<PAGE> 1
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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 December 31, 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
------------------
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 February 1, 1999 there were 29,028,946 outstanding shares of the
registrant's common stock consisting of 26,300,146 outstanding shares of Class A
Common Stock and 2,728,800 outstanding shares of Class B Common Stock.
================================================================================
<PAGE> 2
AMERITRADE HOLDING CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
--------
PART I - FINANCIAL INFORMATION
<S> <C>
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Consolidated Statements of Comprehensive Income 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits 13
(b) Reports on Form 8-K 14
Signatures 15
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. - CONSOLIDATED FINANCIAL STATEMENTS
AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 25,
1998 1998
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 3,677,213 $ 24,526,935
Cash and investments segregated incompliance with federal regulations 837,088,576 503,455,354
Receivable from brokers, dealers, and clearing organizations 25,441,423 25,732,164
Receivable from customers and correspondents - net of allowance
for doubtful accounts: December - $1,706,992; September - $1,039,788 761,338,242 647,121,854
Furniture, equipment and leasehold improvements - net of accumulated
depreciation and amortization: December $8,061,841; September - $6,728,212 27,399,495 26,116,333
Goodwill - net of accumulated amortization 5,886,028 5,983,761
Investments 77,018,726 30,760,729
Other assets 30,254,190 26,704,546
--------------- ---------------
Total assets $ 1,768,103,893 $ 1,290,401,676
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Payable to brokers, dealers and clearing organizations $ 28,159,859 $ 11,765,785
Payable to customers and correspondents 1,521,668 614 1,136,082,337
Accounts payable and accrued liabilities 47,950,614 30,716,987
Notes payable 20,500,000 11,000,000
Income taxes payable 932,881 1,331,170
Deferred income taxes 32,317,433 14,933,313
--------------- ---------------
Total liabilities 1,651,529,401 1,205,829,592
--------------- ---------------
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, $1 par value; authorized 3,000,00 shares, none issued -- --
Common stock, $0.01 par value:
Class A - 60,000,000 shares authorized: 26,306,846 shares issued 263,068 263,068
Class B - 6,000,000 shares authorized; 2,728,800 shares issued and
outstanding 27,288 27,288
--------------- ---------------
Total common stock 290,356 290,356
Additional paid-in capital 23,143,195 23,135,653
Retained earnings 47,498,355 43,756,848
Treasury stock - Class A shares at cost (6,928 shares at Dec. 31, 1998;
9,442 shares at Sept. 25, 1998) (97,407) (133,388)
Accumulated other comprehensive income 45,739,993 17,522,615
--------------- ---------------
Total stockholders' equity 116,574,492 84,572,084
--------------- ---------------
Total liabilities and stockholders' equity $ 1,768,103,893 $ 1,290,401,676
=============== ===============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Revenues:
Commissions and clearing fees $ 36,713,357 $ 15,775,074
Interest revenue 23,039,930 13,109,849
Equity income from investments -- 1,323,054
Other 2,223,387 1,156,689
------------ ------------
Total revenues 61,976,674 31,364,666
Interest expense 9,859,766 5,688,973
------------ ------------
Net revenues 52,116,908 25,675,693
Expenses excluding interest:
Employee compensation and benefits 13,432,117 6,764,708
Commissions and clearance 1,866,038 975,588
Communications 3,452,915 3,124,808
Occupancy and equipment costs 4,122,388 1,943,683
Advertising 9,642,510 24,941,300
Other 13,709,221 5,421,328
------------ ------------
Total expenses excluding interest 46,225,189 43,171,415
------------ ------------
Income(loss) before provision for income taxes 5,891,719 (17,495,722)
Provision for income taxes(benefit) 2,150,212 (6,246,380)
------------ ------------
Net Income(Loss) $ 3,741,507 $(11,249,342)
============ ============
Basic earnings per share $ 0.13 $ (0.39)
Diluted earnings per share $ 0.13 $ (0.39)
Weighted average shares outstanding - basic 29,028,459 29,034,732
Weighted average shares outstanding - diluted 29,133,444 29,052,234
</TABLE>
See notes to consolidated financial statements
4
<PAGE> 5
AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income(loss) $ 3,741,507 $ (11,249,342)
Adjustments to reconcile net income(loss) to net cash from operating activities:
Depreciation and amortization 1,333,629 552,229
Provision for losses 725,000 28,500
Deferred income taxes (656,499) (352,736)
Equity income from investments -- (1,323,054)
Amortization of goodwill 97,733 97,733
Changes in operating assets and liabilities:
Cash and investments segregated in compliance with federal regulations (333,633,222) 10,791,131
Receivable from brokers, dealers and clearing organizations 290,741 (5,760,993)
Receivable from customers and correspondents (114,941,388) (108,562,099)
Income taxes receivable -- (2,545,645)
Other assets (3,549,644) (4,766,679)
Payable to brokers, dealers and clearing organizations 16,394,074 1,395,702
Payable to customers and correspondents 385,586,277 84,207,693
Accounts payable and accrued liabilities 17,233,627 (1,519,297)
Income taxes payable (398,289) (3,430,279)
------------- -------------
Net cash used in operating activities (27,776,454) (42,437,163)
Cash flows from investing activities:
Purchase of furniture, equipment and leasehold improvements (2,616,791) (2,367,054)
Purchase of equity and other investments -- (217,790)
Distributions received from equity investments -- 666,669
Proceeds from sale of investments -- 2,779,951
------------- -------------
Net cash provided by(used in) investing activities (2,616,791) 861,776
Cash flows from financing activities:
Proceeds from notes payable 33,500,000 3,000,000
Principal payments on notes payable (24,000,000) --
Purchase of treasury stock -- (145,000)
Issuance of treasury stock 43,523 95,780
------------- -------------
Net cash provided by financing activities 9,543,523 2,950,780
------------- -------------
Net decrease in cash and cash equivalents (20,849,722) (38,624,607)
Cash and cash equivalents at beginning of period 24,526,935 53,522,447
------------- -------------
Cash and cash equivalents at end of period $ 3,677,213 $ 14,897,840
============= =============
Supplemental cash flow information:
Interest paid $ 9,006,852 $ 5,355,695
Income taxes paid $ 3,201,770 $ 10,223
Supplemental investing activities:
Unrealized investment gain, net of deferred taxes of $18,040,619 $ 28,217,378 $ --
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
AMERITRADE HOLDING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Net Income(Loss) $ 3,741,507 $(11,249,342)
Other Comprehensive Income
Net unrealized holding gains on investment
securities available-for-sale arising during
the period 46,257,997 --
Adjustment for deferred income taxes (18,040,619) --
------------ ------------
Total Other Comprehensive Income, net of tax 28,217,378 --
------------ ------------
Comprehensive Income $ 31,958,885 $(11,249,342)
============ ============
</TABLE>
6
<PAGE> 7
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"): Advanced Clearing, Inc. ("Advanced
Clearing"), formerly known as AmeriTrade Clearing, Inc.; Accutrade, Inc.
("Accutrade"); Ameritrade (Inc.), formerly known as Ceres Securities;
AmeriVest, Inc. ("AmeriVest"), formerly known as All American Brokers, Inc.;
K. Aufhauser & Company ("Aufhauser"); and OnMoney Financial Services
Corporation ("OnMoney"). All significant intercompany balances and
transactions have been eliminated. The Company is a provider of discount
securities brokerage and related financial services, including clearing and
execution services.
During 1998, the Company's Board of Directors declared a two-for-one common
stock split, distributed August 1998, and effected in the form of a stock
dividend. All share data and per share amounts have been restated to reflect
the split.
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. 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 25, 1998. The results of operations for the
three months ended December 31, 1998 are not necessarily indicative of the
results for the entire fiscal year ending September 24, 1999.
2. RECENTLY ISSUED ACCOUNTING STATEMENTS
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income and accordingly, has
presented a Statement of Comprehensive Income. The single component of
comprehensive income for the Company is unrealized gains on investments. See
Note 5 for additional details on the Company's investments.
3. NET CAPITAL
The Company's broker-dealer 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 $49,635,266 and $40,062,733 as of December 31, 1998 and September 25,
1998, respectively, which exceeded aggregate minimum net capital
requirements by $32,301,381 and $25,247,775, respectively. Subsidiary net
capital in the amount of $17,333,885 and $14,814,958 as of December 31, 1998
and September 25, 1998, respectively, is not available for transfer to the
Company due to net capital regulations.
4. 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 at maturity on December 31, 2000. The revolving credit
agreement is collateralized by the common stock of the Company's subsidiaries,
as well as all assets of the Company. Borrowings under the revolving credit
agreement bear interest at prime rate less 0.75 percent (7.00 percent and 7.75
percent borrowing rate at December 31, 1998 and September 25, 1998,
respectively). The Company pays a maintenance fee of 0.25 percent of the unused
borrowings through the maturity date. The Company had outstanding indebtedness
under the revolving credit agreement of $20.5 million and $11.0 million at
December 31, 1998 and September 25, 1998, respectively. The revolving credit
7
<PAGE> 8
agreement contains certain restrictions, including restrictions on the payment
of cash dividends and additional borrowings.
A letter of credit in the amount of $81 million as of December 31, 1998, has
been issued by a financial institution on behalf of Advanced Clearing, 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 December 31, 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.
5. INVESTMENTS
The Company owns 3,953,675 shares of common stock of Knight/Trimark Group,
Inc. ("Knight/Trimark"), a company formed to hold equity interests in
securities trading and market making companies, which represents 7.7 percent
of the issued and outstanding shares of common stock of Knight/Trimark. As
of December 31, 1998 and September 25, 1998, the Company's investment in
Knight/Trimark was subject to a sale restriction agreement made with the
underwriters of the initial public offering. The Company has valued its
investment in Knight/Trimark with a twenty percent discount from the
published market value on the Nasdaq exchange as a result of the sale
restriction agreement and potential registration costs. On September 25,
1998, the Company valued its investment in Knight/Trimark at $29,454,879.
The Company's cost basis on September 25, 1998 was $729,280, therefore the
gross unrealized gain is $28,725,599. On December 31, 1998, the Company
valued its investment in Knight/Trimark at $75,712,876. The cost basis
remained $729,280, therefore the gross unrealized gain is $74,983,596.
6. LEGAL
On September 16, 1998, a putative class action complaint was filed in the
District Court, Douglas County, Nebraska, seeking injunctive and equitable
relief due to the Company's alleged breach of contract, violation of the
Consumer Protection Act, fraudulent inducement, negligent misrepresentation,
negligence, and unjust enrichment regarding the Company's alleged inability
to handle the volume of subscribers to its Internet brokerage services. The
complaint seeks injunctive relief enjoining alleged deceptive, fraudulent,
and misleading practices and unspecified compensatory damages. The Company
believes that it has viable defenses to the allegations raised in the
complaint. However, because this proceeding is at a preliminary phase and
the amount of damages sought has not been quantified, the Company is not
presently able to predict the ultimate outcome of this matter.
7. SUBSEQUENT EVENT
On January 25, 1999, 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 February 5, 1999 will receive, in the form of a stock dividend,
one additional share for each share held by them. On or about February 22,
1999, the Transfer Agent will distribute the additional shares and the stock
will begin trading at the post-split value on February 23, 1999.
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 25, 1998. This discussion contains
forward-looking statements that involve risks and uncertainties that could cause
actual results to differ materially from those anticipated in such forward
looking statements. Factors that may cause such differences include, but are not
limited to: the effect of customer trading patterns on Company revenues and
earnings; computer system failures; risks associated with the Year 2000 computer
systems conversions; the effects of competitors' pricing, product and service
decisions and intensified competition; evolving regulation and changing industry
customs and practices adversely affecting the Company; adverse results of
litigation; changes in revenues and profit margin due to cyclical securities
markets and interest rates; and a significant downturn in the securities markets
over a short period of time or a sustained decline in securities prices and
trading volumes.
8
<PAGE> 9
RESULTS OF OPERATIONS
THREE MONTH PERIODS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
NET REVENUES. Commissions and clearing fees increased 132 percent to $36.7
million in the first quarter of fiscal 1999 from $15.8 million in the first
quarter of fiscal 1998. This increase was primarily attributable to an increase
in the number of securities transactions processed, as average trades per day
increased 215 percent to 33,489 in the first quarter of fiscal 1999 from 10,619
in the first quarter of fiscal 1998. The increase in transaction processing
volume was primarily a result of a significant increase in customer accounts
resulting from the substantial advertising expenditures made by the Company
during fiscal 1998. Offsetting the growth in trades per day is the decrease in
commissions and clearing fees per trade by 30 percent to $16 in the first
quarter of fiscal 1999 from $23 in the first quarter of fiscal 1998. The Company
expects average commission and clearing fees per trade to continue to decrease
due to competitive pressures and the greater anticipated number of
low-commission Internet trades. However, the Company believes the rate of
decline in average commission will be lower than the rate of decline experienced
over the past two years.
The Company has arrangements with several execution agents to receive cash
payments in exchange for routing trade orders to these firms for execution
(payment for order flow). The revenues generated by the Company under these
arrangements totaled $4.9 million, or 9 percent of net revenues for the first
quarter of fiscal 1999 and $2.0 million, or 8 percent of net revenues for the
first quarter of fiscal 1998. Payment for order flow is a component of the
commission and clearing fees revenue line. The majority of these revenues were
received from execution agents owned by Knight/Trimark, a market maker in
over-the-counter equity securities for those securities traded in the Nasdaq
stock market, the OTC Bulletin Board, and those listed on the New York and
American Stock Exchanges. As of December 31, 1998, the Company owned
approximately 3.95 million shares (approximately 7.7 percent) of the common
stock of Knight/Trimark.
Net interest revenue (interest revenue less interest expense) increased 78
percent to $13.2 million in the first quarter of fiscal 1999 from $7.4 million
in the first quarter of fiscal 1998. This increase was due primarily to an
increase of 59 percent in cash and cash equivalents segregated in compliance
with federal regulations, an increase of 17 percent in customer and
correspondent broker-dealer receivables partially offset by an increase of 35
percent in amounts payable to customers and correspondent broker-dealers in the
first quarter of fiscal 1999 from the first quarter of fiscal 1998. The Company
generally expects net interest revenue to grow as the account base grows.
The Company had no equity income from investments in the first quarter of fiscal
1999, compared to $1.3 million in the first quarter of fiscal 1998. The equity
income in fiscal 1998 was primarily generated by the Company's ownership in
Roundtable Partners, LLC, which was reorganized into Knight/Trimark Group, Inc.
in July 1998. Due to the reorganization, the Company no longer recognizes equity
income from this investment.
Other revenues increased 83 percent to $2.2 million in the first quarter of
fiscal 1999 from $1.2 million in the first quarter of fiscal 1998 due primarily
to an increase in marketing and service fees paid to the Company by mutual funds
as the Company holds more customer mutual fund assets.
EXPENSES EXCLUDING INTEREST. Employee compensation and benefits expense
increased 97 percent to $13.4 million in the first quarter of fiscal 1999 from
$6.8 million in the first quarter of fiscal 1998, due primarily to an increase
in full-time employees. Full time equivalent employees rose from 660 at the end
of December 1997 to 1,134 at the end of December 1998. The increase in employees
was necessary to accommodate the dramatic growth in trading volume following the
Company's advertising campaign in fiscal 1998. The Company expects employment
expenses to increase at a slower rate than net revenues in fiscal 1999.
Commissions and clearance costs increased 90 percent to $1.9 million in the
first quarter of fiscal 1999 from $1.0 million in the first quarter of fiscal
1998, due primarily to the 215 percent increase in transaction volume, offset by
efforts that the Company has undertaken to reduce execution, clearance,
settlement, and depository costs with outside entities and the economies of
scale associated with these activities.
Communications expense increased 13 percent to $3.5 million in the first quarter
of fiscal 1999 from $3.1 million in the first quarter of fiscal 1998, primarily
as a result of telephone, quote and market information costs related to the
increase in transaction processing volume. Communication expenses are expected
to continue to increase at a slower rate than transactions processed as the low
cost Internet becomes the Company's predominant communication channel with its
customers.
Occupancy and equipment costs increased 116 percent to $4.1 million in the first
quarter of fiscal 1999 from $1.9 million in the first quarter of fiscal 1998.
The increase was due primarily to the lease of 132,000 square feet in a new
facility in Bellevue,
<PAGE> 10
Nebraska, which started during the third quarter of fiscal 1998, as well as the
lease of equipment to accommodate the Company's growth during the quarter.
Advertising expenses decreased 61 percent to $9.6 million in the first quarter
of fiscal 1999 from $24.9 million in the first quarter of fiscal 1998 as the
Company scaled back its advertising and promotional efforts.
Other operating expenses increased 154 percent to $13.7 million in the first
quarter of fiscal 1999 from $5.4 million in the first quarter of fiscal 1998,
primarily as a result of increased confirmation and statement processing costs
associated with the increase in transaction processing volume and increased
consulting fees related to technology development. In addition, the Company
incurred $3.1 million in customer execution price adjustments largely caused by
system delays and outages in the first quarter of fiscal 1999.
Income tax expense was $2.2 million in the first quarter of fiscal 1999,
compared with a tax benefit of $6.2 million in the first quarter of fiscal 1998
consistent with the increase in the Company's pretax income.
LIQUIDITY AND CAPITAL RESOURCES
The Company expects to spend between $8 million and $12 million during fiscal
1999 on hardware and software upgrades to its computer systems to meet
anticipated increases in trading volumes. In addition, the Company anticipates
expenditures between $4 million and $6 million during fiscal 1999 primarily for
the purchase of office, computer and operating equipment. Lease commitments for
operating equipment and facilities during fiscal 1999 are expected to equal
approximately $7 million with an aggregate commitment of approximately $40.5
million through fiscal 2018. In addition, the Company plans to spend
approximately $10 million on continuing research and development activities
during fiscal 1999. The Company has also entered into a two-year agreement with
America Online, Inc ("AOL") that will feature Ameritrade (Inc.) as one of four
brokerages on AOL's Personal Finance Channel. The pact calls for the Company to
pay AOL $12.5 million annually over a two-year term.
The Company expects to finance its capital and liquidity needs during fiscal
1999 from its operating cash flow and borrowings under a $50 million revolving
credit facility with a bank group (see "Bank Loan Agreements"). Dividends from
subsidiaries are subject to the requirements of the Securities Exchange
Commission and the National Association of Securities Dealers relating to
liquidity, capital standards, and the use of customer funds and securities, as
well as credit agreement provisions, which limit funds available for the payment
of dividends to the parent company.
OPERATING CASH FLOW
Cash used in operating activities was $27.8 million in the first quarter of
fiscal 1999, compared to $42.4 million in the first quarter of fiscal 1998. The
decreased use of cash during the first quarter of fiscal 1999 was attributable
to the substantial decrease in advertising expenditures during the first quarter
of fiscal year 1999.
Cash used in investing activities was $2.6 million in the first quarter of
fiscal 1999, compared to cash provided by investing activities of $0.8 million
in the first quarter of fiscal 1998. The cash provided by investing activities
in the first quarter of fiscal 1998 was primarily related to cash distributions
received from Knight/Trimark and CSS, offset by purchases of property and
equipment. Uses of cash in the first quarter of fiscal 1999 related to purchases
of property and equipment.
Cash provided by financing activities was $9.5 million in the first quarter of
fiscal 1999, compared to $3.0 million in the first quarter of fiscal 1998. The
cash provided by financing activities in the first quarters of both fiscal 1998
and 1999 consisted of proceeds from the Company's revolving credit agreement
with a bank (see "Bank Loan Agreements"), offset by payments on the principal on
the revolving credit loan.
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 at maturity on December 31, 2000. The revolving credit
agreement is collateralized by the common stock of the Company's subsidiaries,
as well as all assets of the Company. Borrowings under the revolving credit
agreement bear interest at prime rate less 0.75 percent (7.00 percent and 7.75
percent borrowing rate at December 31, 1998 and September 25, 1998,
respectively). The Company pays a maintenance fee of 0.25 percent of the unused
borrowings through the maturity date. The Company had outstanding indebtedness
under the revolving credit agreement of $20.5 million and $11.0 million at
December 31, 1998 and September 25, 1998, respectively. The revolving credit
agreement contains certain restrictions, including restrictions on the payment
of cash dividends and additional borrowings.
10
<PAGE> 11
A letter of credit in the amount of $81 million as of December 31, 1998, has
been issued by a financial institution on behalf of Advanced Clearing, 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 December 31, 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.
YEAR 2000
The Company relies heavily on computerized information technology systems ("IT")
for its business operations. In particular, securities trading information moves
to and from the Company's IT system to those operated by stock exchanges,
broker-dealers, clearinghouses and other trading partners on a real-time basis
with little human intervention. The Company's business operations are also
dependent on a variety of non-IT systems that contain embedded circuitry such as
telephone equipment, security and alarm systems, copiers, fax machines, mail
room equipment, heating and air conditioning systems and other infrastructure
systems. In addition, the Company has business relationships with a variety of
third parties whose ability to interface with the Company's IT systems or
otherwise perform their obligations to the Company depends on such systems and
equipment. Some or all of these systems and equipment may be affected by the
so-called "Year 2000 problem" which is the potential inability of certain
computer programs and embedded circuitry to correctly recognize dates occurring
after December 31, 1999. The Company has adopted a plan to deal with this "Year
2000 problem" with respect to its IT, non-IT systems and third party business
relationships.
State of Readiness
The Company has hired a Year 2000 Project Manager who has assembled a working
group that is responsible for the Company's Year 2000 remediation effort. In
general, this effort consists of (i) preparing an inventory of IT and non-IT
systems and assessing the need for remediation of such systems, (ii) determining
the status of Year 2000 remediation of third parties with which the Company has
material business relationships, (iii) remediation of the Company's IT and
non-IT systems and (iv) testing. The Company has completed approximately 75
percent of the inventory and assessment phase of its Year 2000 program. The
Company has been in the process of a planned upgrade of many components of its
IT system and as this process is completed, the Company's IT systems are
expected to become Year 2000 compliant. The Company expects this to occur by
June 30, 1999. The Company has reviewed its Non-IT systems, such as telephone
systems, which have been identified as necessary to the Company's ability to
conduct the operation of its business activities. All Non-IT systems except for
the Company's security system have been modified or replaced to be Year 2000
compliant. The Company expects to have its security system replaced by April
1999.
The Company plans to conduct testing of IT and non-IT systems as remediation
work is completed. In particular, the IT systems will undergo an industry-wide
simulation test of the trading cycle, that will test not only the Company's
internal IT system, but also key interfaces with third parties in the securities
industry. While the test is designed to simulate actual trading activity, it
will not be as voluminous as a "normal" cycle, nor will it test the Leap Year
anomaly. The industry-wide testing is scheduled to begin on March 6, 1999.
Notwithstanding the Company's efforts to anticipate and remediate Year 2000
problems, there can be no assurance that the inventory and assessment will
discover all potential Year 2000 problems or that testing will reveal
unanticipated material problems with the Company's IT systems and non-IT systems
that will need to be resolved.
The Company has no control over the remediation efforts of third parties with
which it has material business relationships and the failure of certain of these
third parties to successfully remediate their Year 2000 issues could have a
material adverse effect on the Company. Accordingly, the Company has undertaken
the process of contacting each material third party. Such parties include, but
are not limited to, various brokers-dealers, Internet partners, and market
makers. The Company has received initial compliance documentation from certain
of these third parties that their ability to perform their obligations to the
Company are not expected to be materially adversely affected by the Year 2000
problem. The Company will conduct in-house testing of third party systems when
those systems are available. The Company will continue to request updated
information from these material third parties in order to access their Year 2000
readiness.
Costs to Address Year 2000 Compliance
Costs associated with Year 2000 compliance consist primarily of salaries of the
Year 2000 Project Manager and other staff assigned to the Year 2000 working
group, software used to assess the Company's systems, and consulting fees.
Additional costs will be incurred in connection with replacing non-IT systems as
necessary, polling of third-party readiness and testing. All remediation to the
Company's IT system were made as part of scheduled upgrades and, therefore, have
not been included
11
<PAGE> 12
in the costs of Year 2000 compliance. Costs associated with the Company's Year
2000 program have been minimal to date and are expected to be between $1 million
and $2 million.
Year 2000 Risks
Based on currently available information, the Company does not believe that
there will be any protracted systemic failures of the IT or non-IT systems
utilized by it in connection with the operation of its business. The Company
believes that the most reasonably likely worst-case scenario will be that there
will be a temporary interruption or reduction in trading volume capability due
to a combination of interface breakdowns, utilities disruptions or
communications degradations. If such an interruption or reduction occurs, it
will result in a loss of revenues and, depending on the extent of such
disruption, may cause the Company to lose accounts. The Company cannot estimate
the magnitude of any such loss of revenue at this time, but it could be
material.
Contingency Plans
The Company has compiled a contingency plan with respect to Year 2000 issues as
part of an overall business continuity/disaster recovery initiative. In general,
these plans provide for the use of manual processes and multiple market sources
in order to execute securities trades. Other principal components of the
Company's contingency plan include the use of multiple transmission channels
with several long distance telephone vendors and on-site diesel generators if
telephone service or electricity is interrupted. The Company expects to make
refinements to its contingency plans as additional information regarding Year
2000 strategies becomes available and as a result of the industry-wide
simulation testing described above. There can be no assurance, however, that any
contingency plan utilized by the Company will prevent the Company from incurring
service interruptions and other negative consequences in the event of Year 2000
problems either with its own IT and non-IT systems or with those of third
parties having material business relationships with the Company.
All forecasts, estimates or other statements in this report relating to the Year
2000 readiness of the Company are based on information and assumptions about
future events. Such "forward-looking statements" are subject to various known
and unknown risks and uncertainties that may cause actual events to differ from
such statements. Important factors upon which the Company's Year 2000
forward-looking statements are based include, but are not limited to, (a) the
belief of the Company that the upgraded software used in IT systems is already
able to correctly read and interpret dates after December 31, 1999 and will
require little or no remediation; (b) the ability to identify, repair or replace
mission critical non-IT equipment in a timely manner, (c) third parties'
remediation of their internal systems to be Year 2000 ready and their
willingness to test their systems interfaces with those of the Company, (d) no
third party system failures causing material disruption of telecommunications,
data transmission, payment networks, government services, utilities or other
infrastructure, (e) no unexpected failures by third parties with which the
Company has a material business relationship and (f) no material undiscovered
flaws in the Company's Year 2000 inventory and assessment process.
ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to the information provided in item 7A of
Part II of the Company's Form 10-K filed for the year ended September 25, 1998.
12
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 1. - LEGAL PROCEEDINGS
Item 3 of Part I of the Company's Form 10-K filed for the fiscal year
ended September 25, 1998 details the Company's current legal
proceedings. No material changes have occurred since September 25,
1998.
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)
3.4 Certificate of Correction of Certificate of Amendment of
Certificate of Incorporation of Ameritrade Holding Corporation
dated December 11, 1998 (incorporated by reference to Exhibit 3.4
of the Company's Annual Report on Form 10-K filed on December 21,
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 Sale of Minority Interest Agreement between Comprehensive Software
Systems, Ltd. and ADP Financial Information Services, Inc., dated
as of June 3, 1998 (incorporated by reference to Exhibit 10.5 of
the Company's Annual Report on Form 10-K filed on December 21,
1998)
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. (now known as Ameritrade Holding
Corporation) (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. (now known as
Ameritrade Holding Corporation) (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)
13
<PAGE> 14
10.10 Lease, dated as of October 5, 1995, between A.C. Nielsen Company
and TransTerra Co. (now known as Ameritrade Holding Corporation)
(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. (now known as Ameritrade
Holding Corporation) (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 Third Amendment to Lease, dated as of October 5, 1997, between
A.C. Nielsen Company and Ameritrade Holding Corporation.
10.14 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)
10.15 Lease, dated as of June 20, 1996, between Christ Community Church
and TransTerra Co. (now known as Ameritrade Holding Corporation)
(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)
10.16 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)
10.17 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)
10.18 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)
10.19 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)
10.20 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)
10.21 Amendment to 1996 Long-Term Incentive Plan dated November 11,
1997 (incorporated by reference to Exhibit 10.20 of the Company's
Annual Report on Form 10-K filed on December 21, 1998)
10.22 1996 Directors Incentive Plan, as amended February 10, 1998. This
plan supercedes plan filed February 7, 1997 (incorporated by
reference to Exhibit 10.21 of the Company's Annual Report on Form
10-K filed on December 21, 1998)
10.23 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)
10.24 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)
10.25 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)
10.26 Operating Agreement of Adirondack Trading Partners LLC
(incorporated by reference to Exhibit 10.25 of the Company's
Annual Report on Form 10-K filed on December 21, 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
December 31, 1998.
14
<PAGE> 15
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: February 12, 1999
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)
15
<PAGE> 1
Exhibit 10.13
AMENDMENT NUMBER THREE
TO THE LEASE
BETWEEN A.C. NIELSEN COMPANY
AS LANDLORD
AND AMERITRADE HOLDING CORPORATION
FORMERLY TRANSTERRA COMPANY
AS TENANT
COVERING THE PREMISES AT
10202 F STREET
OMAHA, NE
THIS AMENDMENT is made this 29th day of December, 1998, between A.C.
Nielsen Company, a Delaware corporation having offices at 150 North Martingale
Road, Schaumburg, Illinois 60173 (the "Landlord"), and AmeriTrade Holding
Corporation, a Delaware corporation having an office at 4211 South 102 Street,
Omaha, Nebraska 68127 (the "Tenant").
WHEREAS:
A. Landlord and TransTerra Company entered into Lease dated October 5,
1995 (the "Original Lease") whereby TransTerra Company leased certain premises
in the Landlord's building located at 10202 F Street, Omaha, Nebraska as
therein more particularly described;
B. The Original Lease was modified by that certain Amendment Number One
dated August 23, 1996 ("Amendment No. 1") increasing the number of rentable
square feet in the said leased premises to 7,753 square feet (collectively, the
"Premises");
C. Effective 9-27-96, TransTerra Company reincorporated in the State of
Delaware and changed its name to AmeriTrade Holding Corporation;
D. The Original Lease was further modified by that certain Amendment
Number Two dated October 6, 1997 ("Amendment No. 2" and together with the
Original Lease and Amendment No. 1, collectively hereinafter called the
"Lease").
E. Landlord and Tenant wish to amend the Lease in accordance with the
terms set forth herein.
NOW, THEREFORE, in consideration of the mutual promises contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. This Amendment shall become effective as of November 1, 1998 (the
"Effective Date").
<PAGE> 2
2. This Amendment is hereby deemed and agreed to render null and void
all the terms, conditions and agreements set forth in that certain
Letter of Agreement dated October 3, 1997 ("Letter Agreement").
3. Section 1.b.(1) of the Original Lease and Section 1 of Amendment No. 2
are hereby deleted and substituted therefor is the following:
"The term of this Lease (the "Lease Term") shall commence on
December 1, 1995, or at such date as the premises are
substantially complete, whichever is earlier (the "Commencement
Date")."
4. Section 1.b.(2) of the Original Lease and Section 2 of Amendment No. 2
are hereby deleted and substituted therefor is the following:
"The Lease Term shall end on November 30, 2001, or such earlier
date as this Lease may terminate as provided herein (the
"Expiration Date").
5. As of the Effective Date, Section 2.a. of the Original Lease, Article I
of Amendment No. 1 and Section 3 of Amendment No. 2 are hereby deleted
and substituted therefor is the following:
"Except as modified by Section c, of this Article 2, beginning on
November 1, 1998, until October 31, 1999, Tenant shall pay
Landlord rent (the "Base Rent") at the annual rate of One Hundred
and Eight Thousand Five Hundred Dollars ($108,500.00), payable in
equal monthly installments of Nine Thousand Forty-One Dollars and
66/100 cents ($9,041.66), in advance on the first day of each
calendar month during this period, at Landlord's address set forth
above, or at such other address as Landlord may specify by written
notice to Tenant from time to time. This rental is based on an
annual rental rate of Thirteen Dollars and 99/100 cents ($13.99)
per rentable square foot.
Thereafter, beginning November 1, 1999, until October 31, 2000,
Tenant shall pay Landlord a Base Rent at the annual rate of One
Hundred Twelve Thousand Eight Hundred Forty Dollars ($112,840.00),
payable in equal monthly installments of Nine Thousand Four
Hundred Three Dollars and 33/100 cents ($9,403.33), in advance on
the first day of each calendar month during this period, at
Landlord's address set forth above, or at such other address as
Landlord may specify by written notice to Tenant from time to
time. This rental is based on an annual rental rate of Fourteen
Dollars and 55/100 cents ($14.55) per rentable square foot.
2
<PAGE> 3
Thereafter, beginning November 1, 2000, until the Expiration Date,
Tenant shall pay Landlord a Base Rent at the annual rate of One
Hundred Seventeen Thousand Three Hundred Fifty-Three Dollars and
60/100 cents ($117,353.60), payable in equal monthly installments
of Nine Thousand Seven Hundred Seventy-Nine Dollars and 46/100
cents ($9,779.46), in advance on the first day of each calendar
month during the balance of the Lease Term, at Landlord's address
set forth above, or at such other address as Landlord may specify
by written notice to Tenant from time to time. This rental is
based on an annual rental rate of Fifteen Dollars and 13/100 cents
($15.13) per rentable square foot."
6. As of the Effective Date, Section 3a.(2) of the Original Lease is
hereby deleted and substituted therefor is the following:
"(2) "Base Year for Operating Expenses" - the period from January
1, 1998 to December 31, 1998."
7. As of the Effective Date, Section 3a.(3) of the Original Lease is
deleted and substituted therefor is the following:
"(3) "Base Year for Taxes" - The period from January 1, 1998 to
December 31, 1998.
8. Section 3a.(6) of the Original Lease, Operating Expenses, is revised as
follows:
The words "reasonable and competitive" in line 1 are hereby
deleted and the word "actual" is inserted in lieu thereof.
9. Section 3d.(2) of the Original Lease, Landlord's Statements, is revised
as follows:
The Words "Base Year for Operating Expenses" in line 1 are hereby
deleted and the words "Comparison Year" are inserted in lieu
thereof.
10. Section 3d. (2)(i) of the Original Lease, Landlord's Statements, is
revised as follows:
The word "such" in line 1 is hereby deleted and the word "the" is
inserted in lieu thereof and the words "for Operating Expenses"
are inserted after the words "Base Year" at the end of line 1.
11. Tenant acknowledges and agrees that Landlord has completed all
Landlord's Work specified in Section 4b. of the Original Lease.
12. Section 12 of the Original Lease, Surrender, is revised as follows:
3
<PAGE> 4
The following words are inserted in line 7 thereof after the words
"upon termination of this Lease."
"Notwithstanding the foregoing, at the Landlord's option, the
Tenant at its expense, shall remove any alterations or
improvements made subsequent to the completion of the work
identified on Exhibit C upon termination of this Lease and repair
any damage caused by removal or pay Landlord the cost of repair
prior to vacating the Premises. The Landlord shall give Tenant
notice of such requirement to remove at the time Landlord consents
to same. If any alterations or improvements are made without
Landlord's consent in violation of Section 11 hereof, Landlord,
among other things, may require Tenant, at its expense, to remove
same at the end of the Lease Term and repair any damage etc.,
occasioned by such removal."
13. Section 26 of the Original Lease and Section 4 of Amendment No. 2 are
hereby deleted in their entirety and substituted therefor is the
following:
"26. CONDITIONAL OPTION TO RENEW
---------------------------
a. At Landlord's sole option, Tenant may have the right to extend the
term of this Lease for one (1) year beyond the Expiration Date (the
"Renewal Term"), subject to the provisions of this Article 26.
Tenant must send Landlord notice no later than June 1, 2001, of
Tenant's desire to so extend the term. If Landlord is in agreement
that Tenant may extend the term, Landlord, within thirty (30) days
after receipt of Tenant's notice, shall send Tenant a written notice
(the "Rent Notice") stating the rent for the Renewal Term. If
Landlord does not send a Rent Notice or elects not to extend the
Lease for the Renewal Term, this conditional option shall be deemed
null and void and of no further force or effect. If Landlord elects
to send a Rent Notice, the rent stated shall be Landlord's estimate
of the fair market rental value of the Premises for the Renewal
Term, but shall in no event be less than the rent in effect just
prior to commencement of the Renewal Term. Tenant shall have ten
(10) days after receipt of Landlord's Rent Notice to give Landlord
further written notice accepting or rejecting the rent. If Tenant
rejects the rent, this conditional extension option shall be deemed
null and void and of no further force or effect. If Tenant accepts
the rent, the extension of this Lease shall be deemed effective on
all the same terms and conditions as are herein set forth, except at
the rent stated in the Rent Notice and without any further right of
renewal.
4
<PAGE> 5
b. Tenant's rights under this Article 26 shall be subject to
Tenant not being in default at the time it exercises any
conditional option or at the commencement of the Renewal Term.
c. TIME IS OF THE ESSENCE with regard to each party's obligation,
if any, to deliver notices within the time stated pursuant
to Section 26a above."
14. Upon execution of this Amendment, Tenant shall reimburse Landlord for
all of Landlord's reasonable legal costs and expenses incurred in
connection with this Agreement.
15. This Amendment:
(a) Constitutes an amendment to the Lease;
(b) is hereby deemed and agreed to form part of the Lease;
(c) is subject to all terms and conditions of the Lease, except to the
extent that the Lease is specifically amended hereby.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the ____ day of December, 1998.
Witness: ______________________________________
LANDLORD
________________________ By:___________________________________
Name:_________________________________
Title:________________________________
Witness: Ameritrade Holding Corporation
--------------------------------------
TENANT
/s/ Joan F. Kost By: /s/ SUSAN M. HOHMAN
-----------------------------------
Name: Susan M. Hohman
---------------------------------
Title: VP, Infrastructure & Facilities
--------------------------------
6
<PAGE> 7
STATE OF )
) ss:
COUNTY OF )
On this the _______ day of ______________ 1998, before me, the undersigned
officer, personally appeared ___________________________, who acknowledged
himself/herself to be _______________________________ of A.C. NIELSEN COMPANY, a
Delaware corporation, and that he/she, as such officer, being authorized so to
do, executed the foregoing instrument for the purposes therein contained and
acknowledged the same to be his/her free act and deed and as such officer, the
free act and deed of said corporation.
IN WITNESS WHEREOF, I hereunto set my hand.
________________________________
Notary Public
My Commission Expires:
STATE OF NEBRASKA )
) ss:
COUNTY OF DOUGLAS )
On this the 29th day of December, 1998, before me, the undersigned officer,
personally appeared Susan M. Hohman, who acknowledged himself/herself to be V.P.
of AMERITRADE HOLDING CORPORATION, a Delaware corporation, and that he/she, as
such officer, being authorized so to do, executed the foregoing instrument for
the purposes therein contained and acknowledged the same to be his/her free act
and deed and as such officer, the free act and deed of said corporation.
IN WITNESS WHEREOF, I hereunto set my hand.
------------------------------------
GENERAL NOTARY STATE OF NEBRASKA
JOAN F. KOST
MY COMM. EXP. SEPT. 30, 1999 /s/ JOAN F. KOST
------------------------------------ --------------------------------
Notary Public
My Commission Expires: Sept. 30, 1999
7
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROMTHE FINANCIAL
STATEMENTS INCLUDED IN THE FORM 10Q AS OF DEC. 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-24-1999
<PERIOD-START> SEP-26-1998
<PERIOD-END> DEC-31-1998
<CASH> 840,765,789
<RECEIVABLES> 786,779,665
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 19,924,069
<INSTRUMENTS-OWNED> 0
<PP&E> 27,399,495
<TOTAL-ASSETS> 1,768,103,893
<SHORT-TERM> 0
<PAYABLES> 1,549,828,473
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 0
<LONG-TERM> 0
0
0
<COMMON> 290,356
<OTHER-SE> 116,574,492
<TOTAL-LIABILITY-AND-EQUITY> 1,768,103,893
<TRADING-REVENUE> 0
<INTEREST-DIVIDENDS> 23,039,930
<COMMISSIONS> 36,713,357
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 2,223,387
<INTEREST-EXPENSE> 9,859,766
<COMPENSATION> 13,432,117
<INCOME-PRETAX> 5,891,719
<INCOME-PRE-EXTRAORDINARY> 5,891,719
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,741,507
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
