eTrade 2001 Annual Report Download - page 71

Minority interest in subsidiaries was $480,000 in fiscal 2001, $(181,000) in fiscal 2000 and $2.2 million in fiscal 1999. Minority
interest in subsidiaries results primarily from ETFC’ s interest payments to subsidiary trusts which have issued Company-obligated
mandatorily redeemable capital securities and which hold junior subordinated debentures of ETFC. Also included in minority interest
in subsidiaries is the net income or loss attributed to a minority interest in one of our international affiliates in fiscal year 2001 and two
of our international affiliates in fiscal year 2000.
Cumulative Effect of Change in Accounting Change
The cumulative effect of change in accounting principle of $(469,000) in fiscal 1999 resulted from the implementation by ETFC of
Statement of Position 98-5, Reporting on the Cost of Start-Up Activities , which requires that the cost of start-up activities be expensed
as incurred rather than capitalized, with the initial application reported as the cumulative effect of a change in accounting principle.
Extraordinary Gain (Loss) on Early Extinguishment of Debt
Extraordinary gain (loss) on early extinguishment of debt was $29.3 million in fiscal 2001, none in fiscal 2000 and $(2.0) million in
1999. In fiscal 2001, extraordinary gain on early extinguishment of debt of $29.3million (net of tax expense of $19.5 million) included
a $36.0 million gain (net of tax expense of $24.0million) from retirement of $214.8 million of our 6% convertible subordinated notes
in exchange for approximately 19.2 million shares of our common stock and $15.3 million paid in cash, offset by a $6.7 million loss
(net of tax benefit of $4.5 million) recorded as a result of the early redemption of $827.0 million of adjustable and fixed rate advances
from the FHLB. The FHLB advances were entered into as a result of normal funding requirements of our Banking operations. The loss
consisted primarily of prepayment penalties and costs associated with these early redemptions. In fiscal 1999, ETFC redeemed all of
its outstanding debt. ETFC wrote off both the related premium and the remaining discount as an extraordinary loss on the early
extinguishment of debt, totaling approximately $2.0 million, net of tax.
Variability of Results
We expect to experience fluctuations in future quarterly operating results that may be caused by many factors, including the following:
the timing of introductions or enhancements to online investing and banking services and products by us or our competitors; market
acceptance of online investing and banking services and products; the pace of development of the market for online commerce;
changes in trading volume in securities markets; trends in the securities and banking markets; domestic and international regulation of
the brokerage and
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banking industries; changes in interest rates; changes in pricing policies by us or our competitors; changes in strategy; the success of or
costs associated with acquisitions, joint ventures or other strategic relationships; changes in key personnel; seasonal trends; the extent
of international expansion; the mix of international and domestic revenues; changes in the level of operating expenses to support
projected growth; and general economic conditions.
Because of the foregoing factors, in addition to other factors that impact our operating results and financial position, investors should
not consider past financial performance or management’ s expectations to be a reliable indicator of future performance, and should not
use historical trends to anticipate results or trends in future periods. In that regard, results of operations and financial condition could
be adversely affected by a number of factors in addition to those discussed above, including overall economic conditions. Furthermore,
our stock price is subject to volatility. Any of the factors discussed above could have an adverse effect on our stock price. In addition,
our stock price could be adversely affected if our revenues or earnings in any quarter fail to meet the investment community’ s
2002. EDGAR Online, Inc.