eTrade 2002 Annual Report Download - page 118

Table of Contents
Index to Financial Statements
Engelman Securities, Inc.
On December 17, 2002, the Company acquired 100% of Engelman Securities, Inc., a privately-held, Chicago Stock Exchange member and
registered broker-dealer. The Company acquired Engelman for an aggregate purchase price of $7.5 million, comprised of approximately 1.3
million shares of the Company’ s common stock valued at $6.5 million (based on the average of the closing prices of the Company’ s common
stock on the date the shares to be issued were determined and for the three days before and after), $0.5 million in cash and acquisition costs of
$0.5 million.
In addition, the Company agreed to pay contingent stock consideration of up to $14.0 million if Engelman’ s operating results exceed certain
targets and revenue goals for fiscal 2003, fiscal 2004 and part of fiscal 2005. The results of Engelman’ s operations are combined with those of
the Company from the date of acquisition.
E*TRADE Professional Trading
On June 3, 2002, in order to expand its brokerage business to include onsite professional trading, the Company acquired 100% of privately-held
Tradescape Securities, LLC, a subsidiary of Tradescape Corp., a direct access brokerage firm for active online traders, together with
Tradescape Technologies, LLC, a high-speed provider of direct access trading software, technology and network services, and Momentum
Securities, LLC (renamed as E*TRADE Professional Trading, LLC), an onsite brokerage firm for individual professional traders, (collectively
“E*TRADE Professional Trading”). The Company did not acquire any interest in, and exercises no management control over, Tradescape
Corp. or its affiliate, Market XT, Inc. The Company acquired E*TRADE Professional Trading for an aggregate purchase price of $96.2 million,
comprised of approximately 11.8 million shares of the Company’ s common stock valued at $83.1 million (based on the average of the closing
prices of the Company’ s common stock on the date the number of shares to be issued were determined and for the three days before and after),
$8.2 million for the fair value of operating leases assumed by the Company and other charges of approximately $4.9 million. Other charges
include costs to exit or dispose of duplicative property and equipment, legal costs and accounting costs.
In addition, the Company agreed to pay contingent stock consideration of up to $180 million if E*TRADE Professional Trading’ s operating
results exceed certain targets and revenue goals for the remainder of fiscal 2002 and for all of fiscal 2003. The targets and revenue goals for
fiscal 2002 were not met and no additional shares were issued, reducing the maximum contingent consideration to $120 million. The Company
also incurred $5.5million of non-capitalizable rebranding costs, which are included in acquisition-related expenses. The acquisition was
recorded using the purchase method of accounting.
The Company has allocated the E*TRADE Professional Trading purchase price as follows (in thousands):
Net tangible liabilities of E*TRADE Professional Trading $ (11,916 )
Proprietary agreements 16,800
Technology 7,000
Agency relationships 6,300
Net deferred tax liability (9,512 )
Goodwill 87,483
Total Purchase Price $ 96,155
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2003. EDGAR Online, Inc.