1st fiscal quarter highlights:
* Cash earnings totaled $47.6 million for the first quarter ended
January 31, 2001, a 27% decrease from first quarter last year. Net
income was $37.1 million for the first quarter, compared to
$57 million a year ago.
* Cash earnings per share were $0.13, compared to $0.17 last year.
After deducting goodwill, earnings per share were $0.10 versus $0.15
a year ago.
* Revenues were $347 million compared to $360 million last quarter,
and were down 9% from first quarter 2000.
* Pre-tax operating margin (excluding goodwill and marketing) was 30%
compared to 31% last quarter and 38% last year.
* Customer assets increased 3% from a year ago to $154 billion, and
were down 3% from last quarter.
* New account openings were 160,000 at an average cost per account of
$175.
* Trades per day were 149,100 (with 74% of transactions on-line)
compared to 151,900 last quarter. This represents a 21% decrease
from the first quarter of last year.
NEW YORK, Feb. 14 /PRNewswire/ -- TD Waterhouse Group, Inc. today
announced cash earnings of 13 cents per share (10 cents per share after
deducting goodwill) on revenues of $347 million despite difficult market
conditions in the first quarter. The firm also achieved a 30% pre-tax
operating margin (excluding goodwill and marketing).
"We made progress against our goals this quarter in spite of challenging
market conditions. While we saw an 18% decline in the NASDAQ composite and the
Dow Jones Industrial Average was virtually unchanged from October 31 to
January 31, TD Waterhouse finished the quarter with $154 billion in assets,
down only 3% from October 31," said Chief Executive Officer Steve McDonald.
"The firm also reported 160,000 new accounts with an average cost per new
account of $175, which we believe is the lowest in the industry and a
traditional strength of TD Waterhouse."
"Our customers' curtailed investment activity this quarter affected our
results. This did not distract us from our objective of delivering better
products and services to customers, with the long-term goal of becoming our
customers' primary financial service relationship," McDonald said. "Our focus
on both long-term success and short-term results helped us generate positive
financials for the quarter and execute against our four key growth strategies:
enhancing customer relationships; expanding core and new growth segments;
leveraging technology; and extending global reach."
1. Enhancing customer relationships:
"We're constantly reviewing our products and services to ensure they meet
customers' needs, and this quarter we closed gaps in some key areas," said
Frank J. Petrilli, President and COO. "We've made progress on our segmentation
strategy of customizing services for specific customer groups, and we expanded
our products for independent investment advisors."
Specific ways TD Waterhouse is enhancing its relationships with customers
include:
* Launching a new service for active investors in the United States.
This two-tiered program, called Select and Select Plus, was rolled
out to customers in December and provides active investors with
one-screen access to all of the resources needed to make swift
investment decisions. This enhanced service is offered at a discount
to our standard commission rate, making it one of the most
competitive offerings for active investors in the industry.
* New programs for independent financial advisor customers in both the
U.S. and Canada. In the U.S., we announced an agreement to allow us
to market administrative trust services through The Capital Trust
Company of Delaware, an independent trust company. In Canada, an
agreement with Spectra Securities Software will allow us to offer a
wealth management portal with contact management and portfolio
management software via an Internet link.
TD Waterhouse's efforts to meet investors' needs continue to be recognized
around the world. In the U.K., the firm won the Most Innovative New Entrant
award at the Institute of Financial Services Financial Innovation Annual
Awards in January. In addition, our joint venture in Japan was ranked first
among the Internet brokerages in two of the three categories in the "The First
Complete Guide to Online Trading" in the Nikkei Net Trading magazine (Vol. 2,
2001, published on January 18, 2001 by Nikkei Business Publications Inc., sold
by Nikkei BP Publishing Center, Inc.).
2. Expanding core and new growth segments:
TD Waterhouse remains committed to finding new sources of growth, both by
providing existing customers with enhanced services and by creating new
customer relationships. New initiatives to help us reach this goal include:
* A marketing agreement with Clarica Life Insurance Company in Canada
that will allow Clarica and its agents to refer customers who wish
to buy and sell stocks and bonds to TD Waterhouse. Clarica sales
professionals currently offer financial planning solutions to their
clients in the areas of asset allocation, insurance and mutual fund
investing. Through this relationship, Clarica's online customer
access system will link with TD Waterhouse's online platform to give
customers access to comprehensive account information. Clarica
serves nearly 3 million customers through 7,300 staff, agents,
financial planners and group representatives that operate out of 90
offices in Canada.
* TD Waterhouse also has launched incentive promotions in both the
U.S. and Canada for new and existing customers who fund a retirement
account with $10,000. In the U.S., we've also teamed up with Quicken
to present investors who purchase TurboTax(SM) a special offer when
they open an IRA with the firm.
* Our joint venture in Japan expanded its equity product offering to
include NASDAQ Japan stocks in addition to issues traded on the
Tokyo and Osaka Stock Exchanges.
3. Leveraging technology:
In addition to launching a new web-based platform for active investors
this quarter, we continued to build our wireless platform around the world.
Recent initiatives include:
* A new feature for AT&T's Digital Pocketnet(SM) service in the U.S.
The "TD Waterhouse Quotes & News" wireless market information system
is a featured provider, which makes it a free site for all of AT&T's
Digital Pocketnet(SM) customers.
* In Canada, we added options and mutual fund trading to our wireless
platform, creating the first Canadian service that lets Canadian
investors use web-enabled cell phones to trade equities, options and
mutual funds in one service.
* Launching wireless trading in Japan for Japanese and U.S. equities
and a free alert service for the estimated 12 million users of
DoCoMo's i-mode mobile telephone service. In December, our joint
venture, Tokyo-Mitsubishi TD Waterhouse, became the first company in
Japan to offer U.S. equity trading for i-mode, as well as a free
service that provides real-time financial news, quotes, price alerts
and more via an e-mail to a customer's i-mode phone.
* We had another first when we rolled out Australia's first wireless
service that gives investors there access to both Australian and
U.S. stock quotes, indices and news.
* In Hong Kong, we created an alliance with two other companies to
offer the country's first Internet-on-TV stock trading service.
Customers of Hong Kong's only Internet-on-TV service, iCare, can now
open investment accounts and trade stocks at TD Waterhouse's
website.
4. Extending global reach:
During the quarter, we continued to look for growth opportunities outside
North America, most recently in the United Kingdom. TD Waterhouse teamed up
with The Charles Schwab Corporation to create a joint venture to participate
in market making in the U.K., and announced the joint venture's acquisition of
Glasgow, Scotland-based Aitkin-Campbell to serve as the foundation for its
business. TD Waterhouse and Schwab each have an equal stake in the joint
venture, which is expected to receive regulatory approval in the second
quarter of 2001.
"This joint venture does three important things for TD Waterhouse," said
McDonald. "It illustrates our commitment to providing U.K. clients with the
highest quality services. It allows us to vertically integrate our businesses
in the U.K., and it will help us further diversify our revenue streams."
Outlook:
"Clearly, current market conditions are difficult for both our customers
and our industry. If these conditions persist, it is likely that we will not
achieve our goals for the fiscal year of 1.2 million new accounts and $40
billion in new customer assets," McDonald said. "Regardless of future market
conditions, rest assured that we will continue to manage our operations
carefully while investing to build our business and enhance our customers'
experience."
TD Waterhouse Group, Inc., (NYSE: TWE; TSE), also known as "TD
Waterhouse," provides investors with a broad range of brokerage, mutual fund,
banking and other consumer financial products on an integrated basis.
Worldwide, TD Waterhouse currently services 4.5 million customer accounts in
the United States, Canada, the United Kingdom, Australia, and Hong Kong. The
firm also has joint ventures in Japan, India and Luxembourg to serve investors
in those countries. TD Waterhouse can be found on the Internet at
http://www.tdwaterhouse.com and on America Online at Keyword: TD Waterhouse.
TD Waterhouse's majority owner is TD Bank (NYSE: TD; TSE), which holds
88.6% of the outstanding share capital of TD Waterhouse. Headquartered in
Toronto, Canada, with offices around the world, TD Bank Financial Group offers
a full range of financial products and services to approximately 13 million
customers worldwide.
SUMMARY DISCUSSION OF RESULTS
FOR 1st QUARTER 2001
Net income for the quarter of $37 million decreased 35% from first quarter
2000. Cash earnings per share (i.e. excluding the after tax impact of
goodwill amortization) of $0.13 compares to $0.17 last year.
Results for the quarter reflect the following:
* Total revenue of $347 million decreased 9% from 1st quarter last
year as the impact of reduced trading by customers more than offset
the growth in other revenue categories.
* Commissions and fees declined 24% to $196 million as revenue trades
per day decreased 22%. Commissions per revenue trade also decreased
4% as the popularity of our online trading platform continued to
increase with 74% of trades transacted on-line versus 72% a year
ago.
* Mutual fund and related revenue grew 25% in response to our focus on
asset gathering as mutual funds and FDIC-insured money market
deposits reached $40 billion.
* Net interest grew 5% reflecting a 30 basis point improvement in the
spread on margin loans and the increased value of our invested
capital; these positive results were offset in part by a 7% decline
in average margin loan balances.
* Other income more than doubled. The $16 million increase is mainly
the result of $11 million of securities gains as well as $4 million
of new fee income.
Operating expenses (excluding goodwill) of $271 million were about the
same as last year.
* Employee compensation and benefits decreased 2% to $102 million,
with a 16% increase in full time equivalent employees more than
offset by a decrease in compensation based on the Company's
operating results.
* Occupancy and equipment and professional fees increased 29% and 34%
respectively. These categories are reflective of our technology and
globalization initiatives.
* Advertising and marketing decreased 23% to $28 million. First
quarter last year marked the first full quarter of our new branding
and advertising campaign following our initial public offering.
While this quarter reflects the upfront cost of production for a new
advertising campaign, we spent less than originally intended, in
recognition of the generally less responsive environment. It is
important to note that we believe that our advertising cost per new
account opened of $175 is still the best amongst all of our major
competitors.
Also reflected in these results is the start up impact of our expansion
outside North America. This quarter these operations cost us $12 million
after tax versus $3 million in first quarter 2000.
Sequential quarterly results indicate a 10% decrease in cash earnings per
share with reported net income of $37 million compared to $42 million in 4th
quarter 2000.
* The overall revenue decrease of 3% compares to a 3% decline in
operating expenses excluding advertising and goodwill.
* Net interest revenue decreased 13% mainly as a result of an 18%
decrease in average margin loans.
* Other income grew $9 million, reflecting a $5 million increase in
securities gains and $3 million of new fee income.
* Professional fees decreased 27% as a result of lower consulting
expenditures which peaked in fourth quarter of 2000.
* The 28% increase in advertising is largely reflective of the launch
of our new TV and print campaigns mentioned above.
This release may contain forward-looking statements, including statements
with respect to our operating goals. These statements, which reflect
management's current beliefs and expectations, are subject to risks and
uncertainties that may cause actual results to differ materially from these
statements. Such risks and uncertainties include, but are not limited to,
market volatility, decreased trading activity, the development and acceptance
of new products and services, system delays and failures, competition, and
general economic conditions. For a discussion of risks and uncertainties that
may cause actual results to differ from those reflected in such
forward-looking statements, please refer to our filings with the Securities
and Exchange Commission, including the information included under the heading
"Item 1. Business-Risk Factors" in our Annual Report on Form 10-K for the
fiscal year ended October 31, 2000.
Webcast of call: A live internet webcast of TD Waterhouse's quarterly
conference call with investors and analysts will take place on February 14,
2001 at 10:30 a.m. EST. The call will be broadcast via the TD Waterhouse
website. To reach the webcast, please visit http://www.tdwaterhouse.com and
click on the Investor Relations tab where you will see a link for "Webcast
Regarding First Quarter Earnings Results - February 14, 2001, at 10:30 AM
EST."
TD WATERHOUSE GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in US $ millions, except per share amounts)
(unaudited)
Three Months Ended
January 31
2001 2000 % Change
Inc/(Dec)
Revenues
Commissions and Fees $196.3 $ 258.8 -24%
Mutual Fund and Related Revenue 41.6 33.2 25%
Net Interest Revenue 79.8 75.9 5%
Other 29.6 13.7 116%
Total Revenues 347.3 381.6 -9%
Expenses
Employee Compensation
and Benefits 101.9 103.5 -2%
Execution and Clearing Costs 39.5 41.1 -4%
Occupancy and Equipment 34.5 26.9 29%
Advertising and Marketing 28.0 36.1 -23%
Communications 15.5 13.6 14%
Amortization of Goodwill 11.9 9.6 23%
Professional Fees 11.6 8.6 34%
Other 39.5 40.9 -3%
Total Expenses 282.4 280.3 1%
Income Before Income Taxes 64.9 101.3 -36%
Provision for Income Taxes 27.8 44.3 -37%
Net Income $37.1 $57.0 -35%
Earnings Per Share
- Earnings from Operations $0.13 $0.17 -28%
- After Tax Impact of
Goodwill Amortization 0.03 0.02 29%
- Basic $0.10 $0.15 -36%
- Diluted $0.10 $0.15 -36%
Number of Shares Outstanding
(millions)
- Basic 379.8 376.4 1%
- Diluted 379.9 376.4 1%
TD WATERHOUSE GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in US $ millions, except per share amounts)
(unaudited)
Three Months Ended
January 31, October 31, % Change
2001 2000 Inc/(Dec)
Revenues
Commissions and Fees $196.3 $205.9 -5%
Mutual Fund and Related Revenue 41.6 40.3 3%
Net Interest Revenue 79.8 92.3 -13%
Other 29.6 21.0 41%
Total Revenues 347.3 359.5 -3%
Expenses
Employee Compensation
and Benefits 101.9 107.1 -5%
Execution and Clearing Costs 39.5 38.3 3%
Occupancy and Equipment 34.5 37.5 -8%
Advertising and Marketing 28.0 21.9 28%
Communications 15.5 14.7 6%
Amortization of Goodwill 11.9 11.8 1%
Professional Fees 11.6 15.9 -27%
Other 39.5 36.1 9%
Total Expenses 282.4 283.3 0%
Income Before Income Taxes 64.9 76.2 -15%
Provision for Income Taxes 27.8 34.0 -18%
Net Income $37.1 $42.2 -12%
Earnings Per Share
- Earnings from Operations $0.13 $0.14 -10%
- After Tax Impact of
Goodwill Amortization 0.03 0.03 1%
- Basic $0.10 $0.11 -12%
- Diluted $0.10 $0.11 -12%
Number of Shares outstanding
(millions)
- Basic 379.8 379.8 0%
- Diluted 379.9 380.2 0%
TD WATERHOUSE GROUP, INC.
OPERATING DATA
(in US $)
(unaudited)
Three Months Ended
January 31
2001 2000 % Change
Inc/(Dec)
Pre-Tax Operating Margin,
Excluding Goodwill 22% 29% -24%
Pre-Tax Operating Margin,
Excluding Goodwill
and Marketing 30% 38% -21%
Trades per Day (000) 149.1 190.0 -21%
Revenue Trades per Day (000) 140.4 179.4 -22%
On-Line Trades per Day (000) 110.4 136.9 -19%
Active Accounts - Ending (000) 3,241 2,372 37%
Total On-Line Accounts
- Ending (000) 2,372 1,416 68%
Total Customer Assets
- Ending ($Billions) $154.1 $150.3 3%
On-line Customer Assets
- Ending ($Billions) $105.6 $91.0 16%
Number of New Accounts (000) 159.5 260.5 -39%
Advertising per New Account $175.50 $138.71 27%
On-Line Penetration 74% 72% 3%
Commissions per Revenue Trade $20.56 $21.36 -4%
Three Months Ended
January 31, October 31, % Change
2001 2000 Inc/(Dec)
Pre-Tax Operating Margin,
Excluding Goodwill 22% 24% -10%
Pre-Tax Operating Margin,
Excluding Goodwill
and Marketing 30% 31% -1%
Trades per Day (000) 149.1 151.9 -2%
Revenue Trades per Day (000) 140.4 143.0 -2%
On-Line Trades per Day (000) 110.4 110.0 0%
Active Accounts - Ending (000) 3,241 3,109 4%
Total On-Line Accounts
- Ending (000) 2,372 2,272 4%
Total Customer Assets
- Ending ($Billions) $154.1 $158.9 -3%
On-Line Customer Assets
- Ending ($Billions) $105.6 $109.7 -4%
Number of New Accounts (000) 159.5 165.4 -4%
Advertising per New Account $175.50 $132.70 32%
On-Line Penetration 74% 72% 2%
Commissions per Revenue Trade $20.56 $20.80 -1%
Three Months Ended
December 31, September 30, % Change
2000 2000 Inc/(Dec)
Trades per Day (000) 153.0 152.6 0%
Revenue Trades per Day (000) 144.5 143.6 1%
On-Line Trades per Day (000) 112.2 110.9 1%
Active Accounts - Ending (000) 3,226 3,051 6%
Total On-Line Accounts
- Ending (000) 2,342 2,224 5%
Total Customer Assets
- Ending ($Billions) $141.9 $164.9 -14%
On-Line Customer Assets
- Ending ($Billions) $96.7 $114.4 -15%
Number of New Accounts (000) 163.1 159.4 2%
Advertising per New Account $183.56 $129.14 42%
On-line Penetration 73% 73% 1%
Commissions per Revenue Trade $20.49 $20.53 0%
TD WATERHOUSE GROUP, INC.
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(in US $ thousands)
(unaudited)
January 31, October 31,
2001 2000
Assets
Cash and cash equivalents $ 411,992 $ 859,579
Securities owned, at market value 542,612 138,515
Receivable from brokers and dealers 107,854 104,266
Receivable from customers 6,085,545 7,978,551
Deposits paid for securities borrowed 1,215,981 640,750
Deposits with clearing organizations 57,513 51,943
Fixed assets, net of depreciation 158,082 140,591
Goodwill, net of accumulated amortization 796,714 804,266
Other Assets 216,604 270,856
Total Assets $ 9,592,897 $10,989,317
Liabilities
Bank loans and overdrafts $ 27,458 $ 963,031
Deposits received for
securities loaned 3,218,328 4,111,677
Payable to brokers and dealers 158,998 105,467
Payable to customers 3,324,873 2,849,485
Accrued compensation,
taxes payable and other 597,067 735,734
Total Liabilities $ 7,326,724 $ 8,765,394
Stockholders' Equity $ 2,266,173 $ 2,223,923
Total Liabilities and
Stockholders' Equity $ 9,592,897 $10,989,317
SOURCE TD Waterhouse Group, Inc.
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Related links:
http://www.tdwaterhouse.com
CONTACT:
Melissa Gitter, First Vice President, Public
Affairs, 212-806- 3522, or Kevin Sterns, Executive Vice President
& Chief Financial Officer, 212-908-7301
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