E*Trade 8-K  
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 

FORM 8-K

CURRENT REPORT
 

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 
 

Date of Report (Date of earliest event reported)           June 30, 2001 
 

E*TRADE Group, Inc.

(Exact name of registrant as specified in charter)
 
Delaware
(State or other jurisdiction
of incorporation)		 1-11921
(Commission
File Number)		 94-2844166
(IRS Employer
Identification No.)

4500 Bohannon Drive, Menlo Park, California

(Address of principal executive offices)

94025

(Zip Code)
Registrant’s telephone number, including area code:
 (650) 331-6000

Not Applicable
(Former name or former address, if changed since last report.)


 

ITEM 5. OTHER EVENTS

     On July 18, 2001, E*TRADE Group, Inc. ("E*TRADE") announced its financial results for the quarter ended June 30, 2001.

     Financial Results

E*TRADE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share amounts)


           
  Three Months Ended
June 30,
Six Months Ended
June 30,
2001
2000
2001
2000
Revenues:
  Transaction revenues $  109,264  $  180,194  $  240,626  $  434,790 
  Interest income 298,515  258,391  615,945  501,973 
  Global and institutional 37,047  40,577  73,888  90,253 
  Other 71,185 
24,949 
135,677 
41,660 
      Gross revenues 516,011  504,111  1,066,136  1,068,676 
  Interest expense (206,176) (164,841) (425,277) (311,450)
  Provision for loan losses (1,656)
(974)
(3,099)
(2,230)
      Net revenues 308,179 
338,296 
637,760 
754,996 
Cost of services 150,458 
128,582 
292,893 
264,161 
Operating expenses:
  Selling and marketing 55,399  117,324  149,097  297,929 
  Technology development 23,420  33,792  45,701  77,127 
  General and administrative 61,906  52,188  122,148  104,739 
  Amortization of goodwill and other intangibles 9,022  6,908  17,021  12,205 
  Acquisition-related expenses 517 
1,133 
517 
25,732 
      Total operating expenses 150,264 
211,345 
334,484 
517,732 
      Total cost of services and operating expenses 300,722 
339,927 
627,377 
781,893
Operating income (loss) 7,457 
(1,631)
10,383 
(26,897)
Non-operating income (expense):
  Corporate interest income 5,220  5,609  10,998  9,229 
  Corporate interest expense (12,759) (11,020) (23,987) (18,148)
  Gain (loss) on investments (13,042) 24,416  (15,573) 35,331 
  Equity in losses of investments (1,811) (1,414) (5,152) (2,150)
  Unrealized loss on venture funds (8,958) (3,462) (20,569) (18,090)
  Fair value adjustments of financial derivatives (1,710) —  (1,376) — 
  Other 292 
(970)
(408)
(1,723)
      Total non-operating income (expense) (32,768)
13,159 
(56,067)
4,449 
Pre-tax income (loss) (25,311) 11,528  (45,684) (22,448)
Income tax expense (benefit) (12,655) 7,896  (25,897) (1,022)
Minority interest in subsidiaries (350) (585) (315) (177)
Income (loss) before extraordinary gain on early extinguishment of debt, net of tax (12,306) 4,217 (19,472) (21,249)
Extraordinary gain on early extinguishment of debt, net of tax 2,111 
— 
74 
— 
Net income (loss) $ (10,195)
$ 4,217 
$ (19,398)
$ (21,249)
Income (loss) per share before extraordinary gain on early extinguishment of debt:
  Basic $  (0.04)
$  0.01 
$  (0.06)
$  (0.07)
  Diluted $  (0.04)
$  0.01 
$  (0.06)
$  (0.07)
Net income (loss) per share:
  Basic $  (0.03)
$  0.01 
$  (0.06)
$  (0.07)
  Diluted  $  (0.03)
$  0.01 
$  (0.06)
$  (0.07)
Shares used in computation of per share data:
  Basic 321,550  302,870  319,405  298,115 
  Diluted  321,550  318,731  319,405  298,115 


 
 

E*TRADE GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE STATEMENT
(in thousands, except share amounts)


       
June 30,
2001
(unaudited)		 September 30,
2000
ASSETS
Cash and equivalents $  185,409 $  175,443 
Cash and investments required to be segregated under Federal or other regulations 173,454  125,862 
Brokerage receivables—net 4,335,405  6,542,508 
Mortgage-backed securities 3,998,938  4,188,553 
Loans receivable—net 6,913,032  4,172,754 
Investments 2,080,166  985,218 
Property and equipment-net 414,399  334,262 
Goodwill and other intangibles 492,227  484,166 
Other assets 707,141 
308,671 
  Total assets $  19,300,171 
$  17,317,437 
LIABILITIES AND SHAREOWNERS' EQUITY
Liabilities:
Brokerage payables $  4,255,376  $  6,055,530 
Banking deposits 7,687,006  4,721,801 
Borrowings by bank subsidiary 3,832,887  3,531,000 
Accounts payable, accrued and other liabilities 749,119  471,626 
Convertible subordinated notes 945,000 
650,000 
    Total liabilities 17,469,388 
15,429,957
Company-obligated mandatorily redeemable preferred capital securities of subsidiary trusts holding solely junior subordinated debentures of the Company (redemption value $32,400) 30,779 
30,647
Commitments and contingencies
Shareowners' equity:
Preferred stock, shares authorized: 1,000,000; issued and outstanding: none at June 30, 2001 and September 30, 2000  — —
Shares exchangeable into common stock, $.01 par value, shares authorized: 10,644,223; issued and outstanding: 2,823,206 at June 30, 2001 and 5,619,543 at September 30, 2000  28  56 
Common stock, $.01 par value, shares authorized: 600,000,000; issued and outstanding: 334,394,381 at June 30, 2001 and 304,504,764 at September 30, 2000  3,344  3,045 
Additional paid-in capital 2,012,665  1,814,581 
Unearned Employee Stock Ownership Plan shares (1,157) (1,560)
Shareowners' notes receivable (31,644) (19,103)
Deferred stock compensation (34,521) —
Accumulated deficit (24,953) (6,908)
Accumulated other comprehensive income (loss) (123,758)
66,722 
    Total shareowners' equity 1,800,004 
1,856,833 
    Total liabilities and shareowners' equity $  19,300,171 
$  17,317,437 


 

Key Performance Indicators

The following table sets forth several key performance indicators which management utilizes in measuring our performance and in explaining the results of our operations for the comparative three and six months presented (dollars in thousands except cost per new account, average commission per domestic brokerage transaction and rebates per domestic brokerage transaction):
 

  Three Months Ended
June 30,
Six Months Ended
June 30,
  2001
2000
Percentage
Change
2001
2000
Percentage
Change
Active domestic brokerage accounts 3,289,014  2,693,784  22% 3,289,014  2,693,784  22%
Active banking accounts 434,804  222,582  95% 434,804  222,582  95%
Active global and institutional accounts 104,792 
61,779 
70% 104,792 
61,779 
70%
Total active accounts at period end 3,828,610 
2,978,145 
29% 3,828,610 
2,978,145 
29%
Net new domestic brokerage accounts 65,610  270,708  (76)% 176,646  817,881  (78)%
Net new banking accounts 30,039  51,998  (42)% 72,187  91,947  (21)%
Net new global and institutional accounts 7,840 
10,854 
(28)% 20,768 
34,413 
(40)%
Total net new accounts 103,489 
333,560 
(69)% 269,601 
944,241 
(71)%
Cost per new account $  232 
$  291 
(20)% $  328 
$  269 
22%
Total customer households end of period 2,738,838 
NA 
NA  2,738,838 
NA 
NA 
Average assets per household $  19,513 
NA 
NA  $  19,513 
NA 
NA 
Total assets in domestic brokerage accounts $  44,553,710  $  56,224,190  (21)% $  44,553,710  $  56,224,190  (21)%
Total deposits in banking accounts 7,687,006  3,896,200  97% 7,687,006  3,896,200  97%
Total assets in global and institutional accounts 1,202,718 
1,247,391 
(4)% 1,202,718 
1,247,391 
(4)%
Total assets/deposits in customer accounts at period end $  53,443,434 
$  61,367,781 
(13)% $  53,443,434 
$  61,367,781 
(13)%
Total domestic brokerage transactions 7,148,235 
10,491,288 
(32)% 15,233,084 
24,733,340 
(38)%
Daily average domestic brokerage transactions 113,464 
166,528 
(32)% 121,865 
196,296 
(38)%
Average commission per domestic brokerage transaction $  13.23 
$  15.13 
(13)% $  13.44 
$  15.55 
(14)%
Rebates per domestic brokerage transaction $  2.06 
$  1.79 
15% $  2.36 
$  1.92 
23%

     For purposes of the table above:

  • A domestic or global brokerage account is included as an active account if the account has a positive asset balance, or if a trade has been made in the account in the past six months or if the account was opened in connection with a corporate employee stock benefit program. Customers may have separate or multiple accounts for each relationship they maintain with us, including separate or multiple brokerage and banking accounts.
  • A banking account is included as an active account if a customer has made an initial deposit and the account is not considered abandoned or dormant under applicable Federal and State laws and the account has not been closed.
  • Net new accounts is equal to the number of accounts opened during the applicable period that qualify as active accounts less the number of accounts deactivated due to customer attrition or because the account no longer meets the definition of an active account during the reported period.
  • A household is a collection of active accounts, as defined above, which have a matching address and last name.

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 

 
Date: July 24, 2001 E*TRADE Group, Inc.

By:    /s/ Leonard C. Purkis 
     Leonard C. Purkis, Chief Financial 
     Officer (principal financial and 
     accounting officer)