eTrade 2001 Annual Report Download - page 68

Acquisition-Related Expenses
Acquisition-related expenses were $11.2 million in fiscal 2001, $36.4 million in fiscal 2000 and $7.2million in fiscal 1999. In fiscal
2001, acquisition-related expenses include approximately $5.8 million related to losses incurred by Web Street during the transition of
Web Street’ s accounts to our systems. The transition of Web Street’ s accounts was completed in the fourth quarter of 2001, at which
time all of Web Street’ s domestic stand-alone operations ceased. Also included in acquisition-related expenses during fiscal 2001 was
approximately $4.9 million paid under a management continuity agreement in connection with the acquisition of Dempsey in October
2001. Acquisition-related expenses in fiscal 2000 primarily relate to transaction costs associated with the acquisitions of ETFC and
E*TRADE Technologies. In fiscal 1999, acquisition-related expenses were incurred primarily in connection with the acquisitions of
E*TRADE Institutional, ClearStation and ETFC.
Facility Restructuring and Other Nonrecurring Charges
On August 29, 2001, we announced a restructuring plan aimed at streamlining operations primarily by consolidating facilities in the
United States and Europe. This restructuring resulted in a pre-tax charge of $202.8million ($148.0 million after tax) in fiscal 2001.
Over the past three years, we have completed more than 16 acquisitions of companies with facilities in major metropolitan centers in
the United States and Europe. The restructuring was designed to consolidate some of these facilities to bring together key
decision-makers and streamline operations. As discussed in our summary of critical policies and estimates portion of management’ s
discussion and analysis, we have recorded a pre-tax restructuring charge of $131.8 million related to our facilities consolidation at
September 30, 2001 (adjusted by $3.3 million at December 31, 2001), representing the undiscounted value of ongoing lease
commitments offset by anticipated third party subleases. The charge also includes a pre-tax write-off of leasehold improvements and
furniture and fixtures totaling $38.6 million. The charge does not include relocation costs that will be incurred over the next 12 months
and expensed as incurred. The cash outflow related to this action will be paid out over the length of our committed lease terms of 7 to
11 years.
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As a result of our worldwide consolidation activities, certain software developed for specific locations and certain other fixed assets
will no longer be used. In addition, management reviewed our current technology development activities and decided to focus on
projects generating the highest return in the short term. As such, work on less critical projects has ceased. In total, we recorded a
pre-tax charge of $52.5 million related to the write-off of capitalized software and hardware related to certain technology projects and
other fixed assets. In calculating the charge related to our asset write-off, we calculated the amount of write-offs as the net book value
of assets less the amount of estimated proceeds upon disposition for certain saleable assets. The increase to our initial asset write-off
charge of $49.4 million to $52.5 million reflects the identification of additional excess equipment.
The restructuring accrual also included other pre-tax charges of $15.8 million for committed expenses, termination of consulting
agreements and cancellation penalties on various services, that will no longer be required in the facilities the Company is vacating. We
recorded an increase to our initial restructuring charge included in Other of $5.9million for severance payments made to associates
identified in the fourth quarter of fiscal 2001 as a part of our consolidation and integration efforts. As required by generally accepted
accounting principles, severance is recorded in the period in which associates are identified and communication is made to these
individuals (See Note 3 to Consolidated Financial Statements).
Executive Loan Settlement
In connection with the renegotiation of our employment contract with our Chairman of the Board and Chief Executive Officer and as
2002. EDGAR Online, Inc.