Chicago Mercantile Exchange Inc – ‘8-K’ for 10/24/01 – EX-99

On:  Wednesday, 10/24/01   ·   For:  10/24/01   ·   Accession #:  950172-1-501026   ·   File #:  333-95561

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Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                         2±     9K 
 2: EX-99       Exhibit 99.1                                           5±    24K 

EX-99   —   Exhibit 99.1

                                                          EXHIBIT 99.1

Contacts:   Ellen G. Resnick, 312/930-3435                                      
Maryellen T. Thielen, 312/930-3467                      
news@cme.com                                            

                                                 FOR IMMEDIATE RELEASE

CHICAGO MERCANTILE EXCHANGE INC. REPORTS STRONG RESULTS                         
FOR THIRD QUARTER AND FIRST NINE MONTHS OF 2001                                 
Significant growth in interest rate and equity index volumes contributed to     
higher revenues and profits                                                     

CHICAGO, Oct. 24, 2001 - Due largely to significant growth in 
demand for its interest rate and equity index products, Chicago Mercantile      
Exchange Inc. (CME) reported strong growth in revenues and earnings for the     
third quarter and first nine months of 2001.                                    

For the quarter ended Sept. 30, 2001, revenues increased 106  
percent to $101.9 million, compared with $49.5 million for the third            
quarter of 2000. Revenues, reduced by securities lending interest expense,      
improved 93 percent to $95.3 million. This interest expense was incurred to     
generate additional interest income through a securities lending program        
which began in June 2001.                                                       

  Net income for the third quarter of this year was $17.6 million,
or 60 cents per diluted Class A equivalent share, versus a loss of $3.7         
million, or a loss of 13 cents per diluted Class A share, for the               
year-earlier period.*                                                           

  "During the third quarter, average daily trading volume rose 145
percent in our interest rate products and 78 percent in our equity index        
products compared to the third quarter of 2000 - with increases in our          
other product areas as well," said Chairman Scott Gordon. "CME's volume         
growth is related to the uncertainty that market participants feel about        
the economy, interest rates and the performance of U.S. stocks. In this         
environment, we are seeing greater demand for our risk management products      
and services."                                                                  

As of the end of August, CME already had exceeded its previous
annual trading volume record set in 2000. CME reported its highest volume       
month ever in September, with more than 40 million contracts changing           
hands. Through the end of September 2001, CME traded 295.5 million              
contracts, up 73 percent from the number traded in the first nine months of     
2000.                                                                           

  "Our average daily electronic trading volume climbed 142 percent
during the third quarter, to more than 322,000 contracts a day, due in part     
to expanded direct electronic access to products traded on our GLOBEX(R)2       
electronic trading system and enhanced GLOBEX2 capabilities," said              
President and Chief Executive Officer Jim McNulty. "By executing our            
business plan, we have delivered top-line revenue growth with small             
increases in expenses. Our third quarter operating margin was 31 percent,       
compared with a negative 12 percent for the third quarter of last year."        

For the third quarter of 2001, clearing and transaction fees  
increased 125 percent to $72.7 million, compared with $32.3 million for the     
third quarter of 2000. Quotation fees from the sale of market data rose 33      
percent to $12.0 million for the third quarter of 2001, versus $9.0 million     
for the same quarter a year ago.                                                

Third quarter 2001 expenses were $65.7 million, an increase of
$10.1 million from $55.6 million for the year-earlier period. Salaries and      
benefits had the largest dollar impact on the increase. The category            
totaled $28.1 million for the third quarter of 2001, versus $22.3 million       
for the third quarter of 2000, primarily due to increased compensation, a       
discretionary annual bonus accrual and pension expenses. In addition, CME       
incurred a one-time expense of $1.0 million by establishing the Chicago         
Mercantile Exchange Foundation in response to the terrorist attacks on          
Sept. 11. The foundation is distributing donations from CME, its                
shareholders and employees to various agencies and charities offering           
relief and support to the victims and their families.                           

CME had an income tax provision of $12.1 million for the third
quarter of 2001, compared with a tax benefit (due to operating losses) of       
$2.4 million for the same period of 2000.                                       

Nine-Month Results                                                              

For the first nine months of this year, revenues increased 81 
percent to $289.3 million from $159.4 million for the same period last          
year. When reduced for securities lending interest expense, revenues for        
the first nine months of 2001 rose 77 percent to $282.2 million. Clearing       
and transaction fees improved 96 percent to $211.9 million for the first        
nine months of 2001 from $108.0 million a year ago, benefiting from a 73        
percent increase in total trading volume and a new fee structure introduced     
in early 2001. Quotation data fees climbed 30 percent to $35.8 million for      
the first three quarters of 2001.                                               

 Total operating expenses were $195.7 million for the first nine
months of 2001, up $19.8 million from $175.9 million for the year-earlier       
period. Much of the increase was due to the improving value of CME's Class      
B shares, which affected a noncash charge for stock-based compensation          
expense. Stock-based compensation expense increased to $11.1 million for        
the first nine months of 2001 from $2.1 million for the same period a year      
ago. Excluding this category, expenses for the first nine months of 2001        
would have been $184.6 million, an increase of 6 percent from $173.8            
million. CME's largest expense category, salaries and benefits, increased       
10 percent to $78.3 million for the first nine months of 2001. The company      
reported an income tax provision of $34.7 million for 2001 to date, versus      
a tax benefit of $7.1 million for the same period of 2000. The effective        
tax rate was about 40 percent for both periods.                                 

CME reported net income of $51.8 million, or $1.78 per diluted
Class A equivalent share, for the first nine months of 2001, compared with      
a net loss of $10.6 million, or a loss of 37 cents per diluted Class A          
equivalent share, for the first nine months of 2000.* Excluding the impact      
of noncash stock-based compensation expense, CME's net income for the first     
three quarters of 2001 would have been $58.5 million, versus a loss of $9.3     
million for the same period a year ago.                                         

CME's working capital position increased to $127.4 million at 
Sept. 30, 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. On Nov. 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. The exchange moves about     
$1.5 billion per day in settlement payments and manages $28.4 billion in        
collateral deposits.                                                            

   Statements in this news release that are not historical facts are
forward-looking statements. They are based on current expectations,             
estimates, forecasts and projections about the industry in which CME            
operates, management's beliefs and assumptions made by management. These        
statements are not guarantees of future performance and involve certain         
risks, uncertainties and assumptions which are difficult to predict.            
Therefore, actual outcomes and results may differ materially from what is       
expressed or forecasted in such forward-looking statements. CME undertakes      
no obligation to publicly update any forward-looking statements, whether as     
a result of new information, future events or otherwise. These factors that     
might affect CME's performance include increasing competition by foreign        
and domestic competitors, including new entrants; rapid technological           
developments; CME's ability to continue introducing competitive new             
products and services on a timely, cost-effective basis; CME's mix of           
products/services; its ability to lower costs and expenses; changes in          
domestic and foreign regulations; protection and validity of our                
intellectual property rights; reliance on large customers; technological,       
implementation and cost/financial risks associated with the increasing use      
of large, multi-year contracts; the outcome of pending and future               
litigation and governmental proceedings; and continued availability of          
financing, financial instruments and financial resources in the amounts, at     
the times and on the terms required to support CME's future business. These     
are representative of factors that could affect the outcome of our              
forward-looking statements. In addition, such statements could be affected      
by CME's ability to operate successfully as a for-profit corporation;           
changes in the level of trading activity, the price level and volatility in     
the derivatives markets and in underlying fixed income, equity, foreign         
exchange and commodities markets; economic, political and market                
conditions; industry consolidation; customer consolidation; decreases in        
member trading activity; seasonality of the futures business; and other         
factors.                                                                        

                                                        [Enlarge/Download Table]


                                          CHICAGO MERCANTILE EXCHANGE INC.                                            
                                          Consolidated Statements of Income                                           
                              (unaudited; dollars in thousands, except per share data)                                

                                                                   Quarter Ended 9/30       Nine Months Ended 9/30    
                                                                    2001        2000          2001           2000     
                                                                    ----        ----          ----           ----     
                                                                                                                      
Revenues                                                                                                              
   Clearing and transaction fees                                 $ 72,690      $ 32,282    $ 211,894        $ 107,971 
   Quotation data fees                                             12,003         9,028       35,810           27,479 
   Communication fees                                               2,299         2,442        6,905            7,087 
   Investment income                                                1,727         2,296        6,796            6,680 
   Securities lending interest income                               6,885            --        7,490               -- 
   Other operating revenue                                          6,256         3,433       20,402           10,181 
                                                                 --------      --------     --------        --------- 
       Total revenues                                             101,860        49,481      289,297          159,398 
    Securities lending interest expense                            (6,531)                    (7,100)              -- 
                                                                 ---------     --------     ---------       --------- 
       Revenues, net of securities lending                                                                            
           interest expense                                        95,329        49,481      282,197          159,398 
                                                                 ---------     --------     --------        --------- 
Expenses                                                                                                              
   Salaries and benefits                                           28,132        22,290       78,338           71,167 
   Stock-based compensation                                          (944)         (370)      11,086            2,108 
   Occupancy                                                        5,092         4,874       15,145           15,002 
   Professional fees, outside services, licenses                    6,816         4,823       18,372           15,383 
   Communications and computer and                                                                                    
       software maintenance                                        11,236        11,147       31,365           31,239 
   Depreciation and amortization                                    9,245         8,622       27,279           25,218 
   Public relations and promotion                                   2,055         1,397        3,424            3,459 
   Other operating expense                                          4,035         2,815       10,656           12,324 
                                                                 --------      --------     --------         -------- 
       Total expenses                                              65,667        55,598      195,665          175,900 
                                                                 --------      --------     --------         -------- 
Income (loss) before limited partners' interest                                                                       
   In PMT and income taxes                                         29,662        (6,117)      86,532          (16,502)
   Limited partners' interest in PMT                                   --            21           --           (1,161)
Income tax (provision) benefit                                    (12,053)        2,438      (34,703)           7,065 
                                                                ----------     ---------    ---------       ----------
Net income (loss)                                               $  17,609      $ (3,658)    $ 51,829        $ (10,598)
                                                                =========      =========    ========        ==========
       Earnings per share - basic*                              $    0.61      $  (0.13)    $   1.80        $   (0.37)
                                                                =========      =========    ========        ==========
       Earnings per share - diluted*                            $    0.60      $  (0.13)    $   1.78        $   (0.37)
                                                                =========      =========    ========        ==========

                    Balance Sheet Highlights (unaudited)                                                              
(dollars in thousands)                          At Sept. 30, 2001        At Dec. 31, 2000                             
                                                -----------------        ----------------                             
Current assets**                                         $181,982                $110,583                             
Total assets**                                            295,953                 224,595                             
Current liabilities**                                      54,624                  41,445                             
Long-term debt                                              3,493                   6,063                             
Total liabilities**                                        68,160                  60,924                             
Shareholders' equity                                      227,793                 163,671                             

         * CME became a public company and issued shares on November 13,                                              
2000. Basic and diluted earnings per share calculations are based on all                                              
Class B shares converted to their equivalent number of Class A shares, plus                                           
the actual number of Class A shares outstanding. Calculation of 2000                                                  
earnings per share is based on the same number of shares as the 2001                                                  
calculation and is shown for comparison only. In 2000, the basic and                                                  
diluted net loss per share are the same, since shares issuable for stock                                              
options would be anti-dilutive.                                                                                       
         **  Excludes cash performance bonds and security deposits, which                                             
totaled $609.9 million at Sept. 30, 2001 and $156.0 million at Dec. 31, 2000,                                         
and securities lending proceeds and investment of $131.3 million at Sept. 30, 2001.                                   

01-152                                 #   #   #                                

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘8-K’ Filing		Date		Other Filings
Filed on / For Period End:		10/24/01
		9/30/01		10-Q
		12/31/00		10-K405
		11/13/00		8-K,  8-K/A
				List all Filings