Ameritrade Delivers Strong Performance for Quarter; Continues to be an Industry Leader with 50 Percent Pre-Tax Margin and Annualized Return on Equity of 24 Percent.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:AMTD AMTD Arithmetic Mean Temperature Difference AMTD Automatic Magnetic Tape Distribution AMTD Affordability and Manufacturing Technology Demonstration ) today announced positive results for the quarter ended March 25, 2005. Second Quarter Highlights --Net income of $71 million, or $0.17 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 --Pre-tax income of $117 million, or 50 percent of net revenues --Operating margin(1) of $144 million, or 62 percent --EBITDA(1) of $123 million, or 53 percent --Net revenues of $233 million --Client assets of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $75.6 billion, including $12.7 billion of client cash and money market funds --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 24 percent for the quarter 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. --Average client trades per day of approximately 167,000 --Liquid assets(1) of $152 million; cash and cash equivalents of $254 million --88,000 new accounts at an average cost per account of $313; 50,000 closed accounts; 3,665,000 Total Accounts; 1,730,000 Qualified Accounts(2) --Average client margin balances of approximately $3.7 billion. On March 25, 2005, client margin balances of approximately $3.7 billion. --Ameritrade Apex(TM)(3) received a four-star four-star adj. Of superlative quality: a four-star restaurant. rating in the 2005 Barron's Review of Online Brokers, finishing second overall. "It was a healthy quarter for Ameritrade and we again delivered powerful pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta margin despite a slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. in trading activity. Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. we achieved a 14 percent increase in earnings per share and ROE of 26 percent annualized," 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. "We continue to advance our client-focused strategy that will allow us to become more agile and responsive to client needs." Strategy Progress Evolving its client-focused strategy this quarter, Ameritrade made operational adjustments to offer an improved client experience and generate future growth opportunities. The Company created an entirely new business unit called the Client Experience Organization, which will take the lead in establishing improved insight into the needs of clients to strengthen current value propositions and create new ones to target specific segments. Outlook Ameritrade has tightened its current earnings projections for fiscal year 2005 to $0.77 to $0.87 per share. Details can be found in the "Outlook Statement" section of its corporate Web site located at www.amtd.com. Stock Repurchases Stock repurchase A firm's repurchase of outstanding shares of its common stock. During the quarter, Ameritrade utilized approximately $30.5 million to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. 2.5 million shares of its stock. Since the stock buy-back program was initiated, through March 25, 2005, the Company has invested about $491 million in repurchasing 48.4 million shares at a weighted average price of $10.15 per share. About Ameritrade Holding Corporation For nearly 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.,(4) a subsidiary of Ameritrade Holding Corporation, recently received a four-star 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 or stock price, 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) See attached reconciliation of financial measures. (2) 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. (3) Apex qualification is based on an average of five trades per month over a three-month period, or a $100,000 total account value. Apex membership may also be granted on a free trial basis. Qualification is reviewed every three months. Professional access to real-time data Real-time data denotes information that is delivered immediately after collection. There is no delay in the timeliness of the information provided. Some uses of this term confuse it with the term dynamic data. differs. Apex professionals can subscribe to Verb 1. subscribe to - receive or obtain regularly; "We take the Times every day" subscribe, take buy, purchase - obtain by purchase; acquire by means of a financial transaction; "The family purchased a new car"; "The conglomerate acquired a new company"; receive real-time 1. real-time - Describes an application which requires a program to respond to stimuli within some small upper limit of response time (typically milli- or microseconds). Process control at a chemical plant is the classic example. NYSE NYSE See: New York Stock Exchange market data for $127.25 a month. (4) Ameritrade, Inc., member NASD/SIPC.
AMERITRADE HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands, except per share data
(Unaudited)
Quarter Ended Six Months Ended
------------------- -------------------
Mar. 25, Mar. 26, Mar. 25, Mar. 26,
2005 2004 2005 2004
--------- --------- --------- ---------
Revenues:
Commissions and clearing fees $127,973 $169,127 $281,519 $321,405
Interest revenue 116,301 66,011 229,402 128,843
Other 18,400 20,562 38,415 41,221
--------- --------- --------- ---------
Total revenues 262,674 255,700 549,336 491,469
Brokerage interest expense 30,169 8,836 54,849 18,165
--------- --------- --------- ---------
Net revenues 232,505 246,864 494,487 473,304
--------- --------- --------- ---------
Expenses:
Employee compensation and
benefits 42,850 43,912 86,839 78,205
Clearing and execution costs 6,371 6,770 12,900 15,895
Communications 9,450 11,185 18,896 20,447
Occupancy and equipment costs 9,588 9,923 20,593 21,360
Depreciation and amortization 5,374 5,604 11,646 11,561
Professional services 9,208 8,716 18,775 15,096
Interest on borrowings 449 557 1,006 1,394
Gain on disposal of property (148) (196) (246) (376)
Other 5,160 5,042 9,107 11,350
Advertising 27,525 30,152 50,635 53,218
--------- --------- --------- ---------
Total expenses 115,827 121,665 230,151 228,150
--------- --------- --------- ---------
Pre-tax income 116,678 125,199 264,336 245,154
Provision for income taxes 45,664 44,241 100,771 92,260
--------- --------- --------- ---------
Net income $71,014 $80,958 $163,565 $152,894
========= ========= ========= =========
Basic earnings per share $0.18 $0.19 $0.40 $0.36
Diluted earnings per share $0.17 $0.19 $0.40 $0.35
Weighted average shares
outstanding - basic 402,833 420,821 404,357 423,272
Weighted average shares
outstanding - diluted 410,674 431,296 412,840 433,548
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)
Mar. 25, Sept. 24,
2005 2004
------------ ------------
Assets:
Cash and cash equivalents $254,092 $155,342
Segregated cash and investments 7,451,482 7,802,575
Broker/dealer receivables 3,748,132 2,818,726
Client receivables 3,695,574 3,100,572
Goodwill and intangible assets 1,037,075 1,017,146
Other 168,553 382,660
------------ ------------
Total assets $16,354,908 $15,277,021
============ ============
Liabilities and stockholders' equity:
Liabilities:
Broker/dealer payables $4,620,697 $3,441,802
Client payables 10,067,345 10,322,539
Prepaid variable forward derivative
instrument 31,407 28,738
Prepaid variable forward contract
obligation 38,635 37,803
Other 288,368 235,231
------------ ------------
Total liabilities 15,046,452 14,066,113
Stockholders' equity 1,308,456 1,210,908
------------ ------------
Total liabilities and stockholders'
equity $16,354,908 $15,277,021
============ ============
AMERITRADE HOLDING CORPORATION
SELECTED OPERATING DATA
Quarter ended Six Months Ended
---------------------- -----------------------
Mar. 25, Mar. 26, Mar. 25, Mar. 26,
2005 2004 2005 2004
---------- ----------- ----------- -----------
Trading activity
metrics:
----------------
Average client trades
per day 167,209 211,917 169,472 192,605
Average client trades
per account
(annualized) 11.7 15.7 12.0 14.6
Activity rate 4.6% 6.3% 4.7% 5.9%
Total trades (in
millions) 9.5 12.5 21.1 23.8
Trading days 57.0 59.0 124.5 123.5
Average commissions and
clearing fees per trade $13.43 $13.53 $13.34 $13.51
Account metrics:
----------------
Total accounts (ending) 3,665,000 3,425,000
Qualified accounts
(ending) 1,730,000 1,700,000
Client assets (in
billions) $75.6 $71.9
Net interest
revenue metrics:
----------------
Segregated cash:
Average balance (in
billions) $7.9 $7.7 $7.9 $7.6
Average annualized
yield 2.37% 1.00% 2.11% 0.98%
Client margin balances:
Average balance (in
billions) $3.7 $3.4 $3.5 $3.0
Average annualized
yield 5.33% 4.88% 5.24% 4.92%
Client credit balances:
Average balance (in
billions) $9.7 $9.0 $9.6 $8.7
Average annualized
cost 0.37% 0.12% 0.33% 0.12%
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
---------------------------------------
Mar. 25, 2005 Mar. 26, 2004
------------------- -------------------
$ % of Rev. $ % of Rev.
--------- --------- --------- ---------
Operating Margin (1)
--------------------
Operating margin $144,055 62.0% $155,155 62.9%
Less:
Advertising (27,525) (11.8%) (30,152) (12.2%)
Gain on disposal of property 148 0.1% 196 0.1%
--------- ---------
Pre-tax income $116,678 50.2% $125,199 50.7%
========= =========
EBITDA (2)
----------
EBITDA $122,501 52.7% $131,360 53.2%
Less:
Depreciation and
amortization (5,374) (2.3%) (5,604) (2.3%)
Interest on borrowings (449) (0.2%) (557) (0.2%)
--------- ---------
Pre-tax income $116,678 50.2% $125,199 50.7%
========= =========
As of
---------------------------------------
Mar. 25, Dec. 31, Sept. 24, June 25,
2005 2004 2004 2004
--------- --------- --------- ---------
Liquid Assets (3)
-----------------
Liquid assets(a) $152,227 $153,032 $55,942 $35,050
Plus: Broker-dealer cash and
cash equivalents 135,084 105,006 99,400 94,706
Less:
Excess broker-dealer
regulatory net capital(a) (33,219) (87,169) - -
--------- --------- --------- ---------
Cash and cash equivalents $254,092 $170,869 $155,342 $129,756
========= ========= ========= =========
Six Months Ended
---------------------------------------
Mar. 25, 2005 Mar. 26, 2004
------------------- -------------------
$ % of Rev. $ % of Rev.
--------- --------- --------- ---------
Operating Margin (1)
--------------------
Operating margin $314,725 63.6% $297,996 63.0%
Less:
Advertising (50,635) (10.2%) (53,218) (11.2%)
Gain on disposal of property 246 0.0% 376 0.1%
--------- ---------
Pre-tax income $264,336 53.5% $245,154 51.8%
========= =========
EBITDA (2)
----------
EBITDA $276,988 56.0% $258,109 54.5%
Less:
Depreciation and
amortization (11,646) (2.4%) (11,561) (2.4%)
Interest on borrowings (1,006) (0.2%) (1,394) (0.3%)
--------- ---------
Pre-tax income $264,336 53.5% $245,154 51.8%
========= =========
As of
---------
Mar. 26,
2004
---------
Liquid Assets (3)
-----------------
Liquid assets(a) $195,995
Plus: Broker-dealer cash and
cash equivalents 151,407
Less:
Excess broker-dealer
regulatory net capital(a) (146,381)
---------
Cash and cash equivalents $201,021
=========
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 December 31, 2004 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) the market
value, net of tax, of our investment in Knight Trading Group, Inc.
that is not subject to a prepaid variable forward contract for
future sale 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 in addition to, rather than as
a substitute for, cash and cash equivalents.
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