News Release

CBOT Holdings 4th Quarter 2005 Revenue Rises 33 Percent

Thu Feb 09 2006

Media Contact:

Melissa Jarmel
312.435.7137
news@cbot.com 

Tami Kamarauskas
312.789.8532
InvestorRelations@cbot.com


CHICAGO, February 9, 2006 – CBOT Holdings, Inc., holding company for the Chicago Board of Trade (CBOT®), announced today that exchange and clearing fee revenue in the fourth quarter of 2005 rose 33 percent to $86.4 million compared with $65.1 million in the 2004 fourth quarter.  Net income in the fourth quarter increased $20.4 million to $17.7 million, compared with a $2.7 million loss in the fourth quarter of 2004.

Fourth quarter total revenue was $117.4 million, up from $83.6 million in the fourth quarter of 2004.  Fourth quarter operating income was $30.0 million, up $31.0 million from a $1.0 million loss in the same period during the prior year.  The 2004 fourth quarter included a $9.3 million member dues reversal which reduced total revenue, and included $3.5 million of litigation costs which further reduced 2004 fourth quarter operating income. 

Revenue for 2005 was a record $466.6 million, up 23 percent from $380.2 million in 2004.  Exchange and clearing fee revenue grew 26 percent to $349.1 million from $276.4 million in 2004.  Operating income for the year was a record $132.6 million, rising 79 percent from $74.2 million in the prior year.  Net income for the year was a record $76.5 million, rising 82 percent from $42.0 million in the prior year.

CBOT Holdings President and CEO Bernard W. Dan said, “In 2005, the CBOT achieved substantial success – both operationally and financially.  During the 2005 fourth quarter, we successfully implemented a major upgrade to our electronic trading platform, we completed our initial public offering and posted 33 percent exchange and clearing fee revenue growth.  During the past year we created additional opportunities to capture global liquidity by extending trading hours to 22 hours per day, by adding global e-cbot® connections, and by forging new relationships with exchanges in Sydney, Dubai and Singapore.  While adding future growth capabilities, the CBOT team also achieved new annual volume, revenue, earnings and cash flow from operations records.”

Revenue and earnings in 2005 benefited from an increase in the average rate per contract, which compared to the same period a year ago rose 34 percent in the fourth quarter and rose 12 percent in the 2005 year.  The fourth quarter rate per contract of $0.570 includes $0.011 of benefit related to lower customer refund requests. The average rate per contract represents total exchange and clearing fee revenue divided by total reported trading volume.

Fourth quarter trading volume was 151.4 million contracts, similar to 153.4 million contracts traded during the prior year’s fourth quarter.  Average daily volume (ADV) in the 2005 fourth quarter was 2.4 million contracts, equivalent to the 2004 fourth quarter ADV.  In addition, ADV on the CBOT’s electronic trading platform, e-cbot powered by LIFFE CONNECT®, during the fourth quarter rose to 68 percent of total exchange volume, up from 63 percent in the fourth quarter of 2004.

Trading volume for the 2005 year was 674.7 million contracts, up 12 percent compared with 2004. Average daily volume for the 2005 year was 2.7 million contracts, up 13 percent compared with the 2004 ADV.  

Fourth quarter operating expense of $87.3 million includes $16.0 million of volume-based expenses, $68.3 million of non-volume based or baseline costs and $3.0 million of other costs.  Approximately $4.0 million of the baseline and other costs were not included in the outlook provided October 28, 2005.  Those expenses relate to December 2005 events, including $1.0 million for the final payment related to the non-qualified defined benefit pension plan termination and employee separation costs of $3.0 million related to the realignment of technology resources and related workforce reduction, which affected approximately 40 people – or about 5 percent of the company’s total workforce, and the departure of the company’s former general counsel.

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

 

 Quarter Ended

 Dec 31

 Dec 31

 Sept 30

 

 2005

 2004

 2005

 Average Daily Volume

 2.4

 2.4 

 2.6

 Reported Trading Volume

 151.4

 153.4

 165.2

 Average Rate per Contract

 $0.570

 $0.424

 $0.501

 Revenue

 $117.4

 $83.6

 $112.2

 Operating Income (Loss)

 $30.0

 $(1.0) 

 $32.9

 Operating Margin

 26%

 na 

 29%

 Net Income (Loss)

 $17.7

 $(2.7)

 $19.8

 Depreciation & Amortization

 $13.7

 $12.3 

 $13.1

 Non-Cash Stock Compensation

 $1.8

  $ -0- 

 $-0-

 Capital Expenditures

 $12.8

  $ 22.6

 $7.8

  

CBOT Fourth 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
  • Initial Public Offering of CBOT Holdings Class A common stock completed
  • CBOT successfully moved trading host to Chicago
  • CBOT announced strategic realignment of technology resources
  • CBOT and SGX announced plans to launch an Asian based electronic commodity derivatives exchange

Outlook
Given current market conditions and what is known today, CBOT Holdings currently expects the following for:

 

 (in millions, except per contract data)

 2006 Full Year

2006 March Quarter 

Baseline and other expenses, which equal total
operating expenses less volume-based expenses

 $265- $275  

 $68- $71

Non-cash stock compensation expense included in
baseline expenses

 $2.5 - $3.0

 $0.4-$0.5  

 

 2006 Full Year
and March Quarter

 
Volume-based expenses, which include clearing
costs and contracted license fees, per reported contract 
 $0.106 - $0.109   
An overall rate per contract of about

 $0.559

 

                  

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

 

 

4Q

3Q

2Q

1Q

4Q

 

2005

2005

2005

2005

2004

Trading Days

63

64

64

61

64

 

AVERAGE RATE PER CONTRACT

 

 

4Q

3Q

2Q

1Q

4Q

PRODUCT:

2005

2005

2005

2005

2004

 Interest Rate

0.537

0.469

0.467

0.482

0.386

 Agriculture

0.666

0.631

0.643

0.641

0.640

 Equity Index

0.789

0.672

0.630

0.578

0.560

 Metals, Energy & Other

1.559

1.360

1.312

0.855

0.654

Overall avg rate per contract

0.570

0.501

0.499

0.507

0.424

VENUE:

 

 

 

 

 

 Open-Auction

0.507

0.485

0.483

0.491

0.441

 Electronic

0.506

0.411

0.397

0.400

0.315

 Off-Exchange

2.299

2.117

2.404

2.131

1.786

Overall avg rate per contract

0.570

0.501

0.499

0.507

0.424

 

AVERAGE DAILY VOLUME (Round Turns, in thousands)

 

 

4Q

3Q

2Q

1Q

4Q

PRODUCT:

2005

2005

2005

2005

2004

 Interest Rate

1,951

2,123

2,368

 2,356

   2,006

 Agriculture

331

350

   404

 373

  287

 Equity Index

112

103

   115

 105

  99

 Metals, Energy & Other

9

5

       3

    4

      5

   Total

2,404

2,582

 2,889

 2,838

2,398

VENUE:

 

 

 

 

 

 Open-Auction

685

773

    940

 940

   780

 Electronic

1,633

1,707

  1,843

 1,772

1,507

 Off-Exchange

86

102

    106

 126

  110

   Total

2,404

2,582

  2,889

 2,838

    2,398

 

TRANSACTION FEES (in thousands)

 

 

4Q

3Q

2Q

1Q

4Q

PRODUCT:

2005

2005

2005

2005

2004

 Interest Rate

$65,994

$63,741

$70,733

$69,327

$49,524

 Agriculture

13,869

14,150

16,604

14,598

11,761

 Equity Index

5,588

4,439

4,627

3,687

3,562

 Metals, Energy & Other

908

393

252

184

202

   Total

$86,360

$82,722

$92,216

$87,796

$65,050

VENUE:

 

 

 

 

 

 Open-Auction

$21,885

$23,979

$29,085

$28,185

$22,038

 Electronic

52,013

44,872

46,883

43,285

30,413

 Off-Exchange

12,462

13,871

16,247

16,325

12,598

   Total

$86,360

$82,722

$92,216

$87,796

$65,050

 Quarterly Conference Call

Executives of CBOT Holdings Inc. will host a conference call to review its fourth quarter results today, February 9, 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

800.599.9795 (U.S. callers) and 617.786.2905 (International callers) at least 10 minutes before the call begins.  To listen to an archived recording after the call, please dial 888.286.8010 (U.S. callers) and 617.801.6888 (International callers)

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. 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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