TD Ameritrade Holding Corporation AMTD has released results for the second quarter of fiscal 2017 and reaffirmed its full-year earnings per share guidance of $1.50 to $1.80. The Company gathered approximately $19.5 billion in net new client assets for the quarter and reported 517,000 client trades per day, on average, both reflecting strong year-over-year increases.
The Company's results for the quarter ended March 31, 2017 include the following:(1)
- $0.40 in earnings per diluted share, up 5 percent year over year, on net income of $214 million
- Record net new client assets of approximately $19.5 billion, an annualized growth rate of 10 percent
- Record average client trades per day of approximately 517,000, up 2 percent year over year
- Record net revenues of $904 million, 58 percent of which were asset-based
- Pre-tax income of $344 million, or 38 percent of net revenues
- Interest rate-sensitive assets(2) of $124 billion, up 11 percent year over year
- Record client assets of $847 billion, up 19 percent year over year
"Our record-breaking results reflect the powerful combination of strong investor engagement in the market within an improving interest rate environment. Both factors served as tailwinds further accelerating our continued organic growth and giving us the flexibility to respond to the competitive environment with lower pricing for all of our clients," said Tim Hockey, president and chief executive officer. "Client asset inflows hit an all-time high as investors found value in our outstanding trading platforms, innovative tools, and broad product selection. We're capturing money in motion and have plans firmly in place to help our industry-leading organic growth continue."
"We continued to build on our strong momentum from the December quarter driving solid growth from net new client assets and new accounts," said Steve Boyle, executive vice president and chief financial officer. "We expect the benefits from balance growth and higher interest rates to more than offset the financial impact of our lower commission price. Ongoing investments in cutting-edge technology that drive automation and further enhance the client experience will remain core to our strategy for the balance of the fiscal year."
Capital Management
The Company paid $95 million in its
second fiscal quarter, or $0.18 per share, in cash dividends.
The Company has declared an $0.18 per share quarterly cash dividend, payable on May 16, 2017 to all holders of record of common stock as of May 2, 2017.
Company Hosts Conference Call
TD Ameritrade will host its
April Quarter conference call this morning, April 19, 2017, at 8:30 a.m.
EDT (7:30 a.m. CDT). Participants may listen to the conference call by
dialing 877-648-7976. The Company will webcast the conference call
through www.amtd.com,
via the "Presentations
& Events" page of the web site. A replay of the phone call will
be available by dialing 855-859-2056 and entering the Conference ID
88024252 beginning at 11:30 a.m. EDT (10:30 a.m. CDT) on April 19, 2017.
The replay will be available until 11:59 p.m. EDT (10:59 p.m. CDT) on
April 26, 2017. A transcript of the call will be available on the
Company's corporate web site, www.amtd.com,
via either the "Investor
Relations" page or the "Presentations
& Events" page beginning Thursday, April 20, 2017.
Interested parties can visit or subscribe to newsfeeds at www.amtd.com for the most up-to-date corporate financial information, presentation announcements, transcripts and archives. The company also communicates this information via Twitter, @TDAmeritradePR. Web site links, corporate titles and telephone numbers provided in this release, although correct when published, may change in the future.
Source: TD Ameritrade Holding Corporation
About TD Ameritrade Holding Corporation
Millions of
investors and independent registered investment advisors (RIAs) have
turned to TD Ameritrade's AMTD technology,
people
and education
to help make investing and trading easier to understand and do. Online
or over the phone. In a branch or with an independent RIA. First-timer
or sophisticated trader. Our clients want to take control, and we help
them decide how - bringing Wall Street to Main Street for more than 40
years. TD Ameritrade has time and again been recognized
as a leader in investment services. Please visit TD Ameritrade's newsroom
or www.amtd.com
for more information, or read our stories at Fresh
Accounts.
Safe Harbor
This document contains forward-looking
statements within the meaning of the federal securities laws. We intend
these forward-looking statements to be covered by the safe harbor
provisions of the federal securities laws. In particular, any
projections regarding our future revenues, expenses, earnings, capital
expenditures, effective tax rates, client trading activity, accounts,
stock price or any projections or expectations regarding the proposed
business combination transaction between us and Scottrade Financial
Services, Inc., as well as the assumptions on which such expectations
are based, are forward-looking statements. These statements reflect only
our current expectations and are not guarantees of future performance or
results. These statements involve risks, uncertainties and assumptions
that could cause actual results or performance to differ materially from
those contained in the forward-looking statements. These risks,
uncertainties and assumptions include, but are not limited to: general
economic and political conditions and other securities industry risks,
fluctuations in interest rates, stock market fluctuations and changes in
client trading activity, credit risk with clients and counterparties,
increased competition, systems failures, delays and capacity
constraints, network security risks, liquidity risks, new laws and
regulations affecting our business, regulatory and legal matters, the
ability to obtain regulatory approvals and meet other closing conditions
to the proposed transaction, including the completion of the merger
between Scottrade Bank and TD Bank, N.A., on the expected terms and
schedule; delay in closing the transaction; difficulties and delays in
integrating the TD Ameritrade and Scottrade businesses or fully
realizing cost savings and other benefits; business disruption following
the proposed transaction; changes in asset quality and credit risk; the
inability to sustain revenue and earnings growth; changes in interest
rates and capital markets; inflation; customer borrowing, repayment,
investment and deposit practices; customer disintermediation; the
introduction, withdrawal, success and timing of business initiatives;
competitive conditions; TD Ameritrade's and Scottrade's businesses
experiencing disruptions due to transaction-related uncertainty or other
factors making it more difficult to maintain relationships with
employees, customers, other business partners or governmental entities;
the inability to realize synergies or to implement integration plans and
other consequences associated with mergers, acquisitions and
uncertainties and other risk factors described in our latest Annual
Report on Form 10-K, filed with the SEC on Nov. 18, 2016 and our latest
Quarterly Report on Form 10-Q filed thereafter. These forward-looking
statements speak only as of the date on which the statements were made.
We undertake no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise, except to the extent required by the federal
securities laws.
1 Please see the Glossary of Terms, located in "Investor" section of www.amtd.com for more information on how these metrics are calculated.
2 Interest rate-sensitive assets consist of spread-based assets and money market mutual funds. Ending balances as of March 31, 2017.
Brokerage services provided by TD Ameritrade, Inc., member FINRA (www.FINRA.org) /SIPC (www.SIPC.org).
TD AMERITRADE HOLDING CORPORATION | ||||||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||||
In millions, except per share amounts | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
Quarter Ended | Six Months Ended | |||||||||||||||||||
Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Transaction-based revenues: | ||||||||||||||||||||
Commissions and transaction fees | $ | 365 | $ | 355 | $ | 360 | $ | 719 | $ | 689 | ||||||||||
Asset-based revenues: | ||||||||||||||||||||
Insured deposit account fees | 269 | 245 | 235 | 514 | 462 | |||||||||||||||
Net interest revenue | 154 | 151 | 147 | 305 | 300 | |||||||||||||||
Investment product fees | 103 | 94 | 88 | 197 | 181 | |||||||||||||||
Total asset-based revenues | 526 | 490 | 470 | 1,016 | 943 | |||||||||||||||
Other revenues | 13 | 14 | 16 | 27 | 27 | |||||||||||||||
Net revenues | 904 | 859 | 846 | 1,762 | 1,659 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Employee compensation and benefits | 229 | 214 | 208 | 443 | 408 | |||||||||||||||
Clearing and execution costs | 37 | 36 | 37 | 73 | 67 | |||||||||||||||
Communications | 29 | 35 | 33 | 64 | 66 | |||||||||||||||
Occupancy and equipment costs | 45 | 44 | 43 | 89 | 85 | |||||||||||||||
Depreciation and amortization | 25 | 24 | 22 | 49 | 44 | |||||||||||||||
Amortization of acquired intangible assets | 19 | 19 | 22 | 38 | 45 | |||||||||||||||
Professional services | 59 | 53 | 37 | 111 | 74 | |||||||||||||||
Advertising | 80 | 57 | 81 | 137 | 143 | |||||||||||||||
Other | 23 | 24 | 20 | 47 | 40 | |||||||||||||||
Total operating expenses | 546 | 506 | 503 | 1,051 | 972 | |||||||||||||||
Operating income | 358 | 353 | 343 | 711 | 687 | |||||||||||||||
Other expense: | ||||||||||||||||||||
Interest on borrowings | 14 | 14 | 13 | 28 | 26 | |||||||||||||||
Total other expense | 14 | 14 | 13 | 28 | 26 | |||||||||||||||
Pre-tax income | 344 | 339 | 330 | 683 | 661 | |||||||||||||||
Provision for income taxes | 130 | 123 | 125 | 253 | 244 | |||||||||||||||
Net income | $ | 214 | $ | 216 | $ | 205 | $ | 430 | $ | 417 | ||||||||||
Earnings per share - basic | $ | 0.41 | $ | 0.41 | $ | 0.38 | $ | 0.81 | $ | 0.78 | ||||||||||
Earnings per share - diluted | $ | 0.40 | $ | 0.41 | $ | 0.38 | $ | 0.81 | $ | 0.78 | ||||||||||
Weighted average shares outstanding - basic | 528 | 527 | 533 | 528 | 535 | |||||||||||||||
Weighted average shares outstanding - diluted | 530 | 530 | 535 | 530 | 538 | |||||||||||||||
Dividends declared per share | $ | 0.18 | $ | 0.18 | $ | 0.17 | $ | 0.36 | $ | 0.34 | ||||||||||
TD AMERITRADE HOLDING CORPORATION | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
In millions | ||||||||
(Unaudited) | ||||||||
Mar. 31, 2017 | Sept. 30, 2016 | |||||||
Assets: | ||||||||
Cash and cash equivalents | $ | 2,231 | $ | 1,855 | ||||
Segregated cash and investments | 8,727 | 8,729 | ||||||
Broker/dealer receivables | 1,101 | 1,190 | ||||||
Client receivables, net | 12,036 | 11,941 | ||||||
Investments available-for-sale, at fair value | 747 | 757 | ||||||
Goodwill and intangible assets | 3,004 | 3,042 | ||||||
Other | 1,319 | 1,304 | ||||||
Total assets | $ | 29,165 | $ | 28,818 | ||||
Liabilities and stockholders' equity: | ||||||||
Liabilities: | ||||||||
Broker/dealer payables | $ | 1,884 | $ | 2,040 | ||||
Client payables | 19,238 | 19,055 | ||||||
Long-term debt | 1,765 | 1,817 | ||||||
Other | 953 | 855 | ||||||
Total liabilities | 23,840 | 23,767 | ||||||
Stockholders' equity | 5,325 | 5,051 | ||||||
Total liabilities and stockholders' equity | $ | 29,165 | $ | 28,818 | ||||
TD AMERITRADE HOLDING CORPORATION | |||||||||||||||||||||||||
SELECTED OPERATING DATA | |||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||
Quarter Ended | Six Months Ended | ||||||||||||||||||||||||
Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |||||||||||||||||||||
Key Metrics: |
|||||||||||||||||||||||||
Net new assets (in billions) | $ | 19.5 | $ | 18.7 | $ | 14.1 | $ | 38.1 | $ | 31.6 | |||||||||||||||
Net new asset growth rate (annualized) | 10 | % | 10 | % | 8 | % | 10 | % | 10 | % | |||||||||||||||
Average client trades per day | 516,994 | 486,801 | 509,120 | 501,837 | 473,041 | ||||||||||||||||||||
Profitability Metrics: |
|||||||||||||||||||||||||
Operating margin | 39.6 | % | 41.1 | % | 40.5 | % | 40.4 | % | 41.4 | % | |||||||||||||||
Pre-tax margin | 38.1 | % | 39.5 | % | 39.0 | % | 38.8 | % | 39.8 | % | |||||||||||||||
Return on average stockholders' equity (annualized) | 16.3 | % | 16.9 | % | 16.6 | % | 16.6 | % | 16.9 | % | |||||||||||||||
Net profit margin | 23.7 | % | 25.1 | % | 24.2 | % | 24.4 | % | 25.1 | % | |||||||||||||||
EBITDA(1) as a percentage of net revenues | 44.5 | % | 46.1 | % | 45.7 | % | 45.3 | % | 46.8 | % | |||||||||||||||
Liquidity Metrics: |
|||||||||||||||||||||||||
Interest on borrowings (in millions) | $ | 14 | $ | 14 | $ | 13 | $ | 28 | $ | 26 | |||||||||||||||
Interest coverage ratio (EBITDA(1)/interest on borrowings) | 28.7 | 28.3 | 29.8 | 28.5 | 29.8 | ||||||||||||||||||||
Cash and cash equivalents (in billions) | $ | 2.2 | $ | 1.7 | $ | 2.5 | $ | 2.2 | $ | 2.5 | |||||||||||||||
Liquid assets available for corporate investing and financing activities(1)(2) (in billions) |
$ | 1.0 | $ | 0.8 | $ | 0.5 | $ | 1.0 | $ | 0.5 | |||||||||||||||
Transaction-Based Revenue Metrics: |
|||||||||||||||||||||||||
Total trades (in millions) | 32.1 | 30.4 | 31.1 | 62.5 | 58.7 | ||||||||||||||||||||
Average commissions and transaction fees per trade | $ | 11.38 | $ | 11.65 | $ | 11.60 | $ | 11.51 | $ | 11.74 | |||||||||||||||
Trading days | 62.0 | 62.5 | 61.0 | 124.5 | 124.0 | ||||||||||||||||||||
Order routing revenue (in millions) | $ | 83 | $ | 79 | $ | 76 | $ | 162 | $ | 147 | |||||||||||||||
Spread-Based Asset Metrics: |
|||||||||||||||||||||||||
Average insured deposit account balances (in billions) | $ | 95.1 | $ | 93.3 | $ | 84.0 | $ | 94.2 | $ | 82.2 | |||||||||||||||
Average interest-earning assets (in billions) | 24.6 | 24.4 | 21.8 | 24.5 | 22.0 | ||||||||||||||||||||
Average spread-based balances (in billions) | $ | 119.7 | $ | 117.7 | $ | 105.8 | $ | 118.7 | $ | 104.2 | |||||||||||||||
Insured deposit account fee revenue (in millions) | $ | 269 | $ | 245 | $ | 235 | $ | 514 | $ | 462 | |||||||||||||||
Net interest revenue (in millions) | 154 | 151 | 147 | 305 | 300 | ||||||||||||||||||||
Spread-based revenue (in millions) | $ | 423 | $ | 396 | $ | 382 | $ | 819 | $ | 762 | |||||||||||||||
Avg. annualized yield - insured deposit account fees | 1.13 | % | 1.03 | % | 1.11 | % | 1.08 | % | 1.11 | % | |||||||||||||||
Avg. annualized yield - interest-earning assets | 2.50 | % | 2.42 | % | 2.66 | % | 2.46 | % | 2.69 | % | |||||||||||||||
Net interest margin (NIM) | 1.41 | % | 1.32 | % | 1.43 | % | 1.36 | % | 1.44 | % | |||||||||||||||
Fee-Based Investment Metrics: |
|||||||||||||||||||||||||
Money market mutual fund fees: |
|||||||||||||||||||||||||
Average balance (in billions) | $ | 3.5 | $ | 3.7 | $ | 5.8 | $ | 3.6 | $ | 5.8 | |||||||||||||||
Average annualized yield | 0.44 | % | 0.38 | % | 0.18 | % | 0.41 | % | 0.12 | % | |||||||||||||||
Fee revenue (in millions) | $ | 4 | $ | 3 | $ | 2 | $ | 8 | $ | 4 | |||||||||||||||
Market fee-based investment balances: |
|||||||||||||||||||||||||
Average balance (in billions) | $ | 176.9 | $ | 166.7 | $ | 147.3 | $ | 171.8 | $ | 150.1 | |||||||||||||||
Average annualized yield | 0.22 | % | 0.21 | % | 0.23 | % | 0.22 | % | 0.23 | % | |||||||||||||||
Fee revenue (in millions) | $ | 99 | $ | 91 | $ | 86 | $ | 189 | $ | 177 | |||||||||||||||
Average fee-based investment balances (in billions) | $ | 180.4 | $ | 170.4 | $ | 153.1 | $ | 175.4 | $ | 155.9 | |||||||||||||||
Average annualized yield | 0.23 | % | 0.22 | % | 0.23 | % | 0.22 | % | 0.23 | % | |||||||||||||||
Investment product fee revenue (in millions) | $ | 103 | $ | 94 | $ | 88 | $ | 197 | $ | 181 | |||||||||||||||
(1) See attached reconciliation of non-GAAP financial measures. | |||||||||||||||||||||||||
(2) Effective in March 2017, the liquid assets available for corporate investing and financing activities metric was revised. Prior periods have been updated to conform to the current presentation. |
|||||||||||||||||||||||||
NOTE: See Glossary of Terms on the Company's website at www.amtd.com for definitions of the above metrics. | |||||||||||||||||||||||||
TD AMERITRADE HOLDING CORPORATION | |||||||||||||||||||||||||
SELECTED OPERATING DATA | |||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||
Quarter Ended | Six Months Ended | ||||||||||||||||||||||||
Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |||||||||||||||||||||
Client Account and Client Asset Metrics: |
|||||||||||||||||||||||||
Funded accounts (beginning of period) | 7,046,000 | 6,950,000 | 6,686,000 | 6,950,000 | 6,621,000 | ||||||||||||||||||||
Funded accounts (end of period) | 7,189,000 | 7,046,000 | 6,777,000 | 7,189,000 | 6,777,000 | ||||||||||||||||||||
Percentage change during period | 2 | % | 1 | % | 1 | % | 3 | % | 2 | % | |||||||||||||||
Client assets (beginning of period, in billions) | $ | 797.0 | $ | 773.8 | $ | 695.3 | $ | 773.8 | $ | 667.4 | |||||||||||||||
Client assets (end of period, in billions) | $ | 846.7 | $ | 797.0 | $ | 711.2 | $ | 846.7 | $ | 711.2 | |||||||||||||||
Percentage change during period | 6 | % | 3 | % | 2 | % | 9 | % | 7 | % | |||||||||||||||
Net Interest Revenue: |
|||||||||||||||||||||||||
Segregated cash: |
|||||||||||||||||||||||||
Average balance (in billions) | $ | 8.7 | $ | 8.7 | $ | 6.5 | $ | 8.7 | $ | 6.4 | |||||||||||||||
Average annualized yield | 0.46 | % | 0.30 | % | 0.19 | % | 0.38 | % | 0.14 | % | |||||||||||||||
Interest revenue (in millions) | $ | 10 | $ | 7 | $ | 3 | $ | 17 | $ | 4 | |||||||||||||||
Client margin balances: |
|||||||||||||||||||||||||
Average balance (in billions) | $ | 11.9 | $ | 11.9 | $ | 11.6 | $ | 11.9 | $ | 11.9 | |||||||||||||||
Average annualized yield | 3.67 | % | 3.56 | % | 3.79 | % | 3.61 | % | 3.66 | % | |||||||||||||||
Interest revenue (in millions) | $ | 109 | $ | 108 | $ | 111 | $ | 217 | $ | 222 | |||||||||||||||
Securities borrowing/lending: |
|||||||||||||||||||||||||
Average securities borrowing balance (in billions) | $ | 0.9 | $ | 0.9 | $ | 0.7 | $ | 0.9 | $ | 0.7 | |||||||||||||||
Average securities lending balance (in billions) | $ | 1.7 | $ | 1.9 | $ | 1.9 | $ | 1.8 | $ | 2.2 | |||||||||||||||
Net interest revenue - securities borrowing/lending (in millions) | $ | 31 | $ | 33 | $ | 32 | $ | 65 | $ | 73 | |||||||||||||||
Other cash and interest-earning investments: |
|||||||||||||||||||||||||
Average balance (in billions) | $ | 3.1 | $ | 2.9 | $ | 3.0 | $ | 3.0 | $ | 3.0 | |||||||||||||||
Average annualized yield | 0.54 | % | 0.44 | % | 0.17 | % | 0.49 | % | 0.11 | % | |||||||||||||||
Interest revenue - net (in millions) | $ | 4 | $ | 3 | $ | 1 | $ | 7 | $ | 2 | |||||||||||||||
Client credit balances: |
|||||||||||||||||||||||||
Average balance (in billions) | $ | 16.1 | $ | 16.1 | $ | 14.4 | $ | 16.1 | $ | 14.2 | |||||||||||||||
Average annualized cost | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | |||||||||||||||
Interest expense (in millions) | ($0 | ) | ($0 | ) | ($0 | ) | ($1 | ) | ($1 | ) | |||||||||||||||
Average interest-earning assets (in billions) | $ | 24.6 | $ | 24.4 | $ | 21.8 | $ | 24.5 | $ | 22.0 | |||||||||||||||
Average annualized yield | 2.50 | % | 2.42 | % | 2.66 | % | 2.46 | % | 2.69 | % | |||||||||||||||
Net interest revenue (in millions) | $ | 154 | $ | 151 | $ | 147 | $ | 305 | $ | 300 | |||||||||||||||
NOTE: See Glossary of Terms on the Company's website at www.amtd.com for definitions of the above metrics. |
TD AMERITRADE HOLDING CORPORATION | |||||||||||||||||||||||||||||||||||||||||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | |||||||||||||||||||||||||||||||||||||||||||||
Dollars in millions | |||||||||||||||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||||||||||||||
Quarter Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
Mar. 31, 2017 | Dec. 31, 2016 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||
$ | % of Net Rev. | $ | % of Net Rev. | $ | % of Net Rev. | $ | % of Net Rev. | $ | % of Net Rev. | ||||||||||||||||||||||||||||||||||||
EBITDA (1) |
|||||||||||||||||||||||||||||||||||||||||||||
Net income - GAAP | $ | 214 | 23.7 | % | $ | 216 | 25.1 | % | $ | 205 | 24.2 | % | $ | 430 | 24.4 | % | $ | 417 | 25.1 | % | |||||||||||||||||||||||||
Add: | |||||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization | 25 | 2.8 | % | 24 | 2.8 | % | 22 | 2.6 | % | 49 | 2.8 | % | 44 | 2.7 | % | ||||||||||||||||||||||||||||||
Amortization of acquired intangible assets | 19 | 2.1 | % | 19 | 2.2 | % | 22 | 2.6 | % | 38 | 2.2 | % | 45 | 2.7 | % | ||||||||||||||||||||||||||||||
Interest on borrowings | 14 | 1.5 | % | 14 | 1.6 | % | 13 | 1.5 | % | 28 | 1.6 | % | 26 | 1.6 | % | ||||||||||||||||||||||||||||||
Provision for income taxes | 130 | 14.4 | % | 123 | 14.3 | % | 125 | 14.8 | % | 253 | 14.4 | % | 244 | 14.7 | % | ||||||||||||||||||||||||||||||
EBITDA - non-GAAP | $ | 402 | 44.5 | % | $ | 396 | 46.1 | % | $ | 387 | 45.7 | % | $ | 798 | 45.3 | % | $ | 776 | 46.8 | % | |||||||||||||||||||||||||
As of | |||||||||||||||||||||||||||||||||||||||||||||
Mar. 31, | Dec. 31, | Sept. 30, | June 30, | Mar. 31, | |||||||||||||||||||||||||||||||||||||||||
2017 | 2016 | 2016 | 2016 | 2016 | |||||||||||||||||||||||||||||||||||||||||
Liquid Assets Available for Corporate Investing and Financing Activities (2) |
|||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents - GAAP | $ | 2,231 | $ | 1,662 | $ | 1,855 | $ | 1,917 | $ | 2,476 | |||||||||||||||||||||||||||||||||||
Less: Non-corporate cash and cash equivalents | (1,286 | ) | (1,203 | ) | (1,363 | ) | (1,067 | ) | (1,416 | ) | |||||||||||||||||||||||||||||||||||
Corporate cash and cash equivalents | 945 | 459 | 492 | 850 | 1,060 | ||||||||||||||||||||||||||||||||||||||||
Corporate investments | 747 | 747 | 757 | 400 | - | ||||||||||||||||||||||||||||||||||||||||
Less: Corporate liquidity maintained for operational contingencies | (723 | ) | (773 | ) | (773 | ) | (764 | ) | (764 | ) | |||||||||||||||||||||||||||||||||||
Amounts maintained for corporate working capital | (87 | ) | (87 | ) | (87 | ) | (87 | ) | (87 | ) | |||||||||||||||||||||||||||||||||||
Amounts held as collateral for derivative contracts | (40 | ) | (32 | ) | (93 | ) | (94 | ) | (89 | ) | |||||||||||||||||||||||||||||||||||
Excess corporate cash and cash equivalents and investments | 842 | 314 | 296 | 305 | 120 | ||||||||||||||||||||||||||||||||||||||||
Excess regulatory net capital over management targets | 122 | 478 | 357 | 242 | 404 | ||||||||||||||||||||||||||||||||||||||||
Liquid assets available for corporate investing and financing activities - non-GAAP | $ | 964 | $ | 792 | $ | 653 | $ | 547 | $ | 524 | |||||||||||||||||||||||||||||||||||
Note: The term "GAAP" in the following explanation refers to generally accepted accounting principles in the United States. | |||||||||||||||||||||||||||||||||||||||||||||
(1) EBITDA (earnings before interest, taxes, depreciation and amortization) is considered a non-GAAP financial measure as defined by SEC Regulation G. We consider EBITDA an important measure of our financial performance and of our ability to generate cash flows to service debt, fund capital expenditures and fund other corporate investing and financing activities. EBITDA is used as the denominator in the consolidated leverage ratio calculation for covenant purposes under our senior revolving credit facility. EBITDA eliminates the non-cash effect of tangible asset depreciation and amortization and intangible asset amortization. EBITDA should be considered in addition to, rather than as a substitute for, GAAP pre-tax income, net income and cash flows from operating activities. | |||||||||||||||||||||||||||||||||||||||||||||
(2) Liquid assets available for corporate investing and financing activities is considered a non-GAAP financial measure as defined by SEC Regulation G. We consider "liquid assets available for corporate investing and financing activities" to be an important measure of our liquidity. We include the excess capital of our regulated subsidiaries in the calculation of liquid assets available for corporate investing and financing activities, rather than simply including the regulated subsidiaries' cash and cash equivalents, because capital requirements may limit the amount of cash available for dividend from the regulated subsidiaries to the parent company. Excess capital, as defined below, is generally available for dividend from the regulated subsidiaries to the parent company. Liquid assets available for corporate investing and financing activities should be considered as a supplemental measure of liquidity, rather than as a substitute for GAAP cash and cash equivalents. | |||||||||||||||||||||||||||||||||||||||||||||
We define liquid assets available for corporate investing and financing activities as the sum of (a) excess corporate cash and cash equivalents and investments and (b) our regulated subsidiaries net capital in excess of minimum operational targets established by management. Excess corporate cash and cash equivalents and investments includes cash and cash equivalents from our investment advisory subsidiaries and excludes (i) amounts being maintained to provide liquidity for operational contingencies, including lending to our broker-dealer and FCM/FDM subsidiaries under intercompany credit agreements, (ii) amounts maintained for corporate working capital and (iii) amounts held as collateral for derivative contracts. Liquid assets available for corporate investing and financing activities is based on more conservative measures of net capital than regulatory requirements because we generally manage to higher levels of net capital at our regulated subsidiaries than the regulatory thresholds require. |
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