TD Bank 2003 Annual Report Download - page 12

TD BANK FINANCIAL GROUP ANNUAL REPORT 2003 • Management’s Discussion and Analysis10
How the Bank reports
The Bank prepares its financial statements in accordance with
Canadian generally accepted accounting principles (GAAP),
which are presented on pages 54 to 90 of this Annual
Report. The Bank refers to results prepared in accordance
with GAAP as the ”reported basis”.
The Bank also utilizes the “operating cash basis”to
assess each of its businesses and to measure overall Bank
performance against goals. The calculation of operating cash
basis begins with the reported GAAP results and then
excludes special items and the non-cash charge for intangible
amortization and, prior to 2002, non-cash amortization of
goodwill. There were no special items in fiscal 2003. For fiscal
2002, the only special item excluded was a gain on sale of
the Bank’s mutual fund record keeping and custody business
in the first and third quarter of 2002, respectively. The Bank
views special items as transactions that are not part of the
Bank’s normal business operations and are therefore not
indicative of underlying trends. The majority of the Bank’s
non-cash intangible amortization charge relates to the
Canada Trust acquisition in fiscal 2000. The Bank excludes
amortization of intangibles as it is a non-cash charge and this
approach ensures comparable treatment between periods
and comparable treatment with goodwill. Consequently, the
Bank believes that the operating cash basis provides the
reader with an understanding of the Bank’s results that can
be consistently tracked from period to period.
The goodwill impairment recorded by the Bank in fiscal
2003 relating to the international unit of its wealth manage-
ment business and its U.S. equity options business was not
considered a special item for exclusion when determining the
operating cash basis results. The restructuring charges recog-
nized by the Bank in fiscal 2003, related to the international
unit of its wealth management business and its U.S. equity
options business, were not considered special items given
that they were incurred as part of the rationalization of the
existing businesses.
The reversal of general allowances in fiscal 2003 was
not considered a special item given that the Bank views the
reversal as potentially recurring. However, it may also be
possible that in the future it may be necessary to increase
general allowances.
As explained, operating cash basis results are different
from reported results determined in accordance with GAAP.
The term “operating cash basis results” is not a defined term
under GAAP, and therefore may not be comparable to similar
terms used by other issuers. The table below provides a rec-
onciliation between the Bank’s operating cash basis results
and its reported results.
How We Performed
Reconciliation of operating cash basis results to reported results
(millions of dollars) 2003 2002 2001
Net interest income (TEB) $ 5,846 $ 5,522 $ 4,636
Provision for credit losses (186) (2,925) (620)
Other income 4,424 4,889 6,097
Non-interest expenses (7,592) (6,754) (6,925)
Income before provision for income taxes and
non-controlling interest in subsidiaries 2,492 732 3,188
Provision for income taxes (TEB) (833) (133) (939)
Non-controlling interest in net income of subsidiaries (92) (64) (82)
Net income – operating cash basis $ 1,567 $ 535 $ 2,167
Preferred dividends (87) (93) (92)
Net income applicable to common shares – operating cash basis $ 1,480 $ 442 $ 2,075
Special increase in general provision, net of income taxes ––(208)
Gain on sale of mutual fund record keeping and custody business, net of income taxes –32 –
Gains on sale of investment real estate, net of income taxes ––275
Restructuring costs, net of income taxes ––(138)
Income tax expense from income tax rate changes ––(75)
Net income applicable to common shares – cash basis 1,480 474 1,929
Non-cash goodwill amortization, net of income taxes ––(189)
Non-cash intangible amortization, net of income taxes (491) (634) (440)
Net income (loss) applicable to common shares – reported basis $ 989 $ (160) $ 1,300
(dollars)
Basic net income per common share – operating cash basis $ 2.28 $ .69 $ 3.31
Diluted net income per common share – operating cash basis 2.26 .68 3.27
Basic net income (loss) per common share – reported basis 1.52 (.25) 2.07
Diluted net income (loss) per common share – reported basis 1.51 (.25) 2.05
Certain comparative amounts have been reclassified to conform with current year presentation.