TD Waterhouse Also Announces Share Repurchase Program
2nd fiscal quarter highlights:
* Cash earnings, which exclude goodwill, totaled $16.9 million for the
second quarter ended April 30, 2001, an 80% decrease from second
quarter last year which was the highest quarter on record. Net
income was $6.5 million for the second quarter, compared to $76.6
million a year ago.
* Cash earnings per share were $0.04, compared to $0.23 last year.
After deducting goodwill, earnings per share were $0.02 versus $0.20
a year ago. Excluding securities losses, cash earnings per share
were $0.05.
* Revenues were $283 million compared to $347 million last quarter and
$489 million second quarter 2000.
* Pre-tax operating margin (excluding goodwill and marketing) was 18%
compared to 30% last quarter and 36% last year.
* New account openings were 169,200 at an average cost per account of
$125.
* Customer assets of $138 billion were down 11% from last quarter, and
decreased 14% from a year ago.
* Margin loans of $4.2 billion were down 31% from last quarter and 53%
from a year ago.
* Trades per day were 124,200 (with 74% of transactions on-line)
compared to 149,100 last quarter. This represents a 51% decrease
from the second quarter of last year.
Year-to-date highlights:
* Revenue of $630 million for the first half of fiscal 2001 is down
11% from the last half of fiscal year 2000, and declined 28% from
the first half of fiscal 2000.
* Cash earnings totaled $64 million in the first half of fiscal 2001.
This compares to $97 million in the second half of fiscal 2000, and
$151 million in the first half of fiscal 2000.
* New account openings totaled 328,800 at an average cost per new
account of $150 for the first half of fiscal 2001. This compares to
337,800 in the second half of fiscal 2000, costing $134; and 678,800
in the first half of fiscal 2000, costing $96.
NEW YORK, May 16 /PRNewswire/ -- TD Waterhouse Group, Inc. today announced
cash earnings of 4 cents per share (2 cents per share after deducting
goodwill) on revenues of $283 million in the face of difficult market
conditions that persisted in the firm's second fiscal quarter. New account
openings in the quarter were 169,200 at an average cost per account of $125.
"Market conditions remained volatile in the last quarter, resulting in a
continued low level of trading activity by our customers. Since our revenue
sources remain primarily trading and margin loans, the ensuing financial
results are lower than the previous quarter. In response, the management team
heightened its focus on decreasing expenses and boosting revenues," Chief
Executive Officer Steve McDonald said.
"Our goal is to increase annualized pre-tax income by $200 million and
achieve a pre-tax, pre-goodwill, pre-marketing operating margin of 30%, the
high end of the firm's target range," McDonald said. "While the impact of the
resulting plan in this quarter was quite modest, the cost reduction measures
should yield an annualized $125 million improvement in pre-tax income by the
end of the fourth fiscal quarter of 2001. Of this total, $60 million will
come from decreased compensation and benefit costs primarily due to attrition
and $22 million will stem from changes in our marketing spend in line with
market conditions. The plan also calls for the firm to raise $50 million in
annualized revenue through segmented pricing adjustments by the fourth fiscal
quarter of 2001. The remaining $25 million will be realized during the first
fiscal quarter of 2002."
"Specifically, we plan to continue to take advantage of attrition to
reduce the size of our global workforce; extract operating efficiencies
through technology; and use segmentation to help make every customer
relationship profitable-all without any significant restructuring charges,"
McDonald said. "We've already achieved a key benchmark. One of our goals was
to reduce our headcount worldwide this quarter from 8,180 as of February 1 to
7,500 on April 30 without layoffs. We've exceeded this goal, with a headcount
of 7,418 at the end of the quarter."
Share Repurchase Program Approved
In addition, the Company's Board of Directors has approved the repurchase
of up to 3 million shares of the Company's common stock. The shares may be
purchased from time to time through open market transactions in the U.S.
"While the current environment continues to pose challenges for our
customers and our business, we believe in our long-term prospects for growth,"
said McDonald. "The share repurchase program that we announced today,
TD Waterhouse's first such program, reflects our commitment to enhancing
shareholder value."
Operating Highlights
"Enhancing our customers' experience continues to be a top priority even
as our management team refines its focus on cutting expenses and increasing
revenues. We believe we offer customers a compelling combination of superior
value and top-notch customer service, and we look forward to providing the
same quality service when market conditions improve," said Frank J. Petrilli,
President and Chief Operating Officer. "This approach helped us win the top
ranking in the Winter 2001 Forrester Research Brokerage PowerRankings(TM).
Forrester cited extras such as wireless trading and checking accounts as
contributing factors to our win. In addition, Money magazine ranked online
brokers in their June 2001 issue and TD Waterhouse earned the highest score
possible, five stars, in the customer service category."
Operating highlights at TD Waterhouse this fiscal quarter include:
* E-Services -- Through expansion of this project in this fiscal
quarter, U.S. customers can now receive electronic statements,
confirmations and tax documents in lieu of paper versions. This
program not only reduces the firm's mailing and communications
costs, but provides a valuable customer benefit in the form of an
online archive that's available around the clock.
* TD Waterhouse Wireless for Pocket PC -- The U.S. launch of our
offering for personal digital assistants provides customers with
cutting-edge access to their investment accounts with the ability to
view research; place stock, mutual fund and option orders; and view
account balances, holdings, account history and more.
* Expanding Wireless Access -- In Canada, the expansion of TD
Waterhouse's wireless offering to include options and mutual funds
made it the country's first to offer options, mutual funds and
equities all in one service.
* Improving web-based platforms -- TD Waterhouse Institutional
Services, our U.S. division that serves independent investment
advisors, announced enhancements to its web-based platform, Veo.
The platform has expanded to feature a simplified application
process, online management and submission of client fees, a
customizable homepage and access to TD Waterhouse's database of over
10,000 mutual funds -- all online at the click of a mouse.
* New Products -- TD Waterhouse began offering annuities online with
the launch of "Annuity Center." This new area of the firm's U.S.
website provides investors with a host of tools and products
including educational information, specific product information,
online applications and online tracking of annuity contracts.
* Online Investing Launch -- In India, Tata TD Waterhouse is ready to
offer online investing and the joint venture has a marketing launch
slated for later this month. In addition, Tata TD Waterhouse now
has a physical presence in nine Tata Finance branches, covering
India's major cities.
Outlook:
"The difficult market conditions of the past 12 months have tested the
resolve and resourcefulness of our management team. These circumstances
prompted the global team to take a fresh look at how we do business and have
resulted in new opportunities to reduce costs and increase revenue," McDonald
said. "Our plan to increase annualized pre-tax income by $200 million has
been carefully crafted, and our management team has both the commitment and
discipline that will be necessary to adhere to it in the coming quarters.
While the benefits of this plan have not yet been fully felt, we are confident
in our ability to successfully execute against the plan and expect to feel a
significant positive impact by fiscal year-end, regardless of market
conditions."
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 4.6 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
approximately 89% 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 2nd QUARTER 2001
Cash earnings per share (i.e., excluding the after tax impact of goodwill
amortization) was $0.04 ($0.05 excluding securities losses) and compares to
$0.23 last year. Net income for the quarter of $6.5 million decreased 91%
from second quarter 2000, which was a record quarter.
Results for the quarter reflect the following:
* Total revenue of $283 million decreased 42% from second quarter last
year as the impact of reduced trading by customers and reduced
borrowing through margin loans more than offset the growth in mutual
fund and related revenue.
* Commissions and fees declined 53% to $159 million as revenue trades
per day decreased 52%.
* Commissions per revenue trade of $20.59 are slightly lower than last
year's $20.87 as online penetration stabilized at 74% for both
periods.
* Mutual fund and related revenue grew by 19% reflecting growth in
mutual funds and FDIC Insured Money Market deposits which totaled
$39 billion at April 30, 2001 versus $37 billion a year ago.
* Net interest declined 32% as average margin loans of $5 billion this
year compared to $10 billion in the same quarter last year. This
decrease, along with the reduced value of invested capital, more than
offset a 54 basis point improvement in the spread on margin loans
(2.90% this quarter versus 2.36% a year ago).
* Other income decreased 24% to $15 million. This decrease is
entirely explained by securities losses of $5 million experienced
this quarter versus no impact from securities gains and losses a
year ago.
Operating expenses of $265 million (including goodwill of $12 million)
were 25% below second quarter last year.
* Employee compensation and benefits decreased 18% to $96 million
reflecting mainly a decrease in compensation based on the Company's
operating results. At April 30, 2001 there were 7,418 full-time
equivalent associates. This compares to 8,121 a year earlier.
* Occupancy and equipment increased 18%, running counter to current
business volume, as a reflection of our continued investment in
technology in North America and abroad.
* The rate of reduction in professional fees, 7%, was slower than the
rate of decline in business volume as it includes some of our
technology investment.
* Execution and clearing costs and communication expenses decreased
28% and 33% respectively in response to lower business volume.
* Advertising and marketing decreased 28% to $21 million. While we
had previously indicated the possibility of spending as much as
$25 million in the quarter, we cut our more discretionary
expenditures in response to the continuing unfavorable market
environment. With over 169,000 accounts opened, this resulted in
our advertising cost per new account of $125 (compared to $70 in
second quarter last year, and down from $175 in first quarter this
year).
These results reflect the impact of our continuing global expansion. This
quarter operations outside North America cost us $10 million after tax (about
$0.03 a share) versus $12 million in first quarter 2001 and $4 million in
second quarter 2000.
Sequential quarterly results indicate a decrease in cash earnings per
share to $0.04.
* Excluding securities gains last quarter and securities losses this
quarter ($10.5 million and $5.2 million respectively), revenue
decreased 14%. Total revenue, however, decreased 19% to
$283 million.
* Recognizing the extending nature of this difficult market
environment, with its negative implications for our clients'
portfolios and our business volume, we instituted a program to
improve our results through projects to reduce expenses and increase
revenues by $200 million (annualized).
* The 6% sequential decrease in expenses is, in part, a reflection of
the beginnings of this program, but as disclosed earlier it will
take a few quarters for the full impact to be realized. Our
commitment and our ability to deliver is already evidenced by the
reduction of full time equivalent associates and advertising and
marketing expenditures in the second quarter.
In the month of April, trades per day increased 4% from March to 121,500,
and decreased 49% from 238,000 last April. New account openings of 57,500
compare to 57,000 in March 2001 and 116,700 in April 2000.
This release contains projections and other forward-looking statements
regarding future events and our future financial performance. These
statements are based on management's current beliefs and expectations. These
beliefs and expectations are based on assumptions that are subject to risks
and uncertainties that may cause actual results to differ materially from
these statements. The forward-looking statements contained in this release
speak only as of the date hereof and we do not undertake any obligation to
provide updates on or corrections of such statements in the future as a result
of subsequent developments or otherwise. The risks and uncertainties that may
cause actual results to differ materially from these statements include, but
are not limited to, (i) general economic conditions, (ii) market volatility,
(iii) decreased trading activity by our customers, (iv) customer attrition,
(v) the development and acceptance of new products and services, (vi) system
delays and failures, (vii) competition, (viii) a slowdown in the expected rate
of employee attrition, (ix) the success of our expense reduction initiatives
in achieving their expected benefits, and (x) our ability to estimate when our
expense reduction initiatives will affect our operating results. 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 May 16, 2001 at
10:30 a.m. EDT. 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 under the "Live Earnings
Webcast" section.
TD WATERHOUSE GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in US $ millions, except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
April 30 April 30
% %
Change Change
2001 2000 Inc/Dec 2001 2000 Inc/Dec
Revenues
Commissions
and Fees $159.1 $336.9 -53% $355.3 $595.7 -40%
Mutual Fund and
Related Revenue 44.8 37.7 19% 86.4 70.9 22%
Net Interest
Revenue 63.6 94.0 -32% 143.4 170.0 -16%
Other 15.3 20.1 -24% 44.9 33.7 33%
Total Revenues 282.8 488.7 -42% 630.0 870.3 -28%
Expenses
Employee
Compensation
and Benefits 95.9 116.5 -18% 197.8 220.0 -10%
Execution and
Clearing Costs 34.9 48.2 -28% 74.4 89.3 -17%
Occupancy and
Equipment 39.5 33.3 18% 74.0 60.2 23%
Advertising
and Marketing 21.2 29.2 -28% 49.2 65.4 -25%
Communications 13.4 20.0 -33% 28.9 33.6 -14%
Amortization of
Goodwill 11.7 10.6 11% 23.6 20.2 17%
Professional Fees 10.5 11.3 -7% 22.0 19.9 11%
Other 37.8 82.3 -54% 77.3 123.1 -37%
Total Expenses 264.9 351.4 -25% 547.2 631.7 -13%
Income Before
Income Taxes 17.9 137.3 -87% 82.8 238.6 -65%
Provision for
Income Taxes 11.4 60.7 -81% 39.2 105.0 -63%
Net Income -
Reported Basis $6.5 $76.6 -91% $ 43.6 $133.6 -67%
Add: Goodwill
Amortization -
after tax $10.4 $9.0 16% $ 20.9 $17.0 23%
Cash Earnings $16.9 $85.6 -80% $ 64.5 $150.6 -57%
Add: Securities
(Gains)/Losses -
after tax 3.2 0.0 (3.4) 0.0
Cash Earnings
from Operations $20.1 $85.6 -76% $ 61.1 $150.6 -59%
Basic Earnings Per Share
* Reported Basis $0.02 $ 0.20 -91% $0.11 $0.35 -68%
* Cash Basis $0.04 $ 0.23 -80% $0.17 $0.40 -57%
* Cash Basis
(excluding
securities
gains and
losses) $0.05 $ 0.23 -76% $ 0.16 $ 0.40 -60%
Diluted Earnings per Share
* Reported Basis $0.02 $ 0.20 -91% $0.11 $0.35 -68%
Number of Shares Outstanding (millions)
* Basic 379.8 379.8 0% 379.8 378.1 0%
* Diluted 379.8 379.9 0% 379.8 378.2 0%
TD WATERHOUSE GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in US $ millions, except per share amounts)
(unaudited)
Three Months Ended
April 30, January 31, % Change
2001 2001 Inc/(Dec)
Revenues
Commissions and Fees $159.1 $196.3 -19%
Mutual Fund and Related Revenue 44.8 41.6 8%
Net Interest Revenue 63.6 79.8 -20%
Other 15.3 29.6 -48%
Total Revenues 282.8 347.3 -19%
Expenses
Employee Compensation and Benefits 95.9 101.9 -6%
Execution and Clearing Costs 34.9 39.5 -12%
Occupancy and Equipment 39.5 34.5 14%
Advertising and Marketing 21.2 28.0 -24%
Communications 13.4 15.5 -14%
Amortization of Goodwill 11.7 11.9 -1%
Professional Fees 10.5 11.6 -9%
Other 37.8 39.5 -4%
Total Expenses 264.9 282.4 -6%
Income Before Income Taxes 17.9 64.9 -73%
Provision for Income Taxes 11.4 27.8 -59%
Net Income - Reported Basis $6.5 $37.1 -82%
Add: Goodwill Amortization -
after tax $10.4 $10.5 -1%
Cash Earnings $16.9 $47.6 -65%
Add: Securities (Gains)/Losses -
after tax 3.2 (6.7)
Cash Earnings from Operations $20.1 $40.9 -51%
Basic Earnings Per Share
* Reported Basis $0.02 $0.10 -82%
* Cash Basis $0.04 $0.13 -65%
* Cash Basis (excluding
securities gains or losses) $0.05 $0.11 -51%
Diluted Earnings per Share
* Reported Basis $0.02 $0.10 -82%
Number of Shares outstanding (millions)
* Basic 379.8 379.8 0%
* Diluted 379.8 379.9 0%
TD WATERHOUSE GROUP, INC.
OPERATING DATA
(in US $)
(unaudited)
Three Months Ended Six Months Ended
April 30 April 30
% %
Change Change
2001 2000 Inc/Dec 2001 2000 Inc/Dec
Pre-Tax Operating
Margin, Excluding
Goodwill 10% 30% -65% 17% 30% -43%
Pre-Tax Operating
Margin, Excluding
Goodwill and
Marketing 18% 36% -50% 25% 37% -34%
Trades per Day
(000) 124.2 254.8 -51% 136.8 222.2 -38%
Revenue Trades
per Day (000) 115.6 239.8 -52% 128.1 209.4 -39%
On-Line Trades
per Day (000) 91.9 189.5 -51% 101.2 163.0 -38%
Active Accounts -
Ending (000) 3,269 2,813 16% 3,269 2,813 16%
Total On-Line
Accounts -
Ending (000) 2,492 1,950 28% 2,492 1,950 28%
Total Customer
Assets - Ending
($Billions) $ 137.6 $160.4 -14% $137.6 $160.4 -14%
On-line Customer
Assets - Ending
($Billions) $93.5 $109.0 -14% $93.5 $109.0 -14%
Number of
New Accounts
(000) 169.2 418.3 -60% 328.8 678.8 -52%
Advertising per
New Account $125.15 $69.92 79% $149.58 $96.32 55%
On-Line Penetration 74% 74% 0% 74% 73% 1%
Commissions per
Revenue Trade $20.59 $20.87 -1% $20.57 $21.09 -2%
Three Months Ended
April 30, January 31 % Change
2001, 2001, Inc/(Dec)
Pre-Tax Operating Margin,
Excluding Goodwill 10% 22% -53%
Pre-Tax Operating Margin,
Excluding Goodwill and Marketing 18% 30% -41%
Trades per Day (000) 124.2 149.1 -17%
Revenue Trades per Day (000) 115.6 140.4 -18%
On-Line Trades per Day (000) 91.9 110.4 -17%
Active Accounts - Ending (000) 3,269 3,241 1%
Total On-Line Accounts -
Ending (000) 2,492 2,372 5%
Total Customer Assets -
Ending ($Billions) $137.6 $154.1 -11%
On-Line Customer Assets -
Ending ($Billions) $93.5 $105.6 -11%
Number of New Accounts (000) 169.2 159.5 6%
Advertising per New Account $125.15 $175.50 -29%
On-Line Penetration 74% 74% 0%
Commissions per Revenue Trade $20.59 $ 20.56 0%
Three Months Ended
March 31, Dec. 31, % Change
2001 2000 Inc/(Dec)
Trades per Day (000) 134.1 153.0 -12%
Revenue Trades per Day (000) 124.8 144.5 -14%
On-Line Trades per Day (000) 99.1 112.2 -12%
Active Accounts - Ending (000) 3,243 3,226 1%
Total On-Line Accounts -
Ending (000) 2,446 2,342 4%
Total Customer Assets -
Ending ($Billions) $128.2 $141.9 -10%
On-Line Customer Assets -
Ending ($Billions) $86.6 $96.7 -10%
Number of New Accounts (000) 164.6 163.1 1%
Advertising per New Account $140.47 $183.56 -23%
On-line Penetration 74% 73% 1%
Commissions per Revenue Trade $20.87 $20.49 2%
TD WATERHOUSE GROUP, INC.
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(in US $ thousands)
(unaudited)
April 30, October 31,
2001 2000
Assets
Cash and cash equivalents $ 445,853 $ 859,579
Securities owned, at market value 503,089 138,515
Receivable from brokers and dealers 119,690 104,266
Receivable from customers 4,275,738 7,978,551
Deposits paid for securities borrowed 1,702,239 640,750
Deposits with clearing organizations 52,240 51,943
Fixed assets, net of depreciation 166,035 140,591
Goodwill, net of accumulated amortization 778,307 804,266
Other Assets 238,056 270,856
Total Assets $ 8,281,247 $10,989,317
Liabilities
Bank loans and overdrafts $ 107,047 $ 963,031
Deposits received for securities loaned 1,652,651 4,111,677
Payable to brokers and dealers 264,015 105,467
Payable to customers 3,436,701 2,849,485
Accrued compensation, taxes payable and other 557,639 735,734
Total Liabilities $ 6,018,053 $ 8,765,394
Stockholders' Equity $ 2,263,194 $ 2,223,923
Total Liabilities and Stockholders' Equity $ 8,281,247 $ 10,989,317
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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, both of TD Waterhouse
Group, Inc.
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