SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 19, 2007
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 |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act |
| Item 2.02 | Results of Operations and Financial Condition |
On April 19, 2007, the Registrant issued a press release announcing its results for the quarter ended March 30, 2007. The press release is attached hereto as Exhibit 99.1. The information furnished in this report, including Exhibit 99.1, 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 under the Securities Act of 1933 or the Exchange Act.
| Item 9.01 | Financial Statements and Exhibits |
| (d) | Exhibits |
| 99.1 | Press release dated April 19, 2007 |
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: April 19, 2007 | By: |
| ||
| Name: | Kevin J.P. O’Hara | |||
| Title: | Chief Administrative Officer and Chief Strategy Officer | |||
EXHIBIT INDEX
| Exhibit No. | Title | |
| 99.1 | Press release dated April 19, 2007 |
Exhibit 99.1
For Immediate Release
| Media Contact: |
Investor Contact: | |
| Maria Gemskie | ||
| Craig Grabiner (312) 435-3620 news@cbot.com |
Debbie Koopman (312) 789-8532 investorrelations@cbot.com |
CBOT Holdings Reports Record Quarterly Earnings and Revenues
—Achieves Record Quarterly Trading Volume
—Non-GAAP Operating Margin Expands to Nearly 55 Percent
CHICAGO, April 19, 2007 – CBOT Holdings, Inc. (CBOT), holding company for the Chicago Board of Trade, today announced record quarterly earnings and revenues. Net income was $55.4 million, or $1.05 per diluted share, for the first quarter ended March 31, 2007. Excluding merger-related expenses, net income was $68.4 million, or $1.29 per diluted share, a 95 percent increase from the first quarter of 2006. In last year’s first quarter, the company reported net income of $35.1 million, or $0.66 per diluted share. A reconciliation of all non-GAAP financial information to GAAP financial information is included following the financial statements.
Revenues for the quarter increased 34 percent to $187.7 million, driven by record trading volume and higher average exchange fee rates. Operating margin for the quarter, excluding merger-related expenses, rose nearly 15 percentage points to 54.6 percent, reflecting the effectiveness of the company’s operating model and its disciplined expense management.
Included in the first-quarter 2007 results are $13.0 million in merger-related expenses. These expenses are non-deductible for tax purposes and consist primarily of legal and advisory fees incurred in connection with the CBOT’s merger agreement with Chicago Mercantile Exchange Holdings Inc. (CME) and the previously-announced, unsolicited proposal from IntercontinentalExchange, Inc. (ICE).
“The positive momentum we built last year is carrying through into 2007, as we experience higher trading volume and continue to effectively manage expenses,” said CBOT President and CEO Bernard W. Dan. “I believe that the CBOT is better positioned than ever to provide market participants around the world with unique products, innovative risk management tools and deep, liquid markets.”
Dan continued, “This is a dynamic time for the CBOT and our industry, which is undergoing consolidation and intense global competition. We remain focused on driving growth, managing our day-to-day business and serving the diverse needs of our customers.”
Financial Highlights:
| ($s in millions, except per share) |
Q1 FY07 | Q1 FY06 | Y/Y | ||||||||
| Revenues |
$ | 187.7 | $ | 140.1 | 34 | % | |||||
| GAAP Operating Income |
$ | 89.5 | $ | 55.6 | 61 | % | |||||
| Non-GAAP Operating Income |
$ | 102.5 | $ | 55.6 | 84 | % | |||||
| GAAP Operating Margin % |
47.7 | % | 39.7 | % | 8.0 pts | ||||||
| Non-GAAP Operating Margin % |
54.6 | % | 39.7 | % | 14.9 pts | ||||||
| GAAP Net Income |
$ | 55.4 | $ | 35.1 | 58 | % | |||||
| Non-GAAP Net Income |
$ | 68.4 | $ | 35.1 | 95 | % | |||||
| GAAP Diluted EPS |
$ | 1.05 | $ | 0.66 | 59 | % | |||||
| Non-GAAP Diluted EPS |
$ | 1.29 | $ | 0.66 | 95 | % | |||||
NOTE: Certain prior period amounts have been reclassified to conform to current period presentation.
The non-GAAP financial measures of operating performance exclude merger-related expenses of $13.0 million for the first quarter of 2007. The merger-related expenses are non-deductible for tax purposes, thus the pre-tax and after-tax impact is the same. Non-GAAP measures do not replace and are not a substitute for our GAAP financial results but are provided to improve overall understanding of our current financial performance and our prospects for the future.
Revenue growth for the quarter was primarily driven by higher exchange and clearing fees, which increased $45.3 million, or 43 percent. This growth was a result of a 24 percent increase in trading volume and a 15 percent increase in the average rate per contract in the first quarter of 2007 compared with 2006.
CBOT achieved record trading volume for the quarter with 239.7 million contracts traded, reporting volume increases across each of CBOT’s major product categories. Average daily volume (ADV) for the quarter was 3.9 million contracts, up 24 percent from the same period last year. Electronic trading volume increased 42 percent, boosting the percentage of trades executed on the CBOT’s electronic trading platform to 78 percent of total exchange ADV in 2007’s first quarter, up from 69 percent in the first quarter of 2006 and 73 percent in the fourth quarter of 2006. The higher level of electronic trading, in part, reflects the favorable reception by market participants to the electronic trading of Agricultural futures during daytime hours.
The average rate per contract was $0.633 for the quarter compared with $0.552 in the first quarter of 2006. The rate increase primarily resulted from changes in trading fees implemented in 2006, as part of the company’s strategy to further segment its pricing structure. The average rate per contract also benefited from increased electronic trading of Agricultural contracts following the August 1, 2006, introduction of electronic trading of Agricultural futures during daytime trading hours. The average rate per contract represents total exchange and clearing fee revenue divided by total reported trading volume.
Total operating expenses for the first quarter were $98.2 million, up 16 percent over the prior year’s first quarter. Excluding merger-related expenses of $13.0 million for the quarter, operating expenses were relatively flat compared with the prior year period. Volume-based expenses of $23.9 million rose 21 percent, in line with the growth in trading volume. Baseline and other costs, or non-volume based expenses, were $74.3 million this quarter compared with $64.7 million in the first quarter of 2006, a 15 percent increase. Excluding first quarter 2007 merger-related expenses, non-volume based expenses were down about 5 percent from last year’s first quarter.
Disciplined expense management was a key factor in delivering higher operating margins in the first quarter. The operating margin for the quarter increased to 47.7 percent from 39.7 percent in the same period last year. Excluding merger-related expenses, the operating margin for the quarter was 54.6 percent.
Other Financial Metrics
(in millions, except rate per contract)
| Q1 FY07 | Q1 FY06 | |||||
| Average Daily Volume |
3.9 | 3.1 | ||||
| Reported Trading Volume |
239.7 | 192.7 | ||||
| Average Rate per Contract |
$ | 0.633 | $ | 0.552 | ||
| Depreciation & Amortization |
$ | 11.5 | $ | 14.1 | ||
| Non-Cash Stock Compensation |
$ | 0.8 | $ | 0.4 | ||
| Capital Expenditures |
$ | 2.9 | $ | 4.2 | ||
CBOT First Quarter 2007 Operational Highlights
| • |
Launched a new stock index futures contract based on the Dow Jones U.S. Real Estate IndexSM (DJUSRE), designed to help market participants capitalize on changes in the real estate sector of the stock market and better manage commercial real estate exposure. |
| • | Expanded the CBOT Swap complex with a 30-year Interest Rate Swap futures contract, providing the swap market with a tradable reference point at the long end of the swap curve. |
| • | Announced plans to launch mini-sized Ag futures contracts on CBOT’s electronic trading platform on May 14, 2007. The CBOT mini-sized Corn, Soybeans and Wheat contracts will trade electronically during overnight hours, while continuing to trade by open auction during daytime hours. |
Outlook
The guidance outlined below is based on the company’s current operating model as a standalone company and does not take into account merger-related expenses expected to be incurred in connection with the merger agreement between CBOT and CME or the unsolicited proposal from ICE. Given current market conditions and what is known today, CBOT currently expects the following:
| Fiscal Year 2007 |
Second Quarter 2007 | ||||
| ($s in millions, except per contract data) | |||||
| Baseline and other expenses, which equal total operating expenses less volume-based expenses (excludes merger-related expenses) |
$250 - $260 | $ | 62 - $65 | ||
| Non-cash stock compensation expense included in baseline expenses |
$4.1 - $4.5 | $ | 1.5 - $1.6 | ||
| Fiscal Year and Second Quarter 2007 | ||
| Volume-based expenses, which include clearing costs and contracted license fees, per reported contract |
Around $0.100 to $0.102 | |
| Absent changes in transaction mix, the average rate per contract should approximate the first quarter rate. |
||
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/0,3181,834,00.html#daily
| 1Q 2007 |
4Q 2006 |
3Q 2006 |
2Q 2006 |
1Q 2006 |
4Q 2005 |
3Q 2005 |
2Q 2005 | |||||||||||||||||
| Trading Days |
62 | 63 | 63 | 63 | 62 | 63 | 64 | 64 | ||||||||||||||||
| AVERAGE RATE PER CONTRACT (in dollars) |
||||||||||||||||||||||||
| PRODUCT: |
||||||||||||||||||||||||
| Interest Rate |
$ | 0.552 | $ | 0.569 | $ | 0.568 | $ | 0.523 | $ | 0.517 | $ | 0.537 | $ | 0.469 | $ | 0.467 | ||||||||
| Agriculture |
0.966 | 0.931 | 0.790 | 0.680 | 0.673 | 0.666 | 0.631 | 0.643 | ||||||||||||||||
| Equity Index |
0.799 | 0.803 | 0.779 | 0.712 | 0.760 | 0.789 | 0.672 | 0.630 | ||||||||||||||||
| Metals, Energy & Other |
0.822 | 1.001 | 1.048 | 0.986 | 1.312 | 1.559 | 1.360 | 1.312 | ||||||||||||||||
| Overall average rate per contract |
0.633 | 0.653 | 0.618 | 0.564 | 0.552 | 0.570 | 0.501 | 0.499 | ||||||||||||||||
| VENUE: |
||||||||||||||||||||||||
| Open-Auction |
0.516 | 0.522 | 0.524 | 0.515 | 0.515 | 0.507 | 0.485 | 0.483 | ||||||||||||||||
| Electronic |
0.587 | 0.612 | 0.562 | 0.503 | 0.495 | 0.506 | 0.411 | 0.397 | ||||||||||||||||
| Off-Exchange |
2.821 | 3.179 | 3.172 | 2.564 | 2.296 | 2.299 | 2.117 | 2.404 | ||||||||||||||||
| Overall average rate per contract |
0.633 | 0.653 | 0.618 | 0.564 | 0.552 | 0.570 | 0.501 | 0.499 | ||||||||||||||||
AVERAGE DAILY VOLUME (Round Turns, in thousands)
| 1Q 2007 |
4Q 2006 |
3Q 2006 |
2Q 2006 |
1Q 2006 |
4Q 2005 |
3Q 2005 |
2Q 2005 | |||||||||
| PRODUCT: |
||||||||||||||||
| Interest Rate |
3,032 | 2,480 | 2,507 | 2,588 | 2,561 | 1,951 | 2,123 | 2,368 | ||||||||
| Agriculture |
631 | 611 | 490 | 529 | 412 | 331 | 350 | 404 | ||||||||
| Equity Index |
138 | 112 | 110 | 131 | 113 | 112 | 103 | 115 | ||||||||
| Metals, Energy & Other |
65 | 65 | 56 | 54 | 22 | 9 | 5 | 3 | ||||||||
| Total |
3,866 | 3,269 | 3,163 | 3,302 | 3,108 | 2,404 | 2,582 | 2,889 | ||||||||
| VENUE: |
||||||||||||||||
| Open-Auction |
733 | 813 | 850 | 990 | 887 | 685 | 773 | 940 | ||||||||
| Electronic |
3,031 | 2,375 | 2,232 | 2,220 | 2,132 | 1,633 | 1,707 | 1,843 | ||||||||
| Off-Exchange |
102 | 81 | 81 | 91 | 88 | 86 | 102 | 106 | ||||||||
| Total |
3,866 | 3,269 | 3,163 | 3,302 | 3,108 | 2,404 | 2,582 | 2,889 | ||||||||
TRANSACTION FEES (in thousands)
| 1Q 2007 |
4Q 2006 |
3Q 2006 |
2Q 2006 |
1Q 2006 |
4Q 2005 |
3Q 2005 |
2Q 2005 | |||||||||||||||||
| PRODUCT: |
||||||||||||||||||||||||
| Interest Rate |
$ | 103,697 | $ | 88,894 | $ | 89,673 | $ | 85,339 | $ | 82,032 | $ | 65,994 | $ | 63,741 | $ | 70,733 | ||||||||
| Agriculture |
37,818 | 35,821 | 24,378 | 22,664 | 17,176 | 13,869 | 14,150 | 16,604 | ||||||||||||||||
| Equity Index |
6,815 | 5,677 | 5,416 | 5,859 | 5,337 | 5,588 | 4,439 | 4,627 | ||||||||||||||||
| Metals, Energy & Other |
3,323 | 4,116 | 3,699 | 3,360 | 1,805 | 908 | 393 | 252 | ||||||||||||||||
| Total |
$ | 151,653 | $ | 134,509 | $ | 123,166 | $ | 117,221 | $ | 106,351 | $ | 86,360 | $ | 82,722 | $ | 92,216 | ||||||||
| VENUE: |
||||||||||||||||||||||||
| Open-Auction |
$ | 23,468 | $ | 26,730 | $ | 28,060 | $ | 32,136 | $ | 28,356 | $ | 21,885 | $ | 23,979 | $ | 29,085 | ||||||||
| Electronic |
110,345 | 91,570 | 79,000 | 70,341 | 65,442 | 52,013 | 44,872 | 46,883 | ||||||||||||||||
| Off-Exchange |
17,840 | 16,209 | 16,106 | 14,745 | 12,552 | 12,462 | 13,871 | 16,247 | ||||||||||||||||
| Total |
$ | 151,653 | $ | 134,509 | $ | 123,166 | $ | 117,221 | $ | 106,351 | $ | 86,360 | $ | 82,722 | $ | 92,216 | ||||||||
Earnings Conference Call
CBOT Executives will host a conference call to review its first quarter results today, April 19, 2007, at 8:00 a.m. ET / 7:00 a.m. 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 who wish to listen to the conference call via telephone should dial 888.396.2298 (U.S. callers) and 617.847.8708 (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 40764305.
Use of Non-GAAP Financial Information
In this press release, we use non-GAAP financial measures of operating performance. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure, calculated and prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). Non-GAAP financial measures do not replace and are not a substitute for our GAAP financial results, but are provided to present the effects of expenses recorded by CBOT Holdings, Inc. in connection with our proposed merger with Chicago Mercantile Exchange Holdings, Inc. and the unsolicited offer from IntercontinentalExchange, Inc., and to improve overall understanding of our current financial performance and our prospects for the future. Specifically, we believe the non-GAAP financial results provide useful information to both management and investors regarding certain additional financial and business trends relating to financial condition and operating results. In addition, our management uses these measures for reviewing financial results and evaluating financial performance.
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 159-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.
Important Merger Information
In connection with the proposed merger of CBOT Holdings, Inc. (“CBOT”) and the Chicago Mercantile Exchange Holdings Inc. (“CME”), the parties have filed relevant materials with the Securities Exchange Commission (“SEC”), including a joint proxy statement/prospectus regarding the proposed transaction. INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION, BECAUSE IT CONTAINS IMPORTANT INFORMATION. Investors are able to obtain a free copy of the joint proxy statement/prospectus, as well as other filings containing information about CBOT and CME without charge, at the SEC’s website (http://www.sec.gov). Copies of the joint proxy statement/prospectus can also be obtained when available, without charge by directing a request to CBOT Holdings, Inc., Attention: Investor Relations, at 141 West Jackson, Chicago, Illinois 60604 or calling (312) 435-3500.
CBOT, CME and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from CBOT shareholders in respect of the proposed transaction. Information regarding CBOT directors and executive officers is available in CBOT’s proxy statement for its 2007 annual meeting of stockholders, dated March 29, 2007. Additional information regarding the interests of such potential participants is included in the joint proxy statement/prospectus and the other relevant documents filed with the SEC. This document shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Forward-Looking Statements
Certain statements in this document and its attachments may contain forward-looking information regarding CBOT, CME and the combined company after the completion of the transactions that are intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, the benefits of the business combination transaction involving CBOT and CME including future financial and operating results, the combined company’s plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the management of CBOT and CME and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements.
The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the ability to obtain governmental approvals of the transaction on the proposed terms and schedule; the failure of CBOT shareholders or CME shareholders to approve the transaction; the risk that the businesses will not be integrated successfully; the risk that the cost savings and any other synergies from the transaction may not be fully realized or may take longer to realize than expected; disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; competition and its effect on pricing, spending, third-party relationships and revenues; social and political conditions such as war, political unrest or terrorism; general economic conditions and normal business uncertainty. Additional risks and factors are identified in CBOT’s filings with the SEC, including its Report on Form 10-K for the fiscal year ending December 31, 2006 which is available on CBOT’s website at http://www.cbot.com.
You should not place undue reliance on forward-looking statements, which speak only as of the date of this document. Except for any obligation to disclose material information under the Federal securities laws, CBOT undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this document.
Other Information
“Dow Jones,” and “Dow Jones U.S. Real Estate Index” are service marks of Dow Jones & Company, Inc., and have been licensed for use for certain purposes by CBOT. CBOT’s DJUSRE Index futures contract based on the Dow Jones U.S. Real Estate IndexSM, is not sponsored, endorsed, sold or promoted by Dow Jones, or any of its subsidiaries or affiliates, and none of Dow Jones, or any of its respective subsidiaries or affiliates make any representation regarding the advisability of investing in such contracts.
CBOT Holdings, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
(unaudited, in thousands)
| 03/31/06 | 06/30/06 | 09/30/06 | 12/31/06 | 03/31/07 | |||||||||||||
| ASSETS | |||||||||||||||||
| Current assets: |
|||||||||||||||||
| Cash and cash equivalents: |
|||||||||||||||||
| Unrestricted |
$ | 99,882 | $ | 60,629 | $ | 92,950 | $ | 177,664 | $ | 181,077 | |||||||
| Held under deposit and membership transfers |
4,966 | 5,279 | 2,790 | 1,503 | 6,792 | ||||||||||||
| Total cash and cash equivalents |
104,848 | 65,908 | 95,740 | 179,167 | 187,869 | ||||||||||||
| Restricted cash |
29,203 | 9,182 | 9,220 | 975 | 3,115 | ||||||||||||
| Short term investments |
253,979 | 327,956 | 338,426 | 312,411 | 362,366 | ||||||||||||
| Accounts receivable—net of allowance |
50,962 | 55,959 | 60,099 | 62,451 | 79,280 | ||||||||||||
| Deferred income taxes |
1,921 | 2,240 | 2,489 | — | — | ||||||||||||
| Prepaid expenses |
23,233 | 20,778 | 19,020 | 9,492 | 15,355 | ||||||||||||
| Total current assets |
464,146 | 482,023 | 524,994 | 564,496 | 647,985 | ||||||||||||
| Property and equipment: |
|||||||||||||||||
| Land |
34,234 | 34,234 | 34,234 | 34,234 | 34,234 | ||||||||||||
| Buildings and equipment |
335,415 | 340,113 | 341,171 | 343,271 | 345,473 | ||||||||||||
| Furnishings and fixtures |
189,188 | 180,813 | 184,098 | 184,913 | 185,854 | ||||||||||||
| Computer software and systems |
93,719 | 93,294 | 93,987 | 93,942 | 93,935 | ||||||||||||
| Construction in progress |
4,469 | 4,145 | 4,853 | 1,906 | 1,539 | ||||||||||||
| Total property and equipment |
657,025 | 652,599 | 658,343 | 658,266 | 661,035 | ||||||||||||
| Less accumulated depreciation and amortization |
412,108 | 415,691 | 426,282 | 433,989 | 445,241 | ||||||||||||
| Property and equipment—net |
244,917 | 236,908 | 232,061 | 224,277 | 215,794 | ||||||||||||
| Other assets—net |
21,229 | 23,403 | 23,304 | 22,557 | 21,618 | ||||||||||||
| Total assets |
$ | 730,292 | $ | 742,334 | $ | 780,359 | $ | 811,330 | $ | 885,397 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||
| Current liabilities: |
|||||||||||||||||
| Accounts payable |
$ | 12,965 | $ | 12,291 | $ | 13,125 | $ | 11,149 | $ | 20,256 | |||||||
| Accrued clearing services |
15,023 | 16,490 | 15,670 | 16,226 | 18,796 | ||||||||||||
| Accrued real estate taxes |
6,078 | 8,108 | 5,605 | 7,473 | 5,500 | ||||||||||||
| Accrued payroll costs |
2,966 | 4,931 | 7,739 | 9,859 | 3,996 | ||||||||||||
| Accrued exchange fee rebates |
659 | 400 | 450 | 675 | 972 | ||||||||||||
| Accrued employee termination |
1,755 | 1,141 | 786 | 624 | 31 | ||||||||||||
| Accrued liabilities |
7,241 | 10,672 | 10,935 | 11,007 | 10,569 | ||||||||||||
| Funds held for deposit and membership transfers |
33,220 | 13,532 | 11,088 | 1,562 | 8,991 | ||||||||||||
| Current portion of long-term debt |
19,455 | 20,014 | 11,877 | 10,716 | — | ||||||||||||
| Income tax payable |
24,425 | 6,001 | 10,325 | 10,428 | 35,371 | ||||||||||||
| Other current liabilities |
432 | 412 | 278 | 562 | 493 | ||||||||||||
| Total current liabilities |
124,219 | 93,992 | 87,878 | 80,281 | 104,975 | ||||||||||||
| Long-term liabilities: |
|||||||||||||||||
| Deferred income tax liabilities |
14,872 | 12,200 | 8,680 | 2,984 | 833 | ||||||||||||
| Other liabilities |
13,837 | 14,080 | 12,371 | 19,645 | 14,831 | ||||||||||||
| Total long-term liabilities |
28,709 | 26,280 | 21,051 | 22,629 | 15,664 | ||||||||||||
| Total liabilities |
152,928 | 120,272 | 108,929 | 102,910 | 120,639 | ||||||||||||
| Stockholders’ equity: |
|||||||||||||||||
| Common stock |
53 | 53 | 53 | 53 | 53 | ||||||||||||
| Additional paid-in capital |
487,404 | 488,651 | 489,195 | 489,817 | 490,664 | ||||||||||||
| Retained earnings |
89,821 | 133,281 | 182,094 | 226,961 | 282,352 | ||||||||||||
| Accumulated other comprehensive income (loss) |
86 | 77 | 88 | (8,411 | ) | (8,311 | ) | ||||||||||
| Total stockholders’ equity |
577,364 | 622,062 | 671,430 | 708,420 | 764,758 | ||||||||||||
| Total liabilities and stockholders’ equity |
$ | 730,292 | $ | 742,334 | $ | 780,359 | $ | 811,330 | $ | 885,397 | |||||||
The current balance sheet presentation does not reflect the adoption of Financial Accounting Standards Board Interpretation (“Fin 48”) “Accounting for Uncertain Tax Positions”, which is currently being finalized. Any adjustment as a result of the adoption will not have an impact on the income statement, but rather will result in an adjustment to stockholders’ equity. Any potential impact from the adoption of Fin 48 will be reflected in the consolidated financial statements filed with the Securities Exchange Commission in the company’s first quarter 10-Q.
CBOT Holdings, Inc. and Subsidiaries
Consolidated Statements of Income
(unaudited, in thousands, except per share data)
| QUARTER ENDED | ||||||||||||||||||||
| 06/30/06 | 09/30/06 | 12/31/06 | 03/31/07 | 03/31/06 | ||||||||||||||||
| Revenues: |
||||||||||||||||||||
| Exchange fees |
$ | 91,855 | $ | 93,901 | $ | 104,448 | $ | 117,680 | $ | 83,120 | ||||||||||
| Clearing fees |
25,366 | 29,265 | 30,061 | 33,973 | 23,231 | |||||||||||||||
| Market data |
26,286 | 23,709 | 24,970 | 25,082 | 23,643 | |||||||||||||||
| Building |
5,910 | 5,768 | 5,956 | 5,915 | 5,505 | |||||||||||||||
| Services |
4,299 | 4,431 | 3,280 | 4,234 | 4,236 | |||||||||||||||
| Other |
407 | 550 | 543 | 853 | 351 | |||||||||||||||
| Total revenues |
154,123 | 157,624 | 169,258 | 187,737 | 140,086 | |||||||||||||||
| Expenses: |
||||||||||||||||||||
| Clearing services |
19,490 | 18,671 | 19,225 | 21,796 | 18,023 | |||||||||||||||
| Contracted license fees |
1,914 | 1,771 | 1,858 | 2,119 | 1,738 | |||||||||||||||
| Salaries and benefits |
19,028 | 18,955 | 18,820 | 20,487 | 19,102 | |||||||||||||||
| Depreciation and amortization |
14,789 | 13,671 | 12,252 | 11,520 | 14,086 | |||||||||||||||
| Professional services |
4,558 | 3,661 | 14,401 | 16,654 | 3,939 | |||||||||||||||
| General and administrative expenses |
4,546 | 3,885 | 4,837 | 4,477 | 5,076 | |||||||||||||||
| Building operating costs |
6,002 | 5,406 | 6,450 | 6,420 | 6,603 | |||||||||||||||
| Information technology services |
11,885 | 13,282 | 11,951 | 11,772 | 12,230 | |||||||||||||||
| Programs |
3,086 | 2,497 | 3,525 | 2,991 | 2,627 | |||||||||||||||
| Severance and related costs |
(22 | ) | 67 | 133 | (18 | ) | 1,036 | |||||||||||||
| Operating expenses |
85,276 | 81,866 | 93,452 | 98,218 | 84,460 | |||||||||||||||
| Income from operations |
68,847 | 75,758 | 75,806 | 89,519 | 55,626 | |||||||||||||||
| Non-operating Income and Expense |
||||||||||||||||||||
| Interest income |
4,363 | 5,382 | 5,879 | 6,376 | 3,483 | |||||||||||||||
| Interest expense |
(388 | ) | (304 | ) | (236 | ) | (216 | ) | (585 | ) | ||||||||||
| Non-operating income |
3,975 | 5,078 | 5,643 | 6,160 | 2,898 | |||||||||||||||
| Income before income taxes |
72,822 | 80,836 | 81,449 | 95,679 | 58,524 | |||||||||||||||
| Income taxes |
||||||||||||||||||||
| Current |
32,168 | 35,460 | 33,585 | 41,992 | 25,466 | |||||||||||||||
| Deferred |
(3,042 | ) | (3,777 | ) | 2,794 | (2,122 | ) | (2,291 | ) | |||||||||||
| Total income taxes |
29,126 | 31,683 | 36,379 | 39,870 | 23,175 | |||||||||||||||
| Income before equity in unconsolidated subsidiary |
43,696 | 49,153 | 45,070 | 55,809 | 35,349 | |||||||||||||||
| Equity in loss of unconsolidated subsidiary—net of tax |
(237 | ) | (340 | ) | (203 | ) | (418 | ) | (246 | ) | ||||||||||
| Net income |
$ | 43,459 | $ | 48,813 | $ | 44,867 | $ | 55,391 | $ | 35,103 | ||||||||||
| Earnings per share: |
||||||||||||||||||||
| Basic |
$ | 0.82 | $ | 0.92 | $ | 0.85 | $ | 1.05 | $ | 0.66 | ||||||||||
| Diluted |
$ | 0.82 | $ | 0.92 | $ | 0.85 | $ | 1.05 | $ | 0.66 | ||||||||||
| Weighted average number of common stock shares: |
||||||||||||||||||||
| Basic |
52,792 | 52,794 | 52,795 | 52,798 | 52,787 | |||||||||||||||
| Diluted |
52,848 | 52,865 | 52,887 | 52,900 | 52,840 | |||||||||||||||
| At December 31, 2006, the company changed the format of its income statement. The company reclassified interest income and interest expense from revenue and operating expense, respectively, to a non-operating income and expense section in the consolidated statements of income. Accordingly, prior period amounts have been reclassified to conform to current period presentation. | ||||||||||||||||||||
| Operating expense makeup: |
||||||||||||||||||||
| Volume-based |
21,404 | 20,442 | 21,083 | 23,915 | 19,761 | |||||||||||||||
| Baseline |
63,894 | 61,357 | 72,236 | 74,321 | 63,663 | |||||||||||||||
| Other |
(22 | ) | 67 | 133 | (18 | ) | 1,036 | |||||||||||||
| Total |
85,276 | 81,866 | 93,452 | 98,218 | 84,460 | |||||||||||||||
CBOT Holdings, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited, in thousands)
| QUARTER ENDED | ||||||||||||||||||||
| 06/30/06 | 09/30/06 | 12/31/06 | 03/31/07 | 03/31/06 | ||||||||||||||||
| Cash flows from operating activities: |
||||||||||||||||||||
| Net income |
$ | 43,459 | $ | 48,813 | $ | 44,867 | $ | 55,391 | $ | 35,103 | ||||||||||
| Adjustments to reconcile net income to net cash flows from operating activities: |
||||||||||||||||||||
| Depreciation and amortization |
14,789 | 13,671 | 12,252 | 11,520 | 14,086 | |||||||||||||||
| Deferred income taxes (benefit) |
(3,042 | ) | (3,777 | ) | 2,794 | (2,122 | ) | (2,291 | ) | |||||||||||
| Stock-based compensation |
1,248 | 544 | 543 | 847 | 413 | |||||||||||||||
| Change in allowance for doubtful accounts |
85 | 20 | (368 | ) | 27 | — | ||||||||||||||
| (Gain) / loss on foreign currency transaction |
11 | 3 | — | — | (2 | ) | ||||||||||||||
| (Gain) / loss on sale or retirement of fixed assets |
— | 21 | 38 | 10 | 7 | |||||||||||||||
| Equity in loss of unconsolidated subsidiary |
394 | 567 | 338 | 418 | 411 | |||||||||||||||
| Amortization of short term investment discounts |
(125 | ) | (2,674 | ) | 2,545 | (1,252 | ) | (1,094 | ) | |||||||||||
| Changes in assets and liabilities: |
||||||||||||||||||||
| Accounts receivable |
(2,150 | ) | (4,602 | ) | (651 | ) | (18,065 | ) | (16,654 | ) | ||||||||||
| Income tax receivable / payable |
(18,424 | ) | 4,324 | 103 | 24,943 | 18,674 | ||||||||||||||
| Prepaid expenses |
2,455 | 1,758 | 3,003 | (5,863 | ) | (4,823 | ) | |||||||||||||
| Other assets |
(2,628 | ) | 428 | 528 | 418 | 376 | ||||||||||||||
| Accounts payable |
(674 | ) | 834 | (1,976 | ) | 9,107 | (7,490 | ) | ||||||||||||
| Accrued clearing services |
1,467 | (820 | ) | 556 | 2,570 | 3,737 | ||||||||||||||
| Accrued real estate taxes |
2,030 | (2,503 | ) | 1,868 | (1,973 | ) | (1,652 | ) | ||||||||||||
| Accrued payroll costs |
1,965 | 2,808 | 2,120 | (5,863 | ) | (3,385 | ) | |||||||||||||
| Accrued exchange fee rebates |
(259 | ) | 50 | 225 | 297 | (541 | ) | |||||||||||||
| Accrued employee termination |
(614 | ) | (355 | ) | (162 | ) | (593 | ) | (1,308 | ) | ||||||||||
| Accrued liabilities |
1,047 | 148 | (1,877 | ) | 771 | (702 | ) | |||||||||||||
| Funds held for deposit and membership transfers |
(19,688 | ) | (2,444 | ) | (9,526 | ) | 7,429 | 18,399 | ||||||||||||
| Other current liabilities |
(20 | ) | (134 | ) | (105 | ) | (13 | ) | (4,751 | ) | ||||||||||
| Other long-term liabilities |
243 | (1,709 | ) | 140 | (4,814 | ) | 253 | |||||||||||||
| Net cash flows from operating activities |
21,569 | 54,971 | 57,255 | 73,190 | 46,766 | |||||||||||||||
| Cash flows from investing activities: |
||||||||||||||||||||
| Acquisition of property and equipment |
(6,658 | ) | (8,721 | ) | (4,550 | ) | (2,929 | ) | (4,195 | ) | ||||||||||
| Purchase of short term investments |
(275,633 | ) | (85,151 | ) | (265,940 | ) | (224,285 | ) | (124,483 | ) | ||||||||||
| Proceeds from short term investments |
201,781 | 77,355 | 289,410 | 175,582 | 111,486 | |||||||||||||||
| Restricted cash |
20,021 | (38 | ) | 8,245 | (2,140 | ) | (15,172 | ) | ||||||||||||
| Proceeds from sale of property and equipment |
— | (1 | ) | — | — | 93 | ||||||||||||||
| Investment in joint ventures |
(20 | ) | (1,000 | ) | (10 | ) | — | (254 | ) | |||||||||||
| Net cash flows from (used in) investing activities |
(60,509 | ) | (17,556 | ) | 27,155 | (53,772 | ) | (32,525 | ) | |||||||||||
| Cash flows from financing activities: |
||||||||||||||||||||
| Repayments of borrowings |
— | (7,583 | ) | (1,062 | ) | (10,716 | ) | (10,714 | ) | |||||||||||
| Excess tax benefit of stock compensation |
— | — | 79 | — | — | |||||||||||||||
| Net cash flows used in financing activities |
— | (7,583 | ) | (983 | ) | (10,716 | ) | (10,714 | ) | |||||||||||
| Net increase (decrease) in cash and cash equivalents |
(38,940 | ) | 29,832 | 83,427 | 8,702 | 3,527 | ||||||||||||||
| Cash and cash equivalents—beginning of period |
104,848 | 65,908 | 95,740 | 179,167 | 101,321 | |||||||||||||||
| Cash and cash equivalents—end of period |
$ | 65,908 | $ | 95,740 | $ | 179,167 | $ | 187,869 | $ | 104,848 | ||||||||||
| Cash paid for: |
||||||||||||||||||||
| Interest |
$ | 110 | $ | 550 | $ | 10 | $ | 377 | $ | 736 | ||||||||||
| Income taxes (net of refunds) |
$ | 50,434 | $ | 30,910 | $ | 33,268 | $ | 17,049 | $ | 6,627 | ||||||||||
| Non-cash activity: |
||||||||||||||||||||
| FAS 159 pension adjustment |
$ | — | $ | — | $ | 14,176 | $ | — | $ | — | ||||||||||
Reconciliation of GAAP to Non-GAAP Financial Measures
CBOT used non-GAAP financial measures of operating performance to eliminate merger-related expenses incurred in the first quarter of 2007. Non-GAAP measures do not replace and are not a substitute for our GAAP financial results but are provided to improve overall understanding of our current financial performance and our prospects for the future.
Quarter Ended March 31, 2007 ($s in millions, except per share)
| As Reported | Merger- Expenses |
Adjusted (Non-GAAP) |
||||||||||
| Income from Operations |
$ | 89.5 | $ | 13.0 | $ | 102.5 | ||||||
| Operating Margin % |
47.7 | % | 6.9 | % | 54.6 | % | ||||||
| Net Income |
$ | 55.4 | $ | 13.0 | $ | 68.4 | ||||||
| Diluted Earnings Per Share |
$ | 1.05 | $ | 0.24 | $ | 1.29 | ||||||