e10vqza
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
(Mark One)
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þ |
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Quarterly report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 |
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for the quarterly period ended December 31, 2009 |
OR
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o
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Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 |
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for the transition period from
to
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Commission file number: 0-49992
TD AMERITRADE HOLDING CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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82-0543156
(I.R.S. Employer
Identification Number) |
4211 South 102nd Street, Omaha, Nebraska, 68127
(Address of principal executive offices) (Zip Code)
(402) 331-7856
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 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 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding twelve months. Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes o No þ
As of January 29, 2010, there were 589,529,942 outstanding shares of the registrants common stock.
TABLE OF CONTENTS
Explanatory Note
This Amendment is being filed to provide the Condensed Consolidating Financial
Information presented in Note 11 of the Notes to Condensed Consolidated Financial Statements under
Part I, Item 1 Financial Statements. This information was omitted from the original Form 10-Q.
Except for Item 1 of Part I, no other information included in the original report on Form 10-Q is
amended by this Form 10-Q/A.
2
Part I FINANCIAL INFORMATION
Item 1. Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
TD AMERITRADE Holding Corporation
We have reviewed the condensed consolidated balance sheet of TD AMERITRADE Holding Corporation (the
Company) as of December 31, 2009, and the related condensed consolidated statements of income and
cash flows for the three-month periods ended December 31, 2009 and 2008. These financial
statements are the responsibility of the Companys management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight
Board (United States). A review of interim financial information consists principally of applying
analytical procedures and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance with the standards
of the Public Company Accounting Oversight Board, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material modifications that should be made to the
condensed consolidated financial statements referred to above for them to be in conformity with
U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheet of TD AMERITRADE Holding
Corporation as of September 30, 2009, and the related consolidated statements of income,
stockholders equity, and cash flows for the year then ended (not presented herein) and in our
report dated November 13, 2009, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of September 30, 2009, is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
/s/ ERNST & YOUNG LLP
Minneapolis, Minnesota
May 6, 2010
3
TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
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December 31, |
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September 30, |
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2009 |
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2009 |
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(Unaudited) |
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ASSETS |
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Cash and cash equivalents |
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$ |
903,891 |
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$ |
791,211 |
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Short-term investments |
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40,477 |
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52,071 |
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Cash and investments segregated in compliance with federal regulations |
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5,570,850 |
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5,813,862 |
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Receivable from brokers, dealers and clearing organizations |
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1,158,994 |
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1,777,741 |
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Receivable from clients net of allowance for doubtful accounts |
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6,329,011 |
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5,712,261 |
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Receivable from affiliates |
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87,587 |
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92,974 |
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Other receivables net of allowance for doubtful accounts |
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62,176 |
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73,921 |
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Securities owned, at fair value |
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275,309 |
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23,405 |
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Property and equipment net of accumulated depreciation and
amortization |
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244,799 |
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238,256 |
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Goodwill |
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2,468,875 |
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2,472,098 |
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Acquired intangible assets net of accumulated amortization |
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1,199,142 |
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1,224,722 |
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Deferred income taxes |
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15,724 |
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17,161 |
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Other assets |
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90,349 |
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82,127 |
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Total assets |
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$ |
18,447,184 |
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$ |
18,371,810 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Liabilities: |
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Payable to brokers, dealers and clearing organizations |
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$ |
2,004,163 |
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$ |
2,491,617 |
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Payable to clients |
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10,546,040 |
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9,914,823 |
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Accounts payable and accrued liabilities |
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599,163 |
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700,786 |
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Payable to affiliates |
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3,868 |
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3,724 |
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Deferred revenue |
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80,226 |
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72,134 |
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Long-term debt |
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1,256,983 |
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1,414,900 |
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Capitalized lease obligations |
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24,847 |
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28,565 |
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Deferred income taxes |
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227,249 |
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193,978 |
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Total liabilities |
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14,742,539 |
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14,820,527 |
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Stockholders equity: |
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Preferred stock, $0.01 par value; 100 million shares authorized, none issued |
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Common stock, $0.01 par value; one billion shares authorized; 631,381,860
shares issued; December 31, 2009 - 588,970,893 outstanding;
September 30, 2009 - 587,109,497 outstanding |
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6,314 |
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6,314 |
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Additional paid-in capital |
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1,558,727 |
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1,574,638 |
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Retained earnings |
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2,666,354 |
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2,530,117 |
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Treasury stock, common, at cost December 31, 2009 - 42,410,967 shares;
September 30, 2009 - 44,272,363 shares |
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(526,895 |
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(559,883 |
) |
Deferred compensation |
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201 |
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171 |
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Accumulated other comprehensive loss |
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(56 |
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(74 |
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Total stockholders equity |
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3,704,645 |
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3,551,283 |
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Total liabilities and stockholders equity |
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$ |
18,447,184 |
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$ |
18,371,810 |
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See notes to condensed consolidated financial statements.
4
TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
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Three Months Ended December 31, |
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2009 |
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2008 |
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Revenues: |
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Transaction-based revenues: |
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Commissions and transaction fees |
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$ |
309,388 |
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$ |
287,113 |
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Asset-based revenues: |
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Interest revenue |
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101,240 |
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92,514 |
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Brokerage interest expense |
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(1,827 |
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(7,675 |
) |
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Net interest revenue |
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99,413 |
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84,839 |
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Insured deposit account fees |
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155,331 |
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163,230 |
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Investment product fees |
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29,421 |
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69,166 |
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Total asset-based revenues |
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284,165 |
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317,235 |
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Other revenues |
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31,065 |
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6,381 |
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Net revenues |
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624,618 |
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610,729 |
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Operating expenses: |
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Employee compensation and benefits |
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146,639 |
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117,390 |
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Clearing and execution costs |
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21,905 |
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15,628 |
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Communications |
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24,659 |
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18,744 |
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Occupancy and equipment costs |
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34,889 |
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30,127 |
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Depreciation and amortization |
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13,610 |
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11,503 |
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Amortization of acquired intangible assets |
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25,580 |
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15,538 |
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Professional services |
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33,707 |
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27,339 |
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Advertising |
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65,193 |
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46,697 |
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Other |
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18,036 |
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11,564 |
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Total operating expenses |
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384,218 |
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294,530 |
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Operating income |
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240,400 |
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316,199 |
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Other expense: |
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Interest on borrowings |
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11,629 |
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15,637 |
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Loss on debt refinancing |
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8,392 |
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Total other expense |
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20,021 |
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15,637 |
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Pre-tax income |
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220,379 |
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300,562 |
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Provision for income taxes |
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84,142 |
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116,164 |
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Net income |
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$ |
136,237 |
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$ |
184,398 |
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Earnings per share basic |
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$ |
0.23 |
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$ |
0.31 |
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Earnings per share diluted |
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$ |
0.23 |
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$ |
0.31 |
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Weighted average shares outstanding basic |
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587,843 |
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591,748 |
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Weighted average shares outstanding diluted |
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595,634 |
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600,601 |
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See notes to condensed consolidated financial statements.
5
TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands, except share amounts)
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Three Months Ended December 31, |
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2009 |
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2008 |
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Cash flows from operating activities: |
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Net income |
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$ |
136,237 |
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$ |
184,398 |
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Adjustments to reconcile net income to net cash
provided by operating activities: |
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Depreciation and amortization |
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13,610 |
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11,503 |
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Amortization of acquired intangible assets |
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25,580 |
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15,538 |
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Deferred income taxes |
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30,979 |
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(132,638 |
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Loss on disposal of property |
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644 |
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1,273 |
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Loss on debt refinancing |
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8,392 |
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Stock-based compensation |
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9,181 |
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6,382 |
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Excess tax benefits on stock-based compensation |
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(5,320 |
) |
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(271 |
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Other, net |
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(346 |
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73 |
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Changes in operating assets and liabilities: |
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Cash and investments segregated in compliance
with federal regulations |
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243,012 |
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(1,609,120 |
) |
Receivable from brokers, dealers and clearing organizations |
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618,747 |
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2,320,349 |
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Receivable from clients, net |
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(616,750 |
) |
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2,902,009 |
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Receivable from/payable to affiliates, net |
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5,726 |
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56,382 |
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Other receivables, net |
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11,682 |
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8,742 |
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Securities owned |
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(251,533 |
) |
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3,971 |
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Other assets |
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(6,582 |
) |
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(6,285 |
) |
Payable to brokers, dealers and clearing organizations |
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(487,454 |
) |
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(3,548,630 |
) |
Payable to clients |
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631,217 |
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|
4,685 |
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Accounts payable and accrued liabilities |
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(89,480 |
) |
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72,637 |
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Deferred revenue |
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8,092 |
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(1,602 |
) |
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Net cash provided by operating activities |
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285,634 |
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|
289,396 |
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Cash flows from investing activities: |
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Purchase of property and equipment |
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(20,797 |
) |
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(13,190 |
) |
Purchase of short-term investments |
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(1,100 |
) |
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Proceeds from sale and maturity of short-term investments |
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1,100 |
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Proceeds from redemption of money market funds |
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11,594 |
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250,934 |
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Proceeds from sale of other investments available-for-sale |
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140 |
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Net cash (used in) provided by investing activities |
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(9,203 |
) |
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|
237,884 |
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See notes to condensed consolidated financial statements.
6
TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
(In thousands, except share amounts)
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Three Months Ended December 31, |
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2009 |
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2008 |
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Cash flows from financing activities: |
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Proceeds from issuance of long-term debt |
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$ |
1,248,557 |
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$ |
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Payment of debt issuance costs |
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(10,032 |
) |
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Principal payments on long-term debt |
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(1,406,500 |
) |
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(9,375 |
) |
Principal payments on capital lease obligations |
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(3,718 |
) |
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(309 |
) |
Proceeds from exercise of stock options; Three months ended
December 31, 2009 - 1,599,089 shares; 2008 - 80,976 shares |
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|
5,835 |
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|
372 |
|
Purchase of treasury stock; Three months ended
December 31, 2009 - 159,000 shares; 2008 - 2,980,563 shares |
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|
(3,229 |
) |
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|
(37,584 |
) |
Excess tax benefits on stock-based compensation |
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|
5,320 |
|
|
|
271 |
|
|
|
|
|
|
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Net cash used in financing activities |
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|
(163,767 |
) |
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|
(46,625 |
) |
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|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
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|
16 |
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|
(635 |
) |
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|
|
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|
Net increase in cash and cash equivalents |
|
|
112,680 |
|
|
|
480,020 |
|
|
|
|
|
|
|
|
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|
Cash and cash equivalents at beginning of period |
|
|
791,211 |
|
|
|
674,135 |
|
|
|
|
|
|
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|
Cash and cash equivalents at end of period |
|
$ |
903,891 |
|
|
$ |
1,154,155 |
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|
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|
Supplemental cash flow information: |
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|
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Interest paid |
|
$ |
7,701 |
|
|
$ |
30,840 |
|
Income taxes paid |
|
$ |
100,744 |
|
|
$ |
109,470 |
|
Tax benefit on exercises and distributions of stock-based compensation |
|
$ |
9,414 |
|
|
$ |
282 |
|
See notes to condensed consolidated financial statements.
7
TD AMERITRADE HOLDING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three-Month Periods Ended December 31, 2009 and 2008
(Unaudited)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of TD AMERITRADE Holding
Corporation and its wholly-owned subsidiaries (collectively, the Company). Intercompany balances
and transactions have been eliminated.
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 U.S.
generally accepted accounting principles. These financial statements should be read in conjunction with the consolidated financial statements and
notes thereto included in the Companys annual report filed on Form 10-K for the fiscal year ended
September 30, 2009.
Recently Adopted Accounting Pronouncements:
ASC 805 On October 1, 2009, the Company adopted Accounting Standards Codification (ASC) 805,
Business Combinations. ASC 805 generally requires an acquirer to recognize the identifiable assets
acquired, liabilities assumed, contingent purchase consideration and any noncontrolling interest in
the acquiree at fair value on the date of acquisition. It also requires an acquirer to recognize
as expense most transaction and restructuring costs as incurred, rather than include such items in
the cost of the acquired entity. For the Company, ASC 805 applies prospectively to business
combinations for which the acquisition date is on or after October 1, 2009. The adoption of ASC
805 did not have a material impact on the Companys condensed consolidated financial statements.
ASC 820-10 On October 1, 2009, the Company adopted ASC 820-10, Fair Value Measurements and
Disclosures, for nonfinancial assets and liabilities that are not recognized or disclosed at fair
value in the financial statements on a recurring basis. The adoption of ASC 820-10 did not have a
material impact on the Companys condensed consolidated financial statements.
2. GOODWILL AND ACQUIRED INTANGIBLE ASSETS
The Company has recorded goodwill for purchase business combinations to the extent the purchase
price of each completed acquisition exceeded the fair value of the net identifiable tangible and
intangible assets of each acquired company. The following table summarizes changes in the carrying
amount of goodwill for the three months ended December 31, 2009 (dollars in thousands):
|
|
|
|
|
Balance as of September 30, 2009 |
|
$ |
2,472,098 |
|
Purchase accounting adjustments, net of income taxes (1) |
|
|
871 |
|
Tax benefit on stock-based compensation awards (2) |
|
|
(4,094 |
) |
|
|
|
|
Balance as of December 31, 2009 |
|
$ |
2,468,875 |
|
|
|
|
|
|
|
|
(1) |
|
Purchase accounting adjustments primarily consist of adjustments to assumed liabilities
relating to the acquisition of thinkorswim Group Inc. (thinkorswim) in fiscal 2009. |
|
(2) |
|
Represents the tax benefit realized on replacement stock awards that were issued in
connection with the Datek Online Holdings Corp. (Datek) merger in fiscal 2002 and the
thinkorswim acquisition. The tax benefit realized on a stock award is recorded as a reduction
of goodwill to the extent the Company recorded fair value of the replacement award in the
purchase accounting. To the extent any gain realized on a stock award exceeds the fair value
of the replacement award recorded in the purchase accounting, the tax benefit on the excess is
recorded as additional paid-in capital. |
8
The Companys acquired intangible assets consist of the following as of December 31, 2009
(dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Net |
|
|
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
Client relationships |
|
$ |
1,230,469 |
|
|
$ |
(281,236 |
) |
|
$ |
949,233 |
|
Technology and content |
|
|
100,904 |
|
|
|
(8,214 |
) |
|
|
92,690 |
|
Trade names |
|
|
10,100 |
|
|
|
(3,019 |
) |
|
|
7,081 |
|
Non-competition agreement |
|
|
5,486 |
|
|
|
(1,022 |
) |
|
|
4,464 |
|
Trademark license |
|
|
145,674 |
|
|
|
|
|
|
|
145,674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,492,633 |
|
|
$ |
(293,491 |
) |
|
$ |
1,199,142 |
|
|
|
|
|
|
|
|
|
|
|
Estimated future amortization expense for acquired intangible assets outstanding as of
December 31, 2009 is as follows (dollars in thousands):
|
|
|
|
|
|
|
Estimated |
|
|
|
Amortization |
|
Fiscal Year |
|
Expense |
|
2010 Remaining |
|
|
75,085 |
|
2011 |
|
|
96,705 |
|
2012 |
|
|
92,893 |
|
2013 |
|
|
91,630 |
|
2014 |
|
|
91,168 |
|
2015 |
|
|
90,288 |
|
Thereafter (to 2025) |
|
|
515,699 |
|
|
|
|
|
Total |
|
$ |
1,053,468 |
|
|
|
|
|
3. CASH AND CASH EQUIVALENTS
The Companys cash and cash equivalents is summarized in the following table (dollars in
thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
September 30, |
|
|
|
2009 |
|
|
2009 |
|
Corporate |
|
$ |
170,957 |
|
|
$ |
273,137 |
|
Broker-dealer subsidiaries |
|
|
677,523 |
|
|
|
473,996 |
|
Trust company subsidiary |
|
|
34,541 |
|
|
|
25,143 |
|
Investment advisory subsidiaries |
|
|
20,870 |
|
|
|
18,935 |
|
|
|
|
|
|
|
|
Total |
|
$ |
903,891 |
|
|
$ |
791,211 |
|
|
|
|
|
|
|
|
Capital requirements may limit the amount of cash available for dividend from the
broker-dealer and trust company subsidiaries to the parent company. Cash and cash equivalents of
the investment advisory subsidiaries is generally not available for corporate purposes.
9
4. LONG-TERM DEBT
Long-term debt consists of the following (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
September 30, |
|
|
|
2009 |
|
|
2009 |
|
2.950% Senior Notes due 2012, net of unamortized discount of $249 |
|
$ |
249,751 |
|
|
$ |
|
|
4.150% Senior Notes due 2014, net of unamortized discount of $485 |
|
|
499,515 |
|
|
|
|
|
5.600% Senior Notes due 2019, net of unamortized discount of $683 |
|
|
499,317 |
|
|
|
|
|
Term A Facility |
|
|
|
|
|
|
140,625 |
|
Term B Facility |
|
|
|
|
|
|
1,265,875 |
|
Other |
|
|
8,400 |
|
|
|
8,400 |
|
|
|
|
|
|
|
|
Total long-term debt |
|
$ |
1,256,983 |
|
|
$ |
1,414,900 |
|
|
|
|
|
|
|
|
Fiscal year maturities on long-term debt outstanding at December 31, 2009 are as follows
(dollars in thousands):
|
|
|
|
|
2010 Remaining |
|
$ |
4,138 |
|
2011 |
|
|
4,262 |
|
2012 |
|
|
|
|
2013 |
|
|
250,000 |
|
2014 |
|
|
|
|
2015 |
|
|
500,000 |
|
Thereafter |
|
|
500,000 |
|
|
|
|
|
Total |
|
$ |
1,258,400 |
|
|
|
|
|
Senior Notes On November 25, 2009 the Company sold, through a public offering, $1.25 billion
aggregate principal amount of unsecured senior notes, consisting of $250 million aggregate
principal amount of 2.950% Senior Notes due December 1, 2012 (the 2012 Notes), $500 million
aggregate principal amount of 4.150% Senior Notes due December 1, 2014 (the 2014 Notes) and $500
million aggregate principal amount of 5.600% Senior Notes due December 1, 2019 (the 2019 Notes
and, collectively with the 2012 Notes and the 2014 Notes, the Senior Notes). The Senior Notes
were issued at an aggregate discount of $1.4 million, which is being amortized to interest expense
over the terms of the respective Senior Notes. Interest on the Senior Notes is payable
semi-annually in arrears on June 1 and December 1 of each year.
The Company used the net proceeds from the issuance of the Senior Notes, together with
approximately $158 million of cash on hand, to repay in full the outstanding principal under the
Companys January 23, 2006 credit agreement, effective as of November 25, 2009. Upon repayment, the
January 23, 2006 credit agreement (including the Term A Facility, the Term B Facility and the
Revolving Facility as amended on November 5, 2009), was automatically amended and restated in its
entirety pursuant to the Amended and Restated Credit Agreement (the Restated Credit Agreement),
dated as of November 25, 2009, as described below.
The Senior Notes are jointly and severally and fully and unconditionally guaranteed by each of the
Companys current and future subsidiaries that is or becomes a borrower or a guarantor under the
Restated Credit Agreement. Currently, the only subsidiary guarantor of the obligations under the
Senior Notes is TD AMERITRADE Online Holdings Corp. (TDAOH). The Senior Notes and the guarantee
by the subsidiary guarantor are the general senior unsecured obligations of the Company and the
subsidiary guarantor.
The Company may redeem each series of the Senior Notes, in whole at any time or in part from time
to time, at a redemption price equal to the greater of (a) 100% of the principal amount of the
notes being redeemed, and (b) the sum of the present values of the remaining scheduled payments of
principal and interest on the notes being redeemed, discounted to the date of redemption on a
semi-annual basis at the comparable U.S. treasury rate, plus 25 basis points in the case of the
2012 Notes, plus 30 basis points in the case of the 2014 Notes and plus 35 basis points in the case
of the 2019 Notes, plus, in each case, accrued and unpaid interest to the date of redemption.
Interest Rate Swaps The Company is exposed to changes in the fair value of its fixed-rate Senior
Notes resulting from interest rate fluctuations. To hedge this exposure, on December 30, 2009, the
Company entered into fixed-for-variable interest rate swaps on the 2012 Notes and 2014 Notes for
notional amounts of $250 million and $500 million, respectively, with
10
maturity dates matching the respective maturity dates of the 2012 Notes and 2014 Notes. The interest rate
swaps effectively change the fixed-rate interest on the 2012 Notes and 2014 Notes to variable-rate
interest. Under the terms of the interest rate swap agreements, the Company receives semi-annual
fixed-rate interest payments based on the same rates applicable to the 2012 Notes and 2014 Notes,
and makes quarterly variable-rate interest payments based on three-month LIBOR plus (a) 0.9693% for
the swap on the 2012 Notes and (b) 1.245% for the swap on the 2014 Notes.
The interest rate swaps are accounted for as fair value hedges and qualify for the shortcut method
of accounting. Changes in the payment of interest resulting from the interest rate swaps are
recorded as an offset to interest on borrowings on the Condensed Consolidated Income Statements.
Changes in fair value of the interest rate swaps are completely offset by changes in fair value of
the related notes, resulting in no effect on net income. The fair value of the interest rate swaps
was not material as of December 31, 2009.
The interest rate swaps are subject to counterparty credit risk. Credit risk is managed by
limiting activity to approved counterparties that meet a minimum credit rating threshold and by
entering into credit support agreements. The bilateral credit support agreement related to the
interest rate swaps requires daily collateral coverage, in the form of cash or U.S. Treasury
securities, for the aggregate fair value of the interest rate swaps.
Restated Revolving Facility The Restated Credit Agreement consists of a senior unsecured
revolving credit facility in the aggregate principal amount of $300 million (the Restated
Revolving Facility). The maturity date of the Restated Revolving Facility is December 31, 2012.
The applicable interest rate under the Restated Revolving Facility is calculated as a per annum
rate equal to, at the option of the Company, (a) LIBOR plus an interest rate margin (LIBOR loans)
or (b) (i) the highest of (x) the prime rate, (y) the federal funds effective rate plus 0.50% or
(z) one-month LIBOR plus 1.00%, plus (ii) an interest rate margin (Base Rate loans). The
interest rate margin ranges from 2.00% to 4.00% for LIBOR loans and from 1.00% to 3.00% for Base
Rate loans, determined by reference to the Companys public debt ratings. The Company is obligated
to pay a commitment fee ranging from 0.225% to 0.750% on any unused amount of the Restated
Revolving Facility, determined by reference to the Companys public debt ratings. As of December
31, 2009, the interest rate margin would be 2.50% for LIBOR loans and 1.50% for Base Rate loans,
and the commitment fee is 0.375% per annum, each determined by reference to the Companys current
Standard & Poors public debt rating of BBB+. There were no borrowings outstanding under the
Restated Revolving Facility as of December 31, 2009.
The obligations under the Restated Credit Agreement are guaranteed by each significant subsidiary
(as defined in SEC Rule 1-02(w) of Regulation S-X) of the Company, other than broker-dealer
subsidiaries, futures commission merchant subsidiaries and controlled foreign corporations.
Currently, the only subsidiary guarantor of the obligations under the Restated Credit Agreement is
TDAOH.
The Restated Credit Agreement contains negative covenants that limit or restrict the incurrence of
liens, indebtedness of subsidiaries, mergers, consolidations, transactions with affiliates, change
in nature of business and the sale of all or substantially all of the assets of the Company and its
subsidiaries, subject to certain exceptions. The Company is also required to maintain compliance
with a maximum consolidated leverage ratio covenant and a minimum consolidated interest coverage
ratio covenant, and the Companys broker-dealer subsidiaries are required to maintain compliance
with a minimum regulatory net capital covenant. The Company is restricted under the Restated Credit
Agreement from incurring additional indebtedness in an aggregate principal amount in excess of $100
million that includes any covenants that are more restrictive (taken as a whole) as to the Company
than those contained in the Restated Credit Agreement, unless the Restated Credit Agreement is
amended to include such more restrictive covenants prior to the incurrence of such additional
indebtedness. The Company was in compliance with all covenants under the Restated Credit Agreement
as of December 31, 2009.
Broker-dealer Credit Facilities The Company, through its wholly-owned broker-dealer
subsidiaries, had access to secured uncommitted credit facilities with financial institutions of up
to $630 million as of December 31, 2009 and September 30, 2009. The broker-dealer subsidiaries
also had access to unsecured uncommitted credit facilities of up to $150 million as of December 31,
2009 and September 30, 2009. The financial institutions may make loans under line of credit
arrangements or, in some cases, issue letters of credit under these facilities. The secured credit
facilities require the Company to pledge qualified client securities to secure outstanding
obligations under these facilities. Borrowings under the secured and unsecured credit facilities
bear interest at a variable rate based on the federal funds rate. There were no borrowings
outstanding or letters of credit issued under the secured or unsecured credit facilities as of
December 31, 2009 and September 30, 2009. As of December 31, 2009 and September 30, 2009,
approximately $780 million was available to the Companys broker-dealer subsidiaries pursuant to
uncommitted credit facilities for either loans or, in some cases, letters of credit.
11
5. CAPITAL REQUIREMENTS
The Companys broker-dealer subsidiaries are subject to the SEC Uniform Net Capital Rule (Rule
15c3-1 under the Securities Exchange Act of 1934 (the Exchange Act)), which requires the
maintenance of minimum net capital, as defined. Net capital is calculated for each broker-dealer
subsidiary individually. Excess net capital of one broker-dealer subsidiary may not be used to
offset a net capital deficiency of another broker-dealer subsidiary. Net capital and the related
net capital requirement may fluctuate on a daily basis.
Net capital and net capital requirements for the Companys broker-dealer subsidiaries are
summarized in the following table (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
September 30, 2009 |
|
|
|
|
|
|
Minimum |
|
|
|
|
|
|
|
|
|
|
Minimum |
|
|
|
|
|
|
|
|
|
|
Net Capital |
|
|
Excess |
|
|
|
|
|
|
Net Capital |
|
|
Excess |
|
|
|
Net Capital |
|
|
Required |
|
|
Net Capital |
|
|
Net Capital |
|
|
Required |
|
|
Net Capital |
|
TD AMERITRADE Clearing, Inc. |
|
$ |
853,107 |
|
|
$ |
139,474 |
|
|
$ |
713,633 |
|
|
$ |
855,630 |
|
|
$ |
137,943 |
|
|
$ |
717,687 |
|
TD AMERITRADE, Inc. |
|
|
344,984 |
|
|
|
500 |
|
|
|
344,484 |
|
|
|
263,957 |
|
|
|
500 |
|
|
|
263,457 |
|
thinkorswim, Inc. |
|
|
65,315 |
|
|
|
1,693 |
|
|
|
63,622 |
|
|
|
43,677 |
|
|
|
2,376 |
|
|
|
41,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
1,263,406 |
|
|
$ |
141,667 |
|
|
$ |
1,121,739 |
|
|
$ |
1,163,264 |
|
|
$ |
140,819 |
|
|
$ |
1,022,445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TD AMERITRADE Clearing, Inc. (TDA Clearing) is a clearing broker-dealer and TD AMERITRADE,
Inc. (TDA Inc.) and thinkorswim, Inc. are introducing broker-dealers.
The Companys non-depository trust company subsidiary, TD AMERITRADE Trust Company (TDATC), is
subject to capital requirements established by the State of Maine, which requires TDATC to maintain
minimum Tier 1 capital, as defined. TDATCs Tier 1 capital was $14.0 million and $14.7 million as
of December 31, 2009 and September 30, 2009, respectively, which exceeded the required Tier 1
capital by $4.0 million and $4.7 million, respectively.
6. COMMITMENTS AND CONTINGENCIES
Spam Litigation A purported class action, captioned Elvey v. TD Ameritrade, Inc., was filed on
May 31, 2007 in the United States District Court for the Northern District of California. The
complaint alleges that there was a breach in TDA Inc.s systems, which allowed access to e-mail
addresses and other personal information of account holders, and that as a result account holders
received unsolicited e-mail from spammers promoting certain stocks and have been subjected to an
increased risk of identity theft. The complaint requests unspecified damages and injunctive and
other equitable relief. A second lawsuit, captioned Zigler v. TD Ameritrade, Inc., was filed on
September 26, 2007, in the same jurisdiction on behalf of a purported nationwide class of account
holders. The factual allegations of the complaint and the relief sought are substantially the same
as those in the first lawsuit. The cases were consolidated under the caption In re TD Ameritrade
Accountholders Litigation. The Company hired an independent consultant to investigate whether
identity theft occurred as a result of the breach. The consultant conducted four investigations
from August 2007 to June 2008 and reported that it found no evidence of identity theft. The
parties entered into an agreement to settle the lawsuits on a class basis subject to court
approval. On May 1, 2009, the Court granted preliminary approval of the proposed settlement, which
had been revised. Some class members filed objections and opt-outs. The court denied final
approval of the proposed settlement on October 23, 2009. The court ruled that the asserted
benefits of the settlement to the class were not sufficient to warrant approval and that the
proposed settlement was not fair, reasonable and adequate. A case conference has been scheduled
for February 25, 2010.
Auction Rate Securities Matters The SEC and other regulatory authorities conducted
investigations regarding the sale of auction rate securities (ARS). On July 20, 2009, TDA Inc.
finalized settlements with the SEC and other regulatory authorities, concluding investigations by
the regulators into TDA Inc.s offer and sale of ARS. Under these settlement agreements, TDA Inc.
commenced a tender offer to purchase, from certain current and former account holders, eligible ARS
that were purchased through TDA Inc. on or before February 13, 2008, provided the ARS were not
transferred away from the firm prior to January 24, 2006. This offer does not extend to clients
who purchased ARS through independent registered investment advisors or through another firm and
transferred such securities to TDA Inc. TDA Inc. will complete the program in two phases, based on
the amount of assets a client holds at TDA Inc., and will complete all repurchases no later than
June 30, 2010. In addition, TDA Inc. offered to make whole any losses sustained by eligible
clients who purchased ARS through TDA Inc. on or before February 13, 2008 and sold such securities
at a loss prior to July 20, 2009. TDA Inc. offered to reimburse clients whose borrowing costs
exceeded the amount they earned in interest or dividends from their eligible ARS at the time they
borrowed money from TDA Inc. to satisfy liquidity needs. TDA Inc. will participate in a special
arbitration
12
process for the purpose of arbitrating eligible investors consequential damages claims
arising from their inability to sell their eligible ARS. No fines were imposed by the regulators
under the settlement agreements.
The offer commenced on August 10, 2009. Through December 31, 2009, TDA Inc. has purchased eligible
ARS with an aggregate par value of approximately $269 million. TDA Inc. estimates that, as of
December 31, 2009, ARS up to a total par value of approximately $114 million may remain outstanding
and eligible for the tender offer. The ultimate amounts of tendered ARS purchased and remaining
ARS eligible for the tender offer may decrease due to issuer redemptions. The Company is
accounting for the ARS settlement as a financial guarantee. The Company recorded a charge to
earnings of $13.8 million for the estimated fair value of this guarantee during the fourth quarter
of fiscal 2009. As of December 31, 2009 and September 30, 2009, a liability of $2.0 million and
$13.8 million, respectively, for this guarantee is included in accounts payable and accrued
liabilities on the Condensed Consolidated Balance Sheets.
Reserve Fund Matters During September 2008, The Reserve, an independent mutual fund company,
announced that the net asset value of two of its money market mutual funds (the Primary Fund and
the International Liquidity Fund) declined below $1.00 per share. In addition, The Reserve
announced that the net asset value of the Reserve Yield Plus Fund, which is not a money market
mutual fund, declined below $1.00 per share. TDA Inc.s clients hold shares in these funds, which
are being liquidated by The Reserve. From October 31, 2008 through January 29, 2010, Primary Fund,
International Liquidity Fund and Yield Plus Fund shareholders have received distributions totaling
approximately $0.99 per share, $0.86 per share and $0.94 per share, respectively. The SEC and
other regulatory authorities are conducting investigations regarding TDA Inc.s offering of The
Reserve funds to clients. TDA Inc. has received subpoenas and other requests for documents and
information from the regulatory authorities. TDA Inc. is cooperating with the investigations and
requests.
In November 2008, a purported class action lawsuit was filed with respect to the Yield Plus Fund.
The lawsuit is captioned Ross v. Reserve Management Company, Inc. et al. in the U.S. District Court
for the Southern District of New York. The Ross lawsuit is on behalf of persons who purchased
shares of Reserve Yield Plus Fund. On November 20, 2009, the plaintiffs filed a first amended
complaint naming as defendants the Funds advisor, certain of its affiliates and the Company and
certain of its directors, officers and shareholders as alleged control persons. The complaint
alleges claims of violations of the federal securities laws and other claims based on allegations
that false and misleading statements and omissions were made in the Reserve Yield Plus Fund
prospectuses and in other statements regarding the Fund. The complaint seeks an unspecified amount
of compensatory damages including interest, attorneys fees, rescission, exemplary damages and
equitable relief. On January 19, 2010, the defendants submitted motions to dismiss the complaint.
Legal and Regulatory Matters The Company is subject to lawsuits, arbitrations, claims and other
legal proceedings in connection with its business including, but not limited to, the matters
discussed above. Some of the legal actions include claims for substantial or unspecified
compensatory and/or punitive damages. A substantial adverse judgment or other unfavorable
resolution of these matters could have a material adverse effect on the Companys financial
condition, results of operations and cash flows or could cause the Company significant reputational
harm. Management believes the Company has adequate legal defenses with respect to the legal
proceedings to which it is a defendant or respondent and the outcome of these pending proceedings
is not likely to have a material adverse effect on the financial condition, results of operations
or cash flows of the Company. However, the Company is unable to predict the outcome or the timing
of the ultimate resolution of these matters, or the eventual loss that may result from these
matters.
In the normal course of business, the Company discusses matters with its regulators raised during
regulatory examinations or otherwise subject to their inquiry. These matters, including, but not
limited to, the regulatory matters discussed above, could result in censures, fines, penalties or
other sanctions. Management believes the outcome of any resulting actions will not be material to
the Companys financial condition, results of operations or cash flows. However, the Company is
unable to predict the outcome or the timing of the ultimate resolution of these matters, or the
eventual fines, penalties or injunctive or other equitable relief that may result from these
matters.
Income Taxes The Companys federal and state income tax returns are subject to examination by
taxing authorities. Because the application of tax laws and regulations to many types of
transactions is subject to varying interpretations, amounts reported in the condensed consolidated
financial statements could be significantly changed at a later date upon final determinations by
taxing authorities. The Toronto-Dominion Bank (TD) has agreed to indemnify the Company for tax
obligations, if any, pertaining to activities of TD Waterhouse prior to the Companys acquisition
of TD Waterhouse.
General Contingencies In the ordinary course of business, there are various contingencies that
are not reflected in the condensed consolidated financial statements. These include the Companys
broker-dealer subsidiaries client activities involving the execution, settlement and financing of various client securities transactions. These activities
may expose the Company to credit risk in the event the clients are unable to fulfill their
contractual obligations.
13
Client securities activities are transacted on either a cash or margin basis. In margin
transactions, the Company extends credit to the client, subject to various regulatory and internal
margin requirements, collateralized by cash and securities in the clients account. In connection
with these activities, the Company also executes and clears client transactions involving the sale
of securities not yet purchased (short sales). Such margin-related transactions may expose the
Company to credit risk in the event a clients assets are not sufficient to fully cover losses that
the client may incur. In the event the client fails to satisfy its obligations, the Company has
the authority to purchase or sell financial instruments in the clients account at prevailing
market prices in order to fulfill the clients obligations. The Company seeks to mitigate the
risks associated with its client securities activities by requiring clients to maintain margin
collateral in compliance with various regulatory and internal guidelines. The Company monitors
required margin levels throughout each trading day and, pursuant to such guidelines, requires
clients to deposit additional collateral, or to reduce positions, when necessary.
The Company loans securities temporarily to other broker-dealers in connection with its
broker-dealer business. The Company receives cash as collateral for the securities loaned.
Increases in securities prices may cause the market value of the securities loaned to exceed the
amount of cash received as collateral. In the event the counterparty to these transactions does
not return the loaned securities, the Company may be exposed to the risk of acquiring the
securities at prevailing market prices in order to satisfy its client obligations. The Company
mitigates this risk by requiring credit approvals for counterparties, by monitoring the market
value of securities loaned on a daily basis and requiring additional cash as collateral when
necessary, and by participating in a risk-sharing program offered through the Options Clearing
Corporation (OCC).
The Company borrows securities temporarily from other broker-dealers in connection with its
broker-dealer business. The Company deposits cash as collateral for the securities borrowed.
Decreases in securities prices may cause the market value of the securities borrowed to fall below
the amount of cash deposited as collateral. In the event the counterparty to these transactions
does not return the cash deposited, the Company may be exposed to the risk of selling the
securities at prevailing market prices. The Company mitigates this risk by requiring credit
approvals for counterparties, by monitoring the collateral values on a daily basis and requiring
collateral to be returned by the counterparties when necessary, and by participating in a
risk-sharing program offered through the OCC.
The Company transacts in reverse repurchase agreements in connection with its broker-dealer
business. The Companys policy is to take possession or control of securities with a market value
in excess of the principal amount loaned, plus accrued interest, in order to collateralize resale
agreements. The Company monitors the market value of the underlying securities that collateralize
the related receivable on resale agreements on a daily basis and may require additional collateral
when deemed appropriate.
As of December 31, 2009, client excess margin securities of approximately $8.8 billion and stock
borrowings of approximately $1.0 billion were available to the Company to utilize as
collateral on various borrowings or for other purposes. The Company had loaned approximately $2.0
billion and repledged approximately $0.7 billion of that collateral as of December 31, 2009.
Guarantees The Company is a member of and provides guarantees to securities clearinghouses and
exchanges. Under related agreements, the Company is generally required to guarantee the
performance of other members. Under these agreements, if a member becomes unable to satisfy its
obligations to the clearinghouse, other members would be required to meet shortfalls. The
Companys liability under these arrangements is not quantifiable and could exceed the cash and
securities it has posted to the clearinghouse as collateral. However, the potential for the
Company to be required to make payments under these agreements is considered remote. Accordingly,
no contingent liability is carried on the Condensed Consolidated Balance Sheets for these
guarantees.
See Insured Deposit Account Agreement in Note 10 for a description of a guarantee included in
that agreement.
See Auction Rate Securities Matters above in this Note 6 for a description of a guarantee related
to the ARS settlement.
During September 2008, the net asset value of two money market mutual funds held by some of the
Companys clients, the Primary Fund and the International Liquidity Fund, declined below $1.00 per
share. These funds are managed by The Reserve, an independent mutual fund company. The Reserve
subsequently announced it was suspending redemptions of these funds to effect an orderly
liquidation. The Company announced a commitment of up to $55 million to protect its clients
positions in these funds. In the event the Companys clients receive less than $1.00 per share
for these funds upon an orderly liquidation, the Company will commit up to $50 million (or $0.03
per share of the fund) for clients in the Primary Fund and up to $5 million for clients in the
International Liquidity Fund to mitigate client losses. Based on information from The Reserve and
other publicly available information, the Company has accrued an estimated fair value of $27.0 million
for this obligation as of December 31, 2009 and September 30, 2009, which is included in accounts
payable and accrued liabilities on the Condensed Consolidated Balance Sheets.
14
Employment Agreements The Company has entered into employment agreements with several of its key
executive officers. These employment agreements generally provide for annual base salary and
incentive compensation, stock award acceleration and severance payments in the event of termination
of employment under certain defined circumstances or changes in control of the Company. Incentive
compensation amounts are based on the Companys financial performance and other factors.
7. FAIR VALUE DISCLOSURES
Fair Value Measurement Definition and Hierarchy
ASC 820-10, Fair Value Measurements and Disclosures, defines fair value as the price that would be
received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction
between market participants at the measurement date.
In determining fair value, the Company uses various valuation approaches, including market, income
and/or cost approaches. ASC 820-10 establishes a hierarchy for inputs used in measuring fair value
that maximizes the use of observable inputs and minimizes the use of unobservable inputs by
requiring that the most observable inputs be used when available. Observable inputs reflect the
assumptions market participants would use in pricing the asset or liability, developed based on
market data obtained from sources independent of the Company. Unobservable inputs reflect the
Companys own assumptions about the assumptions market participants would use in pricing the asset
or liability, developed based on the best information available in the circumstances. The fair
value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into
three broad levels, as follows:
|
|
|
Level 1 Quoted prices (unadjusted) in active markets for identical assets or
liabilities that the Company has the ability to access. This category includes active
exchange-traded funds, mutual funds and equity securities. |
|
|
|
|
Level 2 Inputs other than quoted prices included in Level 1 that are observable for
the asset or liability, either directly or indirectly. Such inputs include quoted prices
in markets that are not active, quoted prices for similar assets and liabilities in active
markets, inputs other than quoted prices that are observable for the asset or liability and
inputs that are derived principally from or corroborated by observable market data by
correlation or other means. This category includes most debt securities and other
interest-sensitive investment securities. |
|
|
|
|
Level 3 Unobservable inputs for the asset or liability, where there is little, if
any, observable market activity or data for the asset or liability. This category includes
assets and liabilities related to money market mutual funds managed by The Reserve for
which the net asset value has declined below $1.00 per share and the funds are being
liquidated. This category also includes auction rate securities for which the periodic
auctions have failed. |
15
The following tables present the Companys fair value hierarchy for assets and liabilities measured
on a recurring basis as of December 31, 2009 and September 30, 2009 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009 |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Fair Value |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds |
|
$ |
|
|
|
$ |
|
|
|
$ |
39,377 |
|
|
$ |
39,377 |
|
U.S. government debt securities |
|
|
|
|
|
|
1,100 |
|
|
|
|
|
|
|
1,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal Short-term investments |
|
|
|
|
|
|
1,100 |
|
|
|
39,377 |
|
|
|
40,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities owned: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction rate securities |
|
|
|
|
|
|
|
|
|
|
266,657 |
|
|
|
266,657 |
|
Money market mutual funds |
|
|
|
|
|
|
|
|
|
|
4,607 |
|
|
|
4,607 |
|
Equity securities |
|
|
1,033 |
|
|
|
23 |
|
|
|
|
|
|
|
1,056 |
|
U.S. government debt securities |
|
|
|
|
|
|
171 |
|
|
|
|
|
|
|
171 |
|
Municipal debt securities |
|
|
|
|
|
|
975 |
|
|
|
|
|
|
|
975 |
|
Corporate debt securities |
|
|
|
|
|
|
1,289 |
|
|
|
|
|
|
|
1,289 |
|
Other debt securities |
|
|
|
|
|
|
554 |
|
|
|
|
|
|
|
554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal Securities owned |
|
|
1,033 |
|
|
|
3,012 |
|
|
|
271,264 |
|
|
|
275,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value |
|
$ |
1,033 |
|
|
$ |
4,112 |
|
|
$ |
310,641 |
|
|
$ |
315,786 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold, not yet purchased: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities |
|
$ |
4,046 |
|
|
$ |
35 |
|
|
$ |
|
|
|
$ |
4,081 |
|
Money market mutual funds |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
1 |
|
Municipal debt securities |
|
|
|
|
|
|
375 |
|
|
|
|
|
|
|
375 |
|
Other debt securities |
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Securities sold, not yet purchased (1) |
|
$ |
4,046 |
|
|
$ |
418 |
|
|
$ |
1 |
|
|
$ |
4,465 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts are included in accounts payable and accrued liabilities on the Condensed
Consolidated Balance Sheets. |
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2009 |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Fair Value |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds |
|
$ |
|
|
|
$ |
|
|
|
$ |
50,971 |
|
|
$ |
50,971 |
|
U.S. government debt securities |
|
|
|
|
|
|
1,100 |
|
|
|
|
|
|
|
1,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal Short-term investments |
|
|
|
|
|
|
1,100 |
|
|
|
50,971 |
|
|
|
52,071 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities owned: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction rate securities |
|
|
|
|
|
|
|
|
|
|
14,579 |
|
|
|
14,579 |
|
Money market mutual funds |
|
|
|
|
|
|
|
|
|
|
5,049 |
|
|
|
5,049 |
|
Equity securities |
|
|
471 |
|
|
|
23 |
|
|
|
|
|
|
|
494 |
|
Municipal debt securities |
|
|
|
|
|
|
2,049 |
|
|
|
|
|
|
|
2,049 |
|
Corporate debt securities |
|
|
|
|
|
|
702 |
|
|
|
|
|
|
|
702 |
|
Other debt securities |
|
|
|
|
|
|
532 |
|
|
|
|
|
|
|
532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal Securities owned |
|
|
471 |
|
|
|
3,306 |
|
|
|
19,628 |
|
|
|
23,405 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value |
|
$ |
471 |
|
|
$ |
4,406 |
|
|
$ |
70,599 |
|
|
$ |
75,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold, not yet purchased: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities |
|
$ |
3,102 |
|
|
$ |
2 |
|
|
$ |
|
|
|
$ |
3,104 |
|
Money market mutual funds |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
1 |
|
Municipal debt securities |
|
|
|
|
|
|
118 |
|
|
|
|
|
|
|
118 |
|
Corporate debt securities |
|
|
|
|
|
|
23 |
|
|
|
|
|
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Securities sold, not yet purchased (1) |
|
$ |
3,102 |
|
|
$ |
143 |
|
|
$ |
1 |
|
|
$ |
3,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts are included in accounts payable and accrued liabilities on the Condensed
Consolidated Balance Sheets. |
17
The following tables present the changes in Level 3 assets and liabilities measured on a
recurring basis for the three months ended December 31, 2009 and 2008 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases, |
|
|
|
|
|
|
|
|
|
|
Net Gains (Losses) |
|
|
Sales, |
|
|
|
|
|
|
September 30, |
|
|
Included in |
|
|
Issuances and |
|
|
December 31, |
|
|
|
2009 |
|
|
Earnings(1) |
|
|
Settlements, Net |
|
|
2009 |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds |
|
$ |
50,971 |
|
|
$ |
|
|
|
$ |
(11,594 |
) |
|
$ |
39,377 |
|
|
Securities owned: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction rate securities |
|
|
14,579 |
|
|
|
371 |
|
|
|
251,707 |
|
|
|
266,657 |
|
Money market mutual funds |
|
|
5,049 |
|
|
|
|
|
|
|
(442 |
) |
|
|
4,607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal Securities owned |
|
|
19,628 |
|
|
|
371 |
|
|
|
251,265 |
|
|
|
271,264 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value |
|
$ |
70,599 |
|
|
$ |
371 |
|
|
$ |
239,671 |
|
|
$ |
310,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold, not yet purchased: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds |
|
$ |
1 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1 |
|
|
|
|
(1) |
|
Net gains (losses) included in earnings are recorded in other revenues on the Condensed
Consolidated Statements of Income and were not related to assets held as of December 31, 2009. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases, |
|
|
|
|
|
|
|
|
|
|
Net Gains (Losses) |
|
|
Sales, |
|
|
|
|
|
|
October 1, |
|
|
Included in |
|
|
Issuances and |
|
|
December 31, |
|
|
|
2008 |
|
|
Earnings |
|
|
Settlements, Net |
|
|
2008 |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents (1) |
|
$ |
217,471 |
|
|
$ |
|
|
|
$ |
(217,471 |
) |
|
$ |
|
|
|
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds |
|
|
368,066 |
|
|
|
(81 |
) |
|
|
(250,934 |
) |
|
|
117,051 |
|
|
Securities owned: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction rate securities |
|
|
6,925 |
|
|
|
|
|
|
|
9,350 |
|
|
|
16,275 |
|
Money market mutual funds |
|
|
46,662 |
|
|
|
|
|
|
|
(35,048 |
) |
|
|
11,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal Securities owned |
|
|
53,587 |
|
|
|
|
|
|
|
(25,698 |
) |
|
|
27,889 |
|
|
Other investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction rate securities |
|
|
10,000 |
|
|
|
|
|
|
|
(140 |
) |
|
|
9,860 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at fair value |
|
$ |
649,124 |
|
|
$ |
(81 |
) |
|
$ |
(494,243 |
) |
|
$ |
154,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold, not yet purchased: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds |
|
$ |
4,636 |
|
|
$ |
|
|
|
$ |
(4,412 |
) |
|
$ |
224 |
|
|
|
|
(1) |
|
Represents positions in the Primary Fund that were classified as cash and cash equivalents
as of September 30, 2008. |
Effective October 1, 2009, the Company adopted ASC 820-10 for nonfinancial assets and
liabilities that are not recognized or disclosed at fair value in the financial statements on a
recurring basis. There were no nonfinancial assets or liabilities measured at fair value during
the quarter ended December 31, 2009.
Valuation Techniques
In general, and where applicable, the Company uses quoted prices in active markets for identical
assets or liabilities to determine fair value. This pricing methodology applies to the Companys
Level 1 investments. If quoted prices in active
18
markets for identical assets and liabilities are not available to determine fair value, then the
Company uses quoted prices for similar assets and liabilities or inputs other than the quoted
prices that are observable, either directly or indirectly. This pricing methodology applies to
the Companys Level 2 investments.
Money Market Mutual Funds The fair value of money market mutual fund positions in the Primary
Fund is estimated by management based on the underlying portfolio holdings data published by The
Reserve and is categorized in Level 3 of the fair value hierarchy.
Auction Rate Securities ARS are long-term variable rate securities tied to short-term interest
rates that are reset through a Dutch auction process, which generally occurs every seven to 35
days. Holders of ARS were previously able to liquidate their holdings to prospective buyers by
participating in the auctions. During fiscal 2008, the Dutch auction process failed and holders
were no longer able to liquidate their holdings through the auction process. The fair value of
Company ARS holdings is estimated based on an internal pricing model and categorized in Level 3 of
the fair value hierarchy. The pricing model takes into consideration the characteristics of the
underlying securities as well as multiple inputs, including counterparty credit quality, expected
timing of early redemptions and the yield premium that a market participant would require over
otherwise comparable securities to compensate for the illiquidity of the ARS. These inputs require
significant management judgment.
Fair Value of Long-Term Debt
As of December 31, 2009, the Companys Senior Notes had an aggregate estimated fair value, based on
quoted market prices, of approximately $1.25 billion, which approximated the aggregate carrying
value of the Senior Notes on the Condensed Consolidated Balance Sheet. As of September 30, 2009,
the Companys Term A and Term B credit facilities had an aggregate estimated fair value, based on
quoted market prices, of $1.39 billion, compared to the Condensed Consolidated Balance Sheet
carrying value of $1.41 billion.
8. EARNINGS PER SHARE
The following is a reconciliation of the numerator and denominator used in the computation of basic
and diluted earnings per share (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
Net income |
|
$ |
136,237 |
|
|
$ |
184,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding basic |
|
|
587,843 |
|
|
|
591,748 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
Stock options |
|
|
5,642 |
|
|
|
6,233 |
|
Restricted stock units |
|
|
2,039 |
|
|
|
2,540 |
|
Deferred compensation shares |
|
|
110 |
|
|
|
80 |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding diluted |
|
|
595,634 |
|
|
|
600,601 |
|
|
|
|
|
|
|
|
Earnings per share basic |
|
$ |
0.23 |
|
|
$ |
0.31 |
|
Earnings per share diluted |
|
$ |
0.23 |
|
|
$ |
0.31 |
|
19
9. COMPREHENSIVE INCOME
Comprehensive income is as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
Net income |
|
$ |
136,237 |
|
|
$ |
184,398 |
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
Net
unrealized losses on investment securities available-for-sale |
|
|
|
|
|
|
(610 |
) |
Adjustment
for deferred income taxes on net unrealized losses |
|
|
|
|
|
|
227 |
|
Foreign currency translation adjustment |
|
|
18 |
|
|
|
(404 |
) |
|
|
|
|
|
|
|
Total other comprehensive income (loss), net of tax |
|
|
18 |
|
|
|
(787 |
) |
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
136,255 |
|
|
$ |
183,611 |
|
|
|
|
|
|
|
|
10. RELATED PARTY TRANSACTIONS
Transactions with TD and Affiliates
As a result of the acquisition of TD Waterhouse during fiscal 2006, TD became an affiliate of the
Company. TD owned approximately 45% of the Companys common stock as of December 31, 2009.
Pursuant to the Stockholders Agreement, TD has the right to designate five of twelve members to the
Companys board of directors. The Company transacts business and has extensive relationships with
TD and certain of its affiliates. A description of significant transactions with TD and its
affiliates is set forth below.
Insured Deposit Account Agreement
The Company is party to an insured deposit account (IDA) agreement (formerly known as the money
market deposit account or MMDA agreement) with TD Bank USA, N.A. (TD Bank USA), TD Bank, N.A.,
(TD Bank, and together with TD Bank USA, the Depository Institutions) and TD. Under the IDA
agreement, the Depository Institutions make available to clients of the Company money market
deposit accounts as either designated sweep vehicles or as non-sweep deposit accounts. The Company
provides marketing, recordkeeping and support services for the Depository Institutions with respect
to the money market deposit accounts. In exchange for providing these services, the Depository
Institutions pay the Company a fee based on the yield earned by the Depository Institutions on the
client IDA assets, less the actual interest paid to clients, a flat fee to TD Bank USA of 25 basis
points and the cost of FDIC insurance premiums.
The IDA agreement has a term of five years beginning July 1, 2008, and is automatically renewable
for successive five-year terms, provided that it may be terminated by any party upon two years
prior written notice. The agreement provides that the marketing fee earned on the IDA agreement is
calculated based on three primary components: (a) the actual yield earned on investments in place
as of July 1, 2008, which were primarily fixed-income securities backed by Canadian government
guarantees, (b) the yield on other fixed-rate investments, based on prevailing fixed rates for
identical balances and maturities in the interest rate swap market (generally LIBOR-based) at the
time such investments were added to the IDA portfolio and (c) floating-rate investments, based on
the monthly average rate for 30-day LIBOR. The agreement provides that, from time to time, the
Company may request amounts and maturity dates for the other fixed-rate investments (component (b)
above) in the IDA portfolio, subject to the approval of the Depository Institutions. For the month
of December 2009, the IDA portfolio was comprised of approximately 15% component (a) investments,
75% component (b) investments and 10% component (c) investments.
In the event the fee computation results in a negative amount, the Company must pay the Depository
Institutions the negative amount. This effectively results in the Company guaranteeing the
Depository Institutions revenue of 25 basis points on the IDA agreement, plus the reimbursement of
FDIC insurance premiums. The fee computation under the IDA agreement is affected by many
variables, including the type, duration, credit quality, principal balance and yield of the
investment portfolio at the Depository Institutions, the prevailing interest rate environment, the
amount of client deposits and the yield paid on client deposits. Because a negative IDA fee
computation would arise only if there were extraordinary movements in many of these variables, the
maximum potential amount of future payments the Company could be required to make under this
arrangement cannot be reasonably estimated. Management believes the potential for the fee calculation to
result in a negative
20
amount is remote and the fair value of the guarantee is not material. Accordingly, no
contingent liability is carried on the Condensed Consolidated Balance Sheets for the IDA agreement.
The Company earned fee income associated with the insured deposit account agreement of $155.3
million and $163.2 million for the three months ended December 31, 2009 and 2008, respectively,
which is reported as insured deposit account fees on the Condensed Consolidated Statements of
Income.
Mutual Fund Agreements
The Company and an affiliate of TD are parties to a sweep fund agreement, transfer agency
agreement, shareholder services agreement and a dealer agreement pursuant to which certain mutual
funds are made available as money market sweep or direct purchase options to Company clients. The
Company performs certain distribution and marketing support services with respect to those funds.
In consideration for offering the funds and performing the distribution and marketing support
services, an affiliate of TD compensates the Company in accordance with the provisions of the sweep
fund agreement. The Company also performs certain services for the applicable fund and earns fees
for those services. The agreement may be terminated by any party upon one years prior written
notice and may be terminated by the Company upon 30 days prior written notice under certain
circumstances. The Company earned fee income associated with these agreements of $2.8 million and
$51.5 million for the three months ended December 31, 2009 and 2008, respectively, which is
included in investment product fees on the Condensed Consolidated Statements of Income.
Securities Borrowing and Lending
In connection with its brokerage business, the Company engages in securities borrowing and lending
with TD Securities, Inc. (TDSI), an affiliate of TD. Receivable from brokers, dealers and
clearing organizations includes $0.6 million of receivables from TDSI as of December 31, 2009 and
September 30, 2009. Payable to brokers, dealers and clearing organizations includes $28.0 million
and $34.0 million of payables to TDSI as of December 31, 2009 and September 30, 2009, respectively.
The Company earned net interest revenue of $0.4 million for the three months ended December 31,
2009 and incurred net interest expense of $0.4 million for the three months ended December 31, 2008
associated with securities borrowing and lending with TDSI. The transactions with TDSI are subject
to similar collateral requirements as transactions with other counterparties.
Cash Management Services Agreement
Pursuant to a cash management services agreement, TD Bank USA provides cash management services to
clients of TDA Inc. In exchange for such services, the Company pays TD Bank USA service-based fees
agreed upon by the parties. The Company incurred expense associated with the cash management
services agreement of $0.2 million for the three months ended December 31, 2009 and 2008, which is
included in clearing and execution costs on the Condensed Consolidated Statements of Income. The
cash management services agreement will continue in effect for as long as the IDA agreement remains
in effect, provided that it may be terminated by TDA Inc. without cause upon 60 days prior written
notice to TD Bank USA.
Indemnification Agreement for Phantom Stock Plan Liabilities
Pursuant to an indemnification agreement, the Company agreed to assume TD Waterhouse liabilities
related to the payout of awards under The Toronto-Dominion Bank 2002 Phantom Stock Incentive Plan
following the completion of the TD Waterhouse acquisition. Under this plan, participants were
granted units of stock appreciation rights (SARs) based on TDs common stock that generally vest
over four years. Upon exercise, the participant receives cash representing the appreciated value
of the units between the grant date and the redemption date. In connection with the payout of
awards under the 2002 Phantom Stock Incentive Plan, TD Discount Brokerage Holdings LLC (TDDBH), a
wholly-owned subsidiary of TD, agreed to indemnify the Company for any liabilities incurred by the
Company in excess of the provision for such liability included on the closing date balance sheet of
TD Waterhouse. In addition, in the event that the liability incurred by the Company in connection
with the 2002 Phantom Stock Incentive Plan is less than the provision for such liability included
on the closing date balance sheet of TD Waterhouse, the Company agreed to pay the difference to
TDDBH. There were 41,125 and 43,590 SARs outstanding as of December 31, 2009 and September 30,
2009, respectively, with an approximate value of $1.4 million and $1.6 million, respectively. The
indemnification agreement effectively protects the Company against fluctuations in TDs
common stock price with respect to the SARs, so there will be no net effect on the Companys
results of operations resulting from such fluctuations.
21
Canadian Call Center Services Agreement
Pursuant to the Canadian call center services agreement, TD receives and services client calls at
its London, Ontario site for clients of TDA Inc. After May 1, 2013, either party may terminate
this agreement without cause and without penalty by providing 24 months prior written notice. In
consideration of the performance by TD of the call center services, the Company pays TD, on a
monthly basis, an amount approximately equal to TDs monthly cost. The Company incurred expenses
associated with the Canadian call center services agreement of $4.3 million and $3.9 million for
the three months ended December 31, 2009 and 2008, respectively, which is included in professional
services expense on the Condensed Consolidated Statements of Income.
Certificates of Deposit Brokerage Agreement
TDA, Inc. is party to a certificates of deposit brokerage agreement with TD Bank USA, under which
TDA Inc. acts as agent for its clients in purchasing certificates of deposit from TD Bank USA.
Under the agreement, TD Bank USA pays TDA Inc. a placement fee for each certificate of deposit
issued in an amount agreed to by both parties. During the first quarter of fiscal 2010, TDA Inc.
promoted a limited time offer to purchase a three-month TD Bank USA certificate of deposit with a
premium yield to clients that made a deposit or transferred $25,000 into their TDA Inc. brokerage
account during a specified time period. Under this promotion, TDA Inc. reimburses TD Bank USA for
the subsidized portion of the premium yield paid to its clients. The Company incurred net costs to
TD Bank USA associated with this promotional offer of $1.0 million for the three months ended
December 31, 2009, which is included in advertising expense on the Condensed Consolidated
Statements of Income.
Sale of thinkorswim Canada, Inc. and Trading Platform Hosting and Services Agreement
On June 11, 2009, immediately following the closing of the thinkorswim acquisition, the Company
completed the sale of thinkorswim Canada, Inc. (thinkorswim Canada) to TD Waterhouse Canada Inc.
(TDW Canada), a wholly-owned subsidiary of TD, for cash equal to the total tangible equity of
thinkorswim Canada immediately prior to the closing of the transaction. The Company received gross
proceeds from the sale of approximately $1.7 million. The Company did not recognize a gain or loss
on the sale of thinkorswim Canada.
In connection with the sale of thinkorswim Canada, the Company and TDW Canada entered into a
trading platform hosting and services agreement. The agreement has an initial term of five years
beginning June 11, 2009, and will automatically renew for additional periods of two years, unless
either party provides notice of non-renewal to the other party at least 90 days prior to the end of
the then-current term. Because this agreement represents contingent consideration to be paid for
the sale of thinkorswim Canada, the Company recorded a $10.7 million receivable for the fair value
of this agreement. Under this agreement, TDW Canada will use the thinkorswim, Inc. trading
platform and thinkorswim, Inc. will provide the services to support the platform. In consideration
for the performance by thinkorswim, Inc. of all its obligations under this agreement, TDW Canada
will pay thinkorswim, Inc., on a monthly basis, a fee based on average client trades per day and
transactional revenues. Fees earned under the agreement will be recorded as a reduction of the
contingent consideration receivable until the receivable is reduced to zero, and thereafter will be
recorded as fee revenue. As of December 31, 2009 and September 30, 2009, $10.2 million and $10.4
million, respectively, of contingent consideration is included in receivable from affiliates on the
Condensed Consolidated Balance Sheets.
Other Related Party Transactions
TD Options LLC, a subsidiary of TD, pays the Company the amount of exchange-sponsored payment for
order flow that it receives for routing TDA Inc. client orders to the exchanges. The Company
earned $0.5 million and $0.7 million of payment for order flow revenues from TD Options LLC for the
three months ended December 31, 2009 and 2008, respectively, which is included in commissions and
transaction fees on the Condensed Consolidated Statements of Income.
TD Securities (USA) LLC, an indirect wholly-owned subsidiary of TD, was the joint lead manager and
participated as an underwriter in the Companys offering of $1.25 billion of Senior Notes in
November 2009. In this capacity, TD Securities (USA) LLC earned a discount and commission of $0.5
million. This amount is being accounted for as part of the debt issuance costs included in other
assets on the Condensed Consolidated Balance Sheets and is being amortized to interest expense over
the terms of the respective Senior Notes.
Except as otherwise indicated, receivables from and payables to TD and affiliates of TD resulting
from the related party transactions described above are included in receivable from affiliates and
payable to affiliates, respectively, on the Condensed Consolidated Balance Sheets. Receivables
from and payables to TD affiliates resulting from client cash sweep activity are
22
generally settled in cash the next business day. Other receivables from and payables to affiliates of TD are
generally settled in cash on a monthly basis.
11. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The Senior Notes are jointly and severally and fully and unconditionally guaranteed by TDAOH.
Presented below is condensed consolidating financial information for the Company, its guarantor
subsidiary and its non-guarantor subsidiaries for the periods indicated.
TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2009
(Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiary |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
25,375 |
|
|
$ |
39,061 |
|
|
$ |
839,455 |
|
|
$ |
|
|
|
$ |
903,891 |
|
Cash and investments segregated in
compliance with federal regulations |
|
|
|
|
|
|
|
|
|
|
5,570,850 |
|
|
|
|
|
|
|
5,570,850 |
|
Receivable from brokers, dealers and
clearing organizations |
|
|
|
|
|
|
|
|
|
|
1,158,994 |
|
|
|
|
|
|
|
1,158,994 |
|
Receivable from clients, net of allowance
for doubtful accounts |
|
|
|
|
|
|
|
|
|
|
6,329,011 |
|
|
|
|
|
|
|
6,329,011 |
|
Investments in subsidiaries |
|
|
5,283,054 |
|
|
|
4,194,543 |
|
|
|
|
|
|
|
(9,477,597 |
) |
|
|
|
|
Receivable from affiliates |
|
|
1,486 |
|
|
|
226,856 |
|
|
|
88,952 |
|
|
|
(229,707 |
) |
|
|
87,587 |
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
2,468,875 |
|
|
|
|
|
|
|
2,468,875 |
|
Acquired intangible assets |
|
|
|
|
|
|
145,674 |
|
|
|
1,053,468 |
|
|
|
|
|
|
|
1,199,142 |
|
Other |
|
|
45,696 |
|
|
|
39,375 |
|
|
|
678,777 |
|
|
|
(35,014 |
) |
|
|
728,834 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
5,355,611 |
|
|
$ |
4,645,509 |
|
|
$ |
18,188,382 |
|
|
$ |
(9,742,318 |
) |
|
$ |
18,447,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable to brokers, dealers and clearing
organizations |
|
$ |
|
|
|
$ |
|
|
|
$ |
2,004,163 |
|
|
$ |
|
|
|
$ |
2,004,163 |
|
Payable to clients |
|
|
|
|
|
|
|
|
|
|
10,546,040 |
|
|
|
|
|
|
|
10,546,040 |
|
Accounts payable and accrued liabilities |
|
|
238,969 |
|
|
|
22,346 |
|
|
|
337,848 |
|
|
|
|
|
|
|
599,163 |
|
Payable to affiliates |
|
|
163,414 |
|
|
|
2,428 |
|
|
|
67,733 |
|
|
|
(229,707 |
) |
|
|
3,868 |
|
Long-term debt |
|
|
1,248,583 |
|
|
|
|
|
|
|
8,400 |
|
|
|
|
|
|
|
1,256,983 |
|
Other |
|
|
|
|
|
|
41,688 |
|
|
|
325,648 |
|
|
|
(35,014 |
) |
|
|
332,322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,650,966 |
|
|
|
66,462 |
|
|
|
13,289,832 |
|
|
|
(264,721 |
) |
|
|
14,742,539 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
3,704,645 |
|
|
|
4,579,047 |
|
|
|
4,898,550 |
|
|
|
(9,477,597 |
) |
|
|
3,704,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
5,355,611 |
|
|
$ |
4,645,509 |
|
|
$ |
18,188,382 |
|
|
$ |
(9,742,318 |
) |
|
$ |
18,447,184 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
AS OF SEPTEMBER 30, 2009
(Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiary |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
45,291 |
|
|
$ |
109,079 |
|
|
$ |
636,841 |
|
|
$ |
|
|
|
$ |
791,211 |
|
Cash and investments segregated in
compliance with federal regulations |
|
|
|
|
|
|
|
|
|
|
5,813,862 |
|
|
|
|
|
|
|
5,813,862 |
|
Receivable from brokers, dealers and
clearing organizations |
|
|
|
|
|
|
|
|
|
|
1,777,741 |
|
|
|
|
|
|
|
1,777,741 |
|
Receivable from clients, net of allowance
for doubtful accounts |
|
|
|
|
|
|
|
|
|
|
5,712,261 |
|
|
|
|
|
|
|
5,712,261 |
|
Investments in subsidiaries |
|
|
5,298,879 |
|
|
|
4,145,057 |
|
|
|
|
|
|
|
(9,443,936 |
) |
|
|
|
|
Receivable from affiliates |
|
|
2,140 |
|
|
|
220,654 |
|
|
|
91,839 |
|
|
|
(221,659 |
) |
|
|
92,974 |
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
2,472,098 |
|
|
|
|
|
|
|
2,472,098 |
|
Acquired intangible assets |
|
|
|
|
|
|
145,674 |
|
|
|
1,079,048 |
|
|
|
|
|
|
|
1,224,722 |
|
Other |
|
|
44,877 |
|
|
|
50,501 |
|
|
|
426,131 |
|
|
|
(34,568 |
) |
|
|
486,941 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
5,391,187 |
|
|
$ |
4,670,965 |
|
|
$ |
18,009,821 |
|
|
$ |
(9,700,163 |
) |
|
$ |
18,371,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payable to brokers, dealers and clearing
organizations |
|
$ |
|
|
|
$ |
|
|
|
$ |
2,491,617 |
|
|
$ |
|
|
|
$ |
2,491,617 |
|
Payable to clients |
|
|
|
|
|
|
|
|
|
|
9,914,823 |
|
|
|
|
|
|
|
9,914,823 |
|
Accounts payable and accrued liabilities |
|
|
272,510 |
|
|
|
22,217 |
|
|
|
406,059 |
|
|
|
|
|
|
|
700,786 |
|
Payable to affiliates |
|
|
160,894 |
|
|
|
2,324 |
|
|
|
62,165 |
|
|
|
(221,659 |
) |
|
|
3,724 |
|
Long-term debt |
|
|
1,406,500 |
|
|
|
|
|
|
|
8,400 |
|
|
|
|
|
|
|
1,414,900 |
|
Other |
|
|
|
|
|
|
41,700 |
|
|
|
287,545 |
|
|
|
(34,568 |
) |
|
|
294,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
1,839,904 |
|
|
|
66,241 |
|
|
|
13,170,609 |
|
|
|
(256,227 |
) |
|
|
14,820,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
3,551,283 |
|
|
|
4,604,724 |
|
|
|
4,839,212 |
|
|
|
(9,443,936 |
) |
|
|
3,551,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
5,391,187 |
|
|
$ |
4,670,965 |
|
|
$ |
18,009,821 |
|
|
$ |
(9,700,163 |
) |
|
$ |
18,371,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED DECEMBER 31, 2009
(Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiary |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
Net revenues |
|
$ |
4,767 |
|
|
$ |
46 |
|
|
$ |
624,599 |
|
|
$ |
(4,794 |
) |
|
$ |
624,618 |
|
Operating expenses |
|
|
2,315 |
|
|
|
302 |
|
|
|
386,395 |
|
|
|
(4,794 |
) |
|
|
384,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
2,452 |
|
|
|
(256 |
) |
|
|
238,204 |
|
|
|
|
|
|
|
240,400 |
|
Other expense |
|
|
19,646 |
|
|
|
|
|
|
|
375 |
|
|
|
|
|
|
|
20,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes and equity
in income of subsidiaries |
|
|
(17,194 |
) |
|
|
(256 |
) |
|
|
237,829 |
|
|
|
|
|
|
|
220,379 |
|
Provision for (benefit from) income taxes |
|
|
(4,273 |
) |
|
|
(93 |
) |
|
|
88,508 |
|
|
|
|
|
|
|
84,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity in income of
subsidiaries |
|
|
(12,921 |
) |
|
|
(163 |
) |
|
|
149,321 |
|
|
|
|
|
|
|
136,237 |
|
Equity in income of subsidiaries |
|
|
149,158 |
|
|
|
149,486 |
|
|
|
|
|
|
|
(298,644 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
136,237 |
|
|
$ |
149,323 |
|
|
$ |
149,321 |
|
|
$ |
(298,644 |
) |
|
$ |
136,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF INCOME
THREE MONTHS ENDED DECEMBER 31, 2008
(Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
|
|
|
Parent |
|
|
Subsidiary |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Total |
|
Net revenues |
|
$ |
7,964 |
|
|
$ |
511 |
|
|
$ |
610,312 |
|
|
$ |
(8,058 |
) |
|
$ |
610,729 |
|
Operating expenses |
|
|
6,830 |
|
|
|
136 |
|
|
|
295,505 |
|
|
|
(7,941 |
) |
|
|
294,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
1,134 |
|
|
|
375 |
|
|
|
314,807 |
|
|
|
(117 |
) |
|
|
316,199 |
|
Other expense (income) |
|
|
15,716 |
|
|
|
117 |
|
|
|
(79 |
) |
|
|
(117 |
) |
|
|
15,637 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes and equity
in income of subsidiaries |
|
|
(14,582 |
) |
|
|
258 |
|
|
|
314,886 |
|
|
|
|
|
|
|
300,562 |
|
Provision for (benefit from) income taxes |
|
|
(2,499 |
) |
|
|
62 |
|
|
|
118,601 |
|
|
|
|
|
|
|
116,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity in income of
subsidiaries |
|
|
(12,083 |
) |
|
|
196 |
|
|
|
196,285 |
|
|
|
|
|
|
|
184,398 |
|
Equity in income of subsidiaries |
|
|
196,481 |
|
|
|
196,285 |
|
|
|
|
|
|
|
(392,766 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
184,398 |
|
|
$ |
196,481 |
|
|
$ |
196,285 |
|
|
$ |
(392,766 |
) |
|
$ |
184,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 2009
(Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
Parent |
|
|
Subsidiary |
|
|
Subsidiaries |
|
|
Total |
|
Net cash provided by (used in) operating activities |
|
$ |
(24,891 |
) |
|
$ |
(6,142 |
) |
|
$ |
316,667 |
|
|
$ |
285,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
|
|
|
|
|
|
|
|
(20,797 |
) |
|
|
(20,797 |
) |
Proceeds from redemption of money market funds |
|
|
24 |
|
|
|
11,124 |
|
|
|
446 |
|
|
|
11,594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
24 |
|
|
|
11,124 |
|
|
|
(20,351 |
) |
|
|
(9,203 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt |
|
|
1,248,557 |
|
|
|
|
|
|
|
|
|
|
|
1,248,557 |
|
Payment of debt issuance costs |
|
|
(10,032 |
) |
|
|
|
|
|
|
|
|
|
|
(10,032 |
) |
Principal payments on long-term debt |
|
|
(1,406,500 |
) |
|
|
|
|
|
|
|
|
|
|
(1,406,500 |
) |
Purchase of treasury stock |
|
|
(3,229 |
) |
|
|
|
|
|
|
|
|
|
|
(3,229 |
) |
Other |
|
|
11,155 |
|
|
|
|
|
|
|
(3,718 |
) |
|
|
7,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(160,049 |
) |
|
|
|
|
|
|
(3,718 |
) |
|
|
(163,767 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany investing and financing activities, net |
|
|
165,000 |
|
|
|
(75,000 |
) |
|
|
(90,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
16 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
(19,916 |
) |
|
|
(70,018 |
) |
|
|
202,614 |
|
|
|
112,680 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
45,291 |
|
|
|
109,079 |
|
|
|
636,841 |
|
|
|
791,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
25,375 |
|
|
$ |
39,061 |
|
|
$ |
839,455 |
|
|
$ |
903,891 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
TD AMERITRADE HOLDING CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 2008
(Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor |
|
|
Non-Guarantor |
|
|
|
|
|
|
Parent |
|
|
Subsidiary |
|
|
Subsidiaries |
|
|
Total |
|
Net cash provided by (used in) operating activities |
|
$ |
44,801 |
|
|
$ |
(158,147 |
) |
|
$ |
402,742 |
|
|
$ |
289,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
|
|
|
|
|
|
|
|
|
(13,190 |
) |
|
|
(13,190 |
) |
Proceeds from redemption of money market funds |
|
|
528 |
|
|
|
114,364 |
|
|
|
136,042 |
|
|
|
250,934 |
|
Other |
|
|
|
|
|
|
140 |
|
|
|
|
|
|
|
140 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by investing activities |
|
|
528 |
|
|
|
114,504 |
|
|
|
122,852 |
|
|
|
237,884 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payments on long-term debt |
|
|
(9,375 |
) |
|
|
|
|
|
|
|
|
|
|
(9,375 |
) |
Purchase of treasury stock |
|
|
(37,584 |
) |
|
|
|
|
|
|
|
|
|
|
(37,584 |
) |
Other |
|
|
643 |
|
|
|
|
|
|
|
(309 |
) |
|
|
334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(46,316 |
) |
|
|
|
|
|
|
(309 |
) |
|
|
(46,625 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intercompany investing and financing activities, net |
|
|
|
|
|
|
(43,936 |
) |
|
|
43,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
(635 |
) |
|
|
(635 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
(987 |
) |
|
|
(87,579 |
) |
|
|
568,586 |
|
|
|
480,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
989 |
|
|
|
171,010 |
|
|
|
502,136 |
|
|
|
674,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
2 |
|
|
$ |
83,431 |
|
|
$ |
1,070,722 |
|
|
$ |
1,154,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Part II OTHER INFORMATION
Item 6. Exhibits
|
|
|
|
|
|
|
|
|
|
15.1 |
|
|
Awareness Letter of Independent Registered Public Accounting Firm |
|
|
|
|
|
|
|
|
|
|
31.1 |
|
|
Certification of Fredric J. Tomczyk, Principal Executive Officer, as required
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
|
|
|
31.2 |
|
|
Certification of William J. Gerber, Principal Financial Officer, as required
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
|
|
|
|
|
32.1 |
|
|
Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 |
26
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: May 6, 2010
|
|
|
|
|
|
TD AMERITRADE Holding Corporation
(Registrant)
|
|
|
By: |
/s/ FREDRIC J. TOMCZYK
|
|
|
|
Fredric J. Tomczyk |
|
|
|
President and Chief Executive Officer
(Principal Executive Officer) |
|
|
|
|
|
|
By: |
/s/ WILLIAM J. GERBER
|
|
|
|
William J. Gerber |
|
|
|
Executive Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer) |
|
|
27