		$	28,185		$	22,038		$	26,458		$	32,067		$	29,742
Electronic			44,872			46,883			43,285			30,413			30,123			28,011			31,726
Off-Exchange			13,871			16,247			16,325			12,598			11,702			12,084			9,473
Total		$	82,722		$	92,216		$	87,796		$	65,050		$	68,284		$	72,163		$	70,940

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Quarterly Conference Call

 

Executives of CBOT Holdings Inc. will host a conference call to review its third quarter results today, October 28, at 8:00 am ET 7:00 am CT. The conference call and any accompanying slides will be publicly available via live web cast from the investor relations section of the CBOT Holdings web site at http://www.cbot.com. The web cast will be available for replay at the same address approximately two hours following its conclusion. Those wishing to listen to the live conference via telephone should dial 866.362.5158 (U.S. callers) and 617.597.5397 (International callers) at least 10 minutes before the call begins.

 

About the CBOT

 

As one of the leading global derivative exchanges, the Chicago Board of Trade provides a diverse mix of financial, equity, and commodity futures and options-on-futures products. Building on its 157-year history, the CBOT continues to advance into the future using the strength of deep liquidity, market integrity and member-trader expertise. Using superior trading technology in both electronic and open-auction trading platforms, the CBOT provides premier customer service to risk managers and investors worldwide. For more information visit our web site at www.cbot.com.

 

Forward Looking Statements

 

In this release, our use of the words “may,” “will,” “should,” “could,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or other comparable terminology is intended to identify 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. More detailed information about factors that may affect our performance may be found in filings made by CBOT Holdings, Inc. with the Securities and Exchange Commission, which can be obtained at its web site at www.sec.gov. Except for any obligation to disclose material information under Federal securities laws, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

 

# # #

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CBOT Holdings, Inc. and Subsidiaries

Consolidated Statements of Financial Condition

(unaudited, in thousands)

 

		12/31/04			03/31/05			06/30/05			09/30/05
ASSETS
Current assets:
Cash and cash equivalents:
Unrestricted		$	91,165		$	101,455		$	101,868		$	73,436
Held under deposit and membership transfers			14,262			16,439			2,050			862
Total cash and cash equivalents			105,427			117,894			103,918			74,298
Restricted cash			7,661			4,025			22,102			17,254
Short term investments			—			—			24,700			64,199
Accounts receivable - net of allowance			34,556			47,775			40,761			38,310
Income tax receivable			1,557			—			—			—
Deferred income taxes			2,219			2,591			2,573			2,974
Prepaid expenses			20,542			24,388			21,065			21,114
Total current assets			171,962			196,673			215,119			218,149
Property and equipment:
Land			34,234			34,234			34,234			34,234
Buildings and equipment			320,295			322,363			325,161			328,992
Furnishings and fixtures			188,316			189,825			196,344			197,054
Computer software and systems			72,662			81,492			84,091			84,112
Construction in progress			13,702			6,196			8,287			11,440
Total property and equipment			629,209			634,110			648,117			655,832
Less accumulated depreciation and amortization			360,038			373,708			387,137			400,110
Property and equipment - net			269,171			260,402			260,980			255,722
Other assets - net			19,283			19,162			19,387			19,252
Total assets		$	460,416		$	476,237		$	495,486		$	493,123
LIABILITIES AND MEMBERS’ / STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	20,545		$	12,837		$	14,098		$	14,960
Accrued clearing services			11,591			13,516			15,003			12,630
Accrued real estate taxes			7,623			5,994			7,995			9,595
Accrued payroll costs			6,031			2,882			3,986			5,568
Accrued exchange fee rebates			2,301			1,587			1,955			2,555
Accrued employee termination			403			322			273			302
Accrued liabilities			9,524			9,056			8,381			7,348
Funds held for deposit and membership transfers			14,262			16,439			24,123			17,230
Current portion of long-term debt			20,359			20,229			19,726			19,588
Income tax payable			—			12,012			2,135			1,764
Other current liabilities			249			4,733			4,700			322
Total current liabilities			92,888			99,607			102,375			91,862
Long-term liabilities:
Deferred income tax liabilities			28,484			27,225			25,588			23,468
Long-term debt			31,074			20,231			19,728			11,810
Other liabilities			14,379			14,671			15,048			13,412
Total long-term liabilities			73,937			62,127			60,364			48,690
Total liabilities			166,825			161,734			162,739			140,552
Members’ / Stockholders’ equity:
Common stock			—			—			49			49
Additional paid-in capital			—			—			315,500			315,500
Retained earnings			—			—			17,198			37,022
Members’ equity			293,591			314,503			—			—
Total members’ / stockholders’ equity			293,591			314,503			332,747			352,571
Total liabilities and members’ / stockholders’ equity		$	460,416		$	476,237		$	495,486		$	493,123

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CBOT Holdings, Inc. and Subsidiaries

Consolidated Statements of Income

(unaudited, in thousands, except per share data)

 

		QUARTER ENDED														YTD
		03/31/05			06/30/05				09/30/05				09/30/04			09/30/05				09/30/04
Revenues:
Exchange fees		66,518				69,657				62,696			49,675				198,871			156,555
Clearing fees		21,277				22,559				20,027			18,609				63,863			54,832
Market data		18,522				18,306				18,289			16,119				55,117			48,118
Building		5,608				5,479				5,595			5,328				16,682			16,089
Services		3,591				3,623				4,230			3,133				11,444			9,465
Dues		—				—				—			—				—			9,315
Other		941				963				1,331			711				3,235			2,182
Total revenues		116,457				120,587				112,168			93,575				349,212			296,556
Expenses:
Clearing services		16,516				17,378				15,630			14,080				49,524			40,162
Contracted license fees		1,625				1,780				1,718			1,575				5,123			4,586
Salaries and benefits		18,633				17,902				18,127			16,923				54,662			52,820
Depreciation and amortization		13,814				14,231				13,144			11,507				41,189			33,757
Professional services		4,592				4,558				4,979			6,389				14,129			19,115
General and administrative expenses		4,922				5,167				5,427			5,511				15,516			14,638
Building operating costs		6,638				6,514				6,542			5,899				19,694			17,813
Information technology services		10,677				11,392				10,660			8,905				32,729			26,378
Programs		2,016				3,089				2,306			1,902				7,411			8,053
Interest		922				796				633			1,114				2,351			3,654
Litigation						4,000											4,000
Severance and related costs		114				50				113			(31	)			277			387
Operating expenses		80,469				86,857				79,279			73,774				246,605			221,363
Income from operations		35,988				33,730				32,889			19,801				102,607			75,193
Income taxes
Current		16,577				17,002				15,586			9,957				49,165			26,793
Deferred		(1,632	)			(1,618	)			(2,521	)		(2,120	)			(5,771	)		4,421
Total income taxes		14,945				15,384				13,065			7,837				43,394			31,214
Income before equity in unconsolidated subsidiary and minority interest in consolidated subsidiary		21,043				18,346				19,824			11,964				59,213			43,979
Equity in loss of unconsolidated subsidiary - net of tax		(255	)			(112	)			—			(121	)			(367	)		(373	)
Minority interest in loss of consolidated subsidiary		—				—				—			323				—			1,100
Net income		20,788				18,234				19,824			12,166				58,846			44,706
Earnings per share: (1)
Basic					$	0.35			$	0.40						$	0.75
Diluted					$	0.35			$	0.40						$	0.75
Weighted average number of common stock shares: (2)(3)
Basic						49,360				49,360							49,360
Diluted						49,360				49,360							49,360

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(1)

Income used in the calculation of earnings per share, only includes earnings allocated to each reported period after April 22, 2005, the date the CBOT demutualized and became a stock, for-profit company. The amount of income allocated to the period before April 22, 2005 and not included in the calculation of earnings per share was $1,036 for the quarter ended June 30, 2005 and $21,824 for the nine months ended September 30, 2005.

(2)

CBOT members received an aggregate of 49,360 shares of Class A common stock of CBOT Holdings as a result of the demutualization.Weighted average number of shares used in the calculation is based on the average number of shares outstanding after April 22, 2005 rather than the entire reporting period.

(3)	On October 24, 2005, CBOT Holdings closed an initial public offering of its Class A common stock. The number of shares of Class A common stock outstanding immediately after this offering was 52,807 shares.

 

Operating expense makeup:
Volume-based		18,141		19,158		17,348		15,655			54,647		44,748
Baseline		62,214		63,649		61,818		58,150			187,681		176,228
Other		114		4,050		113		(31	)		4,277		387
Total		80,469		86,857		79,279		73,774			246,605		221,363

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CBOT Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited, in thousands)

 

		QUARTER ENDED																YTD
		03/31/05				06/30/05				09/30/05				09/30/04				09/30/05				09/30/04
Cash flows from operating activities:
Net income		$	20,788			$	18,234			$	19,824			$	12,166			$	58,846			$	44,706
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization			13,814				14,231				13,144				11,507				41,189				33,757
Change in allowance for doubtful accounts			230				61				78				(5	)			369				(234	)
Gain / loss on foreign currency transaction			(260	)			(1,006	)			(316	)			(153	)			(1,582	)			361
Gain / loss on sale or retirement of fixed assets			—				(4	)			8				(21	)			4				13
Deferred income taxes (benefit)			(1,632	)			(1,618	)			(2,521	)			(2,120	)			(5,771	)			4,420
Minority interest in loss of subsidiary			—				—				—				(323	)			—				(1,100	)
Equity in loss of unconsolidated subsidiary			425				188				—				201				613				621
Amortization of short term investment discounts			—				(26	)			(111	)			—				(137	)			—
Changes in assets and liabilities:
Accounts receivable			(13,449	)			6,953				2,373				337				(4,123	)			1,046
Income tax receivable / payable			13,569				(9,877	)			(371	)			(498	)			3,321				12,926
Prepaid expenses			(3,846	)			3,323				(49	)			(1,752	)			(572	)			(7,852	)
Other assets			(410	)			(335	)			19				446				(726	)			707
Accounts payable			(7,708	)			1,261				862				1,026				(5,585	)			(14,071	)
Accrued clearing services			1,925				1,487				(2,373	)			191				1,039				10,257
Accrued real estate taxes			(1,629	)			2,001				1,600				1,305				1,972				870
Accrued payroll costs			(3,149	)			1,104				1,582				1,441				(463	)			(31	)
Accrued exchange fee rebates			(714	)			368				600				105				254				(1,812	)
Accrued employee termination			(81	)			(49	)			29				(474	)			(101	)			(1,970	)
Accrued liabilities			(468	)			(675	)			(1,033	)			(451	)			(2,176	)			(3,723	)
Funds held for deposit and membership transfers			2,177				7,684				(6,893	)			(6,110	)			2,968				993
Other current liabilities			4,484				(33	)			(4,378	)			3,721				73				3,695
Other long-term liabilities			292				377				(1,636	)			(1,362	)			(967	)			(1,006	)
Net cash flows from operating activities			24,358				43,649				20,438				19,177				88,445				82,573
Cash flows from investing activities:
Acquisition of property and equipment			(4,932	)			(14,702	)			(7,777	)			(17,031	)			(27,411	)			(28,608	)
Purchase of short term investments			—				(24,674	)			(49,285	)			—				(73,959	)			—
Proceeds from short term investments			—				—				9,897				—				9,897				—
Restricted cash			3,636				(18,077	)			4,848				(5	)			(9,593	)			(6,803	)
Proceeds from sale of property and equipment			—				9				—				227				9				229
Investment in joint ventures			(6	)			(191	)			(1	)			(50	)			(198	)			(323	)
Net cash flows used in investing activities			(1,302	)			(57,635	)			(42,318	)			(16,859	)			(101,255	)			(35,505	)
Cash flows from financing activities:
Repayments of borrowings			(10,713	)			—				(7,740	)			(7,939	)			(18,453	)			(18,652	)
Capital contributions from members			124				10				—				81				134				275
Distribution to partners			—				—				—				—				—				(60,300	)
Net cash flows used in financing activities			(10,589	)			10				(7,740	)			(7,858	)			(18,319	)			(78,677	)
Net increase (decrease) in cash and cash equivalents			12,467				(13,976	)			(29,620	)			(5,540	)			(31,129	)			(31,609	)
Cash and cash equivalents - beginning of period			105,427				117,894				103,918				116,597				105,427				142,666
Cash and cash equivalents - end of period		$	117,894			$	103,918			$	74,298			$	111,057			$	74,298			$	111,057
Cash paid for:
Interest		$	1,089			$	297			$	1,000			$	1,600			$	2,386			$	3,346
Income taxes (net of refunds)			2,837				26,841				15,959				10,375				45,637				13,619