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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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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

10/24/01  Chicago Mercantile Exchange Inc   8-K:9      10/24/01    2:15K                                    Skadden Arps Sla..LLP/FA

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
9/30/0110-Q
12/31/0010-K405
11/13/008-K,  8-K/A
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