Loss of $21.8 million on a reported basis reflects recently-announced
restructuring charge of $22.4 million after tax
3rd fiscal quarter highlights:
-- Cash earnings (excluding goodwill and restructuring charges) totaled
$10.9 million for the third quarter ended July 31, 2001, a 76% decrease
from third quarter last year. On a reported basis, there was a net loss
for the quarter of $21.8 million, which includes the after tax impact of
goodwill amortization ($10.3 million) and restructuring charges incurred
in the fiscal quarter ($22.4 million).
-- Cash earnings per share were $0.03, compared to $0.12 last year. After
deducting goodwill and restructuring costs, TD Waterhouse incurred a
$0.06 loss per share compared to earnings per share of $0.09 a year ago.
-- Revenues were $257 million compared to $283 million last quarter and
$346 million third quarter 2000.
-- Pre-tax operating margin (excluding goodwill, marketing, and
restructuring costs) was 15%, compared to 18% last quarter and 29% last
year.
-- New account openings were 105,500 at an average cost per account
of $154.
-- Customer assets of $137 billion were down 1% from last quarter, and
decreased 16% from a year ago.
-- Margin loans of $4.3 billion were up 1% from last quarter and down 50%
from a year ago.
-- Trades per day were 101,700 (with 77% of transactions on line) compared
to 124,200 last quarter. Trading volumes declined 35% from the third
quarter of last year.
Year-to-date highlights:
-- Revenues of $887 million for the first nine months of fiscal 2001 are
down 27% from the first nine months of fiscal 2000.
-- Cash earnings totaled $75 million in the first nine months of fiscal
2001. This compares to $195 million in the first nine months of
fiscal 2000.
-- New account openings totaled 434,300 at an average cost per new account
of $151 for the first nine months of fiscal 2001. This compares to
851,200 in the first nine months of fiscal 2000, with an average cost
of $104.
NEW YORK, Aug. 22 /PRNewswire/ -- TD Waterhouse Group, Inc.
(NYSE: TWE; TSE) today announced cash earnings of $.03 cents per share on
revenues of $257 million in the face of further deterioration of market
conditions and a resulting decline in investor activity in the firm's third
fiscal quarter. New account openings in the quarter were 105,500 at an average
cost per account of $154.
In the third fiscal quarter, TD Waterhouse recorded $10.3 million in
after-tax charges for amortization of goodwill and other intangibles
associated with past acquisitions as well as a $22.4 million after-tax charge
for restructuring ($35.4 million pre-tax).
"As uncertain market conditions kept investors on the sidelines, we saw a
further decrease in investment activity among customers this quarter. While
our overall results reflect these declines, our customer asset level was
virtually unchanged, which positions us to benefit from a rebound in investor
sentiment and increase in investment activity," Chief Executive Officer Steve
McDonald said.
Strategic Restructuring
"Last fiscal quarter we took decisive action to combat weak activity
levels through Project 200, a combination of important cost reduction and
revenue raising initiatives designed to increase pre-tax income by
$200 million. We have made notable progress on Project 200's cost-cutting
measures, including surpassing our target of reducing our workforce to 7,000
Associates through attrition this quarter," McDonald said. "However, it had
become clear that the current market environment required further action and
last month we announced a strategic restructuring that provides near-term
relief from challenges in our operating environment and better positions the
firm for long term growth."
Under the recently-announced restructuring plan, TD Waterhouse will reduce
its global workforce by approximately 600 positions or 9%. Specifically, the
restructuring consists of: moving to a two-call center strategy in the U.S. by
closing the firm's third call center in Chicago; closing 17 U.S. branches to
focus physical locations in areas the firm has identified as growth
opportunities; and reducing U.S. corporate staff by 10% and eliminating
selected U.S. technology positions. In the U.K., the firm announced plans to
close a call center located in Bradford. The restructuring is expected to
result in annual pre-tax savings of more than $40 million beginning next
fiscal quarter.
"One important focus of the restructuring is realizing operational
efficiencies gained through technology," McDonald added. "In doing so, we are
able to do more with fewer resources than before, ensuring that we will be
able to provide customers with the same level of high-quality service they
have come to expect from us -- even if investor activity levels increase
significantly from this quarter's levels."
Operating Highlights
"In current market conditions, customers rely on us as a source of
investment information and guidance -- making our ability to deliver
outstanding customer service and high-quality products more important than
ever. To that end, we continue to build our broad financial services platform
to offer investors around the world the resources and products they need to
successfully manage their investments," said Frank J. Petrilli, President and
Chief Operating Officer.
Operating highlights at TD Waterhouse include:
-- Acquisition of R.J. Thompson Holdings, Inc. (RJT) -- We announced an
agreement to acquire Omaha, Nebraska-based RJT, a direct access
brokerage firm earlier this month. The technology platform we will
secure upon closure of this transaction will form the basis of one of
the industry's most robust offerings for the active trader. RJT will
continue operating as a separate unit serving the needs of active
traders, and in the first half of 2002 key features of RJT's technology
platform will be incorporated into TD Waterhouse's services. The
transaction is expected to close in the fourth fiscal quarter of 2001
subject to regulatory approvals and satisfaction of certain closing
conditions.
-- Sale of Epoch Partners, Inc. -- This quarter we sold our stake in Epoch
Partners, Inc., the online investment bank, to Goldman Sachs Group,
Inc. In connection with this sale, we will offer U.S. retail and
investment advisor customers access to high-quality investment research
and equity product offerings from Goldman Sachs, one of the world's
leading investment banks.
-- Joint Venture with Singapore's DBS Group -- In July we agreed to create
a joint venture with DBS Group Holdings Ltd., the largest banking group
in Southeast Asia, to provide self-directed investors access to a broad
range of global investment services through the Internet, call centers,
kiosks, and other distribution channels. Initially the joint venture
will serve customers in Hong Kong and Singapore, where TD Waterhouse
and DBS each have existing operations, with plans to expand into other
Asian markets.
-- Internaxx Launch -- This quarter we launched Internaxx, the
multi-market, multi-currency, multi-lingual service for European
high-net worth investors, that was created through our joint venture
with Banque Generale du Luxembourg, one of the largest banks in
Luxembourg and a member of the Fortis Group.
-- Online Fixed Income Center -- In Canada we launched an online fixed
income center that provides customers with access to more than
1,000 fixed income and money market products online -- more than any
other Canadian self-directed broker.
-- New U.K. Mutual Fund Marketplace -- The launch of our fund supermarket
means U.K. investors can access nearly 400 funds via telephone and the
web. The marketplace's offerings include six TD Waterhouse funds,
managed by TD Asset Management Inc., and access to institutional fund
research and analysis from TD Asset Management's global fund research
group and Morningstar UK.
-- Implementing Computer Telephony Integration (CTI) Technology -- This
quarter we rolled out a CTI initiative in the U.S. to improve the
efficiency of handling customer calls. This initiative is expected to
both improve the firm's average speed of answering calls and
automatically route incoming calls most effectively.
Outlook
"By restructuring our business to realize operational efficiencies
achieved through technology solutions, we reconcile two important needs:
balancing expenses and revenues in the face of continuing declines in investor
activity, while leaving the firm with the resources critical for future growth
when market conditions become more favorable," McDonald said. "Despite the
difficult operating environment facing our industry, we remain convinced of
the strength of our business model and expect that the corporate restructuring
we announced, the provisions of Project 200, and the enhancements we continue
to make to our global offering, will keep the firm on the path toward
long-term success and will foster shareholder value."
TD Waterhouse Group, Inc., (NYSE/TSE: TWE), also known as "TD Waterhouse,"
provides investors and independent financial advisors with a broad range of
brokerage, mutual fund, banking and other consumer financial products on an
integrated basis. Worldwide, TD Waterhouse currently services 3.3 million
active 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/TSE: TD), 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 3rd QUARTER 2001
Cash earnings per share (i.e. excluding the after tax impact of goodwill
amortization and the restructuring charge) was $0.03 ($0.02 excluding net
securities gains) and compares to $0.12 last year.
Cash earnings from operations decreased 79% from third quarter last year
to $9.4 million.
On a reported basis a net loss for the quarter of $21.8 million includes
an after-tax restructuring charge of $22.4 million ($35.4 million pre-tax).
This compares to net income last year of $34.5 million.
Results for the quarter reflect the following:
Total revenue of $257 million decreased 26% from third 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 36% to $131 million as revenue trades per
day decreased 36%.
-- Commissions per revenue trade of $20.06 are slightly higher than last
year's $19.69, reflecting the introduction of a limit order fee in the
4th quarter 2000, and offset in part by online penetration which
increased to 77% in the quarter. This compares to 74% for third
quarter last year.
-- Mutual fund and related revenue grew by 24% reflecting growth in money
market mutual funds and FDIC-insured money market deposits which
totaled $17.3 billion at July 31, 2001 versus $15.4 billion a year ago.
Total funds and deposits at July 31, 2001, were $39.9 billion, up
slightly from a year ago.
-- Net interest declined 35% as average margin loans were $4.3 billion
this quarter compared to $8.5 billion in the same quarter last year.
This decrease, along with the reduced value of invested capital, more
than offset a 42 basis point improvement in the spread on margin loans
(2.91% this quarter versus 2.49% a year ago).
-- Other income increased 34% to $22 million and reflects new fees
introduced in the U.S. since 3rd quarter 2000.
Operating expenses of $282 million include goodwill amortization of
$12 million and a restructuring charge of $35 million. Excluding these items,
operating expenses were 12% below third quarter last year.
-- Employee compensation and benefits include a restructuring charge of
$8 million. A decrease of 6% excluding the charge is largely a
reflection of a reduction in full time equivalent associates to 6,741
from 8,436 a year earlier, offset in part by annual merit increases and
the expansion of our technology team.
-- Occupancy and equipment includes a restructuring charge of $23 million.
The 24% increase excluding the charge is a reflection of our continued
investment in technology in North America and abroad.
-- Excluding a restructuring charge of $0.5 million, professional fees
decreased 8%. This rate of decline is slower than the decrease in
business volume as it includes some of our technology investment.
-- Execution and clearing costs and communication expenses decreased 16%
and 14% respectively in response to lower business volume.
-- Advertising and marketing decreased 31% to $16 million. While we had
previously indicated the possibility of spending as much as $19 to
$20 million in the quarter, we cut our more discretionary expenditures
in response to the continuing unfavorable business conditions. With
over 105,500 accounts opened in the quarter, our advertising cost per
new account was $154 (compared to $136 in third quarter last year and
$125 in second quarter this year).
-- Other expenses of $34 million include a restructuring charge of
$4.0 million. A decrease of 38% excluding the charge is in part a
reflection of reduced business volume, but also reflects the success of
the Project 200 initiatives.
These results also reflect the impact of our continuing global expansion.
This quarter operations outside North America cost us $12 million after-tax
(excluding after-tax $2.0 million of restructuring) versus $10 million in each
of second quarter 2001 and third quarter 2000.
Results for the 3rd Quarter reflect a decrease in cash earnings per share
to $0.03 from 2nd Quarter cash earnings of $0.04. The 3rd Quarter results also
include:
-- Total revenue decreased 9% to $257 million.
-- Excluding securities losses last quarter and securities gains this
quarter ($5.2 million and $2.3 million respectively), revenue decreased
12%. The decrease in revenue is reflective of an 18% decrease in
revenue trades per day and a 10% decrease in net interest revenue
(as average margin loans decreased $0.7 billion to $4.3 billion).
These decreases were offset in part by a 3% growth in mutual fund and
related revenue.
-- As we announced last quarter, our Project 200 included significant
initiatives to reduce expenses. This project is largely responsible
for the 7% sequential decrease in expenses this fiscal quarter
(excluding goodwill amortization and restructuring charges) to
$235 million.
-- Our most significant success in cutting costs comes from the reduction
of full time equivalent staff through attrition to 6,741 at July 31
versus our Project 200 target of 7,000. This is an 18% decrease from
January 31, 2001, the base for Project 200; it does not include the
impact of the recently announced restructuring which will result in a
further decrease of almost 600 full-time equivalents.
-- We announced the restructuring at the end of July because of the
continued decrease in revenue, and in recognition of our continued
success in leveraging technology. When this restructuring is completed
during fourth quarter 2001, we expect it will reduce operating expenses
by $40 million, annualized.
In the month of July trades per day decreased 15% from June to 85,300, and
decreased 48% from 165,000 last July. New account openings totaled 34,700,
compared to 34,500 in June 2001 and 50,500 in July 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) changes in general economic conditions and prevailing
interest rates, (ii) market volatility or further sustained decreases in the
market prices of securities generally, (iii) significant increases or
decreases in trading activity by our customers, (iv) customer attrition, (v)
the development and acceptance of new products and services, (vi) system
delays and failures, (vii) increased 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.
TD WATERHOUSE GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in US $ millions, except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
July 31 July 31
% %
Change Change
2001 2000 Inc/Dec 2001 2000 Inc/Dec
Revenues
Commissions
and Fees $130.7 $ 202.9 -36% $486.0 $ 798.6 -39%
Mutual Fund and
Related Revenue 46.0 37.1 24% 132.3 108.0 23%
Net Interest
Revenue 57.5 88.8 -35% 200.9 258.8 -22%
Other 22.4 16.8 34% 67.4 50.5 33%
Total Revenues 256.6 345.6 -26% 886.6 1,215.9 -27%
Expenses
Employee Compensation
and Benefits 100.0 97.5 3% 297.8 317.6 -6%
Execution and
Clearing Costs 34.0 40.6 -16% 108.4 129.9 -17%
Occupancy and
Equipment 62.8 32.4 94% 136.8 92.6 48%
Advertising and
Marketing 16.3 23.4 -31% 65.5 88.8 -26%
Communications 12.4 14.5 -14% 41.3 48.1 -14%
Amortization
of Goodwill 11.8 11.6 2% 35.4 31.8 11%
Professional Fees 11.0 11.5 -4% 33.1 31.4 5%
Other 33.5 47.3 -29% 110.8 170.3 -35%
Total Expenses * 281.8 278.8 1% 829.1 910.5 -9%
Income / (Loss)
Before Income
Taxes (25.2) 66.8 -138% 57.5 305.4 -81%
Provision for
Income Taxes (3.4) 32.3 -111% 35.8 137.3 -74%
Net Income /
(Loss) - Reported
Basis $(21.8) $ 34.5 -163% $21.7 $ 168.1 -87%
Add: Restructuring
Costs - after
tax 22.4 -- 22.4 --
Add: Goodwill
Amortization - after
tax 10.3 10.0 3% 31.3 27.1 16%
Cash Earnings
excluding
restructuring $10.9 $44.5 -76% $75.4 $195.2 -61%
Add: Securities
(Gains) / Losses -
after tax (1.5) (0.5) 183% (5.0) (0.5) 847%
Cash Earnings from
Operations excluding
restructuring $9.4 $44.0 -79% $70.4 $194.7 -64%
Basic Earnings Per Share
Reported Basis $(0.06) $0.09 -163% $0.06 $0.44 -87%
Cash Basis excluding
restructuring $0.03 $0.12 -75% $0.20 $0.52 -61%
Cash Basis (excluding
securities gains
or losses and
restructuring) $0.02 $0.12 -79% $0.19 $0.51 -64%
Diluted Earnings
per Share
Reported
Basis $(0.06) $0.09 -163% $0.06 $0.44 -87%
Number of Shares
Outstanding
(millions)
Basic 379.0 379.8 0% 379.5 378.7 0%
Diluted 379.1 380.1 0% 379.6 378.8 0%
* total expenses include $35.4 million in restructuring costs in the
quarter and nine months ended July 31, 2001
TD WATERHOUSE GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in US $ millions, except per share amounts)
(unaudited)
Three Months Ended
%
July 31, April 30, Change
2001 2001 Inc/(Dec)
Revenues
Commissions and Fees $130.7 $ 159.1 -18%
Mutual Fund and Related Revenue 46.0 44.8 3%
Net Interest Revenue 57.5 63.6 -10%
Other 22.4 15.3 47%
Total Revenues 256.6 282.8 -9%
Expenses
Employee Compensation
and Benefits 100.0 95.9 4%
Execution and Clearing Costs 34.0 34.9 -2%
Occupancy and Equipment 62.8 39.5 59%
Advertising and Marketing 16.3 21.2 -23%
Communications 12.4 13.4 -7%
Amortization of Goodwill 11.8 11.7 1%
Professional Fees 11.0 10.5 5%
Other 33.5 37.8 -11%
Total Expenses * 281.8 264.9 6%
Income / (Loss) Before
Income Taxes (25.2) 17.9 -241%
Provision for Income Taxes (3.4) 11.4 -130%
Net Income / (Loss) -
Reported Basis $(21.8) $6.5 -435%
Add: Restructuring
Costs - after tax 22.4 --
Add: Goodwill
Amortization- after tax 10.3 10.4 -1%
Cash Earnings $10.9 $16.9 -36%
Add: Securities (Gains) /
Losses - after tax (1.5) 3.2 -146%
Cash Earnings from
Operations excluding
restructuring $9.4 $ 20.1 -53%
Basic Earnings Per Share
Reported Basis $(0.06) $0.02 -436%
Cash Basis (excluding
restructuring) $0.03 $0.04 -35%
Cash Basis (excluding
securities
gains or
losses and
restructuring) $0.02 $0.05 -53%
Diluted Earnings per Share
Reported Basis $ (0.06) $0.02 -436%
Number of Shares
outstanding (millions)
Basic 379.0 379.8 0%
Diluted 379.1 379.8 0%
* total expenses include $35.4 million in restructuring costs
in the quarter ended July 31, 2001
TD WATERHOUSE GROUP, INC.
OPERATING DATA
(in US $)
(unaudited)
Three Months Ended Nine Months Ended
July 31 July 31
% %
Change Change
2001 2000 Inc/ 2001 2000 Inc/
(Dec) (Dec)
Pre-Tax Operating
Margin, Excluding
Goodwill and
Restructuring 9% 23% -62% 14% 28% -48%
Pre-Tax Operating
Margin, Excluding
Goodwill, Marketing
and Restructuring 15% 29% -49% 22% 35% -38%
Trades per
Day (000) 101.7 156.8 -35% 124.8 200.1 -38%
Revenue Trades
per Day (000) 94.6 147.9 -36% 116.7 188.6 -38%
On-Line Trades
per Day (000) 78.8 115.6 -32% 93.6 147.0 -36%
Active Accounts
- Ending (000) 3,262 3,011 8% 3,262 3,011 8%
Total On-Line Accounts
- Ending (000) 2,518 2,126 18% 2,518 2,126 18%
Total Customer
Assets - Ending
($Billions) $136.7 $162.6 -16% $136.7 $162.6 -16%
On-line Customer
Assets - Ending
($Billions) $91.4 $111.1 -18% $91.4 $111.1 -18%
Number of New
Accounts (000) 105.5 172.4 -39% 434.3 851.2 -49%
Advertising per
New Account $154.21 $135.95 13% $150.71 $104.34 44%
On-Line Penetration 77% 74% 5% 75% 73% 2%
Commissions per
Revenue Trade $20.06 $19.69 2% $20.43 $ 20.71 -1%
Three Months Ended
July 31, April 30, % Change
2001 2001 Inc/(Dec)
Pre-Tax Operating Margin,
Excluding Goodwill and
Restructuring 9% 10% -18%
Pre-Tax Operating Margin,
Excluding Goodwill,
Marketing and Restructuring 15% 18% -17%
Trades per Day (000) 101.7 124.2 -18%
Revenue Trades per Day (000) 94.6 115.6 -18%
On-Line Trades per Day (000) 78.8 91.9 -14%
Active Accounts - Ending (000) 3,262 3,269 0%
Total On-Line Accounts
- Ending (000) 2,518 2,492 1%
Total Customer Assets
- Ending ($Billions) $136.7 $137.6 -1%
On-Line Customer Assets
- Ending ($Billions) $91.4 $93.5 -2%
Number of New Accounts (000) 105.5 169.2 -38%
Advertising per New Account $154.21 $125.15 23%
On-Line Penetration 77% 74% 5%
Commissions per
Revenue Trade $20.06 $ 20.59 -3%
Three Months Ended
June 30, March 31, % Change
2001 2001 Inc/(Dec)
Trades per Day (000) 113.5 134.1 -15%
Revenue Trades per Day (000) 106.1 124.8 -15%
On-Line Trades per Day (000) 87.5 99.1 -12%
Active Accounts - Ending (000) 3,237 3,243 0%
Total On-Line Accounts
- Ending (000) 2,500 2,446 2%
Total Customer Assets
- Ending ($Billions) $138.7 $128.2 8%
On-Line Customer Assets
- Ending ($Billions) $93.5 $86.6 8%
Number of New Accounts (000) 128.4 164.6 -22%
Advertising per New Account $126.75 $140.47 -10%
On-line Penetration 77% 74% 4%
Commissions per Revenue Trade $20.02 $20.87 -4%
TD WATERHOUSE GROUP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in US $ thousands)
(unaudited)
July 31, October 31,
2001 2000
Assets
Cash and cash equivalents $347,264 $859,579
Securities owned, at market value 456,807 138,515
Receivable from brokers and dealers 91,287 104,266
Receivable from customers 4,317,157 7,978,551
Deposits paid for securities borrowed 1,186,522 640,750
Deposits with clearing organizations 50,538 51,943
Fixed assets, net of depreciation 160,841 140,591
Goodwill, net of accumulated amortization 766,262 804,266
Other Assets 297,065 270,856
Total Assets $7,673,743 $10,989,317
Liabilities
Bank loans and overdrafts $38,218 $963,031
Deposits received for securities loaned 1,310,156 4,111,677
Payable to brokers and dealers 258,672 105,467
Payable to customers 3,242,649 2,849,485
Accrued compensation, taxes
payable and other 596,093 735,734
Total Liabilities $5,445,788 $8,765,394
Stockholders' Equity $2,227,955 $2,223,923
Total Liabilities and
Stockholders' Equity $7,673,743 $10,989,317
SOURCE TD Waterhouse Group, Inc.
 back to top
Related links:
http://www.tdwaterhouse.com
CONTACT:
Media - Melissa Gitter, First Vice President,
Public Affairs, +1-212-806-3522; or Analysts - Kevin Sterns,
Executive Vice President & CFO, +1-212-908-7301, both for TD
Waterhouse Group, Inc.
|
