4th fiscal quarter highlights:
* Cash earnings (excluding goodwill) totaled $ 2.8 million for the
fourth quarter ended October 31, 2001, a 95% decrease from the
fourth quarter last year. On a reported basis, TD Waterhouse
incurred a loss for the quarter of $7.5 million, which includes the
after tax impact of goodwill amortization ($10.3 million).
* Cash earnings per share were $0.01, compared to $0.14 for the same
quarter last year. After deducting goodwill, TD Waterhouse incurred
a loss of $0.02 per share compared to earnings per share of $0.11 a
year ago.
* Revenues were $230 million compared to $257 million last quarter and
$360 million in the fourth quarter 2000.
* Pre-tax operating margin (excluding goodwill, marketing costs and
restructuring) was 9%, compared to 15% last fiscal quarter and
31% last year.
* New account openings were 100,700 at an average cost per account of
$109, compared to 105,500 accounts last quarter at an average cost
per account of $154.
* Customer assets of $125 billion were down 8% from last quarter, and
down 21% from a year ago.
* Margin loans of $3.4 billion were down 20% from last quarter and
57% from a year ago.
* Trades per day were 90,400 (with 76% of transactions on line)
compared to 101,700 last quarter. Trading volumes declined 40% from
the fourth quarter of last year.
Fiscal 2001 highlights:
* Cash earnings (excluding goodwill and restructuring charges) totaled
$78 million for the year, compared to $248 million in fiscal 2000.
On a reported basis, earnings for the year were $14 million which
includes the after tax impact of goodwill amortization
($41.6 million) and restructuring charges ($22.4 million); this
compares to $210 million for 2000.
* Cash earnings per share were $0.21, compared to $0.66 last year.
After deducting goodwill and restructuring costs, TD Waterhouse
earned $0.04 per share compared to $0.56 per share last year.
* New account openings totaled 535,000 at an average cost per new
account of $143 for the year. This compares to slightly more than
1 million accounts in fiscal 2000 with an average cost of $109.
* Revenues of $1,117 million for the year ended October 31, 2001 were
down 29% from fiscal 2000.
NEW YORK, Nov. 13 /PRNewswire/ -- TD Waterhouse Group, Inc.
(NYSE: TWE; TSE), today announced cash earnings of $0.01 per share on revenues
of $230 million for the quarter ended October 31, 2001.
"Fiscal year 2001 was a tough one for the online brokerage sector and the
continued deterioration in the fourth fiscal quarter compounded the already
difficult operating conditions. Over the past year, our business and our
financial performance have been significantly affected by our customers'
understandable hesitancy to invest," said Chief Executive Officer Steve
McDonald. "In this difficult environment our focus on cost containment
through our Project 200 and restructuring initiatives has been important;
however, continuing revenue declines have made it difficult to sustain
profitability levels even with our significant progress on cost reductions.
Nevertheless TD Waterhouse remains committed to strategic investment in our
brand and technology to improve our customers' experience and, on a long term
basis, our operating efficiency."
SUMMARY DISCUSSION OF RESULTS FOR 4th QUARTER 2001
Cash earnings per share (i.e. excluding the after tax impact of goodwill
amortization) were $0.01 compared to $0.14 last year.
Cash earnings from operations decreased 95% from the fourth quarter last
year to $2.4 million.
On a reported basis a net loss for the quarter of $7.5 million compares to
net income last year of $42.2 million.
Results for the quarter reflect the following:
Total revenue of $230 million decreased 36% from the fourth quarter last
year as the impact of reduced trading by customers and reduced borrowing
through margin loans more than offset growth in mutual fund and related
revenue.
* Commissions and fees declined 44% to $115 million as revenue trades per
day decreased 42%.
* Commissions per revenue trade of $21.37 were 3% higher than last year's
$20.80, reflecting increased pricing in the U.S. in the fourth quarter
2001, and offset in part by online penetration which increased to 76% in
the quarter, compared to 72% in fourth quarter last year.
* Mutual fund and related revenue grew 15% reflecting growth in money
market mutual funds and FDIC-insured money market deposits which totaled
$18 billion at October 31, 2001 versus $15 billion a year ago. Total
funds and deposits at October 31, 2001 were $38.8 billion, up slightly
from a year ago.
* Net interest declined 43% as average margin loans were $3.8 billion this
quarter compared to $8.2 billion in the same quarter last year. This
decrease, along with the reduced value of invested capital, more than
offset a 25 basis point improvement in the spread on margin loans (2.90%
this quarter versus 2.65% a year ago).
* Other income decreased 22% ($5 million) as securities gains declined
$6 million.
Operating expenses of $232 million include goodwill amortization of
$12 million. Excluding goodwill, operating expenses were 19% below fourth
quarter last year.
* Employee compensation and benefits decreased 23%, largely reflecting a
reduction in full time equivalent associates to 5,915 from 8,298 a year
ago, evidence of the success of our previously announced Project 200
initiatives and restructuring.
* Occupancy and equipment increased 9% and is a reflection of our
continued investment in technology in North America and abroad.
* Professional fees decreased 28%. 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 18%
and 10% respectively in response to lower business volume.
* Advertising and marketing decreased 50% to $11 million. This is
indicative of our cost management as we cut our discretionary
expenditures in response to the continuing unfavorable business
conditions. With over 100,000 accounts opened in the quarter, our
advertising cost per new account was $109 (compared to $133 in fourth
quarter last year and $154 in third quarter this year).
* Other expenses of $30 million declined 18%, in large part due to the
success of the Project 200 initiatives.
These results also reflect the impact of our continuing global expansion.
This quarter our operations outside North America reported a loss of
$13 million after tax versus $12 million in the third quarter 2001 and
$8 million in fourth quarter 2000.
Results for the fourth quarter reflect a decrease in cash earnings per
share to $0.01 from $0.03 in the third quarter. Comparing fourth quarter to
third quarter:
* Total Revenue decreased 10% to $230 million.
* The decrease in revenue reflects a 12% decrease in revenue trades per
day and a 9% decrease in net interest revenue (as average margin loans
decreased $0.5 billion to $3.8 billion).
* The 18% decrease in operating expenses reflects in part the impact of
restructuring charges in the third quarter. Excluding those charges,
expenses in the fourth quarter declined $14 million, mainly due to the
combined impact of our Project 200 initiatives as well as benefits from
restructuring.
TD Waterhouse will not be conducting an investors conference call to
discuss its results.
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) customer attrition, (viii) the 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)
Three Months Ended Twelve Months Ended
October 31 October 31
% %
Change Change
2001 2000 Inc/(Dec) 2001 2000 Inc/(Dec)
Commissions and Fees $114.9 $205.9 -44% $600.9 $1,004.5 -40%
Mutual Fund and
Related Revenue 46.4 40.3 15% 178.7 148.3 20%
Net Interest Revenue 52.3 92.3 -43% 253.2 351.1 -28%
Other 16.4 21.0 -22% 83.8 71.5 17%
Total Revenues 230.0 359.5 -36% 1,116.6 1,575.4 -29%
Expenses
Employee Compensation
and Benefits 82.8 107.1 -23% 380.6 424.6 -10%
Execution and
Clearing Costs 31.6 38.3 -18% 140.0 168.2 -17%
Occupancy and
Equipment 40.8 37.5 9% 177.7 130.1 37%
Advertising
and Marketing 11.0 21.9 -50% 76.5 110.8 -31%
Communications 13.2 14.7 -10% 54.5 62.7 -13%
Amortization of
Goodwill 11.8 11.8 0% 47.2 43.6 8%
Professional Fees 11.5 15.9 -28% 44.5 47.3 -6%
Other 29.5 36.1 -18% 140.3 206.5 -32%
Total Expenses * 232.2 283.3 -18% 1,061.3 1,193.8 -11%
Income / (Loss)
Before Income Taxes (2.2) 76.2 -103% 55.3 381.6 -85%
Provision for
Income Taxes 5.3 34.0 -84% 41.1 171.3 -76%
Net Income / (Loss) -
Reported Basis $(7.5) $42.2 -118% $14.2 $210.3 -93%
Add: Restructuring
Costs - after tax -- -- 22.4 --
Add: Goodwill Amortization
- after tax 10.3 10.4 -1% 41.6 37.5 11%
Cash Earnings excluding
restructuring $2.8 $52.6 -95% $78.2 $247.8 -68%
Add: Securities (Gains)/
Losses - after tax (0.4) (4.8) -92% (5.4) (5.3) 2%
Cash Earnings from
Operations excl.
Restructuring $2.4 $47.8 -95% $72.8 $242.5 -70%
Basic Earnings Per Share
Reported Basis $(0.02) $0.11 -118% $0.04 $0.56 -93%
Cash Basis excluding
restructuring $0.01 $0.14 -95% $0.21 $0.66 -69%
Cash Basis (excluding
securities gains or
losses and
restructuring) $0.01 $0.13 -95% $0.19 $0.64 -70%
Diluted Earnings per Share
Reported Basis $(0.02) $0.11 -118% $0.04 $0.55 -93%
Number of Shares Outstanding (millions)
Basic 378.3 379.8 0% 379.2 378.9 0%
Diluted 378.3 380.2 0% 379.3 379.2 0%
* Total expenses for the twelve months ended October 31, 2001 include
$35.4 million (pre-tax) in restructuring costs recorded in July, 2001.
TD WATERHOUSE GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in US $ millions, except per share amounts)
Three Months Ended
%
Oct. 31, July 31, Change
2001 2001 Inc/(Dec)
Revenues
Commissions and Fees $114.9 $130.7 -12%
Mutual Fund and Related Revenue 46.4 46.0 1%
Net Interest Revenue 52.3 57.5 -9%
Other 16.4 22.4 -27%
Total Revenues 230.0 256.6 -10%
Expenses
Employee Compensation and Benefits 82.8 100.0 -17%
Execution and Clearing Costs 31.6 34.0 -7%
Occupancy and Equipment 40.8 62.8 -35%
Advertising and Marketing 11.0 16.3 -32%
Communications 13.2 12.4 6%
Amortization of Goodwill 11.8 11.8 0%
Professional Fees 11.5 11.0 4%
Other 29.5 33.5 -12%
Total Expenses* 232.2 281.8 -18%
Income / (Loss) Before Income Taxes (2.2) (25.2) -91%
Provision for Income Taxes 5.3 (3.4) -254%
Net Income / (Loss) - Reported Basis $(7.5) $(21.8) -65%
Add: Restructuring Costs - after tax -- 22.4
Add: Goodwill Amortization- after tax 10.3 10.3 0%
Cash Earnings $2.8 $10.9 -74%
Add: Securities (Gains) /
Losses - after tax (0.4) (1.5) -72%
Cash Earnings from Operations
excluding restructuring $2.4 $9.4 -75%
Basic Earnings Per Share
Reported Basis $(0.02) $(0.06) -65%
Cash Basis (excluding restructuring) $0.01 $0.03 -74%
Cash Basis (excluding securities
gains or losses and restructuring) $0.01 $0.02 -75%
Diluted Earnings per Share
Reported Basis $(0.02) $(0.06) -65%
Number of Shares outstanding (millions)
Basic 378.3 379.0 0%
Diluted 378.3 379.1 0%
* Total expenses for the quarter ended July 31, 2001 include $35.4 million
in restructuring costs.
TD WATERHOUSE GROUP, INC.
OPERATING DATA
(in US $)
Three Months Ended Twelve Months Ended
October 31 October 31
% %
Change Change
2001 2000 Inc/(Dec) 2001 2000 Inc/(Dec)
Pre-Tax Operating Margin,
Excluding Goodwill
and Restructuring 4% 24% -83% 12% 27% -54%
Pre-Tax Operating Margin,
Excluding Goodwill,
Marketing and
Restructuring 9% 31% -71% 19% 34% -44%
Trades per Day (000) 90.4 151.9 -40% 116.3 187.8 -38%
Revenue Trades
per Day(000) 83.3 143.0 -42% 108.4 176.9 -39%
On-Line Trades
per Day (000) 69.0 110.0 -37% 87.5 137.5 -36%
Active Accounts
- Ending (000) 3,266 3,109 5% 3,266 3,109 5%
Total On-Line Accounts
-Ending (000) 2,494 2,272 10% 2,494 2,272 10%
Total Customer Assets
- Ending ($Billions) $125.4 $158.9 -21% $125.4 $158.9 -21%
On-line Customer Assets
- Ending ($Billions) $82.7 $109.7 -25% $82.7 $109.7 -25%
Number of New
Accounts (000) 100.7 165.4 -39% 535.0 1,016.6 -47%
Advertising per
New Account $109.22 $132.70 -18% $142.90 $108.96 31%
On-Line Penetration 76% 72% 5% 75% 73% 3%
Commissions per
Revenue Trade $21.37 $20.80 3% $20.61 $20.68 0%
Three Months Ended
October 31, July 31, % Change
2001 2001 Inc/(Dec)
Pre-Tax Operating Margin,
Excluding Goodwill
and Restructuring 4% 9% -53%
Pre-Tax Operating Margin,
Excluding Goodwill,
Marketing and Restructuring 9% 15% -40%
Trades per Day (000) 90.4 101.7 -11%
Revenue Trades per Day (000) 83.3 94.6 -12%
On-Line Trades per Day (000) 69.0 78.8 -12%
Active Accounts - Ending (000) 3,266 3,262 0%
Total On-Line Accounts -
Ending (000) 2,494 2,518 -1%
Total Customer Assets -
Ending ($Billions) $125.4 $136.7 -8%
On-Line Customer Assets -
Ending ($Billions) $82.7 $91.4 -10%
Number of New Accounts (000) 100.7 105.5 -5%
Advertising per New Account $109.22 $154.21 -29%
On-Line Penetration 76% 77% -1%
Commissions per Revenue Trade $21.37 $20.06 7%
Three Months Ended
September 30, June 30, % Change
2001 2001 Inc/(Dec)
Trades per Day (000) 87.9 113.5 -23%
Revenue Trades per Day (000) 80.9 106.1 -24%
On-Line Trades per Day (000) 66.9 87.5 -23%
Active Accounts - Ending (000) 3,249 3,237 0%
Total On-Line Accounts -
Ending (000) 2,476 2,500 -1%
Total Customer Assets -
Ending ($Billions) $120.3 $138.7 -13%
On-Line Customer Assets -
Ending ($Billions) $78.7 $93.5 -16%
Number of New Accounts(000) 99.3 128.4 -23%
Advertising per New Account $123.39 $126.75 -3%
On-line Penetration 76% 77% -1%
Commissions per Revenue Trade $20.90 $20.02 4%
TD WATERHOUSE GROUP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(in US $ thousands)
October 31, October 31,
2001 2000
Assets
Cash and cash equivalents $330,067 $859,579
Securities owned, at market value 435,896 138,515
Receivable from brokers and dealers 73,788 104,266
Receivable from customers 3,384,159 7,978,551
Securities purchased under
agreements to resell 1,164,781 377,668
Deposits paid for securities borrowed 27,013 263,082
Deposits with clearing organizations 54,964 51,943
Fixed assets, net of depreciation 156,146 140,591
Goodwill, net of accumulated amortization 753,223 804,266
Other Assets 263,312 270,856
Total Assets $6,643,349 $10,989,317
Liabilities
Bank loans and overdrafts $17,966 $963,031
Deposits received for securities loaned 279,093 4,111,677
Payable to brokers and dealers 76,005 105,467
Payable to customers 3,754,480 2,849,485
Accrued compensation, taxes
payable and other liabilities 300,071 735,734
Total Liabilities $4,427,615 $8,765,394
Stockholders' Equity $2,215,734 $2,223,923
Total Liabilities and Stockholders' Equity $6,643,349 $10,989,317
SOURCE TD Waterhouse Group, Inc.
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Related links:
http://www.tdwaterhouse.com
CONTACT:
Media - Melissa Fox, Public Affairs Manager,
+1-212-908-3101, or Analyst - Kevin Sterns, Executive Vice
President & CFO, +1-212-908-7301, both of TD Waterhouse Group,
Inc.
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