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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-Q
(Mark One)
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarterly Period Ended June 26, 1998
OR
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 from the transition period from ___________ to ___________
Commission file number: 0-22163
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AMERITRADE HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 47-0642657
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
4211 SOUTH 102ND STREET, OMAHA, NEBRASKA
68127
(Address of principal executive offices)
(Zip Code)
(402) 331-7856
(Registrant's telephone number, including area code)
-------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months, and (2) has been subject to such filing
requirements for the past ninety days:
Yes (X) No ( )
As of August 4, 1998 there were 14,513,102 outstanding shares of the
registrant's common stock consisting of 13,148,702 outstanding shares of Class A
Common Stock and 1,364,400 outstanding shares of Class B Common Stock.
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AMERITRADE HOLDING CORPORATION
INDEX
Page No.
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PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets................................. 3
Consolidated Statements of Operations....................... 4
Consolidated Statements of Cash Flows....................... 5
Notes to Consolidated Financial Statements.................. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............... 7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK................................................. 10
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits .............................................. 11
(b) Reports on Form 8-K ................................... 12
Signatures ................................................ 13
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PART I - FINANCIAL INFORMATION
ITEM 1. - CONSOLIDATED FINANCIAL STATEMENTS
AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 26, SEPTEMBER 26,
1998 1997
------------------ ------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and Cash Equivalents $ 24,102,080 $ 53,522,447
Cash and Investments Segregated in Compliance with Federal Regulations 453,541,248 319,763,921
Receivable from Brokers, Dealers, and Clearing Organizations 22,019,224 17,823,640
Receivable from Customers and Correspondents - net of allowance for doubtful accounts 609,804,516 325,407,147
Furniture, Equipment and Leasehold Improvements - net of accumulated
depreciation and amortization: June 26, 1998 - $5,544,961; Sept. 26, 1997 - $3,732,790 21,226,416 8,709,923
Goodwill - net of accumulated amortization 6,074,511 6,346,763
Equity Investments 729,280 7,597,972
Other Investment 303,850 5,000,000
Deferred Income Taxes -- 39,314
Other Assets 19,258,204 13,145,616
--------------- ---------------
Total Assets $ 1,157,059,329 $ 757,356,743
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Payable to Brokers, Dealers and Clearing Organizations $ 8,024,023 $ 1,404,999
Payable to Customers and Correspondents 1,048,431,210 666,279,440
Accounts Payable and Accrued Liabilities 30,281,675 19,252,931
Notes Payable 6,500,000 --
Deferred Income Taxes 431,924 --
Income Taxes Payable 2,138,869 3,430,279
--------------- ---------------
1,095,807,701 690,367,649
Total Liabilities
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $1 par value; authorized 3,000,000 shares, none issued -- --
Common stock, $0.01 par value:
Class A - 60,000,000 and 25,000,000 shares authorized at June 26, 1998 and Sept. 26,
1997, respectively; 13,153,423 shares issued 131,534 131,534
Class B - 6,000,000 and 2,000,000 shares authorized at June 26, 1998 and Sept. 26,
1997, respectively; 1,364,400 shares issued and outstanding 13,644 13,644
--------------- ---------------
Total Common Stock 145,178 145,178
Additional Paid In Capital 23,281,051 23,297,506
Retained Earnings 37,966,517 43,546,410
Treasury Stock - Class A shares at cost (4,991 and 0 shares at June 26, 1998 and Sept. 26,
1997, respectively) (141,118) --
--------------- ---------------
Total Stockholders' Equity 61,251,628 66,989,094
--------------- ---------------
Total Liabilities and Stockholders' Equity $ 1,157,059,329 $ 757,356,743
=============== ===============
</TABLE>
See notes to unaudited financial statements.
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AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED NINE MONTH PERIOD ENDED
-------------------------------- ---------------------------------
JUNE 26, 1998 JUNE 27, 1997 JUNE 26, 1998 JUNE 27, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES
Commissions and Clearing Fees $ 24,040,099 $ 13,238,251 $ 59,249,480 $ 36,380,575
Interest Revenue 18,850,473 10,033,641 46,759,012 25,158,249
Equity Income from Investments 2,477,971 684,409 5,005,664 2,379,948
Gain from Sale of Investment 794,634 - 794,634 -
Other 1,762,572 947,583 4,243,321 2,667,741
Total Revenues 47,925,749 24,903,884 116,052,111 66,586,513
Interest Expense 8,320,242 4,958,559 20,693,295 12,845,825
Net Revenues 39,605,507 19,945,325 95,358,816 53,740,688
EXPENSES EXCLUDING INTEREST
Employee Compensation and Benefits 10,684,489 4,716,452 25,376,396 13,670,951
Commissions and Clearance 1,741,344 900,023 4,013,773 2,297,772
Communications 3,518,439 1,359,166 9,975,275 3,972,265
Occupancy and Equipment Costs 2,743,697 1,429,758 6,956,743 3,759,194
Advertising 5,243,425 2,464,332 39,757,195 12,032,335
Other 6,414,362 1,935,746 17,832,135 5,524,789
Total Expenses Excluding Interest 30,345,756 12,805,477 103,911,517 41,257,306
Income (Loss) Before Provision for Income Taxes 9,259,751 7,139,848 (8,552,701) 12,483,382
Provision for Income Taxes 3,319,428 2,552,402 (2,972,808) 4,502,580
NET INCOME (LOSS) $ 5,940,323 $ 4,587,446 $ (5,579,893) $ 7,980,802
Basic Earnings (Loss) per Share $ 0.41 $ 0.32 $ (0.38) $ 0.59
Diluted Earnings (Loss) per Share $ 0.41 $ 0.32 $ (0.38) $ 0.59
Weighted Average Shares Outstanding - Basic 14,514,625 14,517,823 14,516,528 13,519,244
Weighted Average Shares Outstanding - Diluted 14,531,217 14,517,823 14,516,528 13,519,302
</TABLE>
See notes to unaudited financial statements.
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AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Month Period Ended
--------------------------------
June 26, 1998 June 27, 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (5,579,893) $ 7,980,802
Adjustments to Reconcile Net Income (Loss) to Net Cash from
Operating Activities:
Depreciation and Amortization 1,815,766 1,180,741
Provision for Losses 320,000 36,000
Deferred Income Taxes 471,238 55,371
Equity Income from Investments (5,005,664) (2,379,948)
Gain from Sale of Investment (794,634) --
Amortization of Goodwill 272,252 272,255
Changes in Operating Assets and Liabilities:
Cash and Investments Segregated in Compliance with Federal Regulations (133,777,327) (189,713,142)
Brokerage Receivables (288,912,953) (92,168,884)
Other Assets (6,112,588) (4,768,874)
Brokerage Payables 388,770,794 256,358,498
Accounts Payable and Accrued Liabilities 11,028,744 8,012,162
Income Taxes Payable (1,291,410) (205,872)
------------- -------------
Net Cash Used In Operating Activities (38,795,675) (15,340,891)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Furniture, Equipment and Leasehold Improvements (14,332,259) (4,561,210)
Purchase of Equity Investments (650,740) (441,823)
Distributions Received from Equity Investments 12,187,485 3,200,552
Proceeds from Sale of Investments 5,828,395 --
------------- -------------
Net Cash Provided By (Used In) Investing Activities 3,032,881 (1,802,481)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Notes Payable 14,000,000 1,700,000
Principal Payments on Notes Payable (7,500,000) (6,553,000)
Proceeds from Initial Public Offering - net of offering costs -- 22,471,131
Purchase of Class A Treasury Stock (286,375) --
Issuance of Class A Treasury Stock 128,802 33,750
------------- -------------
Net Cash Provided By Financing Activities 6,342,427 17,651,881
------------- -------------
Net Increase (Decrease) In Cash And Cash Equivalents (29,420,367) 508,509
Cash and Cash Equivalents at Beginning of Period 53,522,447 15,767,170
============= =============
Cash and Cash Equivalents at End of Period $ 24,102,080 $ 16,275,679
============= =============
Supplemental Cash Flow Information:
Interest Paid $ 19,892,144 $ 12,144,171
Income Taxes Paid (Received) $ (2,224,720) $ 4,523,217
Noncash Investing Activity:
Unrealized Investment Loss - net of deferred income taxes $ -- $ 584,734
</TABLE>
See notes to unaudited financial statements.
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AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Ameritrade Holding Corporation and its wholly owned
subsidiaries (collectively, the "Company"). The Company is a provider of
discount securities brokerage and related financial services, including
clearing and execution services.
These financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC) and, in the
opinion of management, reflect all adjustments, which are all of a normal
recurring nature, necessary to present fairly the financial position,
results of operations and cash flows for the periods presented in
conformity with generally accepted accounting principles. All material
intercompany balances and transactions have been eliminated. These
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's annual
report filed on Form 10-K for the fiscal year ended September 26, 1997.
The results of operations for the three and nine months ended June 26,
1998 are not necessarily indicative of the results for the entire fiscal
year ending September 25, 1998.
2. NET CAPITAL
The Company's subsidiaries are subject to the Net Capital Rule under the
Securities Exchange Act of 1934 and are required to maintain a minimum net
capital. Net capital and the related net capital requirement may fluctuate
on a daily basis.
The Company's broker-dealer subsidiaries had net capital, in the
aggregate, of $37,355,527 as of June 26, 1998, which exceeded aggregate
minimum net capital requirements by $23,916,518. Subsidiary net capital in
the amount of $13,439,009 as of June 26, 1998 is not available for
transfer to the Company.
3. NOTES PAYABLE
The Company entered into a revolving credit agreement with a bank group on
January 16, 1998. The revolving credit agreement permits borrowings up to
$50 million through June 30, 1999 with permissible borrowings declining
$2.5 million quarterly to $35 million maturity at December 31, 2000. The
revolving credit agreement is collateralized by the common stock of the
Company's subsidiaries, as well as all tangible and intangible assets of
the Company. Borrowings under the revolving credit agreement bear interest
at prime rate less 0.75 percent. The Company had outstanding indebtedness
under the revolving credit agreement of $6.5 million at June 26, 1998. The
Company pays a maintenance fee of 0.25 percent of the unused borrowings
through the maturity date.
4. EARNINGS PER SHARE
The Company has adopted Statement of Financial Accounting Standards (SFAS)
No. 128, Earnings per Share. Accordingly, basic and diluted earnings
(loss) per share and weighted average shares outstanding are presented on
the consolidated statements of operations. Basic earnings per share is
computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding during the period.
Diluted earnings per share is consistent with the calculation of basic
earnings per share while giving effect to dilutive potential shares
outstanding during the period. For each period presented, dilutive
potential shares consisted entirely of stock options.
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5. SUBSEQUENT EVENT
As of June 26, 1998, the Company owned a 9.2 percent interest in
Roundtable Partners L.L.C. ("Roundtable"), a company formed to hold equity
interests in securities trading and market making companies. The Company
has accounted for its investment in Roundtable under the equity method
since its inception. On July 8, 1998, Roundtable was reorganized into a
corporation known as Knight/Trimark Group, Inc. ("Knight/Trimark")
coincident with an initial public offering of Knight/Trimark common stock.
As a result of this reorganization, all of the Company's ownership
interest in Roundtable was converted into 3,953,675 shares of common stock
of Knight/Trimark, which represents 7.7 percent of the issued and
outstanding shares of common stock of Knight/Trimark. The Company also
received a cash distribution of $7.8 million in connection with the
reorganization. The $7.8 million cash distribution was a return of
capital, there is no gain or loss associated with the distribution.
Effective July 8, the Company will account for its investment in
Knight/Trimark as a marketable equity security held available-for-sale
under the provisions of SFAS 115. Accordingly, this investment will be
carried at fair value, with unrealized gains and losses reported in a
separate component of stockholders' equity. The Company's investment in
Knight/Trimark is subject to a 180 day sale restriction agreement with the
underwriters of the initial public offering. The amount of the discount
from published market value on the Nasdaq exchange, if any, as a result of
the sale restriction agreement, has yet to be determined. The Company has
executed a portion of its securities transactions through subsidiaries of
Roundtable since March 1995 and expects to continue to use Knight/Trimark
for execution of securities transactions in the future.
On July 20, 1998, the Company announced a two-for-one split of its Class
A and Class B Common Stock. Stockholders of record as of the close of
business on August 7, 1998 will receive, in the form of a stock dividend,
one additional share for each share held by them. On or about August 17,
1998, the Transfer Agent will distribute the additional shares and the
stock will begin trading at the post-split value on August 18, 1998.
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the financial condition and results of operations of
the Company should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's annual report on Form
10-K for the fiscal year ended September 26, 1997. This discussion contains
forward-looking statements that involve risks and uncertainties. The Company's
actual results may differ materially from those anticipated in these
forward-looking statements.
RESULTS OF OPERATIONS
THREE MONTH PERIODS ENDED JUNE 26, 1998 AND JUNE 27, 1997
NET REVENUES. Commissions and clearing fees increased 82 percent to $24.0
million in the third quarter of fiscal 1998 from $13.2 million in the third
quarter of fiscal 1997. This increase was primarily attributable to an increase
in the number of securities transactions processed, as average trades per day
increased 221 percent to 21,412 in the third quarter of fiscal 1998 from 6,672
in the third quarter of fiscal 1997. The increase in transaction processing
volume was primarily a result of a significant increase in advertising
expenditures by the Company during the first six months of fiscal 1998. The
increase in transactions processed was partially offset by a decrease in average
commissions and clearing fees per trade of 43 percent to $18 in the third
quarter of fiscal 1998 from $31 in the third quarter of fiscal 1997, primarily
as a result of an increased proportion of trades generated by the Company's
Ameritrade (Inc.) subsidiary which has a lower average commission than any of
the Company's other units.
Net interest revenue (interest revenue less interest expense) increased 106
percent to $10.5 million in the third quarter of fiscal 1998 from $5.1 million
in the third quarter of fiscal 1997. This increase was due primarily to an
increase of 11 percent in average cash and cash equivalents segregated in
compliance with federal regulations, an increase of 83 percent in average
customer and correspondent broker-dealer receivables and an increase of 40
percent in amounts payable to customers and correspondent broker-dealers in the
third quarter of fiscal 1998 from the third quarter of fiscal 1997.
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Equity income from the Company's investments increased 257 percent to $2.5
million in the third quarter of fiscal 1998 from $0.7 million in the third
quarter of fiscal 1997. This increase was due to increased net income generated
by the Company's investment in Roundtable Partners, L.L.C.. Due to the
reorganization of Roundtable into a corporation on July 8, 1998, the Company
will no longer recognize equity income from this investment after that date.
The Company earned $0.8 million on the sale of a portion of its limited
partnership interest in Comprehensive Software Systems, Ltd. ("CSS") on June 3,
1998. As a result of the CSS sale, the Company's ownership interest in CSS
decreased from 14.3 percent to 7.2 percent. Accordingly, the Company began
accounting for its investment in CSS under the cost method as of that date, and
will, therefore, no longer recognize income or loss based on the operations of
CSS.
Other revenues increased 100 percent to $1.8 million in the third quarter of
fiscal 1998 from $0.9 million in the third quarter of fiscal 1997 due primarily
to an increase in marketing and service fees earned by the Company.
EXPENSES EXCLUDING INTEREST. Employee compensation and benefits expense
increased 128 percent to $10.7 million in the third quarter of fiscal 1998 from
$4.7 million in the third quarter of fiscal 1997, due primarily to an increase
in full-time employees during the same period.
Commissions and clearance costs increased 89 percent to $1.7 million in the
third quarter of fiscal 1998 from $0.9 million in the third quarter of fiscal
1997, due primarily to the increase in transaction processing volume.
Communications expense increased 150 percent to $3.5 million in the third
quarter of fiscal 1998 from $1.4 million in the third quarter of fiscal 1997,
primarily as a result of telephone, quote and market information costs related
to the increase in transaction processing volume and as a result of postage
costs associated with the Company's advertising campaign.
Occupancy and equipment costs increased 93 percent to $2.7 million in the third
quarter of fiscal 1998 from $1.4 million in the third quarter of fiscal 1997.
The increase was due primarily to the lease of equipment to accommodate the
employment growth during the quarter as well as the lease of over 35,000 square
feet of additional office space at the Company's headquarters during the latter
part of the third quarter of fiscal 1997. The Company also began occupying a new
facility in Bellevue, Nebraska during the third quarter of fiscal 1998.
Advertising expenses increased 108 percent to $5.2 million in the third quarter
of fiscal 1998 from $2.5 million in the third quarter of fiscal 1997 as the
Company made a planned major advertising and promotional effort to increase its
customer base. The advertising campaign resulted in 57,000 new customer accounts
in the third quarter of fiscal 1998 as compared to 11,000 accounts added in the
third quarter of fiscal 1997.
Other operating expenses increased 237 percent to $6.4 million in the third
quarter of fiscal 1998 from $1.9 million in the third quarter of fiscal 1997,
primarily as a result of increased confirmation and statement processing costs
associated with the increase in transaction processing volume, as well as
professional and consulting fees related to technology development, advertising
and public relations.
Income tax expense increased 27 percent to $3.3 million in the third quarter of
fiscal 1998 from $2.6 million in the third quarter of fiscal 1997 consistent
with the increase in the Company's pretax income.
NINE MONTH PERIODS ENDED JUNE 26, 1998 AND JUNE 27, 1997
NET REVENUES. Commissions and clearing fees increased 63 percent to $59.2
million in the first nine months of fiscal 1998 from $36.4 million in the first
nine months of fiscal 1997. This increase was primarily attributable to an
increase in the number of securities transactions processed, as average trades
per day increased 179 percent to 16,423 in the first nine months of fiscal 1998
from 5,889 in the first nine months of fiscal 1997. The increase in transaction
processing volume was primarily a result of a significant increase in
advertising expenditures by the Company during the first six months of fiscal
1998. The increase in transactions processed was partially offset by a decrease
in average commissions and clearing fees per trade of 41 percent to $19 in the
first nine months of fiscal 1998 from $33 in the first nine months of fiscal
1997, primarily as a result of an increased proportion of trades generated by
the Company's Ameritrade (Inc.) subsidiary which has a lower average commission
than any of the Company's other units.
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Net interest revenue (interest revenue less interest expense) increased 112
percent to $26.1 million in the first nine months of fiscal 1998 from $12.3
million in the first nine months of fiscal 1997. This increase was due primarily
to an increase of 48 percent in average cash and cash equivalents segregated in
compliance with federal regulations, an increase of 121 percent in average
customer and correspondent broker-dealer receivables and an increase of 77
percent in amounts payable to customers and correspondent broker-dealers in the
first nine months of fiscal 1998 from the first nine months of fiscal 1997.
Equity income from the Company's investments increased 108 percent to $5.0
million in the first nine months of fiscal 1998 from $2.4 million in the first
nine months of fiscal 1997. This increase was due to increased net income
generated by the Company's investment in Roundtable Partners, L.L.C.. Due to the
reorganization of Roundtable into a corporation on July 8, 1998, the Company
will no longer recognize equity income from this investment after that date.
The Company earned $0.8 million on the sale of a portion of its limited
partnership interest in CSS on June 3, 1998. As a result of the CSS sale, the
Company's ownership interest in CSS decreased from 14.3 percent to 7.2 percent.
Accordingly, the Company began accounting for its investment in CSS under the
cost method as of that date and will, therefore, no longer recognize income or
loss based on the operations of CSS.
Other revenues increased 56 percent to $4.2 million in the first nine months of
fiscal 1998 from $2.7 million in the first nine months of fiscal 1997 due
primarily to an increase in marketing and service fees earned by the Company.
EXPENSES EXCLUDING INTEREST. Employee compensation and benefits expense
increased 85 percent to $25.4 million in the first nine months of fiscal 1998
from $13.7 million in the first nine months of fiscal 1997, due primarily to an
increase in full-time employees during the same period.
Commissions and clearance costs increased 74 percent to $4.0 million in the
first nine months of fiscal 1998 from $2.3 million in the first nine months of
fiscal 1997, due primarily to the increase in transaction processing volume.
Communications expense increased 150 percent to $10.0 million in the first nine
months of fiscal 1998 from $4.0 million in the first nine months of fiscal 1997,
primarily as a result of telephone, quote and market information costs related
to the increase in transaction processing volume and as a result of postage
costs associated with the Company's advertising campaign.
Occupancy and equipment costs increased 84 percent to $7.0 million in the first
nine months of fiscal 1998 from $3.8 million in the first nine months of fiscal
1997. The increase was due primarily to the lease of equipment to accommodate
the employment growth during the first nine months of fiscal 1998 as well as the
lease of over 35,000 square feet of additional office space at the Company's
headquarters during the latter part of the third quarter of fiscal 1997. The
Company also began occupying a new facility in Bellevue, Nebraska during the
third quarter of fiscal 1998.
Advertising expenses increased 232 percent to $39.8 million in the first nine
months of fiscal 1998 from $12.0 million in the first nine months of fiscal 1997
as the Company made a planned major advertising and promotional effort to
increase its customer base. The advertising campaign resulted in 181,000 new
customer accounts in the first nine months of fiscal 1998 as compared to 43,000
accounts added in the first nine months of fiscal 1997.
Other operating expenses increased 224 percent to $17.8 million in the first
nine months of fiscal 1998 from $5.5 million in the first nine months of fiscal
1997, primarily as a result of increased confirmation and statement processing
costs associated with the increase in transaction processing volume, as well as
professional and consulting fees related to technology development, advertising
and public relations.
Income tax expense decreased to a $3.0 million credit in the first nine months
of fiscal 1998 from a $4.5 million expense in the first nine months of fiscal
1997 consistent with the pretax loss in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its growth primarily through the use of
funds generated from operations. In March 1997, the Company completed an initial
public offering of its common stock, resulting in net proceeds of $22.5 million.
Upon completion of the offering, the Company repaid its then existing term and
revolving debt in their entirety, resulting in the use of proceeds of $5.4
million. The Company entered into a $50 million revolving
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credit agreement on January 16, 1998 to help fund its growth. As of June 26,
1998, $6.5 million is outstanding under the agreement.
OPERATING CASH FLOW
The Company used $38.8 million of cash in operations in the first nine months of
fiscal 1998, compared to cash used of $15.3 million in the first nine months of
fiscal 1997. The increase in cash used in operations during the first nine
months of fiscal 1998 was attributable to the net loss resulting from the
substantial increase in advertising expenditures during the period.
Cash provided by investing activities was $3.0 million in the first nine months
of fiscal 1998, compared to cash used of $1.8 million in the first nine months
of fiscal 1997. The increase in cash provided by investing activities during the
first nine months of fiscal 1998 was mainly attributable to the proceeds from
the Company's equity and other investments.
Cash provided by financing activities was $6.3 million in the first nine months
of fiscal 1998, which resulted from borrowings under the Company's new revolving
credit agreement. During the first nine months of fiscal 1997, cash provided by
financing activities equal to $17.6 million was primarily provided by the
Company's initial public offering, which occurred in the second quarter of
fiscal 1997.
BANK LOAN AGREEMENTS
The Company entered into a revolving credit agreement with a bank group on
January 16, 1998. The revolving credit agreement permits borrowings up to $50
million through June 30, 1999 with permissible borrowings declining $2.5 million
quarterly to $35 million maturity at December 31, 2000. The revolving credit
agreement is collateralized by the common stock of the Company's subsidiaries,
as well as all tangible and intangible assets of the Company. Borrowings under
the revolving credit agreement bear interest at prime rate less 0.75 percent.
The Company has outstanding indebtedness under the revolving credit agreement of
$6.5 million at June 26, 1998.
A letter of credit in the amount of $41 million as of June 26, 1998, has been
issued by a financial institution on behalf of Advanced Clearing Inc. ("Advanced
Clearing"), formerly known as AmeriTrade Clearing, Inc., a wholly owned
subsidiary of the Company which acts as a securities clearing firm. The letter
of credit has been issued to support margin requirements. Advanced Clearing pays
a maintenance fee of 0.5 percent of the committed amount for the letter of
credit. As of June 26, 1998, no amounts were outstanding under the credit
facility. In addition, the same financial institution may make loans to Advanced
Clearing if requested under a note. Advanced Clearing has pledged customer
securities, the amount of which fluctuates from time to time, to secure its
obligations under the letter of credit and the note.
CAPITAL EXPENDITURES
The Company's anticipated capital expenditures for fiscal 1998 approximate $17.5
million, primarily for leasehold improvements in its Bellevue, Nebraska facility
and for the purchase of office, computer and other operating equipment. The
Company anticipates that these expenditures will be financed by a combination of
operating cash flow and borrowings under the $50 million revolving credit
facility discussed above.
YEAR 2000
The Company has implemented a Year 2000 strategy encompassing technical and
business issues. The financial impact of the Company's Year 2000 plan is not
expected to be material to the Company's results of operations, financial
positions, or cash flows. Within the next quarter, the Company is planning an
independent, third party review of the Company's Year 2000 strategic plan and
progress to date.
ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to the Company prior to its annual report on Form 10-K for the
fiscal year ending September 25, 1998.
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PART II - OTHER INFORMATION
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
3.1 Certificate of Incorporation (incorporated by reference to
Exhibit 3.1 of the Company's Registration Statement on Form
S-1 (Registration No. 333-17495) filed on February 7, 1997)
3.2 Bylaws (incorporated by reference to Exhibit 3.2 of the
Company's Registration Statement on Form S-1 (Registration No.
333-17495) filed on February 7, 1997)
3.3 Certificate of Amendment of Certificate of Incorporation of
Ameritrade Holding Corporation dated February 10, 1998
(incorporated by reference to Exhibit 3.3 of the Company's
quarterly report on Form 10-Q filed on May 12, 1998)
4.1 Form of Certificate for Class A Stock (incorporated by
reference to Exhibit 4.1 of the Company's Registration
Statement on Form S-1 (Registration No. 333-17495) filed on
February 7, 1997)
10.1 Agreement of Limited Partnership, dated as of February 4,
1993, of Comprehensive Software Systems Ltd. (incorporated by
reference to Exhibit 10.1 of the Company's Registration
Statement on Form S-1 (Registration No. 333-17495) filed on
February 7, 1997)
10.2 Amendment to Agreement of Limited Partnership, dated as of
September 1993, of Comprehensive Software Systems Ltd.
(incorporated by reference to Exhibit 10.33 of the Company's
Registration Statement on Form S-1 (Registration No.
333-17495) filed on February 7, 1997)
10.3 Second Amendment to Agreement of Limited Partnership, dated as
of December 1994, of Comprehensive Software Systems Ltd.
(incorporated by reference to Exhibit 10.34 of the Company's
Registration Statement on Form S-1 (Registration No.
333-17495) filed on February 7, 1997)
10.4 Third Amendment to Agreement of Limited Partnership, dated as
of December 31, 1995, of Comprehensive Software Systems Ltd.
(incorporated by reference to Exhibit 10.35 of the Company's
Registration Statement on Form S-1 (Registration No.
333-17495) filed on February 7, 1997)
10.5 Amended and Restated Limited Liability Company Agreement,
dated as of March 6, 1995, of Roundtable Partners
(incorporated by reference to Exhibit 10.2 of the Company's
Registration Statement on Form S-1 (Registration No.
333-17495) filed on February 7, 1997)
10.6 Broker Loan Pledge and Security Agreement, dated as of October
24, 1989, made by AmeriTrade, Inc. (now known as Advanced
Clearing, Inc.) in favor of the First National Bank of Chicago
(incorporated by reference to Exhibit 10.18 of the Company's
Registration Statement on Form S-1 (Registration No.
333-17495) filed on February 7, 1997)
10.7 Master Broker Loan Note, dated as of October 24, 1989, made by
AmeriTrade, Inc. (now known as Advanced Clearing, Inc.) in
favor of the First National Bank of Chicago (incorporated by
reference to Exhibit 10.19 of the Company's Registration
Statement on Form S-1 (Registration No. 333-17495) filed on
February 7, 1997)
10.8 Lease, dated as of July 14, 1993, between John Joe and Marlene
M. Ricketts and TransTerra Co. (incorporated by reference to
Exhibit 10.20 of the Company's Registration Statement on Form
S-1 (Registration No. 333-17495) filed on February 7, 1997)
10.9 Amendment to Lease, dated as of September 27, 1996, between
John Joe and Marlene M. Ricketts and TransTerra Co.
(incorporated by reference to Exhibit 10.21 of the Company's
Registration Statement on Form S-1 (Registration No.
333-17495) filed on February 7, 1997)
11
<PAGE> 12
10.10 Lease, dated as of October 5, 1995, between A.C. Nielsen
Company and TransTerra Co. (incorporated by reference to
Exhibit 10.22 of the Company's Registration Statement on Form
S-1 (Registration No. 333-17495) filed on February 7, 1997)
10.11 First Amendment to Lease, dated as of August 23, 1996, between
A.C. Nielsen Company and TransTerra Co. (incorporated by
reference to Exhibit 10.23 of the Company's Registration
Statement on Form S-1 (Registration No. 333-17495) filed on
February 7, 1997)
10.12 Second Amendment to Lease, dated as of October 5, 1997,
between A.C. Nielsen Company and AmeriTrade Holding
Corporation (incorporated by reference to Exhibit 10.12 of the
Company's annual report on Form 10-K filed on December 23,
1997)
10.13 Lease, dated as of March 10, 1996, between New York Executive
Office Network and K. Aufhauser & Company, Inc. (incorporated
by reference to Exhibit 10.24 of the Company's Registration
Statement on Form S-1 (Registration No. 333-17495) filed on
February 7, 1997)
10.14 Lease, dated as of June 20, 1996, between Christ Community
Church and TransTerra Co. (incorporated by reference to
Exhibit 10.25 of the Company's Registration Statement on Form
S-1 (Registration No. 333-17495) filed on February 7, 1997)
10.15 Employment Contract, dated as of December 3, 1996, between J.
Joe Ricketts and AmeriTrade Holding Corporation (incorporated
by reference to Exhibit 10.26 of the Company's Registration
Statement on Form S-1 (Registration No. 333-17495) filed on
February 7, 1997)
10.16 Employment Contract, dated as of December 3, 1996, between
Joseph A. Konen and AmeriTrade Holding Corporation
(incorporated by reference to Exhibit 10.27 of the Company's
Registration Statement on Form S-1 (Registration No.
333-17495) filed on February 7, 1997)
10.17 Employment Contract, dated as of December 3, 1996, between
Robert T. Slezak and AmeriTrade Holding Corporation
(incorporated by reference to Exhibit 10.28 of the Company's
Registration Statement on Form S-1 (Registration No.
333-17495) filed on February 7, 1997)
10.18 Form of Executive Bonus Plan (incorporated by reference to
Exhibit 10.29 of the Company's Registration Statement on Form
S-1 (Registration No. 333-17495) filed on February 7, 1997)
10.19 1996 Long-Term Incentive Plan (incorporated by reference to
Exhibit 10.30 of the Company's Registration Statement on Form
S-1 (Registration No. 333-17495) filed on February 7, 1997)
10.20 1996 Directors Incentive Plan (incorporated by reference to
Exhibit 10.31 of the Company's Registration Statement on Form
S-1 (Registration No. 333-17495) filed on February 7, 1997)
10.21 Loan Agreement, dated as of November 11, 1997 (incorporated by
reference to Exhibit 10.21 of the Company's annual report on
Form 10-K filed on December 23, 1997)
10.22 Loan Agreement, dated as of January 16, 1998, made by
Ameritrade Holding Corporation in favor of a bank group
(incorporated by reference to Exhibit 10.22 of the Company's
quarterly report on Form 10-Q filed on February 13, 1998)
10.23 Lease, dated as of January 19, 1998, between United Investment
Joint Venture and Ameritrade Holding Corporation (incorporated
by reference to Exhibit 10.23 of the Company's quarterly
report on Form 10-Q filed on May 12, 1998).
10.24 Lease, dated as of February 3, 1998, between Southroads Mall
and Ameritrade Holding Corporation (incorporated by reference
to Exhibit 10.24 of the Company's quarterly report on Form
10-Q filed on May 12, 1998).
27.1 Financial Data Schedule, EDGAR filing only
(B) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the three month period ended
June 26, 1998.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 4, 1998
Ameritrade Holding Corporation
(Registrant)
by: /s/ J. Joe Ricketts
-----------------------
J. Joe Ricketts
Director, Chairman and Chief Executive Officer
(Principal Executive Officer)
by: /s/ Robert T. Slezak
------------------------
Robert T. Slezak
Director, Chief Financial Officer,
Vice President and Treasurer
(Principal Financial and Accounting Officer)
13
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS INCLUDED IN THE FORM 10Q AS OF JUN. 26, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-25-1998
<PERIOD-START> MAR-27-1998
<PERIOD-END> JUN-26-1998
<CASH> 477,643,328
<RECEIVABLES> 631,823,740
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 19,348,200
<INSTRUMENTS-OWNED> 0
<PP&E> 21,226,416
<TOTAL-ASSETS> 1,157,059,329
<SHORT-TERM> 0
<PAYABLES> 1,056,455,233
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 0
0
0
<COMMON> 145,178
<OTHER-SE> 61,106,450
<TOTAL-LIABILITY-AND-EQUITY> 1,157,059,329
<TRADING-REVENUE> 0
<INTEREST-DIVIDENDS> 18,850,473
<COMMISSIONS> 24,040,099
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 1,762,572
<INTEREST-EXPENSE> 8,320,242
<COMPENSATION> 10,684,489
<INCOME-PRETAX> 9,259,751
<INCOME-PRE-EXTRAORDINARY> 9,259,751
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,940,323
<EPS-PRIMARY> .41
<EPS-DILUTED> .41
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