Cash Earnings Per Share Grow 80% to 66 Cents
Annual highlights:
-- Net income for the year was $210.3 million, a 116% increase over 1999.
-- Revenues grew 64% to $1.57 billion.
-- New account openings exclusive of acquisitions were up 38% to more than
1 million, at an average cost per new account of $109.
4th fiscal quarter highlights:
-- Net income was $42.2 million for the 4th quarter ended
October 31, 2000 -- up over 102% from the 4th quarter of 1999.
-- Cash earnings per share (i.e. excluding the impact of goodwill) were
$0.14, up 81% from 4th quarter of 1999. On an accrual basis, earnings
per share grew to $0.11 from $0.06 last year.
-- Revenues were up 42% year-over-year to $359 million.
-- New account openings were 165,000 at an average cost per new account of
$133.
-- Customer assets increased by more than 31% to $159 billion.
-- Trades per day increased 47% to 151,900 with 72% of transactions on-
line.
NEW YORK, Nov. 15 /PRNewswire/ -- TD Waterhouse Group, Inc. today
announced outstanding growth in year-over-year profits and in account
growth -- with 1 million new account openings (exclusive of acquisitions) in
fiscal year 2000. Net income for the year was $210 million, more than double
last year's $97 million.
"When we set a goal last year to add 1 million new accounts exclusive of
acquisitions for this fiscal year, we knew it was ambitious, but were
confident of success based on the strength of our business model," said Chief
Executive Officer Steve McDonald. "I'm pleased to note that we not only met
this goal, but that we did so with the lowest average acquisition cost per new
account, $109, in the industry."
"TD Waterhouse remained profitable, delivering earnings of $0.11 cents per
share this quarter. While our year-over-year results were impressive, this was
a tough quarter," McDonald said. "We achieved these results in spite of market
volatility that resulted in a 10% decline in the Nasdaq composite, that
affected both our customers and our business. Market conditions impacted not
only transaction volumes but also the firm's assets under administration and
new account openings. I attribute TD Waterhouse's ability to generate positive
results to two of the firm's strengths. The first is our ability to respond to
changing market conditions by carefully managing customer acquisition costs.
The second is our ability to remain focused on our four key growth strategies:
enhancing customer relationships; expanding core and new growth segments;
leveraging technology; and extending global reach."
1. Enhancing customer relationships:
"It's gratifying when external sources affirm that TD Waterhouse is
satisfying investors' needs. In its October 16th issue, Canadian Business
magazine ranked TD Waterhouse as Canada's Best Discount Broker for the second
year in a row. In addition, TD Waterhouse in the U.S. ranked #1 in Customer
Confidence in the Gomez.com Fall Scorecard," said President and Chief
Operating Officer Frank J. Petrilli.
TD Waterhouse is helping customers achieve their goals through delivery of
financial solutions. Specifically, the firm's efforts include:
-- Redesigning its U.S. web site in early September to feature tighter
integration of our brokerage and banking platforms and to make planning and
educational tools more accessible. Separately, TD Waterhouse is creating a
consistent online experience around the world with the launch of a web site in
India that shares the look and feel of the U.S. site.
-- Adding cash management features to Australian accounts. The integrated
offering is one of the strongest in Australia, combining online brokerage
with: internet and telephone banking, bill payment and checking, and
competitive interest rates regardless of balance.
2. Expanding core and new growth segments:
"We believe it's critical that TD Waterhouse offer a wide array of
products and services that are relevant to our customers around the globe.
That's why we launched online bond trading and seven new proprietary mutual
funds in the U.S., and why we recently expanded our mutual fund marketplace in
Japan -- making it one of the largest collections of independent funds in that
country," said Petrilli. "To reach new investors and expand existing customer
relationships, you need to be where customers are going."
To ensure that both potential and existing customers are aware of what TD
Waterhouse offers, the firm has:
-- Launched a new ad campaign in the United States today. New
advertisements highlight the firm's competitive strengths, such as the support
of a local branch network and the bill payment service available on the firm's
banking platform, through both print and television elements. The tag line
"How Easy Is This" focuses on how simple it is for investors to manage their
finances with TD Waterhouse.
-- Launched the company's first television advertising campaign in the
United Kingdom. The campaign in the U.K. focuses on the ease of buying and
selling shares and will run on television, print advertising, billboards and
branded taxicabs.
-- Sponsored the next three seasons of both the Toronto Maple Leafs hockey
team and Toronto Raptors basketball team in a unique sports marketing
arrangement. In addition, the firm created the TD Waterhouse Fan Zone
featuring interactive hockey and basketball games for enthusiasts when they
visit the arena.
-- Signed a content agreement in Australia with Excite@Home. TD Waterhouse
continues to create strategic alliances to affiliate itself with other
companies with strong brands. Under the latest agreement, TD Waterhouse
provides financial content and research tools to customers of the high-speed
cable Internet service, Optus@Home, and visitors to the leading portal Excite.
In exchange, Excite promotes TD Waterhouse throughout its sites and financial
pages, leading to greater brand recognition in the Australian marketplace.
-- Hosted new seminars in the U.S., Canada and Hong Kong. In the United
States, the firm has hosted more than 1,700 seminars this year, with the
latest series of seminars focusing on wireless investing. In Hong Kong,
additional seminar sessions about online investing have been scheduled.
3. Leveraging technology:
TD Waterhouse is committed to creating a more powerful customer experience
through technology. To this end, the firm continues to expand its capabilities
around the world, including:
-- Forging wireless carrier agreements to expand the reach of wireless
investing platforms. In the U.S. this quarter, agreements have been signed
with Nextel, Sprint and Verizon and the firm is offering incentives for
customers to try the new channel through a $100 rebate offer on web-enabled
phones when customers open new accounts with $10,000 or transfer that amount
to an existing account.
-- Launching a new online market data service for active Canadian
investors. WebBroker Select features a dynamic market data portal that links
investors to streaming real-time financial data and advanced charting tools-
everything from real-time performance of model portfolios to real time alerts
via email, pager, or Digital PCS phone.
4. Extending global reach:
With operations now in seven countries around the world, TD Waterhouse
continues to move decisively toward becoming the global online financial
services firm. The depth of TD Waterhouse's management pool and the ability to
draw on seasoned and broad-based financial services executives from our
majority shareholder, TD Bank Financial Group, ensures that the firm's
management team has the experience to successfully execute against our
business model.
"We have one of the most talented groups of executives in the industry, a
critical success factor in a global marketplace. Our executives make local
decisions about their businesses, ensuring that we can achieve and maintain a
leadership position in the marketplace," McDonald said.
Management changes at TD Waterhouse around the world this quarter
included:
-- The reorganization of TD Waterhouse's business in the United States.
The changes eliminated the distinction between "front-office" and "back-
office," leaving the firm's U.S. management team closer to the customer and
more tightly focused on providing investors with an unparalleled customer
experience.
-- The appointment of Ken Dowd as Executive Vice President and Chief
Operating Officer of TD Waterhouse (UK). Ken previously served as chief
information officer for TD Securities Inc. and his appointment will allow
Bharat Masrani, Vice Chairman of TD Waterhouse Group, to focus on further
expansion into Continental Europe.
Outlook:
"We know that investors have high expectations for TD Waterhouse's
performance. We are looking ahead and setting the bar high for 2001.
Specifically, we expect to open 1.2 million new accounts (net of acquisitions)
and add $40 billion of net new customer assets. In addition, in this fiscal
year we expect to: continue to improve operating margins; increase our brand
visibility; and diversify revenue streams to reduce reliance on commission-
based revenues."
"We are pleased that even in the tough market conditions of the last six
months, we continue to generate profits," McDonald said. "We recognize that
the climate going forward may continue to present difficulties, but are
confident that our strategies and management can meet these challenges by
continuing to exploit existing sources of growth and identifying additional
opportunities for expansion."
TD Waterhouse Group, Inc., (NYSE/TSE: TWE), 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 4.4 million customer accounts in the United
States, Canada, the United Kingdom, Australia, and Hong Kong. The firm also
services customers in Japan and India through joint ventures 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 Financial Group (NYSE/TSE: TD),
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. On February 1, 2000, TD Bank
Financial Group announced the completion of its CDN$8 billion acquisition of
CT Financial Services Inc., catapulting it from the fifth largest Canadian
bank to a leader in most of its retail businesses.
SUMMARY DISCUSSION OF RESULTS
Net income for the year of $210 million is 116% higher than the $97
million for last year. Cash earnings per share (i.e. excluding the after tax
impact of goodwill amortization) of $0.66 compares to $0.37 for last year.
Results for the year reflect the following highlights:
Revenue growth of $615 million (64%) was the result of strong growth in
all categories.
-- Commissions and fees grew 59% to more than $1 billion, as revenue
trades per day increased 75% to 177,000.
-- Mutual funds and related revenue grew more than 50% and reflected
growth in mutual funds and related balances to $38.6 billion at October 31 vs.
$31.1 billion a year ago.
-- Net interest grew 88% to $351 million, led mainly by a 90% growth in
margin loans, which averaged $8.5 billion in 2000 versus $4.5 billion in 1999.
Operating expenses increased 54% to $1.2 billion. Increases in most
categories reflect the combination of growth in customer accounts and trades,
as well as our investments in technology and marketing / branding.
-- Employee compensation and benefits grew 53% to $425 million and was 27%
of Total Revenues versus 29% in 1999.
-- Advertising and marketing increased $48 million, or 76% to $111
million, representing 7% of Total Revenues. This helped us achieve our
aggressive target to open 1 million accounts (exclusive of acquisitions) at a
cost per new account of $109.
-- For the year our technology expenditure (including the capital
equivalent of new leases) was about $140 million, 26% more than we spent on
marketing.
In the 4th quarter our net income of $42 million was more than double last
year.
-- Revenue growth of 42% compares to a 33% increase in expenses.
-- Advertising and marketing expenses this year were 9% lower than last, a
reflection of the start up costs of our global branding campaign last
September.
-- Pre-tax operating margin (excluding goodwill and marketing) of 31% this
year continued to show improvement (last year was 29%).
-- North American profits continue to finance our investment in start up
operations overseas. This quarter the after tax cost of these operations was
$7.9 million compared to $5.2 million last year.
-- International results include a favorable impact of about $4.8 million
after tax related to the mark to market and realization for marketable
securities owned offshore.
Sequential quarterly results indicate an increase of 22% in Net Income to
$42 million.
-- Overall Revenue growth of 4% exceeded the 2% increase in Operating
Expenses. We reduced Advertising and Marketing Expenses (by 6%) in response to
less vibrant general market conditions. In addition, the after tax cost of
international operations decreased from $9.9 million to $7.9 million.
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, 1999.
Webcast of call: A live internet webcast of TD Waterhouse's quarterly
conference call with investors and analysts will take place on November 15,
2000 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 Fourth Quarter Earnings Results -- November 15, 2000, at 10:30 AM
EST."
TD WATERHOUSE GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in US $ millions, except per share amounts)
Three Months Ended
October 31
2000 1999 % Change
Inc/(Dec)
Revenues
Commissions and Fees $205.9 $149.4 38%
Mutual Fund and Related Revenue 40.3 29.1 39%
Net Interest Revenue 92.3 61.9 49%
Other 21.0 12.7 65%
Total Revenues 359.5 253.1 42%
Expenses
Employee Compensation
and Benefits 107.1 75.9 41%
Execution and Clearing Costs 38.3 32.9 17%
Occupancy and Equipment 37.5 21.8 72%
Advertising and Marketing 21.9 24.1 -9%
Communications 14.7 8.4 74%
Amortization of Goodwill 11.8 9.5 24%
Professional Fees 15.9 7.8 103%
Other 36.1 32.2 12%
Total Expenses 283.3 212.6 33%
Income Before Income Taxes 76.2 40.5 88%
Provision for Income Taxes 34.0 19.6 73%
Net Income $42.2 $20.9 102%
Earnings Per Share
Earnings from Operations $ 0.14 $0.08 81%
After Tax Impact of
Goodwill Amortization 0.03 0.02 30%
Basic $0.11 $0.06 100%
Diluted $0.11 $0.06 100%
Number of Shares Outstanding (millions)
Basic 379.8 376.4 1%
Diluted 380.2 376.4 1%
Twelve Months Ended
October 31
2000 1999 % Change
Inc/(Dec)
Revenues
Commissions and Fees $1,004.5 $633.5 59%
Mutual Fund and Related Revenue 148.3 98.4 51%
Net Interest Revenue 351.1 186.8 88%
Other 71.5 41.4 73%
Total Revenues 1,575.4 960.1 64%
Expenses
Employee Compensation
and Benefits 424.6 277.6 53%
Execution and Clearing Costs 168.2 133.4 26%
Occupancy and Equipment 130.1 80.0 63%
Advertising and Marketing 110.8 62.8 76%
Communications 62.7 41.1 53%
Amortization of Goodwill 43.6 37.4 17%
Professional Fees 47.3 24.5 93%
Other 206.5 120.8 71%
Total Expenses 1,193.8 777.6 54%
Income Before Income Taxes 381.6 182.5 109%
Provision for Income Taxes 171.3 85.2 101%
Net Income $210.3 $97.3 116%
Earnings Per Share
Earnings from Operations $0.66 $0.37 80%
After Tax Impact of
Goodwill Amortization 0.10 0.09 10%
Basic $0.56 $0.28 98%
Diluted $0.55 $0.28 97%
Number of Shares Outstanding (millions)
Basic 378.9 348.5 9%
Diluted 379.2 348.5 9%
TD WATERHOUSE GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in US $ millions, except per share amounts)
Three Months Ended
October 31, July 31, % Change
2000 2000 Inc/(Dec)
Revenues
Commissions and Fees $205.9 $202.9 1%
Mutual Fund and Related Revenue 40.3 37.1 9%
Net Interest Revenue 92.3 88.8 4%
Other 21.0 16.8 25%
Total Revenues 359.5 345.6 4%
Expenses
Employee Compensation
and Benefits 107.1 97.5 10%
Execution and Clearing Costs 38.3 40.6 -6%
Occupancy and Equipment 37.5 32.4 15%
Advertising and Marketing 21.9 23.4 -6%
Communications 14.7 14.5 1%
Amortization of Goodwill 11.8 11.6 2%
Professional Fees 15.9 11.5 39%
Other 36.1 47.3 -24%
Total Expenses 283.3 278.8 2%
Income Before Income Taxes 76.2 66.8 14%
Provision for Income Taxes 34.0 32.3 5%
Net Income $42.2 $34.5 22%
Earnings Per Share
Earnings from Operations $0.14 $0.12 18%
After Tax Impact of
Goodwill Amortization 0.03 0.03 4%
Basic $0.11 $0.09 22%
Diluted $0.11 $0.09 22%
Number of Shares
outstanding (millions)
Basic 379.8 379.8 0%
Diluted 380.2 380.1 0%
TD WATERHOUSE GROUP, INC.
OPERATING DATA
(in US $)
Three Months Ended
October 31
2000 1999 %Change
Inc/(Dec)
Pre-Tax Operating Margin,
Excluding Goodwill 24% 20% 24%
Pre-Tax Operating Margin,
Excluding Goodwill and Marketing 31% 29% 5%
Trades per Day (000) 151.9 103.5 47%
Revenue Trades per Day (000) 143.0 97.0 47%
On-Line Trades per Day (000) 110.0 70.0 57%
Active Accounts -- Ending (000) 3,109 2,168 43%
Total On-Line
Accounts -- Ending (000) 2,272 1,160 96%
Total Customer
Assets -- Ending ($Billions) $158.9 $121.7 31%
On-Line Customer
Assets -- Ending ($Billions) $109.7 $67.2 63%
Number of New Accounts (000) 165.4 149.8 10%
Advertising per New Account $132.70 $160.64 -17%
On-Line Penetration 72% 68% 7%
Commissions per Revenue Trade $20.80 $22.38 -7%
Twelve Months Ended
October 31
2000 1999 % Change
Inc/(Dec)
Pre-Tax Operating Margin,
Excluding Goodwill 27% 23% 18%
Pre-Tax Operating Margin,
Excluding Goodwill and Marketing 34% 29% 16%
Trades per Day (000) 187.8 107.1 75%
Revenue Trades per Day (000) 176.9 100.9 75%
On-Line Trades per Day (000) 137.5 66.6 106%
Active Accounts -- Ending (000) 3,109 2,168 43%
Total On-Line
Accounts -- Ending(000) 2,272 1,160 96%
Total Customer
Assets -- Ending ($Billions) $158.9 $121.7 31%
On-line Customer
Assets -- Ending ($Billions) $109.7 $67.2 63%
Number of New Accounts (000) 1,016.6 739.2 38%
Advertising per New Account $108.96 $84.90 28%
On-Line Penetration 73% 62% 18%
Commissions per Revenue Trade $20.68 $23.02 -10%
Three Months Ended
Oct. 31, July 31, % Change
2000 2000 Inc/(Dec)
Pre-Tax Operating Margin,
Excluding Goodwill 24% 23% 8%
Pre-Tax Operating Margin,
Excluding Goodwill and Marketing 31% 29% 4%
Trades per Day (000) 151.9 156.8 -3%
Revenue Trades per Day (000) 143.0 147.9 -3%
On-Line Trades per Day (000) 110.0 115.6 -5%
Active Accounts -- Ending (000) 3,109 3,011 3%
Total On-Line
Accounts -- Ending (000) 2,272 2,126 7%
Total Customer
Assets -- Ending ($Billions) $158.9 $162.6 -2%
On-Line Customer
Assets -- Ending ($Billions) $109.7 $111.1 -1%
Number of New Accounts (000) 165.4 172.4 -4%
Advertising per New Account $132.70 $135.95 -2%
On-Line Penetration 72% 74% -2%
Commissions per Revenue Trade $20.80 $19.69 6%
Three Months Ended
Sept. 30, June 30, % Change
2000 2000 Inc/(Dec)
Trades per Day (000) 152.6 178.6 -15%
Revenue Trades per Day (000) 143.6 168.6 -15%
On-Line Trades per Day (000) 110.9 132.1 -16%
Active Accounts -- Ending (000) 3,051 2,979 2%
Total On-Line
Accounts -- Ending (000) 2,224 2,085 7%
Total Customer
Assets -- Ending ($Billions) $164.9 $165.3 0%
On-Line Customer
Assets -- Ending ($Billions) $114.4 $113.2 1%
Number of New Accounts (000) 159.4 238.6 -33%
Advertising per New Account $129.14 $110.17 17%
On-Line Penetration 73% 74% -2%
Commissions per Revenue Trade $20.53 $19.55 5%
TD WATERHOUSE GROUP, INC.
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
(in US $ thousands)
October 31, October 31,
2000 1999
Assets
Cash and cash equivalents $859,579 $569,181
Securities owned, at market value 138,515 342,042
Receivable from brokers and dealers 104,266 194,370
Receivable from customers 7,978,551 5,868,804
Deposits paid for securities borrowed 640,750 664,299
Deposits with clearing organizations 51,943 35,495
Fixed assets, net of depreciation 140,591 73,543
Goodwill, net of accumulated amortization 804,266 654,081
Other Assets 270,856 190,001
Total Assets $10,989,317 $8,591,816
Liabilities $963,031 $249,010
Bank loans and overdrafts
Deposits received for
securities loaned 4,111,677 3,962,958
Payable to brokers and dealers 105,467 160,254
Payable to customers 2,849,485 2,016,535
Accrued compensation,
taxes payable and other 735,734 250,939
Total Liabilities $8,765,394 $6,639,696
Stockholders' Equity $2,223,923 $1,952,120
Total Liabilities
and Stockholders' Equity $10,989,317 $8,591,816
SOURCE TD Waterhouse Group, Inc.
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Related links:
http://www.tdwaterhouse.com
CONTACT:
Melissa Gitter, 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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