eTrade 2009 Annual Report Download - page 32

Summary Financial Results
Income Statement Highlights (dollars in millions, except per share amounts):
Year Ended December 31, Variance
2009 2008 2009 vs. 2008
Net operating interest income $ 1,260.6 $1,268.0 (1)%
Commissions $ 548.0 $ 515.5 6%
Fees and service charges $ 192.5 $ 200.0 (4)%
Total net revenue $ 2,217.0 $1,925.6 15%
Provision for loan losses $ 1,498.1 $1,583.7 (5)%
Operating margin $ (524.4) $ (948.3) *
Loss from continuing operations $(1,297.8) $ (809.4) *
Less: net loss on the Debt Exchange (772.9) — *
Loss from continuing operations excluding the Debt Exchange(1) $ (524.9) $ (809.4) *
Diluted loss per share from continuing operations $ (1.18) $ (1.58) *
Less: diluted loss per share on the Debt Exchange (0.71) — *
Diluted loss per share from continuing operations excluding the Debt
Exchange(1) $ (0.47) $ (1.58) *
* Percentage not meaningful.
(1) Net loss excluding the non-cash charge on the Debt Exchange represents net loss plus the non-cash charge on the Debt Exchange, net of
tax and is a non-GAAP measure. Loss per share excluding the non-cash charge on the Debt Exchange represents net loss plus the
non-cash charge on the Debt Exchange, net of tax, divided by diluted shares and is a non-GAAP measure. Management believes that
excluding the non-cash charge associated with the Debt Exchange from net loss and loss per share provides a useful additional measure
of the Company’s ongoing operating performance because the charge is not directly related to our performance. The reconciliation of
these non-GAAP measures is provided in the table above.
During the year ended December 31, 2009, we increased the level of income generated in the trading and
investing segment and achieved record levels of DARTs and brokerage accounts. This strong performance was
more than offset by the provision for loan losses reported in our balance sheet management segment. Although
we expect our provision for loan losses to continue at elevated levels in future periods, the level of provision for
loan losses has declined for five consecutive quarters. While we cannot state with certainty that this trend will
continue, we believe it is a positive indicator that our loan portfolio has continued to stabilize.
We made significant progress during the year ended December 31, 2009 on our comprehensive plan to
strengthen the Company’s capital structure. We completed an offer to exchange $1.7 billion aggregate principal
amount of our corporate debt for an equal principal amount of newly-issued non-interest-bearing convertible
debentures. The Debt Exchange resulted in a $968.3 million pre-tax non-cash loss on extinguishment of debt and
an increase to additional paid-in capital of $707.2 million during the year ended December 31, 2009. The net
effect of the Debt Exchange to shareholders’ equity was a reduction of $65.7 million(1). As a result of the
completion of this exchange, we reduced our annual corporate interest payments by approximately $200 million
and eliminated any substantial debt maturities until 2013.
In addition to the Debt Exchange, we successfully raised $765 million of gross proceeds ($733 million in
net proceeds) from our common stock equity offerings during the year ended December 31, 2009.
(1) For further details regarding the loss on extinguishment of debt, see “Earnings Overview” in Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations, Note 1—Organization, Basis of Presentation and Summary of Significant
Accounting Policies and Note 14—Corporate Debt of Item 8. Financial Statements and Supplementary Data.
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