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Net
Revenues
Commissions and clearing fees decreased 31 percent
to $269.4 million in fiscal 2001 from $389.7 million
in fiscal 2000. This decrease was primarily attributable
to an 18 percent decrease in commissions and clearing
fees per trade to $10.69 for fiscal 2001 from $13.11
for fiscal 2000, and an 11 percent decrease in the
average number of trades processed per day to 101,998
in fiscal 2001 from 114,339 in fiscal 2000. The
decrease in commissions per trade was due primarily
to our clients increasingly using the Internet to
place trades, as we charge lower commissions for
Internet trades than for trades placed through other
means, growth in our Freetrade.com™ client
base, a lower commission structure for option trades
and lower payment for order flow revenue per trade.
Payment for order flow revenue per trade decreased
due primarily to regulatory changes, including stock
market decimalization. The decrease in transaction
processing volume was primarily a result of significantly
lower client trading activity during fiscal 2001,
compared to unusually high client trading activity
throughout much of fiscal 2000. Clients averaged
approximately 17 trades per account during fiscal
2001, compared to approximately 32 trades per account
during fiscal 2000. In addition, there were fewer
trading days during fiscal 2001 than fiscal 2000
due to fiscal 2000 being a 53-week fiscal year and
four days of market closures in fiscal 2001 due
to the September 11 terrorist attacks. The decreased
volume per account was partially offset by a significant
increase in client accounts resulting primarily
from the substantial advertising expenditures made
by us during the past few years, and 215,000 core
accounts added through our acquisition of NDB. Client
accounts increased to approximately 1,794,000 at
September 28, 2001, from approximately 1,233,000
at September 29, 2000.
Net interest revenue decreased 13 percent to $147.7
million in fiscal 2001 from $168.8 million in fiscal
2000. This decrease was due primarily to a decrease
of 36 percent in average client and correspondent
receivables and a decrease of approximately 30 basis
points in the average interest rate charged on client
and correspondent receivables, partially offset
by a 109 percent increase in average cash and investments,
including cash and investments segregated in compliance
with federal regulations, in fiscal 2001 compared
to fiscal 2000.
Other revenues increased 73 percent to $37.8 million
in fiscal 2001 from $21.9 million in fiscal 2000,
due primarily to the implementation of a $15 per
quarter fee during the third quarter of fiscal 2001
on accounts that do not meet certain minimum levels
of trading activity or assets. In addition, fees
charged to third party broker-dealers for orders
placed through the TradeCast licensed order entry
software system also contributed to the increase. |
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Expenses
Excluding Client Interest
Employee compensation and benefits expense was virtually
unchanged at $144.8 million in fiscal 2001 compared
to $144.9 million in fiscal 2000. Full-time equivalent
employees decreased 23 percent to 1,970 at the end
of fiscal 2001 from 2,573 at the end of fiscal 2000.
Reductions in expense resulting from staff reductions
during fiscal 2001 were largely offset by costs
associated with the hiring of our new Chief Executive
Officer during the second quarter of fiscal 2001.
Communications expense increased 10 percent to $39.9
million in fiscal 2001 compared to $36.4 million
in fiscal 2000, primarily due to higher quote and
market information costs and additional communication
expenses for TradeCast.
Occupancy and equipment costs increased 34 percent
to $60.5 million in fiscal 2001 from $45.2 million
in fiscal 2000. This increase was due primarily
to the lease of equipment and additional office
space. In fiscal 2000, we added approximately 150,000
square feet of additional space in Baltimore, Maryland;
Ft. Worth, Texas; Omaha, Nebraska; Chicago, Illinois;
and American Fork, Utah. We also leased additional
equipment during fiscal 2000. Occupancy and equipment
costs in Houston, Texas related to TradeCast also
contributed to the increase.
Depreciation and amortization increased 67 percent
to $36.0 million in fiscal 2001, from $21.6 million
in fiscal 2000, due primarily to depreciation on
additional equipment, furniture and leasehold improvements
added during fiscal 2000 to accommodate growth and
additional goodwill amortization resulting from
the TradeCast acquisition.
Professional services expense decreased 23 percent
to $55.0 million in fiscal 2001 from $71.5 million
in fiscal 2000. This decrease was primarily due
to higher usage of marketing and technology consulting
services during the first half of fiscal 2000, including
consulting costs related to the development of OnMoney.com.
Interest on borrowings decreased 33 percent to $11.1
million in fiscal 2001 from $16.4 million in fiscal
2000, due to lower average interest rates and the
conversion of $152.4 million of convertible subordinated
notes to Class A Common Stock in February 2001.
Other operating expenses decreased 17 percent to
$28.4 million in fiscal 2001 compared to $34.1 million
in fiscal 2000, primarily due to the effect of lower
transaction processing volumes.
Advertising expenses decreased 40 percent to $134.8
million in fiscal 2001 from $225.8 million in fiscal
2000. The continuing high level of advertising expenditures
was principally related to our efforts to build
and maintain awareness of the Ameritrade brand and
was primarily responsible for the significant increase
in the number of client accounts during the period.
However, due to adverse stock market conditions
and a historically slow market for new accounts
during the summer, we reduced our advertising expenditures
during the second half of fiscal 2001.
Gain on sale of investment consists of a gain of
approximately $9.7 million on the sale of our preferred
stock of Epoch during fiscal 2001. We sold our interest
in Epoch for approximately $16.4 million in cash.
Restructuring and asset impairment charges of $38.3
million in fiscal 2001 consisted primarily of severance
pay and benefits for approximately 480 terminated
employees and impairment charges related to a comprehensive
facilities consolidation in connection with a reorganization
of our corporate and management structure. Offices
in Fort Worth, Texas; Omaha, Nebraska; Baltimore,
Maryland; and Purchase, New York were affected by
the facilities consolidation. We recorded asset
impairment charges of $4.7 million during fiscal
2000 related to specific software applications that
were discontinued.
Debt conversion expense in fiscal 2001 consisted
of $58.7 million of cash paid to holders of the
convertible subordinated notes in connection with
the conversion of $152.4 million of the notes into
4.7 million shares of Class A Common Stock, and
$3.4 million of deferred note origination costs
written off related to the converted notes.
Income tax benefit was $55.2 million in fiscal 2001
compared to $6.6 million in fiscal 2000. The effective
income tax rate in fiscal 2001 increased to 38 percent
compared to 33 percent in fiscal 2000, due in part
to the effect of state economic development tax
credits in fiscal 2000. |
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