For the quarter ended June 30, 2001, revenues rose 81 percent to $94.7 million from $52.3 million in the second quarter of 2000. Net income for the second quarter of 2001 was $14.2 million, or 48 cents per diluted Class A equivalent share, compared with a second quarter 2000 net loss of $4.1 million, or a loss of 14 cents per diluted Class A equivalent share.* Excluding the impact of a noncash stock-based compensation expense, CME's net income for the second quarter of 2001 would have been $21.5 million, versus a loss of $3.5 million for the second quarter of 2000.
Revenues benefited from stronger trading volume, which increased 62 percent for the quarter to 98.4 million contracts from 60.8 million contracts for the second quarter last year. For the second quarter of 2001, clearing and transaction fees improved 92 percent to $68.3 million, compared with $35.6 million for the second quarter of 2000. In particular, higher Eurodollar and electronic trading volumes improved transaction fees for the period. The second largest revenue category, quotation fees from the sale of market data, increased 59 percent to $13.6 million for the second quarter of 2001, versus $8.6 million for the year-earlier quarter. Overall, CME revenues also improved due to a new pricing structure announced late last year.
"Two trends deserve mention," said Chairman Scott Gordon. "First, uncertainty over the economy and interest rates increased our trading volumes. Activity was particularly strong in our benchmark Eurodollar and equity index products. Second, we saw a 150 percent increase in electronic trading volume, to 19.8 million contracts this past quarter from only 7.9 million in the same period of last year."
"Three reasons for the growth in our trading volume include expanded direct electronic access to products traded on our GLOBEX ® 2 electronic trading system, enhanced GLOBEX2 capabilities and volume discounts we began offering on our flagship Eurodollar contract," said President and Chief Executive Officer Jim McNulty.
Second quarter 2001 expenses grew 21 percent to $71.2 million from $58.9 million for the year-earlier period. The increase was largely due to a noncash charge for stock-based compensation expense, which increased primarily because of the improved value of CME's Class B shares. Excluding stock-based compensation, second quarter 2001 expenses were $59.2 million, up 2 percent from $57.9 million. CME had an income tax provision of $9.3 million for the second quarter of 2001, compared with a tax benefit (due to operating losses) of $2.7 million for the same period of 2000.
Six-Month Results
For the first six months of 2001, revenues improved 70 percent to $186.9 million, versus $109.9 million for the same period last year. Clearing and transaction fees benefited from higher trading volume and CME's new fee structure, climbing 84 percent to $139.2 million for the first half of 2001. In particular, higher Eurodollar trading volume and a 143 percent increase in electronic trading volume improved transaction fees for the period. Electronic trading volume of 36.0 million contracts for the first half of 2001 exceeded the 34.5 million contracts traded electronically in all of last year.
Despite the increase in revenues, CME's expenses rose only 8 percent to $130.0 million for the first half of 2001 from $120.3 million for the year-earlier period. The largest expense category, salaries and benefits, increased 3 percent to $50.2 million, with stock-based compensation rising to $12.0 million from $2.5 million and reflecting an increase in the value of CME's Class B shares. CME reported an income tax provision of $22.7 million for 2001 to date, versus a tax benefit of $4.6 million for the same period of 2000.
CME reported net income of $34.2 million, or $1.18 per diluted Class A equivalent share, for the first six months of 2001, compared with a net loss of $6.9 million, or a loss of 24 cents per diluted Class A equivalent share, for the first half of 2000.* Excluding the impact of a noncash stock-based compensation expense, CME's net income for the first half of 2001 would have been $41.5 million, versus a loss of $5.5 million for the first six months of 2000.
CME's working capital position increased to $110.5 million at the end of June 2001, compared with $69.1 million at Dec. 31, 2000.
Chicago Mercantile Exchange Inc. (www.cme.com) is an international marketplace that brings together buyers and sellers on its trading floors and GLOBEX2 around-the-clock electronic trading system. CME offers futures contracts and options on futures primarily in four product areas: interest rates, stock indexes, foreign exchange and commodities. All over the world, pension funds and investment advisers, portfolio managers, corporate treasurers, commercial and investment banks, broker/dealers and individuals are among those who trade on CME as an integral part of their financial management strategy. In 2000, more than 231 million contracts with an underlying value of more than $155 trillion changed hands at CME. The exchange moves about $1.5 billion per day in settlement payments, manages $28.5 billion in collateral deposits and administers more than $1 billion of letters of credit. On November 13, 2000, CME finalized its transformation into a for-profit, shareholder-owned corporation as it became the first U.S. financial exchange to demutualize by converting its membership interests into shares of common stock that can trade separately from exchange trading privileges.
