Charles Schwab 2008 Annual Report Download - page 37

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THE CHARLES SCHWAB CORPORATION
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Millions, Except Ratios, or as Noted)
- 23 -
Professional services expense increased in 2007 from 2006 primarily due to higher levels of fees paid to outsourced service
providers and consultants. Occupancy and equipment expense increased in 2007 from 2006 due to increases in data
processing equipment and maintenance expense of $17 million and occupancy expense of $5 million. Advertising and market
development expense increased in 2007 from 2006 primarily due to the Company’s media and marketing spending related to
its “Talk to Chuck™” national advertising campaign. Communications expense increased in 2007 from 2006 due to higher
levels of postage and printing costs of $15 million and news and quotes services of $5 million. Other expense increased in
2007 from 2006 primarily due to increases in regulatory fees of $7 million, bank service charges of $7 million, and charitable
contributions of $4 million.
Taxes on Income
The Company’s effective income tax rate on income from continuing operations was 39.3% in 2008 and 39.6% in both 2007
and 2006.
Segment Information
The Company provides financial services to individuals, and institutional and corporate clients through three segments –
Investor Services (formerly called Schwab Investor Services), Advisor Services (formerly called Schwab Institutional), and
Corporate and Retirement Services (formerly called Schwab Corporate and Retirement Services). The Investor Services
segment includes the Company’s retail brokerage and banking operations. The Advisor Services segment provides custodial,
trading, and support services to independent investment advisors. The Corporate and Retirement Services segment provides
retirement plan services, plan administrator services, stock plan services, and mutual fund clearing services and supports the
availability of Schwab proprietary mutual funds on third-party platforms. The Company evaluates the performance of its
segments on a pre-tax basis excluding items such as restructuring charges, impairment charges on non-financial assets,
discontinued operations, and extraordinary items. Segment assets are not disclosed because the balances are not used for
evaluating segment performance and deciding how to allocate resources to segments.