SEC Company Response from CME GROUP INC. (CME) (CIK 0001156375) (CME) — Oct 19, 2006
CME GROUP INC. (CME) (CIK 0001156375)
Date: Oct. 19, 2006 · CIK: 0001156375 · Accession: 0001193125-06-211018
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 000-33379
Referenced dates: August 3, 2006, October 3, 2006
Letter
Correspondence Letter
October 19, 2006
VIA EDGAR TRANSMISSION AND FACSIMILE
Securities and Exchange Commission
Division of Corporate Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
Mail Stop 4561
Attention:
Don Walker, Senior Assistant Chief Accountant
John Spitz, Staff Accountant
RE: Chicago Mercantile Exchange Holdings Inc.
Form 10-K for the year ended December 31, 2005
Filed March 6, 2006
File No. 000-33379
Ladies and Gentlemen:
Chicago Mercantile Exchange Holdings Inc. (the “Company”) has received and reviewed the comments from the staff of the Division of Corporate Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) contained in a letter from Don Walker, Senior Assistant Chief Accountant, dated October 3, 2006, regarding the Commission’s limited review of the above-referenced Company filing (the “Comment Letter”). The Company hereby submits its responses to the Staff’s comments contained in the Comment Letter, as set forth below. For the convenience of the Staff, the Staff’s comment has been reproduced below and is set forth in italics immediately prior to the Company’s response.
Securities and Exchange Commission
October 19, 2006
Page 2
Form 10-K filed March 6, 2006
Consolidated Statements of Income, page 57
1. We note your response to comment 2 from our letter dated August 3, 2006. Please tell us how you considered the guidance in EITF 99-19 to support your presentation of securities lending expense as a reduction of total revenues to arrive at net revenues. We continue to believe that securities lending expense should be presented within your expenses in your income statement rather than as a reduction of revenues in accordance with Article 5 of Regulation S-K.
Response:
As discussed in our teleconference with SEC staff members, including John Spitz, on Tuesday, October 17, 2006, securities lending interest revenue and expense are peripheral to our core business operations. While these items have been disclosed individually in the current income statement format, in response to the questions raised during this comment process, we are proposing to move this revenue and expense to non-operating income and expense, respectively. In our response, dated August 31, 2006, to your first comment letter, in Question 2 we stipulated that investment income and the operating results of the unconsolidated subsidiaries were immaterial. However, to achieve consistent reporting of all non-operating items, we are also proposing to move these items to non-operating income. Making these proposed changes will address the comments related to our presentation as it relates to Article 5 of Regulation S-X.
Since all material information relating to these activities has been disclosed to investors in previous filings and this change relates only to the presentation of certain income statement information, our plan is to make this change prospectively. This would include making the appropriate reclassifications to prior period income statements in future filings. It is our intent to make these changes effective with our earnings release scheduled to be released on October 24th and in our Form 10-Q for the three month period ended September 30, 2006. For purposes of clarity, we have attached the proposed format displaying 2005 information in Exhibit A.
Securities and Exchange Commission
October 19, 2006
Page 3
If the Staff has any questions, concerns or additional comments regarding the foregoing or requires additional information, please contact Nancy Goble, Managing Director and Chief Accounting Officer, at (312) 930-2385. Facsimile transmissions may be sent to the undersigned at (312) 930-4556.
Very truly yours,
CHICAGO MERCANTILE EXCHANGE HOLDINGS INC.
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CORRESP 1 filename1.htm Correspondence Letter October 19, 2006 VIA EDGAR TRANSMISSION AND FACSIMILE Securities and Exchange Commission Division of Corporate Finance 450 Fifth Street, N.W. Washington, D.C. 20549 Mail Stop 4561 Attention: Don Walker, Senior Assistant Chief Accountant John Spitz, Staff Accountant RE: Chicago Mercantile Exchange Holdings Inc. Form 10-K for the year ended December 31, 2005 Filed March 6, 2006 File No. 000-33379 Ladies and Gentlemen: Chicago Mercantile Exchange Holdings Inc. (the “Company”) has received and reviewed the comments from the staff of the Division of Corporate Finance (the “Staff”) of the Securities and Exchange Commission (the “Commission”) contained in a letter from Don Walker, Senior Assistant Chief Accountant, dated October 3, 2006, regarding the Commission’s limited review of the above-referenced Company filing (the “Comment Letter”). The Company hereby submits its responses to the Staff’s comments contained in the Comment Letter, as set forth below. For the convenience of the Staff, the Staff’s comment has been reproduced below and is set forth in italics immediately prior to the Company’s response. Securities and Exchange Commission October 19, 2006 Page 2 Form 10-K filed March 6, 2006 Consolidated Statements of Income, page 57 1. We note your response to comment 2 from our letter dated August 3, 2006. Please tell us how you considered the guidance in EITF 99-19 to support your presentation of securities lending expense as a reduction of total revenues to arrive at net revenues. We continue to believe that securities lending expense should be presented within your expenses in your income statement rather than as a reduction of revenues in accordance with Article 5 of Regulation S-K. Response: As discussed in our teleconference with SEC staff members, including John Spitz, on Tuesday, October 17, 2006, securities lending interest revenue and expense are peripheral to our core business operations. While these items have been disclosed individually in the current income statement format, in response to the questions raised during this comment process, we are proposing to move this revenue and expense to non-operating income and expense, respectively. In our response, dated August 31, 2006, to your first comment letter, in Question 2 we stipulated that investment income and the operating results of the unconsolidated subsidiaries were immaterial. However, to achieve consistent reporting of all non-operating items, we are also proposing to move these items to non-operating income. Making these proposed changes will address the comments related to our presentation as it relates to Article 5 of Regulation S-X. Since all material information relating to these activities has been disclosed to investors in previous filings and this change relates only to the presentation of certain income statement information, our plan is to make this change prospectively. This would include making the appropriate reclassifications to prior period income statements in future filings. It is our intent to make these changes effective with our earnings release scheduled to be released on October 24th and in our Form 10-Q for the three month period ended September 30, 2006. For purposes of clarity, we have attached the proposed format displaying 2005 information in Exhibit A. Securities and Exchange Commission October 19, 2006 Page 3 If the Staff has any questions, concerns or additional comments regarding the foregoing or requires additional information, please contact Nancy Goble, Managing Director and Chief Accounting Officer, at (312) 930-2385. Facsimile transmissions may be sent to the undersigned at (312) 930-4556. Very truly yours, CHICAGO MERCANTILE EXCHANGE HOLDINGS INC. Name: Kathleen M. Cronin Title: Managing Director, General Counsel and Corporate Secretary Securities and Exchange Commission October 19, 2006 Page 4 EXHIBIT A Income Statement with Non-Operating Items Presented Separately 2005 Revenues Clearing and transaction fees $ 696,201 Processing services 68,730 Quotation data fees 71,741 Access fees 18,866 Communication fees 8,964 Other 25,264 Total Revenues 889,766 Expenses Compensation and benefits 179,594 Communications 31,098 Technology support services 26,837 Professional fees and outside services 26,850 Depreciation and amortization 64,917 Occupancy 28,529 Licensing and other fee agreements 17,982 Marketing, advertising and public relations 13,278 Other 23,054 Total Expenses 412,139 Operating Income 477,627 Non-Operating Income and Expense Investment income 31,441 Securities lending interest income 58,725 Securities lending interest expense (56,778 ) Equity in losses of unconsolidated subsidiaries (2,636 ) Total Non-Operating 30,752 Income before Income Taxes 508,379 Income tax provision (201,522 ) Net Income $ 306,857