News Release

CBOT Holdings Reports Record Revenue & Earnings For 3rd Quarter 2006

Tue Oct 17 2006

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 REVENUE AND EARNINGS FOR THE THIRD QUARTER OF 2006
Revenue Increases 45 Percent, Operating Margin Expands 20 Percentage Points

CHICAGO, October 17, 2006 – CBOT Holdings, Inc., holding company for the Chicago Board of Trade (CBOT®), announced today that revenue for the third quarter 2006 increased 45 percent to $163.0 million compared with $112.2 million in the third quarter of 2005.  Net income for the quarter more than doubled, hitting a new high of $48.8 million versus $19.8 million for the comparable period last year.  Third quarter 2006 earnings per diluted share were $0.92 compared to $0.40 in last year’s third quarter.  These record-setting results were driven by trading volume growth across all product categories, higher average exchange fee rates and tight cost controls.

Exchange and clearing revenue for the third quarter 2006 increased 49 percent to $123.2 million from $82.7 million in the third quarter of 2005.  In addition, market data revenue rose 30 percent to $23.7 million in the quarter, up from $18.3 million in the third quarter of 2005.  Third quarter operating income was $80.8 million, up from $32.9 million in the same period last year.

“This was another strong quarter for the CBOT, as we continued to build on our positive momentum and make significant progress on our global expansion strategy.  During the third quarter we launched several important initiatives, strengthening our business model and better positioning CBOT for continued growth.  We focused on meeting the needs of our diverse customer base, introducing electronic trading of our Agricultural futures during daytime trading hours, launching our new joint venture, JADE, which offers Asian-based commodities and continuing to enhance our Metals complex and capture greater market share,” said Bernard W. Dan, President and Chief Executive Officer of CBOT.

“Today, we also announced that a landmark agreement has been reached between CME and CBOT to merge the two organizations to create the world’s most diverse, global derivatives exchange.  Moving forward, we are committed to working with CME’s leadership to close this transaction and unlock the tremendous potential we believe the combined company will deliver to customers and shareholders.  I firmly believe that together we will be better positioned to compete globally and leverage the unique strengths of each organization to drive long-term growth.” said Dan.

Third quarter revenue growth was fueled by higher trading volume, an increase in the average rate per contract, and the positive impact of a market data price increase implemented January 1, 2006.  The average rate per contract rose 23 percent compared with the same quarter a year ago primarily due to pricing changes implemented on July 1, 2006.  Additionally, the average rate per contract was positively impacted by increased electronic trading resulting from the electronic trading of Agricultural futures during daytime trading hours beginning August 1, 2006.  The average rate per contract represents total exchange and clearing fee revenue divided by total reported trading volume.

Trading volume for the third quarter was 199.3 million contracts, an increase of 21 percent compared with 165.2 million contracts traded during last year’s third quarter.  Average daily volume (ADV) in the third quarter this year was 3.2 million contracts, up 23 percent compared with ADV of 2.6 million in the 2005 third quarter.  In addition, ADV on the CBOT’s e-cbot® electronic trading platform, rose to 71 percent of total exchange ADV, up from 66 percent in the third quarter of 2005, reflecting the successful introduction and strong adaptation to the side-by-side trading of Agricultural futures.

Total operating expenses of $82.2 million were up 4 percent over the prior year’s third quarter.  Volume-based expenses of $20.4 million rose 18 percent, in line with the growth in trading volume.  Baseline and other costs, or non-volume based expenses, remained relatively flat at $61.7 million this quarter compared to $61.9 million in the third quarter of 2005, contributing to a significant boost in operating margin.  The third quarter operating margin expanded by more than 20 percentage points to 49.6 percent from 29.3 percent in the same period last year.

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

 

Quarter Ended

Sept. 30

Sept. 30

June 30

 

2006

2005

2006

Average Daily Volume

3.2

2.6

3.3

Reported Trading Volume

199.3

165.2

208.0

Average Rate per Contract

$ 0.618

$0.501

$ 0.564

Revenue

$ 163.0

$ 112.2

$ 158.5

Operating Income

$   80.8

$ 32.9

$  72.8

Operating Margin

49.6%

29.3%

45.9%

Net Income

$ 48.8

$ 19.8

$ 43.5

Depreciation & Amortization

$ 13.7

$ 13.1

$ 14.8

Non-Cash Stock Compensation

$ .543

$ -0-

$ 1.3

Capital Expenditures

$ 8.7

$ 7.8

$ 6.7

CBOT Third Quarter 2006 Operational Highlights

  • Introduced electronically-traded Binary options on the Target Federal Funds rate with much success, expanding its short-term interest rate product set.
  • Introduced a new Global Developing Markets Program, furthering its strategy to expand global access to the CBOT’s markets.
  • Experienced strong results in Five-and Ten-Year Swap futures following launch of market maker program with Citigroup and Goldman Sachs on July 3, 2006.  ADV for September 2006 was three times greater than August 2006 and open interest had quadrupled at quarter end compared to July 3, 2006.
  • Successfully launched Agricultural futures on the CBOT electronic trading platform during daytime trading hours on August 1, 2006.  Following the launch of side-by-side trading of CBOT Agricultural products, the complex hit a new daily record for trading volume as well as reaching records for electronic trading.
  • Announced new process and delivery enhancements to its Metals complex, creating a more flexible trading environment.
  • Announced plan to list Metal options in CBOT open auction markets, side-by-side electronic trading of the contracts in the fourth quarter.
  • Announced plan to launch new a Dow Jones-AIG Excess Return Commodity Index futures contract.  The contract was introduced on October 2, 2006.
  • Announced a joint marketing initiative between Reuters and CBOT to promote access to CBOT markets via Reuters terminals.
  • Announced changes to CBOT pricing and membership structure effective October 1, 2006.  The changes focused on rewarding liquidity providers and further segmenting the fee structure.
  • Launched JADE, a joint venture between the CBOT and SGX, on September 25, 2006, with a Natural Rubber futures contract, its first Asian-based commodity derivatives product traded on the all electronic Exchange.
  • Accounted for 52 percent of all listed Metals futures traded in North America for the month of September, up from only 7 percent in September 2005 and 40 percent in June 2006. 

Outlook

Given current market conditions and what is known today, CBOT Holdings currently expects the following for the fourth quarter of 2006:

  • Baseline and other expenses, which equal total operating expenses less volume-based expenses, of $62 million to $65 million, including about $500 to $600 thousand of non-cash stock based compensation expense, but excluding incremental expenses expected to be incurred in connection with the merger.
  • Volume based expenses which include clearing costs and contracted license fees of around $0.103 per reported contract.  
  • An increase in the overall rate per contract from the current rate of about 3 to 6 percent.
  • Diluted shares outstanding of approximately 52.9 million.

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.

 

 

3Q

2Q

1Q

4Q

3Q

2Q

1Q

 

2006

2006

2006

2005

2005

2005

2005

Trading Days

63

63

62

63

64

64

61


AVERAGE RATE PER CONTRACT 

3Q

2Q

1Q

4Q

3Q

2Q

1Q

PRODUCT:

2006

2006

2006

2005

2005

2005

2005

 Interest Rate

0.568

0.523

0.517

0.537

0.469

0.467

0.482

 Agriculture

0.790

0.680

0.673

0.666

0.631

0.643

0.641

 Equity Index

0.779

0.712

0.760

0.789

0.672

0.630

0.578

 Metals, Energy & Other

1.048

0.986

1.312

1.559

1.360

1.312

0.855

   Overall average rate per contract

0.618

0.564

0.552

0.570

0.501

0.499

0.507

VENUE:

 

 

 

 

 

 

 

 Open-Auction

0.524

0.515

0.515

0.507

0.485

0.483

0.491

 Electronic

0.562

0.503

0.495

0.506

0.411

0.397

0.400

 Off-Exchange

3.172

2.564

2.296

2.299

2.117

2.404

2.131

   Overall average rate per contract

0.618

0.564

0.552

0.570

0.501

0.499

0.507

AVERAGE DAILY VOLUME (Round Turns, in thousands)

 

 

3Q

2Q

1Q

4Q

3Q

2Q

1Q

PRODUCT:

2006

2006

2006

2005

2005

2005

2005

 Interest Rate

2,507

2,588

2,561

1,951

2,123

2,368

2,356

 Agriculture

490

529

412

331

350

404

373

 Equity Index

110

131

113

112

103

115

105

 Metals, Energy & Other

56

54

22

9

5

3

4

   Total

3,163

3,302

3,108

2,404

2,582

2,889

2,838

VENUE:

 

 

 

 

 

 

 

 Open-Auction

850

990

887

685

773

940

940

 Electronic

2,232

2,220

2,132

1,633

1,707

1,843

1,772

 Off-Exchange

81

91

88

86

102

106

126

   Total

3,163

3,302

3,108

2,404

2,582

2,889

2,838

 

TRANSACTION FEES (in thousands)

 

 

3Q

2Q

1Q

4Q

3Q

2Q

1Q

PRODUCT:

2006

2006

2006

2005

2005

2005

2005

 Interest Rate

$89,673

$85,339

$82,032

$65,994

$63,741

$70,733

$69,327

 Agriculture

24,378

22,664

17,176

13,869

14,150

16,604

14,598

 Equity Index

5,416

5,859

5,337

5,588

4,439

4,627

3,687

 Metals, Energy & Other

3,699

3,360

1,805

908

393

252

184

   Total

$123,166

$117,221

$106,351

$86,360

$82,722

$92,216

$87,796

VENUE:

 

 

 

 

 

 

 

 Open-Auction

$28,060

$32,136

$28,356

$21,885

$23,979

$29,085

$28,185

 Electronic

79,000

70,341

65,442

52,013

44,872

46,883

43,285

 Off-Exchange

16,106

14,745

12,552

12,462

13,871

16,247

16,325

   Total

$123,166

$117,221

$106,351

$86,360

$82,722

$92,216

$87,796

Merger Announcement Conference Call

Executives of CBOT Holdings, Inc. will host a conference call with executives of CME to review the merger agreement today, October 17, 2006, at 8:30 am ET / 7:30 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 800.659.2032 (U.S. callers) and 617.614.2712 (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 24590429.

Earnings Conference Call

In lieu of an earnings conference call, CBOT Holdings, Inc. has posted a written review of its third quarter earnings on its website.  Please go to the investor relation’s section of cbot.com to access this document.

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.

Corporate Communications

+1 312 930 3434
Email