Bank of Montreal 2010 Annual Report Download - page 93

MD&A
GAAP and Related Non-GAAP Measures used in the MD&A
($ millions, except as noted) 2010 2009 2008
Total non-interest expense (a) 7,590 7,381 6,894
Amortization of intangible assets (1) (36) (43) (42)
Cash-based non-interest expense (b) (2) 7,554 7,338 6,852
Net income 2,810 1,787 1,978
Amortization of intangible assets,
net of income taxes 32 35 35
Cash net income (2) 2,842 1,822 2,013
Preferred share dividends (136) (120) (73)
Charge for capital (2) (1,888) (1,770) (1,535)
Net economic profit (2) 818 (68) 405
Net income 2,810 1,787 1,978
Provision for credit losses 1,049 1,603 1,330
Income taxes and non-controlling
interest in subsidiaries 761 293 3
Income before provision for credit losses,
income taxes and non-controlling
interest in subsidiaries (2) 4,620 3,683 3,311
Revenue (c) 12,210 11,064 10,205
Revenue growth (%) (d) 10.4 8.4 9.2
Productivity ratio (%) ((a/c) x 100) 62.2 66.7 67.6
Cash productivity ratio (%) ((b/c) x 100) (2) 61.9 66.3 67.1
Non-interest expense growth (%) (e) 2.8 7.1 4.4
Cash-based non-interest
expense growth
(%) (f) (2) 2.9 7.1 4.5
Operating leverage (%) (d – e) 7.6 1.3 4.8
Cash operating leverage (%) (d – f) (2) 7.5 1.3 4.7
EPS (uses net income) ($) 4.75 3.08 3.76
Cash EPS (uses cash net income) ($) (2) 4.81 3.14 3.83
(1) The amortization of non-acquisition-related intangible assets is not added back in
the determination of cash-based non-interest expense and cash net income.
(2) These are non-GAAP amounts or non-GAAP measures.
The table above outlines non-GAAP measures used by BMO together with their closest
GAAP counterparts.
Non-GAAP Measures
BMO uses both GAAP and certain non-GAAP measures to assess perfor-
mance. Securities regulators require that companies caution readers
that earnings and other measures adjusted to a basis other than GAAP
do not have standardized meanings under GAAP and are unlikely to be
comparable to similar measures used by other companies. The adjacent
table reconciles these non-GAAP measures, which management regu-
larly monitors, to their GAAP counterparts.
At times, we indicate measures excluding the effects of certain
items but we generally do so in conjunction with disclosure of the
nearest GAAP measure and details of the reconciling item. Amounts and
measures stated on such a basis are considered useful as they could be
expected to be reflective of ongoing operating results or assist readers’
understanding of performance. To assist readers, we have also provided
a schedule that summarizes notable items that have affected results in
the reporting periods.
Cash earnings, cash productivity and cash operating leverage
measures may enhance comparisons between periods when there has
been an acquisition, particularly because the purchase decision may
not consider the amortization of acquisition-related intangible assets to
be a relevant expense. Cash EPS measures are also disclosed because
analysts often focus on this measure, and cash EPS is used by Thomson
First Call to track third-party earnings estimates that are frequently
reported in the media. Cash measures add the after-tax amortization
of acquisition-related intangible assets to GAAP earnings to derive cash
net income (and associated cash EPS), and deduct the amortization of
acquisition-related intangible assets from non-interest expense to derive
cash productivity and cash operating leverage measures.
Net economic profit represents cash net income available to
common shareholders, less a charge for capital, and is considered an
effective measure of added economic value.
Income before provision for credit losses, income taxes and
non-controlling interest in subsidiaries is considered a useful measure
as it provides a measure of performance that excludes the effects
of credit losses and income taxes, which can at times mask performance
because of their size and variability.
BMO Financial Group 193rd Annual Report 2010 91