eTrade 2001 Annual Report Download - page 69

part of other contractual renegotiations undertaken by the Company, in August 2001 we cancelled a $15.0 million note receivable and
agreed to reimburse $15.2 million dollars in related taxes in return for the elimination of certain benefits contained in our Chief
Executive Officer’ s employment agreement. This action had the effect of eliminating the Company’ s contractual obligations to cancel
the note and reimburse related taxes in the event of a change of control of the Company. The total of $30.2million is reflected as
executive loan settlement in the consolidated statement of operations.
Other related party transactions are described in Note 11 to our Consolidated Financial Statements.
Corporate Interest Income
Corporate interest income was $22.2 million in fiscal 2001, $17.2 million in fiscal 2000 and $20.7 million in fiscal 1999. Corporate
interest income primarily relates to interest income earned on corporate investment balances, restricted cash balances, and related party
notes. The increase in corporate interest income was primarily due to an increase in our corporate investment activity during fiscal
2001, reflecting the initial use of proceeds from the issuance of $325 million ($315.3 million, net of issuance costs) of 6.75%
convertible subordinated notes in May 2001 and interest income earned on related party notes, which were entered into during the
period from March 2000 through June 2001.
Corporate Interest Expense
Corporate interest expense was $52.9 million in fiscal 2001, $29.5 million in fiscal 2000 and $100,000 in fiscal 1999. The increase in
corporate interest expense in fiscal 2001 primarily reflects the interest expense resulting from the issuance of $325 million of 6.75%
convertible subordinated notes during the second quarter of fiscal 2001 and interest paid on our $650 million 6% convertible notes
issued during the second quarter of fiscal 2000. Beginning with the end of the second quarter in fiscal 2001 and extending through the
fourth quarter, we retired 6% subordinated notes totaling $214.8 million in share and cash exchanges. The reduction in our outstanding
debt balance is expected to reduce corporate interest expense by $12.9 million annually. The increase in corporate interest expense in
fiscal 2000 primarily reflects the interest expense resulting from the issuance of $650 million in convertible subordinated notes during
the second quarter of fiscal 2000.
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Gain (Loss) on Sale of Investments
Gains (losses) on investments were $(49.8) million in fiscal 2001, $211.1 million in fiscal 2000 and $54.1 in fiscal 1999. In fiscal
2001, loss on sale of investments was primarily comprised of a $(43.5) million impairment write down on publicly-traded equity
securities, proprietary mutual funds, and equity method and other investments. In fiscal 2000, we liquidated portions of our investment
portfolio, recognizing realized gains as a result of these sales. Included in realized gains on sale of investments in fiscal 2000 is $77.5
million on the sale of a portion of our equity holdings in E*TRADE Japan K.K. following its initial public offering and realized gains
of $132.3 million on the sale of other publicly-traded equities. E*TRADE Japan K.K. is accounted for on the equity method.
Equity in Losses of Investments
Equity losses on investments were $6.2 million in fiscal 2001, $11.5 million in fiscal 2000 and $8.8 million fiscal 1999, which resulted
from our minority ownership in investments that are accounted for under the equity method. Losses in fiscal 2001 reflected our
investment in Wit, accounted for under the equity method until it was disposed of on August 20, 2001, and our equity investment in
eAdvisor, partially offset by income recorded from our equity investments in E*TRADE Japan K.K. and AG Arbor, Inc. In fiscal
2002. EDGAR Online, Inc.