Ameritrade Announces Record June Quarter, on Track for Record Year; Eventful Quarter Yields 52 Percent Pre-Tax Margin and Announcement of TD Waterhouse U.S.A. Acquisition Agreement.OMAHA Omaha, city, United States Omaha (ō`məhä, –hô), city (1990 pop. 335,795), seat of Douglas co., E Nebr., on the west bank of the Missouri River; inc. 1857. , Neb. -- Ameritrade Holding Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :AMTD AMTD Arithmetic Mean Temperature Difference AMTD Automatic Magnetic Tape Distribution AMTD Affordability and Manufacturing Technology Demonstration ) today announced results for the quarter ended June June: see month. 24, 2005 that highlight the Company's ability to produce solid financial results while also executing on its long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. growth strategy. Third Quarter Highlights --Net income of $75 million, or $0.18 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share(1) --Pre-tax income of $122 million, or 52 percent of net revenues --Operating margin(2) of $144 million, or 61 percent --EBITDA(2) of $129 million, or 55 percent --Net revenues of $234 million --Client assets of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $78.8 billion, including $13.1 billion of client cash and money market funds --Annualized return on equity (ROE A fictitious surname used for an unknown or anonymous person or for a hypothetical person in an illustration. A lawsuit is generally named for the persons who are parties to it. ) of 22 percent for the quarter; 25 percent year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. --Average client trades per day of approximately 139,000 --Liquid assets(2) of $271 million; cash and cash equivalents of $267 million --69,000 new accounts at an average cost per account of $314; 45,000 closed accounts; 3,689,000 total accounts; 1,730,000 qualified accounts(3) --Average client margin balances of approximately $3.4 billion. On June 24, 2005, client margin balances of approximately $3.4 billion. "Both financially and strategically, we kept our focus and delivered a record June quarter, maintaining our leading pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta margin among our publicly traded peers despite lower trading volumes Trading volume The number of shares transacted every day. As there is a seller for every buyer, one can think of the trading volume as half of the number of shares transacted. That is, if A sells 100 shares to B, the volume is 100 shares. . The Company is also on track to deliver record earnings per share for this fiscal year. We're we're Contraction of we are. we're we are extremely proud to have achieved these financial results while working on the largest M&A transaction this industry has seen. Ameritrade's planned acquisition of TD Waterhouse TD Waterhouse is the brand used for both British and Canadian brokerages within the TD Bank Financial Group. The brand originated as a United States brand for discount brokerage when TD purchased Waterhouse Securities. U.S.A. accelerates our long-term investor Long-term investor A person who makes investments for a period of at least five years in order to finance his or her long-term goals. strategy and we expect it will deliver exceptional shareholder value," said Joe Moglia Joe Moglia is the current CEO of TD Ameritrade, the largest online discount brokerage firm in the world. Born in Queens, New York, Moglia was a football coach for 16 years, finishing as a Dartmouth College assistant from 1981-1983. , chief executive officer. TD Waterhouse U.S.A. Acquisition Announcement On June 22, Ameritrade announced it had entered into a definitive agreement with TD Bank Financial Group to acquire TD Waterhouse U.S.A. Ameritrade expects that the combination of these two highly complementary franchises will provide for a more diversified diversified (di·verˑ·s revenue mix and will produce annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. gross synergies of $578 million.(4) The transaction is also expected to catapult catapult (kăt`əpŭlt'), mechanism used to throw missiles in ancient and medieval warfare. At first, catapults were specifically designed to shoot spears or other missiles at a low trajectory (see bow and arrow). Ameritrade into the long-term investor space and create the largest online retail broker as measured by the average number of retail equity trades per day.(5) Ameritrade shareholders will also benefit from a $6.00 per share special cash dividend, subject to closing. For more information, please visit www.amtd.com. Outlook Ameritrade's earnings projections for the fiscal year 2005 are $0.75 to $0.80 per share. Details can be found in the "Outlook Statement" in the Investors section of its corporate Web site located at www.amtd.com. About Ameritrade Holding Corporation For 30 years, Ameritrade Holding Corporation has provided investment services to self-directed self-di·rect·ed adj. Directed or guided by oneself, especially as an independent agent: the self-directed study of a language. self individuals through its brokerage BROKERAGE, contracts. The trade or occupation of a broker; the commissions paid to a broker for his services. subsidiaries. Ameritrade develops and provides innovative products and services tailored to meet the varying investing and portfolio management needs of individual investors and institutional distribution partners. A brokerage industry leader, Ameritrade, Inc.,(6) a subsidiary of Ameritrade Holding Corporation, recently received a four-star four-star adj. Of superlative quality: a four-star restaurant. rating in the 2005 Barron's Review of Online Brokers for its Apex active trader program. For more information, please visit www.amtd.com. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. This document contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the federal securities laws. We intend these forward-looking statements to be covered by the safe harbor provisions of the federal securities laws. In particular, any projections regarding our future revenues, expenses, earnings, capital expenditures, effective tax rates, client trading activity, accounts, stock price or the impact of the proposed TD Waterhouse U.S.A. transaction, including information regarding annualized gross synergies and earnings expansion, as well as the assumptions on which such expectations are based, are forward-looking statements. These statements reflect only our current expectations and are not guarantees of future performance or results. These statements involve risks, uncertainties and assumptions that could cause actual results or performance to differ materially from those contained in the forward-looking statements. These risks, uncertainties and assumptions include general economic and political conditions, interest rates, market fluctuations and changes in client trading activity, increased competition, systems failures and capacity constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. , regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. and legal matters and uncertainties and other risk factors described in our latest Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and our latest Quarterly Report on Form 10-Q Form 10-Q See 10-Q. . These forward-looking statements speak only as of the date on which the statements were made. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. (1) $0.18 earnings per share achieved this quarter represents the best for a June quarter in Company history and third best quarter overall. (2) See attached reconciliation of financial measures. (3) Total Accounts include all open client accounts (funded and unfunded), except clearing accounts. Qualified Accounts include all open client accounts with a total liquidation value Liquidation value Net amount that could be realized by selling the assets of a firm after paying the debt. greater than or equal to $2,000, except clearing accounts. See Glossary A term used by Microsoft Word and adopted by other word processors for the list of shorthand, keyboard macros created by a particular user. See glossaries in this publication and The Computer Glossary. of Terms on the Company's web site at www.amtd.com for additional information. (4) Synergies, based on operating results for the last 12 months ended March 2005, expected to be realized over 18 months after closing (Yr1: 40%, Yr2: 90%, Yr3: 100%). (5) Source: Ameritrade, Waterhouse There have been several famous people with the surname Waterhouse:
(6) Ameritrade, Inc., member NASD/SIPC. Additional Information and Where to Find It In connection with the proposed transaction, Ameritrade will be filing a proxy statement Proxy Statement A document containing the information that a company is required by the SEC to provide to shareholders so they can make informed decisions about matters that will be brought up at an annual stockholder meeting. and relevant documents concerning the transaction with the Securities and Exchange Commission ("SEC"). SECURITY HOLDERS OF AMERITRADE ARE URGED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders can obtain free copies of the proxy statement and other documents when they become available by contacting Investor Relations Investor relations The process by which the corporation communicates with its investors. at www.amtd.com, or by mail at Ameritrade Investor Relations, 4211 S. 102 Street, Omaha, NE 68127, or by Telephone: 800-237-8692. In addition, documents filed with the SEC by Ameritrade are available free of charge at the SEC's web site at www.sec.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. . Ameritrade Holding Corporation, The Toronto-Dominion Bank The Toronto-Dominion Bank (TD) (TSX: TD NYSE: TD TYO: 8640 ) is a bank headquartered in Toronto, Ontario, Canada. It is one of Canada's Big Five banks, being the second largest bank in the country by assets and market capitalization. , and their respective directors and executive officers may be deemed to be participants in the solicitation solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual of proxies from the stockholders of Ameritrade in connection with the proposed transaction. Information regarding the special interests of these directors and executive officers in the proposed transaction will be included in the proxy statement of Ameritrade described above. Information regarding Ameritrade's directors and executive officers is also available in its proxy statement for its 2005 Annual Meeting of Stockholders, which was filed with the SEC on January January: see month. 24, 2005. This document is available free of charge at the SEC's web site at www.sec.gov and from Investor Relations at Ameritrade as described above. Information regarding The Toronto-Dominion Bank's directors and executive officers is available in its Annual Report on Form 40-F for the year ended October October: see month. 31, 2004, which was filed with the SEC on December December: see month. 13, 2004, and in its notice of annual meeting and proxy See proxy server. (networking) proxy - A process that accepts requests for some service and passes them on to the real server. A proxy may run on dedicated hardware or may be purely software. circular Circular may refer to:
AMERITRADE HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands, except per share data
(Unaudited)
Quarter Ended Nine Months Ended
------------------- -------------------
June 24, June 25, June 24, June 25,
2005 2004 2005 2004
--------- --------- --------- ---------
Revenues:
Commissions and clearing
fees $113,077 $136,231 $394,596 $457,635
Interest revenue 137,396 71,302 366,797 200,144
Brokerage interest expense 38,678 8,604 93,526 26,768
--------- --------- --------- ---------
Net interest revenue 98,718 62,698 273,271 173,376
Other 22,559 21,063 60,973 62,285
--------- --------- --------- ---------
Net revenues 234,354 219,992 728,840 693,296
--------- --------- --------- ---------
Expenses:
Employee compensation and
benefits 43,972 40,384 130,811 118,588
Clearing and execution costs 7,181 8,260 20,081 24,155
Communications 8,307 10,936 27,203 31,382
Occupancy and equipment
costs 12,424 10,720 33,018 32,080
Depreciation and
amortization 5,897 5,897 17,543 17,458
Professional services 7,947 8,957 26,722 24,053
Interest on borrowings 497 565 1,503 1,959
Loss/(gain) on disposal of
property 26 (199) (220) (575)
Other 4,041 5,254 13,146 16,607
Advertising 21,672 27,197 72,307 80,414
--------- --------- --------- ---------
Total expenses 111,964 117,971 342,114 346,121
--------- --------- --------- ---------
Pre-tax income 122,390 102,021 386,726 347,175
Provision for income taxes 47,718 39,763 148,489 132,023
--------- --------- --------- ---------
Net income $74,672 $62,258 $238,237 $215,152
========= ========= ========= =========
Basic earnings per share $0.19 $0.15 $0.59 $0.51
Diluted earnings per share $0.18 $0.15 $0.58 $0.50
Weighted average shares
outstanding - basic 403,017 415,252 403,911 420,599
Weighted average shares
outstanding - diluted 411,074 424,002 412,250 430,386
Note: Certain items in the prior year consolidated statements of
operations have been reclassified to conform to the current
presentation.
AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
In thousands
(Unaudited)
June 24, Sept. 24,
2005 2004
------------ ------------
Assets:
Cash and cash equivalents $267,316 $137,392
Short-term investments 20,000 17,950
Segregated cash and investments 7,757,897 7,802,575
Broker/dealer receivables 3,837,529 2,818,726
Client receivables 3,440,170 3,100,572
Goodwill and intangible assets 1,032,773 1,017,146
Other 150,186 382,660
------------ ------------
Total assets $16,505,871 $15,277,021
============ ============
Liabilities and stockholders' equity:
Liabilities:
Broker/dealer payables $4,563,519 $3,441,802
Client payables 10,251,193 10,322,539
Prepaid variable forward derivative
instrument 16,912 28,738
Prepaid variable forward contract
obligation 39,058 37,803
Other 233,066 235,231
------------ ------------
Total liabilities 15,103,748 14,066,113
Stockholders' equity 1,402,123 1,210,908
------------ ------------
Total liabilities and stockholders'
equity $16,505,871 $15,277,021
============ ============
Note: Certain items in the prior year consolidated balance sheet have
been reclassified to conform to the current presentation.
AMERITRADE HOLDING CORPORATION
SELECTED OPERATING DATA
Quarter Ended Nine Months Ended
--------------------- ---------------------
June 24, June 25, June 24, June 25,
2005 2004 2005 2004
---------- ---------- ---------- ----------
Trading Activity Metrics:
-------------------------
Total trades (in millions) 8.9 10.2 30.0 33.9
Average commissions and
clearing fees per trade $12.72 $13.41 $13.16 $13.48
Average client trades per
day 138,930 163,906 159,102 183,013
Average client trades per
account (annualized) 9.7 11.8 11.2 13.7
Activity rate 3.8% 4.7% 4.4% 5.5%
Trading days 64.0 62.0 188.5 185.5
Net Interest Revenue
Metrics:
---------
Segregated cash:
Average balance (in
billions) $7.6 $7.5 $7.8 $7.6
Average annualized yield 2.80% 1.00% 2.33% 0.99%
Client margin balances:
Average balance (in
billions) $3.4 $3.6 $3.5 $3.2
Average annualized yield 5.79% 4.86% 5.42% 4.89%
Client credit balances:
Average balance (in
billions) $9.3 $9.1 $9.5 $8.9
Average annualized cost 0.53% 0.12% 0.39% 0.12%
Securities lending activity
(in millions):
Interest revenue $30.9 $7.9 $79.7 $23.3
Brokerage interest
expense 26.2 5.9 65.7 18.9
---------- ---------- ---------- ----------
Net interest revenue $4.7 $2.0 $14.0 $4.4
========== ========== ========== ==========
Client Account and Client
Asset Metrics:
--------------
Qualified accounts
(beginning of period) 1,730,000 1,700,000 1,677,000 1,520,000
Qualified accounts (end of
period) 1,730,000 1,720,000 1,730,000 1,720,000
Percentage increase
(decrease) during period 0% 1% 3% 13%
Total accounts (beginning
of period) 3,665,000 3,425,000 3,520,000 3,171,000
Total accounts (end of
period) 3,689,000 3,487,000 3,689,000 3,487,000
Percentage increase
(decrease) during period 1% 2% 5% 10%
Client assets (beginning of
period, in billions) $75.6 $71.9 $68.8 $54.8
Client assets (end of
period, in billions) $78.8 $71.5 $78.8 $71.5
Percentage increase
(decrease) during period 4% (1%) 15% 30%
NOTE: See Glossary of Terms on the Company's web site at www.amtd.com
for definitions of the above metrics.
AMERITRADE HOLDING CORPORATION
RECONCILIATION OF FINANCIAL MEASURES
In thousands, except percentages
(Unaudited)
Quarter Ended
---------------------------------------
June 24, 2005 June 25, 2004
------------------- -------------------
$ % of Rev. $ % of Rev.
--------- --------- --------- ---------
Operating Margin (1)
--------------------
Operating margin $144,088 61.5% $129,019 58.6%
Less:
Advertising (21,672) (9.2%) (27,197) (12.4%)
Gain/(loss) on disposal of
property (26) (0.0%) 199 0.1%
--------- ---------
Pre-tax income $122,390 52.2% $102,021 46.4%
========= =========
EBITDA (2)
----------
EBITDA $128,784 55.0% $108,483 49.3%
Less:
Depreciation and amortization (5,897) (2.5%) (5,897) (2.7%)
Interest on borrowings (497) (0.2%) (565) (0.3%)
--------- ---------
Pre-tax income $122,390 52.2% $102,021 46.4%
========= =========
Nine Months Ended
---------------------------------------
June 24, 2005 June 25, 2004
------------------- -------------------
$ % of Rev. $ % of Rev.
--------- --------- --------- ---------
Operating Margin (1)
--------------------
Operating margin $458,813 63.0% $427,014 61.6%
Less:
Advertising (72,307) (9.9%) (80,414) (11.6%)
Gain/(loss) on disposal of
property 220 0.0% 575 0.1%
--------- ---------
Pre-tax income $386,726 53.1% $347,175 50.1%
========= =========
EBITDA (2)
----------
EBITDA $405,772 55.7% $366,592 52.9%
Less:
Depreciation and amortization (17,543) (2.4%) (17,458) (2.5%)
Interest on borrowings (1,503) (0.2%) (1,959) (0.3%)
--------- ---------
Pre-tax income $386,726 53.1% $347,175 50.1%
========= =========
As of
-------------------------------------------------
June 24, Mar. 25, Dec. 31, Sept. 24, June 25,
2005 2005 2004 2004 2004
--------- --------- --------- --------- ---------
Liquid Assets (3)
-----------------
Liquid assets(a) $271,117 $152,227 $153,032 $55,942 $35,050
Plus: Broker-dealer
cash and cash
equivalents 205,408 135,084 105,006 99,400 94,706
Less:
Non broker-dealer
short-term
investments (20,000) (64,375) - (17,950) -
Excess broker-
dealer regulatory
net capital(a) (189,209) (33,219) (87,169) - -
--------- --------- --------- --------- ---------
Cash and cash
equivalents $267,316 $189,717 $170,869 $137,392 $129,756
========= ========= ========= ========= =========
Note: The term "GAAP" in the following explanations refers to
generally accepted accounting principles in the United States.
(a) Liquid assets as of September 24, 2004 and June 25, 2004 include
the impact of a regulatory matter related to an FDIC-insured
deposit sweep program. Excluding the impact of the regulatory
matter, excess broker- dealer regulatory net capital would be
approximately $85.4 million and $69.4 million, respectively, and
liquid assets would be approximately $141.3 million and $104.5
million, respectively, as of September 24, 2004 and June 25, 2004.
See Note 6 of the Notes to Condensed Consolidated Financial
Statements included in the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 25, 2005 for further discussion
of the regulatory matter.
(1) Operating margin is considered a Non-GAAP financial measure as
defined by SEC Regulation G. We define operating margin as pre-tax
income, adjusted to remove advertising expense and any unusual
gains or charges. We consider operating margin an important
measure of the financial performance of our ongoing business.
Advertising spending is excluded because it is largely at the
discretion of the Company, varies significantly from period to
period based on market conditions and relates to the acquisition
of future revenues through new accounts rather than current
revenues from existing accounts. Unusual gains and charges are
excluded because we believe they are not likely to be indicative
of the ongoing operations of our business. Operating margin should
be considered in addition to, rather than as a substitute for,
pre-tax income and net income.
(2) EBITDA (earnings before interest, taxes, depreciation and
amortization) is considered a Non-GAAP financial measure as
defined by SEC Regulation G. We consider EBITDA an important
measure of our financial performance and of our ability to
generate cash flows to service debt, fund capital expenditures and
fund other corporate investing and financing activities. EBITDA
eliminates the non-cash effect of tangible asset depreciation and
intangible asset amortization. EBITDA should be considered in
addition to, rather than as a substitute for, pre-tax income, net
income and cash flows from operating activities.
(3) Liquid assets is considered a Non-GAAP financial measure as
defined by SEC Regulation G. We define liquid assets as the sum of
a) non broker-dealer cash and cash equivalents, b) non
broker-dealer short-term investments and c) regulatory net capital
of our broker-dealer subsidiaries in excess of 5% of aggregate
debit items. We consider liquid assets an important measure of our
liquidity and of our ability to fund corporate investing and
financing activities. Liquid assets should be considered as a
supplemental measure of liquidity, rather than as a substitute for
cash and cash equivalents.
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