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 20, 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 2.02 | Results of Operations and Financial Condition |
On July 20, 2006, CBOT Holdings, Inc. (“CBOT Holdings”) issued a press release announcing its second quarter 2006 results for the period ended June 30, 2006. The press release is attached hereto as Exhibit 99.1. CBOT Holdings also is furnishing in this report second quarter 2006 summary slides which are attached hereto as Exhibit 99.2. The information furnished in this report, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of CBOT Holdings under the Securities Act of 1933 or the Exchange Act.
Certain statements in this filing may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on CBOT Holding’s current expectations and involve risks and uncertainties that could cause CBOT Holding’s actual results to differ materially from those set forth in the statements. There can be no assurance that such expectations will prove to be correct. Factors that could cause current results to differ materially from current expectations include general economic and business conditions, industry trends, competitive conditions, regulatory developments as well as other risks or factors identified in CBOT Holding’s filings with the Securities Exchange Commission (“SEC”), including its Annual Report on Form 10-K for the fiscal year ended December 31, 2005 which is available on the SEC’s website at http://www.sec.gov. You should not place undue reliance on forward-looking statements, which speak only as of the date of this filing. Except for any obligation to disclose material information under the Federal securities laws, CBOT Holdings undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this filing.
| Item 9.01 | Financial Statements and Exhibits |
| (c) | Exhibits: |
| 99.1 | Press Release dated July 20, 2006. | |
| 99.2 | CBOT Holdings, Inc. Second Quarter 2006 summary slides dated July 20, 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: July 20, 2006 | By: |
/s/ Bernard W. Dan | ||||||
| Name: |
Bernard W. Dan | |||||||
| Title: |
President and Chief Executive Officer | |||||||
INDEX TO EXHIBITS
| Exhibit Number |
Description | |
| 99.1 | Press Release dated July 20, 2006. | |
| 99.2 | CBOT Holdings, Inc. Second Quarter 2006 summary slides dated July 20, 2006. | |
Exhibit 99.1
For Immediate Release
| Media Contact: | Investor Contact: | |
| Melissa Jarmel | Debbie Koopman | |
| (312)435-7137 | (312) 789-8532 | |
| news@cbot.com | investorrelations@cbot.com |
CBOT HOLDINGS REPORTS RECORD RESULTS FOR SECOND QUARTER 2006
Revenue Increases 31 Percent, Operating Margin Expands 18 Percentage Points
CHICAGO, July 20, 2006 – CBOT Holdings, Inc., holding company for the Chicago Board of Trade (CBOT®), announced today that revenue for the second quarter 2006 increased 31 percent to $158.5 million compared with $120.6 million in the second quarter of 2005. Net income for the quarter more than doubled, hitting a record $43.5 million versus $18.2 million for the comparable period last year. Second quarter 2006 earnings per diluted share were $0.82. These favorable results were fueled by record quarterly trading volumes across all product categories as well as higher exchange fee rates overall and continued cost controls.
Exchange and clearing revenue for the second quarter 2006 of $117.2 million was up 27 percent from $92.2 million in the second quarter of 2005. In addition, market data revenue grew 44 percent to $26.3 million in the quarter, up from $18.3 million in the second quarter of 2005. The market data increase was primarily due to a January 1, 2006, price increase and a $2.6 million benefit realized from an adjustment that resulted from customer account reviews. Second quarter operating income was $72.8 million, up from $33.7 million in the same period last year.
“This was a solid quarter for the CBOT, as we continued to realize volume growth across each of our product categories, advance our strategic initiatives aimed at creating new opportunities for our customers and extend our reach globally,” said Bernard W. Dan, President and Chief Executive Officer of CBOT Holdings. “Furthermore, our second quarter record financial results underscore the effectiveness of our business model as we significantly improved our profitability by scaling our operating platform and stringently controlling fixed costs.”
“Moving forward, we will remain focused on identifying growth opportunities and intensifying our efforts to provide products and services that meet the needs of market participants globally. This is an exciting time at the CBOT, as we prepare to launch side-by-side trading of our Agricultural futures contracts on August 1 and ramp up the pace of preparations to go live on September 25 with our new joint venture, JADE,” said Dan.
Revenue and earnings in the second quarter of 2006 benefited from a January 1, 2006 market data price increase and from an increase in the average rate per contract, which rose 13 percent compared with the same quarter a year ago. The average rate per contract represents total exchange and clearing fee revenue divided by total reported trading volume.
Trading volume for the second quarter was 208.0 million contracts, up 13 percent compared with 184.9 million contracts traded during last year’s second quarter. Average daily volume (ADV) in the second quarter this year was 3.3 million contracts, up 14 percent compared with ADV of 2.9 million in the 2005 second quarter. In addition, ADV on the CBOT’s e-cbot® electronic trading platform, rose to 67 percent of total exchange ADV, up from 64 percent in the second quarter of 2005.
Second quarter operating expenses of $85.7 million include $21.4 million of volume-based expenses and $64.3 million of baseline and other expenses, or non-volume-based expenses. Total operating expenses declined 1 percent compared with the prior year’s second quarter. Baseline and other costs were down 5 percent during the same time period, a contributing factor in the significant jump in the operating margin to 45.9 percent for the second quarter of 2006 from 28.0 percent in the same period last year. Last year’s second quarter included a $4.0 million charge for a litigation settlement which did not recur in this year’s second quarter.
Key Financial Metrics (in millions, except rate per contract)
| Quarter Ended |
June 30 2006 |
June 30 2005 |
March 31 2006 |
|||||||||
| Average Daily Volume |
3.3 | 2.9 | 3.1 | |||||||||
| Reported Trading Volume |
208.0 | 184.9 | 192.7 | |||||||||
| Average Rate per Contract |
$ | 0.564 | $ | 0.499 | $ | 0.552 | ||||||
| Revenue |
$ | 158.5 | $ | 120.6 | $ | 143.6 | ||||||
| Operating Income |
$ | 72.8 | $ | 33.7 | $ | 58.5 | ||||||
| Operating Margin |
45.9 | % | 28.0 | % | 40.8 | % | ||||||
| Net Income |
$ | 43.5 | $ | 18.2 | $ | 35.1 | ||||||
| Depreciation & Amortization |
$ | 14.8 | $ | 14.2 | $ | 14.1 | ||||||
| Non-Cash Stock Compensation |
$ | 1.3 | $ | -0- | $ | 0.4 | ||||||
| Capital Expenditures |
$ | 6.7 | $ | 14.7 | $ | 4.2 | ||||||
CBOT Second Quarter 2006 Operational Highlights
| • | A new member firm category called “Trading Member Firms” was established to increase access to CBOT markets. |
| • | CBOT outlined its plan to list Agricultural futures on its electronic trading platform during daytime trading hours beginning August 1, 2006. |
| • | Side-by-side trading for South American Soybean and Ethanol futures contracts began May 15 and May 31, respectively. |
| • | CBOT and Dow Jones Newswires introduced Commodity News for Tomorrow, a newsletter for market participants offering market data from the CBOT and feature stories from Dow Jones Newswires. |
| • | CBOT announced that Citigroup and Goldman Sachs & Co. will become electronic market makers for the Exchange’s Five-and Ten-Year Interest Rate Swap futures beginning in July 2006. |
| • | CBOT announced that it was expanding its short-term interest rate product set, introducing electronically-traded Binary options contracts based on the Target Federal Funds rate. The Binary options contracts started trading on July 12, 2006. |
| • | CBOT added Full-sized Silver options to its Precious Metals complex. |
| • | For the month of June, CBOT’s Metals complex accounted for 40 percent of all listed Metals futures traded in North America, up from only 4 percent in June 2005 and 17 percent in March 2006. |
| • | CBOT introduced Advantage Wireless Quote Service – delivering real-time quotes, charts and market news to wireless devices. |
| • | JADE, a joint venture between the CBOT and SGX scheduled to launch on September 25, 2006, announced that its first Asian-based commodity derivatives product to trade on the all electronic Exchange will be a Natural Rubber futures contract. |
Outlook
Given current market conditions and what is known today, CBOT Holdings currently expects the following for:
| 2006 Full Year |
2006 September Quarter | |||
| (in millions, except per contract data) | ||||
| Baseline and other expenses, which equal total operating expenses less volume-based expenses |
$259 - $265 | $63 - $66 | ||
| Non-cash stock compensation expense included in baseline expenses |
$2.5 - $3.0 | $0.5 to $0.6 | ||
| 2006 Full Year and September Quarter | ||||
| Volume-based expenses, which include clearing costs and contracted license fees, per reported contract |
$0.103 - $0.105 | |||
| An increase in the overall rate per contract from the current rate of about |
5 to 8 percent | |||
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/0,3181,370,00.html.
| 2Q | 1Q | 4Q | 3Q | 2Q | 1Q | |||||||
| 2006 | 2006 | 2005 | 2005 | 2005 | 2005 | |||||||
| Trading Days |
63 | 62 | 63 | 64 | 64 | 61 |
| AVERAGE RATE PER CONTRACT |
2Q | 1Q | 4Q | 3Q | 2Q | 1Q | ||||||
| 2006 | 2006 | 2005 | 2005 | 2005 | 2005 | |||||||
| PRODUCT: |
||||||||||||
| Interest Rate |
0.523 | 0.517 | 0.537 | 0.469 | 0.467 | 0.482 | ||||||
| Agriculture |
0.680 | 0.673 | 0.666 | 0.631 | 0.643 | 0.641 | ||||||
| Equity Index |
0.712 | 0.760 | 0.789 | 0.672 | 0.630 | 0.578 | ||||||
| Metals, Energy & Other |
0.986 | 1.312 | 1.559 | 1.360 | 1.312 | 0.855 | ||||||
| Overall average rate per contract |
0.564 | 0.552 | 0.570 | 0.501 | 0.499 | 0.507 | ||||||
| VENUE: |
||||||||||||
| Open-Auction |
0.515 | 0.515 | 0.507 | 0.485 | 0.483 | 0.491 | ||||||
| Electronic |
0.503 | 0.495 | 0.506 | 0.411 | 0.397 | 0.400 | ||||||
| Off-Exchange |
2.564 | 2.296 | 2.299 | 2.117 | 2.404 | 2.131 | ||||||
| Overall average rate per contract |
0.564 | 0.552 | 0.570 | 0.501 | 0.499 | 0.507 | ||||||
| AVERAGE DAILY VOLUME (Round Turns, in thousands) | ||||||||||||
| 2Q | 1Q | 4Q | 3Q | 2Q | 1Q | |||||||
| 2006 | 2006 | 2005 | 2005 | 2005 | 2005 | |||||||
| PRODUCT: |
||||||||||||
| Interest Rate |
2,588 | 2,561 | 1,951 | 2,123 | 2,368 | 2,356 | ||||||
| Agriculture |
529 | 412 | 331 | 350 | 404 | 373 | ||||||
| Equity Index |
131 | 113 | 112 | 103 | 115 | 105 | ||||||
| Metals, Energy & Other |
54 | 22 | 9 | 5 | 3 | 4 | ||||||
| Total |
3,302 | 3,108 | 2,404 | 2,582 | 2,889 | 2,838 | ||||||
| VENUE: |
||||||||||||
| Open-Auction |
990 | 887 | 685 | 773 | 940 | 940 | ||||||
| Electronic |
2,220 | 2,132 | 1,633 | 1,707 | 1,843 | 1,772 | ||||||
| Off-Exchange |
91 | 88 | 86 | 102 | 106 | 126 | ||||||
| Total |
3,302 | 3,108 | 2,404 | 2,582 | 2,889 | 2,838 | ||||||
TRANSACTION FEES (in thousands)
| 2Q | 1Q | 4Q | 3Q | 2Q | 1Q | |||||||||||||
| 2006 | 2006 | 2005 | 2005 | 2005 | 2005 | |||||||||||||
| PRODUCT: |
||||||||||||||||||
| Interest Rate |
$ | 85,339 | $ | 82,032 | $ | 65,994 | $ | 63,741 | $ | 70,733 | $ | 69,327 | ||||||
| Agriculture |
22,664 | 17,176 | 13,869 | 14,150 | 16,604 | 14,598 | ||||||||||||
| Equity Index |
5,859 | 5,337 | 5,588 | 4,439 | 4,627 | 3,687 | ||||||||||||
| Metals, Energy & Other |
3,360 | 1,805 | 908 | 393 | 252 | 184 | ||||||||||||
| Total |
$ | 117,221 | $ | 106,351 | $ | 86,360 | $ | 82,722 | $ | 92,216 | $ | 87,796 | ||||||
| VENUE: |
||||||||||||||||||
| Open-Auction |
$ | 32,136 | $ | 28,356 | $ | 21,885 | $ | 23,979 | $ | 29,085 | $ | 28,185 | ||||||
| Electronic |
70,341 | 65,442 | 52,013 | 44,872 | 46,883 | 43,285 | ||||||||||||
| Off-Exchange |
14,745 | 12,552 | 12,462 | 13,871 | 16,247 | 16,325 | ||||||||||||
| Total |
$ | 117,221 | $ | 106,351 | $ | 86,360 | $ | 82,722 | $ | 92,216 | $ | 87,796 | ||||||
Quarterly Conference Call
Executives of CBOT Holdings, Inc. will host a conference call to review its second quarter results today, July 20, 2006, at 8:00 am ET / 7:00 am CT. The conference call and any accompanying slides will be publicly available via live webcast from the investor relations section of the CBOT Holdings website at http://www.cbot.com. The webcast 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 800.884.5695 (U.S. callers) and 617.786.2960 (International callers) at least 10 minutes before the call begins. The verbal passcode for the call is “CBOT Holdings.” To listen to an archived recording after the call, please dial 888.286.8010 (U.S. callers) and 617.801.6888 (International callers). The passcode for the replay is 98310538.
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 158-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 website at www.cbot.com.
Forward Looking Statements
Certain statements in this press release 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 press release. 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.
CBOT Holdings, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
(unaudited, in thousands)
| 06/30/05 | 09/30/05 | 12/31/05 | 03/31/06 | 06/30/06 | |||||||||||
| ASSETS | |||||||||||||||
| Current assets: |
|||||||||||||||
| Cash and cash equivalents: |
|||||||||||||||
| Unrestricted |
$ | 101,868 | $ | 73,436 | $ | 99,575 | $ | 99,882 | $ | 60,629 | |||||
| Held under deposit and membership transfers |
2,050 | 862 | 1,746 | 4,966 | 5,279 | ||||||||||
| Total cash and cash equivalents |
103,918 | 74,298 | 101,321 | 104,848 | 65,908 | ||||||||||
| Restricted cash |
22,102 | 17,254 | 14,031 | 29,203 | 9,182 | ||||||||||
| Short term investments |
24,700 | 64,199 | 239,888 | 253,979 | 327,956 | ||||||||||
| Accounts receivable - net of allowance |
40,761 | 38,310 | 33,671 | 50,962 | 55,959 | ||||||||||
| Deferred income taxes |
2,573 | 2,974 | 1,962 | 1,921 | 2,240 | ||||||||||
| Prepaid expenses |
21,065 | 21,114 | 18,410 | 23,233 | 20,778 | ||||||||||
| Total current assets |
215,119 | 218,149 | 409,283 | 464,146 | 482,023 | ||||||||||
| Property and equipment: |
|||||||||||||||
| Land |
34,234 | 34,234 | 34,234 | 34,234 | 34,234 | ||||||||||
| Buildings and equipment |
325,161 | 328,992 | 333,014 | 335,415 | 340,113 | ||||||||||
| Furnishings and fixtures |
196,344 | 197,054 | 198,083 | 189,188 | 180,813 | ||||||||||
| Computer software and systems |
84,091 | 84,112 | 93,636 | 93,719 | 93,294 | ||||||||||
| Construction in progress |
8,287 | 11,440 | 5,577 | 4,469 | 4,145 | ||||||||||
| Total property and equipment |
648,117 | 655,832 | 664,544 | 657,025 | 652,599 | ||||||||||
| Less accumulated depreciation and amortization |
387,137 | 400,110 | 409,789 | 412,108 | 415,691 | ||||||||||
| Property and equipment - net |
260,980 | 255,722 | 254,755 | 244,917 | 236,908 | ||||||||||
| Other assets - net |
19,387 | 19,252 | 21,829 | 21,229 | 23,403 | ||||||||||
| Total assets |
$ | 495,486 | $ | 493,123 | $ | 685,867 | $ | 730,292 | $ | 742,334 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||
| Current liabilities: |
|||||||||||||||
| Accounts payable |
$ | 14,098 | $ | 14,960 | $ | 20,455 | $ | 12,965 | $ | 12,291 | |||||
| Accrued clearing services |
15,003 | 12,630 | 11,286 | 15,023 | 16,490 | ||||||||||
| Accrued real estate taxes |
7,995 | 9,595 | 7,730 | 6,078 | 8,108 | ||||||||||
| Accrued payroll costs |
3,986 | 5,568 | 6,351 | 2,966 | 4,931 | ||||||||||
| Accrued exchange fee rebates |
1,770 | 2,278 | 1,200 | 659 | 400 | ||||||||||
| Accrued employee termination |
273 | 302 | 3,063 | 1,755 | 1,141 | ||||||||||
| Accrued liabilities |
8,566 | 7,625 | 7,395 | 7,241 | 10,672 | ||||||||||
| Funds held for deposit and membership transfers |
24,123 | 17,230 | 14,821 | 33,220 | 13,532 | ||||||||||
| Current portion of long-term debt |
19,726 | 19,588 | 19,366 | 19,455 | 20,014 | ||||||||||
| Income tax payable |
2,135 | 1,764 | 5,751 | 24,425 | 6,001 | ||||||||||
| Other current liabilities |
4,700 | 322 | 5,183 | 432 | 412 | ||||||||||
| Total current liabilities |
102,375 | 91,862 | 102,601 | 124,219 | 93,992 | ||||||||||
| Long-term liabilities: |
|||||||||||||||
| Deferred income tax liabilities |
25,588 | 23,468 | 17,204 | 14,872 | 12,200 | ||||||||||
| Long-term debt |
19,728 | 11,810 | 10,716 | — | — | ||||||||||
| Other liabilities |
15,048 | 13,412 | 13,584 | 13,837 | 14,080 | ||||||||||
| Total long-term liabilities |
60,364 | 48,690 | 41,504 | 28,709 | 26,280 | ||||||||||
| Total liabilities |
162,739 | 140,552 | 144,105 | 152,928 | 120,272 | ||||||||||
| Stockholders’ equity: |
|||||||||||||||
| Common stock |
49 | 49 | 53 | 53 | 53 | ||||||||||
| Additional paid-in capital |
315,500 | 315,500 | 486,990 | 487,404 | 488,651 | ||||||||||
| Retained earnings |
17,198 | 37,022 | 54,719 | 89,821 | 133,281 | ||||||||||
| Accumulated other comprehensive income |
— | — | — | 86 | 77 | ||||||||||
| Total stockholders’ equity |
332,747 | 352,571 | 541,762 | 577,364 | 622,062 | ||||||||||
| Total liabilities and stockholders’ equity |
$ | 495,486 | $ | 493,123 | $ | 685,867 | $ | 730,292 | $ | 742,334 | |||||
CBOT Holdings, Inc. and Subsidiaries
Consolidated Statements of Income
(unaudited, in thousands, except per share data)
| QUARTER ENDED | YTD | |||||||||||||||||||||||||||
| 09/30/05 | 12/31/05 | 03/31/06 | 06/30/06 | 06/30/05 | 06/30/06 | 06/30/05 | ||||||||||||||||||||||
| Revenues: |
||||||||||||||||||||||||||||
| Exchange fees |
$ | 62,696 | $ | 68,086 | $ | 83,120 | $ | 91,855 | $ | 69,657 | $ | 174,975 | $ | 136,175 | ||||||||||||||
| Clearing fees |
20,027 | 18,274 | 23,231 | 25,366 | 22,559 | 48,597 | 43,836 | |||||||||||||||||||||
| Market data |
18,289 | 18,765 | 23,643 | 26,286 | 18,306 | 49,929 | 36,828 | |||||||||||||||||||||
| Building |
5,595 | 5,479 | 5,505 | 5,910 | 5,479 | 11,415 | 11,087 | |||||||||||||||||||||
| Services |
4,230 | 3,852 | 4,236 | 4,299 | 3,623 | 8,535 | 7,214 | |||||||||||||||||||||
| Interest |
1,073 | 2,612 | 3,483 | 4,363 | 701 | 7,846 | 1,415 | |||||||||||||||||||||
| Other |
258 | 293 | 351 | 407 | 262 | 758 | 489 | |||||||||||||||||||||
| Total revenues |
112,168 | 117,361 | 143,569 | 158,486 | 120,587 | 302,055 | 237,044 | |||||||||||||||||||||
| Expenses: |
||||||||||||||||||||||||||||
| Clearing services |
15,630 | 14,286 | 18,023 | 19,490 | 17,378 | 37,513 | 33,894 | |||||||||||||||||||||
| Contracted license fees |
1,718 | 1,733 | 1,738 | 1,914 | 1,780 | 3,652 | 3,405 | |||||||||||||||||||||
| Salaries and benefits |
18,127 | 20,488 | 19,102 | 19,028 | 17,902 | 38,130 | 36,535 | |||||||||||||||||||||
| Depreciation and amortization |
13,144 | 13,732 | 14,086 | 14,789 | 14,231 | 28,875 | 28,045 | |||||||||||||||||||||
| Professional services |
4,979 | 6,424 | 3,939 | 4,558 | 4,558 | 8,497 | 9,150 | |||||||||||||||||||||
| General and administrative expenses |
5,427 | 6,059 | 5,076 | 4,546 | 5,167 | 9,622 | 10,089 | |||||||||||||||||||||
| Building operating costs |
6,542 | 6,006 | 6,603 | 6,002 | 6,514 | 12,605 | 13,152 | |||||||||||||||||||||
| Information technology services |
10,660 | 11,870 | 12,230 | 11,885 | 11,392 | 24,115 | 22,069 | |||||||||||||||||||||
| Programs |
2,306 | 3,104 | 2,627 | 3,086 | 3,089 | 5,713 | 5,105 | |||||||||||||||||||||
| Interest |
633 | 607 | 585 | 388 | 796 | 973 | 1,718 | |||||||||||||||||||||
| Litigation |
— | — | — | — | 4,000 | — | 4,000 | |||||||||||||||||||||
| Severance and related costs |
113 | 3,032 | 1,036 | (22 | ) | 50 | 1,014 | 164 | ||||||||||||||||||||
| Operating expenses |
79,279 | 87,341 | 85,045 | 85,664 | 86,857 | 170,709 | 167,326 | |||||||||||||||||||||
| Income from operations |
32,889 | 30,020 | 58,524 | 72,822 | 33,730 | 131,346 | 69,718 | |||||||||||||||||||||
| Income taxes |
||||||||||||||||||||||||||||
| Current |
15,586 | 17,481 | 25,466 | 32,168 | 17,002 | 57,634 | 33,579 | |||||||||||||||||||||
| Deferred |
(2,521 | ) | (5,252 | ) | (2,291 | ) | (3,042 | ) | (1,618 | ) | (5,333 | ) | (3,250 | ) | ||||||||||||||
| Total income taxes |
13,065 | 12,229 | 23,175 | 29,126 | 15,384 | 52,301 | 30,329 | |||||||||||||||||||||
| Income before equity in unconsolidated subsidiary and minority interest in consolidated subsidiary |
19,824 | 17,791 | 35,349 | 43,696 | 18,346 | 79,045 | 39,389 | |||||||||||||||||||||
| Equity in loss of unconsolidated subsidiary - net of tax |
— | (94 | ) | (246 | ) | (237 | ) | (112 | ) | (483 | ) | (367 | ) | |||||||||||||||
| Net income |
$ | 19,824 | $ | 17,697 | $ | 35,103 | $ | 43,459 | $ | 18,234 | $ | 78,562 | $ | 39,022 | ||||||||||||||
| Earnings per share: (1) |
||||||||||||||||||||||||||||
| Basic |
$ | 0.40 | $ | 0.34 | $ | 0.66 | $ | 0.82 | $ | 0.35 | $ | 1.49 | $ | 0.35 | ||||||||||||||
| Diluted |
$ | 0.40 | $ | 0.34 | $ | 0.66 | $ | 0.82 | $ | 0.35 | $ | 1.49 | $ | 0.35 | ||||||||||||||
| Weighted average number of common stock shares: (2)(3) |
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| Basic |
49,360 | 52,079 | 52,787 | 52,792 | 49,360 | 52,789 | 49,360 | |||||||||||||||||||||
| Diluted |
49,360 | 52,116 | 52,840 | 52,848 | 49,360 | 52,844 | 49,360 | |||||||||||||||||||||
| (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 six months ended June 30, 2005. |
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| (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. |
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| (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 52,787 shares. |
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| Operating expense makeup: |
||||||||||||||||||||||||||||
| Volume-based |
17,348 | 16,019 | 19,761 | 21,404 | 19,158 | 41,165 | 37,299 | |||||||||||||||||||||
| Baseline |
61,818 | 68,290 | 64,248 | 64,282 | 63,649 | 128,530 | 125,863 | |||||||||||||||||||||
| Other |
113 | 3,032 | 1,036 | (22 | ) | 4,050 | 1,014 | 4,164 | ||||||||||||||||||||
| Total |
79,279 | 87,341 | 85,045 | 85,664 | 86,857 | 170,709 | 167,326 | |||||||||||||||||||||
CBOT Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited, in thousands)
| QUARTER ENDED | YTD | |||||||||||||||||||||||||||
| 09/30/05 | 12/31/05 | 03/31/06 | 06/30/06 | 06/30/05 | 06/30/06 | 06/30/05 | ||||||||||||||||||||||
| Cash flows from operating activities: |
||||||||||||||||||||||||||||
| Net income |
$ | 19,824 | $ | 17,697 | $ | 35,103 | $ | 43,459 | $ | 18,234 | $ | 78,562 | $ | 39,022 | ||||||||||||||
| Adjustments to reconcile net income to net cash flows from operating activities: |
||||||||||||||||||||||||||||
| Depreciation and amortization |
13,144 | 13,732 | 14,086 | 14,789 | 14,231 | 28,875 | 28,045 | |||||||||||||||||||||
| Deferred income taxes (benefit) |
(2,521 | ) | (5,252 | ) | (2,291 | ) | (3,042 | ) | (1,618 | ) | (5,333 | ) | (3,250 | ) | ||||||||||||||
| Stock-based compensation |
— | 1,774 | 413 | 1,248 | — | 1,661 | — | |||||||||||||||||||||
| Change in allowance for doubtful accounts |
78 | (118 | ) | — | 85 | 61 | 85 | 291 | ||||||||||||||||||||
| Gain / loss on foreign currency transaction |
(46 | ) | (23 | ) | (2 | ) | 11 | (172 | ) | 9 | (321 | ) | ||||||||||||||||
| Gain / loss on sale or retirement of fixed assets |
8 | 185 | 7 | — | (4 | ) | 7 | (4 | ) | |||||||||||||||||||
| Equity in loss of unconsolidated subsidiary |
— | 155 | 411 | 394 | 188 | 805 | 613 | |||||||||||||||||||||
| Amortization of short term investment discounts |
(111 | ) | (1,074 | ) | (1,094 | ) | (125 | ) | (26 | ) | (1,219 | ) | (26 | ) | ||||||||||||||
| Changes in assets and liabilities: |
||||||||||||||||||||||||||||
| Accounts receivable |
1,596 | 3,546 | (16,654 | ) | (2,150 | ) | 4,136 | (18,804 | ) | (9,857 | ) | |||||||||||||||||
| Income tax receivable / payable |
(371 | ) | 3,987 | 18,674 | (18,424 | ) | (9,877 | ) | 250 | 3,692 | ||||||||||||||||||
| Prepaid expenses |
(49 | ) | 2,704 | (4,823 | ) | 2,455 | 3,323 | (2,368 | ) | (523 | ) | |||||||||||||||||
| Other assets |
19 | 149 | 376 | (2,628 | ) | (335 | ) | (2,252 | ) | (745 | ) | |||||||||||||||||
| Accounts payable |
862 | 5,495 | (8,038 | ) | (674 | ) | 1,261 | (8,164 | ) | (6,447 | ) | |||||||||||||||||
| Accrued clearing services |
(2,373 | ) | (1,344 | ) | 3,737 | 1,467 | 1,487 | 5,204 | 3,412 | |||||||||||||||||||
| Accrued real estate taxes |
1,600 | (1,865 | ) | (1,652 | ) | 2,030 | 2,001 | 378 | 372 | |||||||||||||||||||
| Accrued payroll costs |
1,582 | 783 | (3,385 | ) | 1,965 | 1,104 | (1,420 | ) | (2,045 | ) | ||||||||||||||||||
| Accrued exchange fee rebates |
508 | (1,078 | ) | (541 | ) | (259 | ) | 243 | (800 | ) | (471 | ) | ||||||||||||||||
| Accrued employee termination |
29 | 2,761 | (1,308 | ) | (614 | ) | (49 | ) | (1,922 | ) | (130 | ) | ||||||||||||||||
| Accrued liabilities |
(434 | ) | 769 | (154 | ) | 1,047 | 1,433 | 345 | 1,398 | |||||||||||||||||||
| Funds held for deposit and membership transfers |
(6,893 | ) | (2,409 | ) | 18,399 | (19,688 | ) | 7,684 | (1,289 | ) | 9,861 | |||||||||||||||||
| Other current liabilities |
(4,378 | ) | 4,861 | (4,751 | ) | (20 | ) | (33 | ) | (4,771 | ) | 4,451 | ||||||||||||||||
| Other long-term liabilities |
(1,636 | ) | 172 | 253 | 243 | 377 | 496 | 669 | ||||||||||||||||||||
| Net cash flows from operating activities |
20,438 | 45,607 | 46,766 | 21,569 | 43,649 | 68,335 | 68,007 | |||||||||||||||||||||
| Cash flows from investing activities: |
||||||||||||||||||||||||||||
| Acquisition of property and equipment |
(7,777 | ) | (12,825 | ) | (4,195 | ) | (6,658 | ) | (14,702 | ) | (10,853 | ) | (19,634 | ) | ||||||||||||||
| Purchase of short term investments |
(49,285 | ) | (221,038 | ) | (124,483 | ) | (275,633 | ) | (24,674 | ) | (400,116 | ) | (24,674 | ) | ||||||||||||||
| Proceeds from short term investments |
9,897 | 46,423 | 111,486 | 201,781 | 14,836 | 313,267 | 14,836 | |||||||||||||||||||||
| Restricted cash |
4,848 | 3,223 | (15,172 | ) | 20,021 | (18,077 | ) | 4,849 | (14,441 | ) | ||||||||||||||||||
| Proceeds from sale of property and equipment |
— | 1 | 93 | — | 9 | 93 | 9 | |||||||||||||||||||||
| Investment in joint ventures |
(1 | ) | (3,006 | ) | (254 | ) | (20 | ) | (191 | ) | (274 | ) | (197 | ) | ||||||||||||||
| Net cash flows used in investing activities |
(42,318 | ) | (187,222 | ) | (32,525 | ) | (60,509 | ) | (42,799 | ) | (93,034 | ) | (44,101 | ) | ||||||||||||||
| Cash flows from financing activities: |
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| Repayments of borrowings |
(7,740 | ) | (1,082 | ) | (10,714 | ) | — | — | (10,714 | ) | (10,713 | ) | ||||||||||||||||
| Net proceeds from initial public offering |
— | 169,498 | — | — | — | — | — | |||||||||||||||||||||
| Excess tax benefit of stock compensation |
— | 222 | — | — | — | — | — | |||||||||||||||||||||
| Capital contributions from members |
— | — | — | — | 10 | — | 134 | |||||||||||||||||||||
| Net cash flows used in financing activities |
(7,740 | ) | 168,638 | (10,714 | ) | — | 10 | (10,714 | ) | (10,579 | ) | |||||||||||||||||
| Net increase (decrease) in cash and cash equivalents |
(29,620 | ) | 27,023 | 3,527 | (38,940 | ) | 860 | (35,413 | ) | 13,327 | ||||||||||||||||||
| Cash and cash equivalents - beginning of period |
103,918 | 74,298 | 101,321 | 104,848 | 103,058 | 101,321 | 90,591 | |||||||||||||||||||||
| Cash and cash equivalents - end of period |
$ | 74,298 | $ | 101,321 | $ | 104,848 | $ | 65,908 | $ | 103,918 | $ | 65,908 | $ | 103,918 | ||||||||||||||
| Cash paid for: |
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| Interest |
$ | 1,000 | $ | 41 | $ | 736 | $ | 110 | $ | 297 | $ | 846 | $ | 1,386 | ||||||||||||||
| Income taxes (net of refunds) |
$ | 15,959 | $ | 13,394 | $ | 6,627 | $ | 50,434 | $ | 26,841 | $ | 57,061 | $ | 29,678 | ||||||||||||||
 CBOT
Holdings, Inc. Second Quarter 2006 July 20, 2006 Exhibit 99.2 |
 1 Second Quarter 2006 CBOT Average Daily Volume by Trading Platform 2Q06 versus 2Q05 (millions of dollars, thousands of contracts) 2Q06 compared to 2Q05: Average daily volume up 14% versus 2Q05 Revenue up 31% Operating margin of 46% versus 28% Average rate per contract up 13% Exchange & clearing fee revenue up 27% $121 $158 28.0% 45.9% 2,889 3,302 $43.5 $18.2 Average Daily Volume Revenue Operating Margin Net Income 2Q05 2Q06 Off-Exchange 3% Open-Auction 28% Electronic 69% |
 2 Quarterly Volume and Revenue History Quarterly Average Daily Volume (in thousands) Quarterly Revenue (in millions) 2,203 2,516 2,367 2,398 2,838 2,889 2,582 2,404 3,108 3,302 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 $101 $102 $94 $84 $116 $121 $112 $117 $144 $158 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 |
 3 Quarterly Expense History Operating Expenses (in millions) $74 $74 $74 $85 $80 $87 $79 $87 $85 $86 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 |
 4 Quarterly Operating Profit History Quarterly Operating Profit (in millions) Quarterly results affected by: Exchange fees: Rate increases in 2005, rate per contract up 20% from 4Q04 to 1Q05 and 14% from 3Q05 to 4Q05 Member dues received in 1Q04 and 2Q04, then refunded back to members in 4Q04 ($9.3M) Legal fee settlement expense reflected in 4Q04 ($3.5M) and 2Q05 ($4.0M) 4Q05 severance and related costs, $3.0 million, defined benefit plan termination, $1.0 million 1Q06 market data price increase 2Q06 $2.6 million benefit from market data revenue account adjustment $27 $29 $20 ($1) $36 $34 $33 $30 $59 $73 $27 $29 $20 ($1) $36 $34 $33 $30 $59 $73 Operating Margin 27% 28% 21% -1% 31% 28% 29% 26% 41% 46% 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 |
 5 Market Data Byproduct of exchange activity Minimal marginal cost Partnerships with domestic and global exchanges Minneapolis Grain Exchange, the Kansas City Board of Trade, and the Winnipeg Commodity Exchange Exploring European and Asian agreements Dedicated sales and marketing effort underway Revenue (in millions) Growth Drivers $16 $16 $16 $16 $19 $18 $18 $19 $24 $26 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 |
 6 CBOT Average Daily Volume & Pricing Details 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 Electronic 1,194 1,395 1,426 1,507 1,772 1,843 1,707 1,633 2,132 2,220 Open-Auction 913 1,007 843 780 940 940 773 685 887 990 Off-Exchange 96 115 97 110 126 106 102 86 88 91 Interest Rates 1,735 2,028 1,974 2,006 2,356 2,368 2,123 1,951 2,561 2,588 Agriculture 375 391 295 287 373 404 350 331 412 529 Equity Indices 90 94 96 99 105 115 103 112 113 131 Metals, Energy, & Other 2 2 2 5 4 3 5 9 22 54 Total ADV 2,203 2,516 2,367 2,398 2,838 2,889 2,582 2,404 3,108 3,302 Volume by Venue Volume by Product 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 Electronic 0.429 0.319 0.330 0.315 0.400 0.397 0.411 0.506 0.495 0.503 Open-Auction 0.525 0.506 0.490 0.441 0.491 0.483 0.485 0.507 0.515 0.515 Off-Exchange 1.597 1.668 1.880 1.786 2.131 2.404 2.117 2.299 2.296 2.564 Interest Rates 0.484 0.408 0.417 0.386 0.482 0.467 0.469 0.537 0.517 0.523 Agriculture 0.678 0.673 0.637 0.640 0.641 0.643 0.631 0.666 0.673 0.680 Equity Indices 0.525 0.550 0.564 0.560 0.578 0.630 0.672 0.789 0.760 0.712 Metals, Energy, & Other 0.851 0.870 0.848 0.654 0.855 1.312 1.360 1.559 1.312 0.986 Overall Blended RPC 0.519 0.455 0.451 0.424 0.507 0.499 0.501 0.570 0.552 0.564 Rate per Contract by Venue Rate per Contract by Product NOTE: May not foot due to rounding Average Daily Volume (in thousands) Rate per Contract (in dollars) |
 7 Outlook Assumptions – 3Q06 Outlook As of July 20, 2006 Baseline & other expense (Total operating expenses- volume based expenses) $63 million - $66 million, including about $14 million in depreciation and amortization. . Volume based expenses Clearing and contract license fees about $0.103 - $0.105 per reported contract. Diluted Shares About 52.9 million. Tax rate 40-42%. |