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 |
June 30 |
March 31 |
|
|
2006 |
2005 |
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 |
$259 - $265 |
$63 - $66 |
|
|
|
|
|
Non-cash stock compensation expense included |
$2.5 - $3.0 |
$0.5 to $0.6 |
|
|
2006 Full Year |
|
|
Volume-based expenses, which include clearing costs |
$0.103 - $0.105 |
|
|
|
|
|
|
An increase in the overall rate per contract from |
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 |
|
PRODUCT: |
2006 |
2006 |
2005 |
2005 |
2005 |
2005 |
|
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 |
|
PRODUCT: |
2006 |
2006 |
2005 |
2005 |
2005 |
2005 |
|
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 |
|
PRODUCT: |
2006 |
2006 |
2005 |
2005 |
2005 |
2005 |
|
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
