Filed
by CBOE Holdings, Inc.
pursuant to Rule 425 under the Securities Act of 1933, as amended
Subject
Company: CBOE Holdings, Inc.
Subject Company’s Commission File No.: 333-140574
On April 23, 2007, the Chicago Board Options Exchange, Incorporated posted the following information circular on its website.
IC07-52
April 23, 2007
To: CBOE Members
From: Bradley R. Griffith
Chairman, Financial Planning Committee
Alan J. Dean
Chief Financial Officer
Re: Unaudited First Quarter 2007 Financial Statements
Summary
Attached are CBOE’s unaudited financial statements as of March 31, 2007. During the first quarter of 2007 CBOE recorded a pre-tax profit of $30.3 million on average volume of 3,363,000 options contracts per day. During the same quarter last year CBOE recorded a pre-tax profit of $8.3 million on average volume of 2,486,000 options contracts per day.
Revenue
Gross revenue totaled $77.8 million for the first quarter of 2007 compared to $59.2 million for the same period in 2006. The $18.6 million increase (31% over 2006) resulted from higher trading volumes that increased transaction fees by $17.5 million. Investment income increased by $0.8 million during the 1st quarter of 2007, reflecting higher levels of excess working capital compared to the prior year. Other revenue increased by $0.6 million compared to the same period last year, which reflects the increased level of license fees recovered related to our monthly firm fee cap.
Expenses
Expenses totaled $47.6 million for the first quarter of 2007 compared to $50.8 million for the same period in 2006. Employee costs decreased $0.9 million as a result of decreased staffing levels for the three months ended March 31, 2007 as compared to same period in 2006. Severance expenses decreased for the three months ended March 31, 2007 as CBOE enacted a restructuring in 2006 at a cost of $3.6 million while no such action has occurred in the same period in 2007. Depreciation and amortization decreased by $0.7 million in the 1st quarter 2007 due to capital expenditures in 2004 and 2005 being slightly lower than historical averages. Travel and promotional expenses increased by $0.5 million attributable to our corporate branding program in the 1st quarter 2007. Other expense increased by $1.0 million mainly due to increased market linkage expense. This program that reimburses DPM’s for the cost of linking customer orders to markets at other exchanges was initiated subsequent to March 31, 2006.
Consolidated Balance Sheets
Working capital (current assets minus current liabilities) increased by $15.2 million to $109.3 million while cash and investments increased by $26.4 million to $128.5 million at March 31, 2007. These increases are attributable to revenue exceeding cash expenses less capital expenditures resulting from high trading volume during the quarter as well as the prepayment of transaction fees for 2007 by some of our members. CBOE also spent $8.7 million for capital expenditures mostly for systems hardware and capitalized software.
Questions may be directed to Alan Dean at 312-786-7023 or dean@cboe.com.
This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any state or jurisdiction in which an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
In connection with the proposed restructuring transaction, CBOE Holdings, Inc. (“CBOE Holdings”) has filed certain relevant materials with the United States Securities and Exchange Commission (SEC), including a registration statement on Form S-4. Members are encouraged to read the registration statement, including the proxy statement/prospectus that are a part of the registration statement, because it contains important information about the proposed transaction. Members are able to obtain a free copy of the proxy statement/prospectus, as well as the other filings containing information about CBOE Holdings and the Chicago Board Options Exchange, Incorporated (“CBOE”), without charge, at the SEC’s Web site, http://www.sec.gov, and the companies’ website, www.CBOE.com. In addition, CBOE members may obtain free copies of the proxy statement/prospectus and other documents filed by CBOE Holdings or the CBOE from CBOE Holdings by directing a request to the Office of the Secretary, CBOE Holdings, Inc., 400 South LaSalle Street, Chicago, Illinois 60605.
CBOE Holdings, the CBOE and their respective directors, executive officers and other employees may be deemed to be participants in the solicitation of proxies in connection with the proposed transaction. Information about the directors and executive officers of CBOE Holdings and of the CBOE is available in the prospectus/proxy statement.
CHICAGO BOARD OPTIONS EXCHANGE, INC.
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2007 and MARCH 31, 2006
|
|
Unaudited |
|
Unaudited |
|
|||
|
|
|
Three month period |
|
Three month period |
|
||
|
(in thousands) |
|
Ended March 31, 2007 |
|
Ended March 31, 2006 |
|
||
|
REVENUES: |
|
|
|
|
|
||
|
Transaction fees |
|
$ |
58,816 |
|
$ |
41,302 |
|
|
Other member fees |
|
5,971 |
|
5,774 |
|
||
|
Options Price Reporting Authority (OPRA) income |
|
5,000 |
|
5,040 |
|
||
|
Regulatory fees |
|
3,356 |
|
3,791 |
|
||
|
Investments income |
|
1,736 |
|
874 |
|
||
|
Other |
|
2,965 |
|
2,380 |
|
||
|
Total Revenues |
|
77,844 |
|
59,161 |
|
||
|
|
|
|
|
|
|
||
|
EXPENSES: |
|
|
|
|
|
||
|
Employee costs |
|
18,817 |
|
19,683 |
|
||
|
Severance costs |
|
0 |
|
3,616 |
|
||
|
Depreciation and amortization |
|
6,325 |
|
7,020 |
|
||
|
Data processing |
|
4,661 |
|
4,678 |
|
||
|
Outside services |
|
5,047 |
|
5,037 |
|
||
|
Royalty fees |
|
6,034 |
|
5,740 |
|
||
|
Travel and promotional expenses |
|
2,306 |
|
1,788 |
|
||
|
Net loss from investment in affiliates |
|
228 |
|
369 |
|
||
|
Facilities costs |
|
1,297 |
|
1,112 |
|
||
|
Other |
|
2,842 |
|
1,776 |
|
||
|
Total Expenses |
|
47,557 |
|
50,819 |
|
||
|
|
|
|
|
|
|
||
|
INCOME BEFORE TAXES |
|
30,287 |
|
8,342 |
|
||
|
|
|
|
|
|
|
||
|
PROVISION FOR INCOME TAXES |
|
12,722 |
|
3,335 |
|
||
|
|
|
|
|
|
|
||
|
NET INCOME |
|
$ |
17,565 |
|
$ |
5,007 |
|
|
|
|
|
|
|
|
||
|
RETAINED EARNINGS AT BEGINNING OF YEAR |
|
161,989 |
|
119,974 |
|
||
|
CBOT Exercise Rights Purchased |
|
(127 |
) |
0 |
|
||
|
RETAINED EARNINGS AT END OF MARCH |
|
$ |
179,427 |
|
$ |
124,981 |
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
Other Statistics — unaudited |
|
|
|
|
|
||
|
Trading Days |
|
61 |
|
62 |
|
||
|
Contracts Traded |
|
205,161,300 |
|
154,139,520 |
|
||
|
Contracts Per Day |
|
3,363,000 |
|
2,486,000 |
|
||
|
Transaction Fees Per Contract |
|
$ |
0.287 |
|
$ |
0.268 |
|
CHICAGO BOARD OPTIONS EXCHANGE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2007 and DECEMBER 31, 2006
|
|
Unaudited |
|
|
|
|||
|
(in thousands) |
|
March 31, 2007 |
|
December 31, 2006 |
|
||
|
ASSETS |
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
Cash and investments |
|
$ |
128,542 |
|
$ |
102,099 |
|
|
Other current assets — net |
|
53,716 |
|
42,851 |
|
||
|
Total Current Assets |
|
182,258 |
|
144,950 |
|
||
|
|
|
|
|
|
|
||
|
Investments in affiliates/subsidiary |
|
12,612 |
|
12,830 |
|
||
|
Land |
|
4,914 |
|
4,914 |
|
||
|
Property and equipment: - net |
|
61,406 |
|
59,971 |
|
||
|
Other assets - net |
|
34,134 |
|
33,161 |
|
||
|
|
|
|
|
|
|
||
|
Total Assets |
|
$ |
295,324 |
|
$ |
255,826 |
|
|
|
|
|
|
|
|
||
|
LIABILITIES & MEMBERS’ EQUITY |
|
|
|
|
|
||
|
Total current liabilities |
|
$ |
72,928 |
|
$ |
50,868 |
|
|
Total long-term liabilities |
|
21,568 |
|
21,568 |
|
||
|
Total members’ equity |
|
200,828 |
|
183,390 |
|
||
|
|
|
|
|
|
|
||
|
Total Liabilities and Members’ Equity |
|
$ |
295,324 |
|
$ |
255,826 |
|
CHICAGO BOARD OPTIONS EXCHANGE, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2007 and MARCH 31, 2006
|
|
Unaudited |
|
Unaudited |
|
|||
|
|
|
Three month period |
|
Three month period |
|
||
|
(in thousands) |
|
Ended March 31, 2007 |
|
Ended March 31, 2006 |
|
||
|
Cash Flows from Operating Activities: |
|
|
|
|
|
||
|
Net Income |
|
$ |
17,565 |
|
$ |
5,007 |
|
|
|
|
|
|
|
|
||
|
Adjustments to reconcile net income to net cash |
|
|
|
|
|
||
|
Depreciation and amortization |
|
6,325 |
|
7,020 |
|
||
|
Amortization of discount on investments available for sale |
|
(242 |
) |
0 |
|
||
|
Equity in loss of OneChicago, LLC |
|
153 |
|
369 |
|
||
|
Equity in loss of CBSX |
|
75 |
|
0 |
|
||
|
Deferred income taxes |
|
0 |
|
(596 |
) |
||
|
|
|
|
|
|
|
||
|
Change in assets and liabilities: |
|
11,194 |
|
10,802 |
|
||
|
|
|
|
|
|
|
||
|
Net Cash Flows from Operating Activities |
|
35,070 |
|
22,602 |
|
||
|
|
|
|
|
|
|
||
|
Cash Flows from Investing Activities: |
|
|
|
|
|
||
|
Capital and other assets expenditures |
|
(8,732 |
) |
(3,970 |
) |
||
|
Sale of NSX certificates of proprietary membership |
|
0 |
|
1,500 |
|
||
|
HedgeStreet, Inc. investment |
|
0 |
|
(2,000 |
) |
||
|
CBOE Stock Exchange investment |
|
(10 |
) |
0 |
|
||
|
OneChicago, LLC investment |
|
0 |
|
(1,144 |
) |
||
|
Net Cash Flows from Investing Activities |
|
(8,742 |
) |
(5,614 |
) |
||
|
|
|
|
|
|
|
||
|
Cash Flows from Financing Activities: |
|
|
|
|
|
||
|
CBOT exercise right purchase |
|
(127 |
) |
0 |
|
||
|
Net Cash Flows from Financing Activities |
|
(127 |
) |
0 |
|
||
|
|
|
|
|
|
|
||
|
Net Increase in Cash and Cash Equivalents |
|
26,201 |
|
16,988 |
|
||
|
|
|
|
|
|
|
||
|
Cash and Cash Equivalents at Beginning of Year |
|
82,521 |
|
65,080 |
|
||
|
Cash and Cash Equivalents at End of March |
|
$ |
108,722 |
|
$ |
82,068 |
|
|
|
|
|
|
|
|
||
|
Supplemental Disclosure of Cash Flow Information: |
|
|
|
|
|
||
|
Cash paid for income taxes |
|
$ |
181 |
|
$ |
1,100 |
|
|
Non-cash activities: |
|
|
|
|
|
||
|
Sale of membership shares by OneChicago, LLC |
|
|
|
4,320 |
|
||