eTrade 2009 Annual Report Download - page 46

Operating Expense
The components of operating expense and the resulting variances are as follows (dollars in millions):
Year Ended December 31,
Variance
2008 vs. 2007
2008 2007 Amount %
Operating expense:
Compensation and benefits $ 383.4 $ 434.8 $ (51.4) (12)%
Clearing and servicing 185.1 270.2 (85.1) (32)%
Advertising and market development 175.2 138.6 36.6 26%
FDIC insurance premiums 31.2 20.2 11.0 55%
Communications 96.8 98.3 (1.5) (2)%
Professional services 94.1 99.2 (5.1) (5)%
Occupancy and equipment 85.8 85.2 0.6 1%
Depreciation and amortization 82.5 83.2 (0.7) (1)%
Amortization of other intangibles 35.7 40.5 (4.8) (12)%
Impairment of goodwill — 101.2 (101.2) *
Facility restructuring and other exit activities 29.5 27.2 2.3 9%
Other operating expenses 90.9 175.2 (84.3) (48)%
Total operating expense $1,290.2 $1,573.8 $(283.6) (18)%
* Percentage not meaningful.
Operating expense decreased 18% to $1.3 billion for the year ended December 31, 2008 compared to 2007.
The decrease in operating expense was driven primarily by decreases in compensation and benefits, clearing and
servicing, impairment of goodwill and other expense. These decreases were offset slightly by an increase in
advertising and market development expense.
Compensation and Benefits
Compensation and benefits decreased 12% to $383.4 million for the year ended December 31, 2008
compared to 2007. The decrease resulted primarily from lower salary expense due to a reduction in our employee
base and decreased variable compensation during the year ended December 31, 2008 when compared to 2007.
Clearing and Servicing
Clearing and servicing expense decreased 32% to $185.1 million for the year ended December 31, 2008
compared to 2007. This decrease is related primarily to the exit of our institutional brokerage operations, which
resulted in lower clearing expenses.
Advertising and Market Development
Advertising and market development expense increased 26% to $175.2 million for the year ended
December 31, 2008 compared to 2007. This planned increase was aimed at restoring customer confidence as well
as expanded efforts to promote our products and services to investors.
Impairment of Goodwill
Impairment of goodwill was $101.2 million for the year ended December 31, 2007. This impairment
represents the entire amount of goodwill associated with our balance sheet management business, which had a
significant decline in fair value during the fourth quarter of 2007. There was no such impairment for the year
ended December 31, 2008.
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