eTrade 2005 Annual Report Download - page 37

Table of Contents
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Products per customer is the average number of our products that a customer actively uses. This measure is an indicator of how
well our product and service set appeals to our customer base. We believe increases to this measure are representative of our
ability to cross-sell and overall customer engagement with our products and services.
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Company Financial Metrics
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Operating margin is the percentage of every dollar of revenue that goes to net income before other income, income taxes,
minority interest, discontinued operations and cumulative effect of accounting change. This percentage is indicative of our
operating efficiency.
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Revenue growth is an indicator of our overall financial well being and our ability to execute on our strategy. When coupled with
the operating margin, the two provide information about the general success of current strategies. Revenue growth is the
difference between the current and prior period total net revenues divided by the prior period total net revenues.
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Revenue per compensation and benefits dollar is a broad indicator of productivity. The increase in 2005 is an indicator of our
ability to drive revenue growth using the existing infrastructure. Revenue per compensation and benefits dollar is total net
revenues divided by compensation and benefits expense.
Significant Events in 2005
Acquisitions
Harris
direct
We completed our acquisition of Harris
direct
on October6, 2005. At the time of the acquisition, Harris
direct
, an online discount
brokerage company, had approximately 425,000 customers who conducted approximately 16,000 DARTs. As of October 6, 2005, Harris
direct
had approximately $34.8 billion in customer assets including $5.0 billion in customer cash. Margin debt was approximately $0.9
billion at the time of the acquisition. Harris
direct
was purchased for approximately $709 million in cash from Harris Financial Corp, a
subsidiary of BMO Financial Group. As part of the financing to acquire Harris
direct
, we issued $450 million in fixed-rate senior notes.
BrownCo
We completed our acquisition of JP Morgan Invest, LLC, more commonly known as BrownCo, on November30, 2005. BrownCo, an
online discount brokerage company, had approximately 186,000 customers who conducted approximately 28,000 DARTs. As of
November 30, 2005, BrownCo had approximately $34.2 billion in customer assets including approximately $3.5 billion in customer cash.
Brokerage receivables were approximately $3.1 billion at the time of the acquisition. BrownCo was purchased for approximately $1.6
billion in cash from JPMorgan Chase& Co. As part of the financing to acquire BrownCo, we issued $550 million fixed-rate senior notes,
$650 million in common stock and $450 million in face value of mandatory convertible notes. The common stock was sold in the market
and proceeds were used for the BrownCo acquisition.
Wealth Management Advisors
We acquired two wealth management advisors, Kobren Insight Management and Howard Capital Management during 2005. These
companies provide advisory and asset management services to retail clients. On a combined basis, these companies manage $1.5
billion in customer assets. The acquisition of these companies are part of our ongoing strategy to enhance our product offering to
customers. The growth of our wealth management business extends our ability to provide customers with the complete support they
are demanding to address their varied financial needs.
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2006. EDGAR Online, Inc.